The week that was saw gold breakout to a new all time high above $2450 per ounce and then an extremely violent selloff in the precious to close out the week. The crazy part about this weeks failed breakout is that this is normal behavior for precious metals as the market attempts to break out to new all time highs month after month.
The one year chart tells the tale of the tape:
The first level of support has been holding since the breakout in March and even the 50 day moving average(dma) has held thus far this month. I believe however that it will breakdown further, probably trading below the 50 dma for a while between $2320 per ounce and $2350 with the 200 dma becoming ultimate support.
The chart above with the overlay of the Bollinger Bands provides a perspective on what the trading should be for gold for at least the next three weeks.
Silver is behaving a bit worse:
With a retest in the $28.50 area upcoming, it will probably take silver a bit longer to recover to prices over $32 and a breakout above $35 to new all time highs.
There is one thing to keep in consideration when looking at these prices and the relative technical stability they are displaying. If a major geopolitical event, including in the United States, were to occur the demand for the metal will begin to soar again and that ultimately means new all time highs sooner rather than later.
Thus why this author believes that after another two to three week consolidation and upcoming major equity and US Treasury market instability in August, the odds of this rally reigniting without warning is almost a mortal lock. Prepare for a major breakout in precious metals prices along with panic buying and short squeezes in the future to cause the price acceleration to occur with mind boggling speed.
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