Metals Prices Say?

I’ve put up two different metals standard price charts. One for precious metals vs currencies, the other for base metals vs precious metals.

To look at the charts as they are today, click the links. The rest of this posting will be my evaluation of those charts as they stand today. They will change over time, so if this posting is read some weeks or months in the future, this analysis will not match the charts.

First up, the Gold and Silver chart.

Pretty much says that Gold has had a bubble top just like silver did. Notice how silver had a recovery after the bubble, failed to make new highs, then fell after a sideways pause? Notice how gold had a recovery from its dip and is now in a sideways pause? Think about it… I’ll wait…

The Simple Moving Average stack is in a ‘weave’ pattern. This often happens at decision or inflection points. After a rise, it often means a fall to come. Furthermore, that “spike down” today was “not good”. At this point I’d be exiting any remaining gold trade positions (if I had any, but I sold mine some time ago).

Silver is moving more or less with gold recently, but is in a downtrend from a recent high. This, too, is “not good” for gold.

Looking at the currencies, we see the Euro Double Short rising. Earlier we saw that the Euro Double Short tends to move in opposition to gold (at least recently). IMHO, some large traders or hedge funds are moving out of gold and Euros and into something else. It is also likely that sales of the GLD ETF are putting downward pressure on gold prices as well.

RSI – At the start of November RSI had a peak, but it was a lower peak than the ‘near 80’ from August. “Lower Highs” is a downtrend.

MACD – Not only is it “red on top” but it has crossed the zero line to a negative value. Gold Bear Market is what it’s saying. While we had a counter trend rally in October (DMI and MACD both blue on top) that’s ended.

DMI – Fairly reliable indication to be out with “red on top”. Also note that ADX, the black line, is picking up strength. Direction of the trade is to the downside, and accelerating.

The currency lines are interesting, with a clear August intervention start by the Swiss Central Bank (probably coordinated with the other central banks.) A great example of why you don’t want to ride ‘a strong Swiss Franc’ too long. The Euro is dropping (no surprise there) and the dollar is rising. (The UUP is largely a ‘Euro short’ so tends to move in opposition to the Euro. EUO is a Euro double short, so is more leveraged. You can see that both lines have the same shape with different amplifications.)

The Yen has largely gone flat, though with a slight residual drop. The general message here is that the dollar is rising, the Euro is having issues (but we already knew that) and the precious metals are not cutting it. It looks like folks are moving into the US dollar. Perhaps out of European banks?

Overall, there aren’t a lot of investment ideas here, just some trades. Gold is not yet in a confirmed bear market, just a probable bear trend, so a bit hard to short it with confidence (other than on a day trade basis or an hourly chart swing trade). Short Euro will likely work a bit longer, but will have political news driven changes of direction. Again very fast swing trades. Mostly the message is “be in $US and keep the powder dry”. Likely due to large international flows out of Euro land until they get their currency straightened out.

Base Metals vs Precious Metals

The story here is mostly that base metals have stopped dropping. We had a quick swing trade up, but that’s ended as metals took a dip. Prices are still below the SMA stack, which has gone flat but is not yet in a ‘weave’. That means the prior falling trend is still the one we follow. While it’s likely a bottom, or a bottom soon, it’s not yet a confirmed bottom and could fall away at any time. In that context, you swing trade the ripples on a very fast chart.

Tin and Nickle are falling more than the copper / aluminum / DBB basket. “Stuff” metals are having the worst of it. Economic production is down, and not showing signs of increase (yet). In some ways, Platinum is the most interesting metal of the bunch. Relatively flat, most certainly at or near a bottom. Unfortunately, it has a drop of the end rather like all the other metals. Folks are not expecting a lot of increased chemical production nor auto sales…

The USA may be doing better than the EuroZone, but we’re more of a “Not Dead Yet!” than a “growing well”.

In Conclusion

Not seeing much reason to be invested in metals yet. Trade yes.

Platinum has potential, but would need an upturn to show it was really time.

Base Metals, particularly copper, may be forming a bit of a base, so it would be reasonable to look at the metals MINERS. Even if the metals just lay there for a while (and the ETNs have some loss of time value) the company stock may be paying a worthwhile dividend. So on the ToDo list is “look at miners”.

There is little to indicate any “upturn” in global manufacturing, and global inflation vs deflation fears look more or less in balance (thus the precious metals being flat / down).

JJN, Nickle, was higher at the top and is now lower at the bottom. It is a more volatile, so faster to react, ticker. It may well move to positive trend first, and watching for it to cross over JJC copper might be an interesting indicator.

Overall “message of the metals” is “duck and cover” and “risk off – in $US”.

As long as metals prices are this low, the miners will have shut in capacity. That means fewer orders for the giant trucks, cranes, and the tires that those use. Those stocks will likely be down for a while too.

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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5 Responses to Metals Prices Say?

  1. E.M.Smith says:

    I had intended to post this last night, but got distracted by looking at earthquakes and only this morning realized I’d hit ‘save’ and not ‘publish”.

    Today gold and silver (and all the metals to some extent) are down even more, and I could have had this out in a more timely manner. My apologies.

  2. P.G. Sharrow says:

    Yes the bubbles seem to have sprung a leak. By my reckoning they are now only about twice what the cost of production is. Unless runaway inflation for the next few years is to be allowed for. Platinum might be realistically valued at present. pg

  3. Pascvaks says:

    Chiefio –
    Did you say the charts ‘clicked’ to bigger, readable size? (Still waking up;-)

  4. H.R. says:

    “Overall “message of the metals” is “duck and cover” and “risk off – in $US”.

    I had that thought a few days ago. I was thinking, Where to jump?” and it hit me that it’s all a pig-in-the-mud out there but for the moment, the tail of the pig ($US) is sticking up out of the mud. Then I shuddered at the thought.

    P.G. brought up “bubbles” and the next bubble is alternative energy. It’s been pumped up by government (natch), folks are beginning to grumble, so the pols will move on to create the next bubble. I’m thinking they are going to double down on electric vehicles.

  5. Pingback: WSW, Wedneday, 21 December, 2011 « Musings from the Chiefio

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