By Keith Weiner
Chart Patterns
The prices of the metals dropped $20 and $0.39, a downhill slide interrupted on Thursday by speculation fueled by some economic data (as we covered in our special report), and which resumed on Friday.
Gold over the past two years. The blue rectangle outlines the pattern discussed below. It doesn’t really work well as a head and shoulders (H&S) pattern in gold, since the neckline would be beyond skewed. We should also mention that this pattern is really not what seems to be commonly believed nowadays. In its original meaning, an H&S pattern can only occur at the end of an extended trend, with the “head” marking a major price peak. The recent “head” would be below the peak seen last year, so it is disqualified based on this definition. Similarly, an inverse H&S pattern occurs only at a major low, not somewhere in the middle of a trend. Gold has moved sidewaysin a series of overlapping waves since rallying from late 2015 to mid-2016. In other words, this some sort of (complex) corrective formation is being built. Given that it has been two years since the price low (in non-dollar currencies the low was made 3 to 5 years ago), it seems highly unlikely that this is a corrective wave in a primary bear market. It is not impossible, but it isn’t likely. In USD terms gold trades 23% above its 2015 low – and it does so despite a fundamental macro backdrop that is at best neutral with a bearish tilt. All of this points to a beginning cyclical bull market. [PT] – click to enlarge.
A look at the price charts of both metal shows what could be head and shoulders patterns. The left shoulders are in June. The head is in September. And the right shoulder is occurring now. Or if you zoom out and look back to the start of 2017, you see a series of higher highs. In gold, at least. In silver, if you zoom to look at a graph starting in mid-2016, you see a series of lower highs.
Trying to divine the next price move based on past price action is trying to act based on incomplete information: the fundamentals. In stocks, we don’t know many people who look only at price charts, without regard to the company behind the stock. Why should it be any different in gold and silver?
Fundamental Developments
We will look at an updated picture of supply and demand. But first, here are the charts of the prices of gold and silver, and the gold-silver ratio.
Gold and silver priced in USD – click to enlarge.
Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. The ratio rose a bit.
In this graph, we show both bid and offer prices for the gold-silver ratio. If you were to sell gold on the bid and buy silver at the ask, …read more
Source:: Acting Man
The post Precious Metals Supply and Demand appeared first on Junior Mining Analyst.