What Happens To Gold And Silver Next? Look Out Below?

We start the week off almost where we left off on Friday.

Did you notice how today both gold and silver almost touched they yearly lows once again, only to back off. Does this price action seem familiar? Well, it should because this is what gold and silver started doing after their gaps down in April. After they established their yearly lows, they bounced and then tried again to touch the yearly lows, only to bounce again. This continued on for 2 months until you fast forward to last week were we finally started the next leg lower.

Therefore, it shouldn't be no surprise that prices once again rally, perhaps even an attempt to fill this most recent gap. What remains to be seen is if we continue this range bound trade for an extended time or if gold and silver continue to grind lower but at a much faster pace.

lets look at our proxies

GLD- lower high, lower low and 52 low

SLV- lower high, lower low and 52 low

Remember, prices at 52 yearly low confirm the strength of the downtrend.

My friends, don't be in a rush to make big purchases of gold and silver. There is no rush AT ALL. If you must nimble, consider only proof silver and gold or coins that carry numismatic value.

Let me share an example that I have mentioned already. The lowest price in USD that I could find for a RCM 1/4 oz proof .999 artic fox coin 2013 issue coin was 616 USD before shipping. Guess what? This same coin is now going on ebay for 510 and even lower at 425! These prices are coming down on these proof coins and I dare say once prices stabilize for gold and silver, these proof coins will be the first to recover in price.

So friends, please be patient and dont jump all in. Right now is NOT the time to be dropping large amounts on gold and silver. Your patience WILL be rewarded.

@ yup: What are your view/opinion on the 4 waves (a, b, c, d) pattern when you looking historical chart (recent past price action). Would last week price drop be considered 2nd wave down?

If PMs flatline at the end of the shakeout (like silver 1982-1996) then all the people that have been buying options and hedging --- now the cymbals hit the floor. Cause remember the last thing those guys want is for it to flatline. The price per ounce doesn't matter but the absence of the waves does. That's cause they can't make money going long and shorting their holdings with options. All these PM buyers you see on television. That's how they make their money. Just like stock options.

ok let me get to some answers-

@SA4H I dont use Wave patterns at all in my analysis on the technical side so I wouldn't be able to comment on that.

@atchisonbj - You are correct in saying that lower prices are coming and agree with you. However, when you see prices trade in a narrow range, one has to first understand at what point in time is this happening. We cannot reference the past and point to it as certainty.

The churn/narrow range we are seeing now at this point in price is normal as the market is allowing time to resolve the move, in this case, lower. Bottoms and tops are a process and this tight narrow range trading is all part of it.

However, before we get a lengthy tight now range that goes on for years, first we must find a floor for prices. We aren't there yet. After we have found a floor that holds, then I do think we enter a period of time where silver and gold do nothing for an extended period of time.

@jenger -The real answer is, YES we can know where prices are headed too. To say no one knows is simply wrong. I do this sort of trading all the time, ALL asset classes give clues as to where they are heading to, when they are exhibiting price behavior that is saying they are done running higher or done running lower. This is done in the world financial markets every single day. While it is true no one can call an EXACT bottom or top in price, we can determine when we are at or getting close to a change in trend.

So I disagree 100% with you, we can know how much lower we are going to go and what happens after that. Patterns repeat and there is nothing new at all in how prices act.

@Miggs

Very good question my friend.

Is it possible to see higher prices, sometime in the future. Absolutely, yes that's possible. However, that wont be happening anytime soon and its clear that will be something far off in the future.

Why?

1- Gold and silver ended their incredible strong uptrend about 2 years. they enjoyed a multi year powerful uptrend that carried gold to all time historical highs.

2- Trends are very powerful in all asset classes. However, now gold and silver are in a very strong downtrend. These trends take their time to play out. Just as gold and silver enjoyed a strong uptrend that took time to play out, now this strong downtrend in place and it will take time to play out to the downside.

3- The crisis and panic we saw years ago is now in the rear view mirror. I know many bristle at the notion that I would even dare say things are getting better, but they are. This economic growth is for real and the USA will lead the way. I stand behind what I say because I see it everyday in the markets and companies that are reporting and future estimates. Its not perfect but we are not going back to the fear and panic. That is behind now and the healing has started and continues.

There are credit spreads I watch, including the TED spread and they are normal. Yields are not rising, those rates are crazy cheap as they should be when things are normal.

I also want to tell you this. The markets price things out into the future. Just because you dont see it in your area, or hear the media talking about it should be no surprise. The markets work and look way ahead. They had been telegraphing that gold and silver were going to get knocked down.

4- I would disagree with Marc Faber. Traders are not buying or waiting to get into gold miners. Everyone on the desks is selling gold miners short, they are profiting as their stock prices continue to fall. There is no one at all buying all these gold miners and there is no volume to support what he is saying. I would say that Faber is probably talking his book, hes always been into doom and gloom. In fact I would place my money that Marc Faber isn't even buying gold right now, hes probably very short of it as well.

I would agree that gold is a very finite resource and valuable. However, nothing trumps the price action and it is saying lower prices are coming and will be here.

5- It doesn't look for gold and silver for a long time. Why do I say this? Well for starters, I had been saying for a long time that the long bond was dying, and sure enough its at yearly lows and keeps sinking. The 30 year note is the ultimate safety, go to option, even over gold. If its dying and not finding buyers, gold and silver DO NOT stand a chance. Also the USD continues to get stronger and soon everyone will be talking about the King DOllar.

6- Where is the fund and institutional money going? It is going into the stock market, with the US markets leading the charge. From there its going into various sectors that will and are producing better returns than gold and silver.

So, there is a lot of things in front of gold and silver price wise. Yes, there will be a time when they are back to their former glory days. But for now, I see prices continuing to slide and then enter a long period of stagnant do nothing price action.

If I can answer more of your questions or I missed any, let me know, its been a long day and I might missed a few points.

Too many people guys missed the boat back in and around 2000 when gold was around 250 an oz. and silver was around 4 bucks per oz. and they know it and ARE not gonna allow it to happen again. To many of us said if we ever get that chance (most of us thought we would never see) we said we would do it right this time around....

That fact alone that MANY more will be buying HEAVY when the bottom gets here where ever that may be.....

In fact curious Yup what you think that bottom is for each the big four?

My mom was in New York I have often mentioned here when she decided to buy a sheet of world trade tower silver rounds before the towers went down. For a keep sake and souvs for the rest of family....

At that time she was paying 10 bucks per coin or if one bought a roll that would have been 200 bucks. So there you go, that is about as low as a 20 roll can go....

My mom gave me like 10 back around the time I first got into silver in around 2009. I sold all of those coins for like 75 each not to long after I put my first 100 oz together....

Those coins sparked my pm interest and started it all that and all that gloom and doom bs that never happened. It may still, their time line may have just been off lol. We will see....

Silver's 1-Year Close looks like the graph of a sin/cosine function. Goes up and down, but when you look at it from a 10 year perspective, prices seem to resemble a near bottomed fluctuation.
I'm quite confident that prices will rebound up to the 30 dollar level shortly due to increased demand by investors and also industries.
I calculated a rough true inflation adjusted price of silver and it turned out to be $16.61/oz when compared to the value of the dollar in exactly 1800.
Now, this could be the very bottom before everything starts springing up. I calculated this number by taking $2.50 (approximately 5 half dollars equaling around 2ozt) and then dividing that number by 2, to find how much $2.50 is worth today...
Anyways, that is probably the worst estimate you will hear, but at least I have a price in my hands.