Avi Gilburt: “Gold and Silver at Key Turning Points” – Minyanville

Posted on :Aug 12, 2013

Last week in Silver and Gold Can Go Either Way, I said that I  was unsure if we would be getting a big breakout in the metals for a larger 4th  wave, per Elliott Wave analysis, or if we would have another drop before we can  even begin that larger 4th wave.  Well, today, I can report… that I am no  further along in that determination.  The  market is truly at a crossroads at this time, and a breakout is a strong  possibility.   But, a small corrective/pullback consolidation will be needed to set up that breakout.

Since silver potentially has the clearer chart, I am going to key off that  chart at this time in my broader metals discussion.  Last week I  continually noted how important the 20.50-20.60 region is for the Mini Silver  Futures Contract as resistance.

In fact, as it has set up over the last  two weeks, we can clearly see a b-wave flat in silver, as we have moved right  into the resistance region which I have noted is so important.   Furthermore, this move into this region can easily represent the entire c-wave  of this b-wave flat, and seems to be just about concluded based upon the pattern  and technicals we were left with at the end of the day on Friday, as we have  just about completed five full waves up from the prior low.

In the more  immediately bearish count, this would mean that the b-wave is just about  concluded, and silver will be heading down to the 17 region to complete a c-wave  of wave v of larger degree wave 3. This means we would need to see a strong  impulsive move down begin quite immediately if this were the count playing out  at this time.

Alternatively, if this is the larger degree 4th wave, then  this is simply wave 1 of the yellow c-wave higher.  This would mean that  silver should pull back correctively early next week, and should not break below  19.65, the .618 retracement of this move up.  In fact, when silver is in a  bullish stance, it usually does not break down below the .500/.382 retracement  region. And, when we note that the declining trend line from which we have  nominally broken out is around the .618 retracement region as well, it tells me  that the 19.65 region is really the lowest I want to see silver if we are  setting up for much higher levels in an extended c-wave, which can target as  high as the 23-25 region.

I will also apply similar analysis to the  SPDR Gold Shares (NYSEARCA:GLD), and note that GLD has not broken through the  larger mid-channel DTL that I have on my chart in the 127 region.  And, in  order to see a true breakout in GLD, we will need to see a strong move through  the 130 level, which will potentially take it back up to the 135-139 region in  its c-wave of a larger wave 4 as well.

For those who believe that the  metals have actually bottomed for good, I would like to gently dissuade you of  this notion.  While it is, of course, possible that the low is in,  the buying volume on this rise is truly indicative of 4th wave type of  volume.  So, I am not optimistic that the metals have seen their final  bottom just yet, and still believe that there is at least one more low that will  be seen this year before we can even consider a bottom as being solidly in  place.

Also, as a reminder, I have mentioned many times in the past that  I think the metals could be setting up to trade in lockstep with the equity markets.  When you see  this happening to a greater degree, please do take notice.  This could have  very serious ramifications to the larger deflationary/inflationary discussions  we have had over the last several years.  When all assets run together in  the same direction, my expectation is that we will have a large rally in all,  followed by a large collapse.  But, before the large rally takes place, I  am looking for a drop in both, with both potentially completing their respective  corrections in the fall.

Gold Goliath is not your typical gold dealer.

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