Gold-Backed Currency? Not Any Time Soon Based On The Trends, But Be Prepared [SPDR Gold Trust (ETF)]

The gold:silver ratio remains around the 73 area, and we are still of the belief that silver will outperform gold once the next rally phase gets underway. There is no substitute for buying physical silver and gold, and the reason for doing so are even more compelling at current price levels.

silver daily chart 05 December 2014 money currency

While trying to assess last week’s surprising sell-off and equally surprising recovery within several trading hours, after a few years of price decline for context, the “look” of how gold has developed since the July swing high stood out in the 4-step process as outlined on the chart.

It is but one way to view this market because it shows an inability of buyers to make a stronger show of strength. How the market develops next week and beyond may alter that view, but until it does, the risk of saying gold has put in a bottom could prove costly.

gold weekly chart 05 December 2014 money currency

The daily activity echoes the weekly assessment when noting how price is struggling as it has rallied from the November low. The bars have been overlapping since the strong rally bar in mid-November, and last Friday’s close is just about $6 higher after 14 more TDs [Trading Days]. So much for the “argument” that gold was at its seasonal low starting in the Fall and a rally should ensue.

This analysis is light on making a more positive assessment because there is not much that argues for a stronger stance. More developing market activity is needed before drawing a more definitive conclusion. Otherwise, the risk of buying futures has to be a stop under the low of 1130. Anything else would be a “money stop,” as in how much are you willing to risk between now and under 1130? Money stops are an admission of too large of a viable stop-out price location. Until that changes, it continues to be caveat emptor, which does not apply to buyers of the physical metals.

gold daily chart 05 December 2014 money currency

 

This article is brought to you courtesy of Michael Noonan from Edge Trader Plus.

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