Wednesday, February 15, 2006

 

Technical 'Picture' Shows Gold Buyers 'Exhausted'

Morningstar has the precious metals trading action. "The precious-metals complex turned negative on Wednesday in New York as gold took a lashing due to further fund selling while the U.S. dollar made gains against the euro. The most-active April gold contract settled $6.20 lower at $542.70 an ounce. During the session the contract dipped to a $539 low, just above Tuesday's five week low of $537.80 an ounce."

"Andrew Chaveriat of BNP Paribas said the weekly momentum of the gold market is on the verge of a bearish crossover off an overbought extreme. 'The picture is reminiscent of the December 2004 high, which was followed by a lengthy pullback. This time around, bearish momentum could fuel a deep and sharp drop in gold prices,' Chaveriat said."

"Chaveriat said this week's decline in April gold below $548.50 confirmed a secondary top is in place at $572.30, the Feb. 10 high, joining the $579.50 peak from Feb. 2. 'Secondary tops often exhaust buying power leading to substantial medium-term and potentially longer-term declines,' Chaveriat said."

"Additionally, Chaveriat said the formation of this secondary top has been accompanied by a dramatic increase in short-term volatility. 'A sharp increase in volatility is often associated with a turning point,' Chaveriat said."

"Meanwhile, silver futures followed gold lower with the March contract settling down at $9.215 an ounce, off 10 cents on the day. April platinum settled $12.40 lower at $1,006.50 an ounce. It dipped to a low of $1,001 an ounce during the day. March palladium ended the session $3.90 lower at $277 an ounce."

Comments:
Technical analysis can be useful in certain situations, like turning points. For instance, those of you closely watching the daily prices; isn't all this volatility wearing you out? Imagine the same thought process times many millions.

I like what he said about volatility and tops (or bottoms for that matter). It is also true that the greater the degree of the trend, the greater the volatility. IMO, we haven't had very big price swings recently. That would imply any greater top has yet to be made; rather perhaps a shorter term top has been achieved.

Personally, I welcome cheaper prices of any asset I want to buy.
 
ben:

Personally, I welcome cheaper prices of any asset I want to buy.

I'll second that, and I'm pretty well rested, too! ;-)
 
I'm reading the cheuruex gold report. if gold is so useless, why do the central banks of the world hold 31,000 tonnes of it?
 
A couple new metal interviews tonight regarding the correction at: http://www.howestreet.com/goldradio/

I'm waiting for Peter Schiff's show from tonight to get posted to: http://www.europac.net/radioshow_archives.asp

Do you guys have any favorite programs? (Sorry for being off-topic Ben)
 
austin,

If you hadn't already gathered it from my earlier posts, I always try to listen to all three hours of the weekly radio program at FSO.

www.financialsense.com
 
So am I TJ.
Looks like most of us are frequent FSO readers and listeners.
 
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