Thursday, October 20, 2011

Another down day for the Metals

Both gold and silver continue to move lower and towards the bottom of their trading ranges. In the case of gold it dropped through $1620 and fell to just above $1600 where buyers showed up. It is currently attempting to get back over the $1620 level.

Silver violated support at both $31 and then again at $30 but it did encounter some decent-sized buying just below that latter level and has bounced back above $30 as I write this.



As expected, the HUI, once it sank through the support region near 520, fell all the way to the next support zone near 500 which extends down towards 490. This needs to hold if the mining shares are going to avoid even steeper losses.

The HUI is already deeply negative for the year but has been able to recover on each trip down towards 490 for nearly an entire year now. We would not want to see this level give way. If it does, the critical Fibonacci of 50% comes in near 470 and one would expect that to stem the selling. Should it fail there really is not muchn on the chart as far as support goes until we get all the way down towards 460-450.

Note that the weekly uptrend line on the chart has given way. The shares will need a strong rally tomorrow to go off the board for this week on a better note.


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6 comments:

  1. boatmanOctober 20, 2011 at 1:46 PM

    always apreciate your take, dan.

    seems the whole world's in a temporary deflation mood, anticipating the bigbadabust that will be started in/by the continent that invented cradle-to-grave govmint.

    after 3 years and $2.75 worth of price increases on my brand of beer per case.....it went down .75.

    course we all know this is temporary, until euro explodes(monday?).....n they print one currency(eur) or 12.

    and you know what helicopter ben will do.

    too bad beer goes skunky if stockpiled.

    but gold doesn't.

    mahalo.

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  2. arnieOctober 20, 2011 at 2:14 PM

    If there was ever a get all the deadweight off the boat, clear all weak longs out, make sure no one but the devoted are long gold and silver until they reach all time highs, this was the move. The deadweight, the cargo and even the planks are off the boat, so it should be easy to sail to new highs now

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  3. HenriOctober 20, 2011 at 3:06 PM

    @arnie, if only the devoted are there, long gold and silver, and already bought, then who else is there in the market to buy further?
    And without additional buyers, how could gold price go up?
    What you need is not have "weak hands" away or "strong hands" in the boat.
    What you need is a continuous stream of buying.
    Maybe the devoted accumulated so much gold already that they don't want to stack some more?
    Time will tell, but I think you need more buyers and I don't see them, despite situation in Europe, despite situation in the US, despite central banks printing more and more money, despite the end of summer and the asian festival season coming closer, etc...
    It seems that 1600 $ is not a bargain able to convince enough buyers and propel prices much higher.
    Technically, MACD 9 20 7 is close to crossing down.
    I hope we don't have a new wave of panic selling...but trading and hope mode are not doing well.

    How down can gold and silver go before we reach the "day of reckoning"?
    For sure, I'm disappointed in the recent gold price stagnation in front of what's going on every day in terms of fundamental economic news.

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  4. jlrchrdsOctober 20, 2011 at 3:30 PM

    Hey Dan. Just a thank you note. I've learned a heck of a lot from you and appreciate your thoughts. Thanks again. Jeff

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  5. Crusso33October 20, 2011 at 7:46 PM

    Can someone explain to me why anyone owns these stocks? When gold and silver go up...they don't go up. When gold and silver go down...they go down. Why not just own gold if you want to own gold. I'm so confused by all this. If you want to leverage gold, then you an ETF or leap options. Why does anyone screw with these companies when you wake up one morning and Agnico has huge problem like on Tuesday and drops 15%. Am I nuts are people who own these shares nuts? What am I missing...please Dan, set me straight.

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  6. Trader DanOctober 20, 2011 at 8:14 PM

    Thanks for all the kind words.

    Crusso33 - one has to be extremely selective in which mining shares they choose to own for starters. When you are building a portfolio, you have to be ruthless in the sense that you want to own only the best performers out of the sector. Those lead to the upside when they are moving higher and tend to hold their value better on the downside.

    Also, many of the former buyers of the shares are no longer in the sector as they Trojan Horse known as the Gold ETF has sucked away their buying.

    those hedge funds wanting leveraged exposure to gold can now play the ETF on margin and avoid having the sort of risk endemic to the mining sector.

    Gold shares can be very trying.

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