'Golden Cross' For Gold and Silver Signals Further Gains

Published in Market Update  Precious Metals Update  on 20 September 2012

By Michael O’Brien


Today’s AM fix was USD 1,760.00, EUR 1,360.33 and GBP 1,088.03 per ounce.
Yesterday’s AM fix was USD 1,774.50, EUR 1,361.44 and GBP 1,092.54 per ounce.

Silver is trading at $34.31/oz, €26.61/oz and £21.28/oz. Platinum is trading at $1,619.50/oz, palladium at $663.50/oz and rhodium at $1,225/oz.

Gold fell $0.10 or 0.01% in New York yesterday and closed at $1,770.50. Silver hit $34.958 in Asia and fell to $34.27 in early New York trade and it then bounced back higher, but finished with a loss of 0.49%.

Gold edged down today due to dollar strength and profit taking as speculators and some investors booked profits on 16% price gains from this year’s low.

Gold continues to see smart money diversification as central banks from the ECB and the Fed to the BOJ have all announced ‘stimulus’ or money debasement measures which has led investors to seek gold as an inflation hedge.

All eyes will be on China as perhaps the next to announce action after today’s data showed further contraction in its manufacturing sector for the 11th consecutive month. 

The UK will then follow and then other central banks may announce their own measures as competitive currency devaluations or currency wars intensify in the coming months. 

We have seen consecutive weeks of bullish strength in the gold and silver markets. Gold has completed what is known as a ‘Golden Cross’ and silver is poised to complete one in the coming days.

A ‘Golden Cross’ occurs when not only the current price, but also shorter-term moving averages such as the 50 day moving average “cross” or rise above the longer term 200 day moving average.

Gold’s 50 day moving average (simple) has risen to $1,651/oz and is now comfortable above the 200 day moving average (simple) at $1,645/oz and accelerating higher.

Silver’s 50 day moving average (simple) has risen to $29.86/oz and will soon challenge the 200 day moving average (simple) at $30.47/oz.

These are important indicators of longer term technical strength and in conjunction with the recent positive technical picture are bullish.  

The 18 months of sideways-to-lower price action has “built a base”, a very large foundational base, in markets that are in the middle of two of the longest and strongest bull markets in history. 

It is another indication that both markets are capable of moving higher in the coming months.

John Bollinger the president of BollingerBands.com said in January that “the golden cross is a great tool in a big, roaring bull market, like the bull market from 1982 to 1998, when it tells you when you’re supposed to be in the market and tells you periods in which the risk is somewhat higher of corrections and such,” he said.

Gold and silver are in such secular bull markets and the combination of these long term bull markets, the recently trending higher markets and the 'Golden Cross' is important technically.

The last time there was a 'Golden Cross' for gold was in early February 2009 (see chart) and gold subsequently rose 103% in the next two years.

Similar gains are quite possible today given the strong fundamentals. Were gold to replicate those gains, it could see gold rise to double today's value of $1,756/oz or to over $3,500/oz.

Silver, too, saw a ‘golden cross’ in late February 2009 when silver was trading at under $14/oz.

It subsequently surged 257% to over $49/oz in April 2011 for a 257% increase in just 2 years and 2 months. Given silver’s very strong fundamentals similar gains may be seen in the coming months.

As ever physical bullion should not be bought in expectation of capital gains. They have the potential to reward with massive capital gains but they should be bought for diversification and financial insurance reasons.

For breaking news and commentary on financial markets and gold, follow us on Twitter.

NEWSWIRE
(Bloomberg) -- Swiss Monthly Imports, Exports of Platinum-Group Metals
The following is a table of monthly Swiss imports and exports of platinum, palladium and rhodium. The figures include raw form or powder and half-processed material, and were sent in an e-mail by the Swiss Federal Customs Administration. Amounts are in kilograms. One kilogram equals 2.2 pounds.

