Long term technical analysis of Gold and Silver price: correction only

Turning to technical analysis for Gold and Silver when investors and traders are divided

There is a raging debate on the Internet about the actual worth of gold and silver. From my layman point of view, investors are divided into two camps: bulls who argue that metal prices do not reflect demand especially that coming from Asia while bears say that physical metals are overbought and simply due for correction. There are deep divisions that extend into the domain of macroeconomics. Most interestingly, we have the Federal Reserve Chairman Mr Ben Bernanke exclaiming that gold is not money and then thought leaders like Mr Jim Rogers and Dr Ron Paul come out to say that they possess gold and are passionate about it. See this video where Dr Ron Paul and Mr Jim Rogers spoke at the Sovereign Man: Offshore Tactics Workshop in Santiago, Chile, on March 30 – April 1, 2013. The video is just over 3 minutes so no matter what, it is a MUST WATCH.

I am no expert but I am deeply suspicious of any individual or group who tell me gold is not valuable. See this story “When people went bananas over money“.

Lee Chin Gee, son of Lee Choon Seng, a former chairman of OCBC, told the bank’s biographers that he sold his wife’s gold chain for $3,500. Yet that money was not enough to buy even two big fishes, so he settled for a medium-size fish and two bananas.

When money fails, gold will not.


Long term charts say that Gold and Silver prices are correcting only

To join in with my 2 cents worth, let’s look at 20 year long charts for a clue. These charts combine simple technical analysis concepts of trendlines, fibonacci retracement and confluence only. Before we go further however, this information here is meant for long term investors. Short term wise, my stand is that both metals are still falling with no signs of reversal.

Now here are some facts:

  1. Based on very long trendlines from 2001, both silver and gold are merely retracing and the trend is not yet over.
  2. However before both metals reach their long term trendlines, some more correction may take place.
  3. Silver is weaker than gold because it has retraced a lot more.
  4. Fibonacci ratios have proven their worth before. Gold was supported at 23.6 percent between 2011- 2012 (see green zone) while silver was supported at 50.0 percent based on price action at these levels
  5. If we look for confluence of both fib ratios and trendlines to indicate very strong support, then the best places to look are gold at 50.0 percent fib retracement and silver at 76.4 percent fib retracement (see purple stars).
Charts of Gold and Silver

Long term charts of both precious metals from 1994 – 2013

And my parting shot to gold bears.


Local demand for gold is quite strong indeed to cause stock out in some types of bullion

Loading Facebook Comments ...

3 thoughts on “Long term technical analysis of Gold and Silver price: correction only”

  1. Daniel Ku Guet Liang says:

    Thanks Tiong Hum for the analysis. May I ask your opinion of Ag at this point in time (3Jul13), there apparantly a rejection of F7 level b/w 1Oct2008 & 1Mar2011. Do you consider this a strong(?) level that price may continue its uptrend? If not, may I understand your reasoning? Thank you in advance. Appreciate your view.

    1. Soh Tiong Hum says:
        Hi Daniel, you are referring to this? This set up is also possible but lacks the confluence from trendline that I was looking at. If I anticipate your concerns: if you are short selling and looking to square, you can set both as target and exit progressively/ if you intend to buy, it will have to depend on where a bullish reversal and buy trigger will appear.
  2. Daniel Ku Guet Liang says:

    Thanks Tiong Hum. I understand better now. The trend line certainly adds confluence (& confidence). There is an apparant Inverted HS at this point but I am waiting for neckline to break before considering long. [I’ve got this terrible nag of seeing reversal when it isn’t there. =D] Thanks again.

Leave a Reply