Readers will know that when investing all my decisions are based purely on technical analysis, using a fairly standard array of tools and classic methodology. Chart patterns, moving averages, trend lines and Fibonacci retracements, plus Japanese Ichimoku candles and clouds for good measure. This is not crystal ball stuff, but a type of financial analysis that has been around for at least three hundred years.
Now let's look at the precious metals charts starting with gold as it has the most followers - and matters to central banks. A decade-long bull market peaked at a record high $1,920 in 2011. Falls and corrective bounces since then have all been textbook stuff, including this year's small one. So why am I querying my bearish outlook? Because downside momentum has dropped over the past three months; because there is a cluster of support levels around the psychological $1,000; because we are close to secular trend line support. Tread carefully, as they say, and consider lower volatility and smaller moves becoming the norm.
Gold
Its close and much cheaper cousin, silver, is a bit of a Jekyll and Hyde, sometimes spending years doing next to nothing and then rallying fivefold in 24 months. It's another one trading close to a secular trend line and the watershed level of $14.50 per ounce. I have a feeling price action both up and down looks set to become sticky and therefore frustrating for fund managers.
Silver
Platinum has certainly lost its lustre, hitting its lowest ratio to gold in 30 years (0.80 oz gold per one of platinum from 1.6 in 1986 and a peak of 2.3 in 2000 and again in 2008). Like gold, it saw frenzied rallies not once but twice in the past 10 years only to slump all the way back down to where we started. The question: are we there yet? Maybe soon, and probably somewhere between $650 and $850 per ounce. Watch and wait for confirmation, though.
Platinum
Finally palladium, another cut-price version in the platinum group metals (PGM) complex and the one with the biggest rollercoaster ride in the past 20 years. A tremendous short squeeze to a record high in 2000 was triggered by its use in catalytic converters and an auto-manufacturer trying to corner the market. The rally from 2008's low was equally sharp and more difficult to know where to pin the blame. Above $500 per ounce it remains relatively expensive from a historical perspective.
Palladium
A caveat here, and the case with many wholesale commodity prices: internationally these are usually quoted in US dollars. Changes in the value of the greenback will therefore, all things being equal, be reflected in their cost. If the dollar strengthens by, say, 10 per cent, the nominal value of gold should drop by the same amount - and vice versa, which we think might be the case in 2016.
