Late last year we wrote in this column about the tarnished edges precious metals charts had to them, saying the outlook was negative although not overwhelmingly so. The one exception we thought was palladium, and indeed that managed to rally in January this year, but didn’t quite reach our upside target; since then it’s joined the others in their sad little trio.
Today we’re turning back to these charts because they have dropped in price quite steadily since February, and are now poised at what are watershed-type levels. Will they or won’t they crack – that is the question. Major breaks in ultra-long-term levels need to be confirmed by monthly closes through support or resistance points – and clearly so, not by a whisker. Even better are quarterly closes, but unfortunately June did not throw up any strong signals.
Since September last year, spot palladium has been forming a large interim top, either an inverted V-shape or a head-and-shoulders top, with a horizontal neckline just under $900. Unfortunately, the market did not settle below here on Tuesday, something necessary to complete and confirm the pattern. But during July, it did however slump through the lower edge of a trend channel that has held well since the first quarter of 2016; it also failed to crawl back inside this channel at Tuesday’s close, adding weight to our bearish view. Preferably within the next two months, but not essential, a monthly close below $900 kicks off a correction towards $700.
Platinum has done exactly as we had suggested, dropping steadily all this year from the psychological $1,000 point. It is currently retesting pivotal support between $750 and $800 per ounce – again, as predicted. A monthly close below $800 is essential to maintain the bearish pressure that has built on the move down. Again, a pity we didn’t quite manage this by the end of July. This waiting for a clear break is one of the most difficult things for a technical analyst to live through; jumping the gun on a market move is rarely a good idea. July’s hammer candlestick suggests we will not get the break lower towards $650 that we now favour until the fourth quarter of 2018.
Gold has also done as we told it to, holding rather unsteadily between $1,350 and the psychological $1,200 per ounce. Our December view that ‘the sensible investor should pencil in a drop to $1,085, the half-way mark between the Gordon Brown low and the record high at $1,920 remains valid – and increasingly likely. Again, a monthly close within the next two months would set up such a move, and possibly a test of 2015’s low at $1,045 – worth almost half of peak value.
As for silver, price action has indeed been slow, something we had predicted, with the down trend only kicking in during June. There is no doubt that the relentless move to lower prices that started with a speculative peak at $49.50 in April 2011 is intact. While we feel that silver prices can continue to slip further, the chart is a good example of the asymmetry between bull and bear markets. On the way up, punters and investors are swept up with the hype and rallies often take the shape of a parabolic curve. After a long bear run, and the closer one gets to zero, downside moves are hard-won and maybe not worth the bother.
