When taking the gold price since late 2009 into perspective, it strikes the eye that another consolidation (beneath a blue resistance after a light-green boom) started in August 2011. Such a sideways consolidation is also defined as a (blue-green/red) triangular price formation, whereas the (light-green) booms represent the final movements (out) of triangles (so-called “thrust“). In early 2012, the upper (blue) triangle-leg at approximately $1,700 was broken, whereafter the price spiked to the $1,900-level (so-called “breakout“) and subsequently fell back to the apex of the triangle (so-called “pullback“). As the breakout and pullback are completed already and the price just started to move up yesterday after having landed on the triangle-apex a few days ago, we now anticipate a strong and longer-termed thrust to the upside. Principally, the goal of a thrust is to break the high of the breakout ($1,793) and the triangle ($1,918) and transform them into new support – in order for a new and longer-termed upward-trend to start thereafter. A sell-signal à la thrust to the downside is not given until breaching the triangle-apex ($1,640), the 260-day EMA (currently at $1,620) and the green-dashed support (currently at $1,600).
Although the gold price commenced its new and long-term upward-trend in 2001, the price movements as early as 1999 “paved the way to the upside“ (respectively the green upward trend-channel). Principally, it is valued as a very bullish sign if the uppermost resistive (green) trend-channel is broken and successfully transformed into new support – as typically a new and strong boom commences thereafter. After the successful breakout in mid-2011 from approximately $1,600 to $1,900, numerous pullbacks occurred to the (formerly resistive) green trend-channel – in order to test and (potentially) confirm it as new support. This breakout and pullback took the form of a (blue-green) triangle out of which a thrust to the upside commenced recently. We anticipate a dynamic increase in price appreciation after rising and holding above the red resistance at approximately $1,800.
The silver price has fluctuated within a (green) upward-channel since 1997, whose uppermost resistance was broken in early 2011 at approximately $25 rising to the $50-level, whereafter pullbacks to the new (green) support currently at approximately $27.50 followed. Hence, a first buy-signal was just generated with landing and holding above the green-dashed support, whereas the price is expected to boom noticeably after breaking the red resistance currently at approximately $36.
The shorter-term perspective since late 2009 shows the silver price in consolidation mode (again) fluctuating within a red (parallel) trend-channel. Currently, silver trades at $32.80 and thus close to the 260-day EMA at $32.91 (strong buy-signal when rising and holding above).
Since 2008, the US Dollar Index slightly moves up within the dark-green trend-channel. Most recently, a sell-signal was generated with breaching the blue and dark-green support at approximately 79.50 points, whereas a strong sell-signal is given when breaching the light-green support currently at approximately 78.60 points and the 260-day EMA currently at 78.15 points.
Putting the USD index since 1983 into perspective, it becomes obvious that the greenback fluctuated within the boundaries of a (red-blue) triangle between 1987-1997 and that the breakout went from 92 to 122 points until 2002, whereafter numerous pullbacks forced the dollar down to the triangle-apex at approximately 72 points. A buy-signal à la thrust to the upside is generated when rising above the upper (violet) triangle-leg currently at approximately 82 points, while an analog sell-signal is given when breaching the lower leg currently at approximately 75 points and especially the level of the triangle-apex at approximately 72 points.
Stephan Bogner (Dipl. Kfm. in Economics) is a mining and commodity analyst with Rockstone Research Ltd, an independent research house specialized in the analysis and valuation of capital markets and publicly listed companies. The focus is set on the exploration, development and production of resource deposits.