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

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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.   Soh's Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX.   Disclaimer notice: "I do not have a financial advisor's license. I am not qualified by any regulator to give financial advice. I do not know you the reader. Your investment means and motive may be different from me. My posts here are based on observations and meant for education. I am not responsible for for any consequence from your actions."
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