One of the respected technical analysts we have been following is Louise Yamada. Her independent research company provides in-depth and thought-provoking analysis on all markets, including precious metals. She has a background of 25 years as Managing Director of Technical Research at Citi.
We have been following Yamada’s work for a long time and appreciate her analysis because it is truly unbiased, very sharp and broad (it covers plenty of markets worldwide). An outstanding feature of the analysis is that readers are offered different perspectives on each market, which sometimes reveal trends that are not very visible. For precious metals investors it helps to put the market activity of metals in a broad perspective of ongoing market trends. Understanding broad market activity is helpful to interpret the state of the metals market.
The following is an excerpt from Yamada’s latest monthly update for premium subscribers, released earlier this week. We were granted permission to release the analysis related to the precious metals. We recommend subscribing to the monthly in-depth analysis of Louise Yamada on www.lyadvisors.com.
Gold Spot price (GOLDS-1.299.62, see Figure 23) is following the technical adage “the bigger the drop, the longer the need for repair.” Gold has now spent one year in a range between 1,400 resistance and 1,200 support, direction unknown. This is a normal part of the process of repair, if price is to move higher at a later date. A neutral pattern can also precede another decline in an ongoing downtrend. Monthly momentum is still negative but flattening, and weekly momentum is positive but flattening. Neutral remains the trend until one of the above parameters is breached. The brief attempt to penetrate the 2012 downtrend (dashed line) was aborted and price is interestingly back below and so far, rallies are struggling there.
It pays to step back and look again at the longer-term relationship of the S&P 500 (SPX) versus Gold (see Figure 24), a ratio that has shown the outperformance of Gold (falling ratio line) from 2000 to 2011 during which equities were experiencing a bear market into 2009, and the rising ratio now, which depicts the SPX outperforming Gold.
The five-year base and breakout suggest that a new structural advance in equities versus Gold is now in place, and that any interruptions, as may now be noted, is nothing more than a short-term interruption to the new structural outperformance trend for equities. Thus one might make a deduction that Gold could either remain flat, decline further, or go up less than equities.
Silver Spot price (SILV-19.50) has not fared quite as well as Gold and again is tickling support near 19 and holding below both MAs as depicted herein last month. Risk remains at 18 and only a lift through the 200-day MA at 21.10 and the downtrend line at 21.60 would suggest potential for a rally.
Platinum spot price (PLAT- 1438.25) depicted herein last month, has moved little, retaining a sideways pattern above support at 1,400-1,325. The three-year downtrend remains in place and weekly and monthly momentum are barely positive and barely negative respectively 5 effectively neutral. Price still would need to exceed 1,500 to reverse the more negative bias of the downtrends.
Palladium spot price (PALL-811.65) is the only metal to definitively break out of a two-year consolidation through 800 (see Figure 26) with a confirmation in the monthly momentum just turning up to positive. Price may now address the 2011 high near 860 and could even progress beyond over time. Support now lies at 785 and 750, the uptrend from 2009.
Subscribe to the monthly analysis of Louise Yamada on www.lyadvisors.com for in-depth insights on ongoing market activity.