Imports
                     August 2012         July 2012       Total 2012

Platinum          2,503 Kg          3,068 Kg        21,593 Kg

Palladium           822 Kg          1,331 Kg        13,329 Kg

Rhodium               3 Kg             34 Kg           121 Kg

Exports
                        August 2012         July 2012       Total 2012

Platinum            905 Kg          3,171 Kg        24,185 Kg

Palladium           345 Kg          1,772 Kg        29,545 Kg

Rhodium               0 Kg             25 Kg            45 Kg

(Bloomberg) -- Gold, Silver Futures in Shanghai Retreat; Cash Bullion Declines
Gold for December delivery fell as much as 0.4 percent to 363.95 yuan a gram ($1,793.77 an ounce) on the Shanghai Futures Exchange, and was at 364.24 yuan at 9:03 a.m. Singapore time. December-delivery silver lost as much as 0.9 percent to 7,366 yuan per kilogram, before trading at 7,376 yuan.

Cash gold of 99.99 percent purity slid as much as 0.5 percent to 359.32 yuan a gram on the Shanghai Gold Exchange, and last traded at 360.25 yuan. Volumes for the benchmark contract on the country’s largest cash bullion market were 3,309 kilograms yesterday, from 4,449 kilograms on Sept. 18.

(Bloomberg) -- CICC Raises Gold, Silver Prices Forecast After QE3
Gold prices may rise to $1,850 and $1,950 an ounce at the end of 2012 and at the end of 2013, respectively, as the U.S.’s quantitative easing materializes and as lower real interest rates, weaker 

US dollar and stronger investment demand will lift the precious metal’s prices, the China International Capital Corp. Said in an e-mailed report today.

Silver will outperform gold thanks to its higher price resilience, the report said, without giving details.

(Bloomberg) -- Gold ETP Holdings Jump for 11th Straight Day to Record 
Gold holdings in exchange-traded products backed by the metal rose to a record for the 11th straight session.

The amount jumped 10.86 metric tons to 2,517.15 tons, data tracked by Bloomberg showed.

(Bloomberg) -- Credit Suisse Client Survey Sees Gold Above $2,000 in a Year
Gold will be above $2,000 an ounce in one year, according to 33 percent of about 160 clients surveyed by Credit Suisse Group AG.

Forty percent of the clients said commodities would be at least 10 percent higher in a year, and 13 percent said they would be at least 10 percent lower, according to the survey conducted yesterday and provided to reporters in London today. 

(Bloomberg) -- Zimbabwe Says Foreign-Owned Platinum Mines Meet Ownership Law
Majority of foreign-owned mines comply with govt’s plans to finalize transfer of majority stakes to local black investors, Empowerment Minister Saviour Kasukuwere says at National Indigenization and Economic Board conference in the capital, Harare.

"The mining sector, that area is now compliant,’’ Kasukuwere says. “Zimplats, Mimosa Platinum and Unki Platinum are done deals”

NOTE: Mimosa Platinum is a joint venture between Impala Platinum and Aquarius; Unki Platinum is owned by Anglo American Platinum

(Bloomberg) -- Standard Chartered Says Gold Prices Will Average $1,875 in 2013
Gold will average $1,875 an ounce next year, Standard Chartered Plc said in a report dated yesterday.


Cross Currency Table – (Bloomberg)

NEWS
Gold slips from six-and-a-half-month top, waiting for China action - Reuters

Gold down as investors take profits – Sydney Morning Herald

Gold futures gain after Bank of Japan move – Market Watch

Gold Rises to 29-Week High on Stimulus by Central Banks - Bloomberg

COMMENTARY
‘Golden Cross’ May Signal Big Gold Gains Ahead - CNBC

Deutsche Bank: Gold Is Money- Zero Hedge

The Trouble with Printing Money - GoldSeek

Monetary Schizophrenia In Germany – Testosterone Pit

Embry - We’re Witnessing A Historic & Frightening End Game – King World News

 

 


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