Commodity Trade Mantra

Gold, Silver, Copper – All Firmly In The Bear Market Grip

Gold, Silver, Copper – All Firmly In The Bear Market Grip

Gold, Silver, Copper – All Firmly In The Bear Market Grip

Gold Spot price (GOLDS/1,095.82, see Figure 28) finally gave way in the ongoing structural bear market as price plunged below 1,138 (nearly a year/long support). Every rally following the initial breakdown in 2013 has failed to exceed the prior rally, continuing to point to the selling into strength (supply). This secondary break is the next in the process of carrying Gold closer to our targets of 1 ,000 (August 2013 report) over the months ahead and 800. The expectation of significant upside beyond contra-trend rallies into resistance of 1,150/1,200 remains unlikely in the current technical condition.

The target of 1,000 represents the support of the 2 008/2009 consolidation (see circle). The measured move from the back of the 2013/2015 descending triangle formation (see arrow) of 200 points, projected downward, carries toward 1,000. The 2001 uptrend over time intersects with 800, the next potential target, suggested over a year or two.


In spite of a flat S&P 500, the anticipated collapse in Gold has inched this structural portrayal of the S&P 500 / Gold ratio higher (see Figure 29), in fav or of outperformance of the S&P 500 over Gold / (When the line is rising the S&P 500 is outperforming Gold; when the line is falling, Gold is outperforming equities, as from 2001 to 2010.)

This ratio has been one of our historical structural arguments for equities having initiated another structural bull market, and Gold having initiated another structural bear market , when the ratio turned up in 2013, as equities pierced up through the 2007 /2008 highs. The trend should be expected to continue, notwithstanding any near/term cyclical correction / cyclical bear market in equities (during which the ratio could turn down minimally as expected in the course of an uptrend), but not necessarily implying Gold will rally; only that equities may correct.


Last month we included a section “ Don’t Count on Gold Stocks ” showing the underperformance of Gold stocks to the price of the metal. That chart, too, has broken down to a new low from that depicted herein last month. Additionally, the GDX (Market Vectors Gold Miners ETF) has plunged to a new low (see Figure 30). We continue to steer clear of Gold stocks.


For both Gold and Gold stocks, don’t try to catch a falling sword. Price can fall of its own weight s imply from an absence of buyers .

Silver – Breaking Support

Silver Spot price (SILV/14.78, see Figure 31) is inching down below the closing lows of the last year and is addressing the 2002 uptrend. The next support / target is 12, and 10 for silver; resistance 16 /17.


Copper – New Lows

The Copper Continuous Futures Contract (HG1/236.35, see Figure 33), following a rally int o the broken support, now resistance at 300, price has characteristically turned down again to make a new five/year low in an ongoing structural bear market . The next target appears to be 200, after which 1.50, near the 2009 low would come next over months. There is no technical evidence of a reversal beyond normal contratrend rallies along the extending down trend; resistance 250, 300. All momentum models support lower levels.


Given the bear market for this industrial commodity, one might question the strength of world economies, unless there is less of a demand, given the technological industries’ reliance on other commodity inputs. One might also wonder whether China’s pursuit of commodity hoarding led to excessive demand for this and other commodities which, once hoarded, were no longer as sought after.

We have also expressed some wonder as to whether post the financial crisis, the elimination of many trading desks might have dampened the price as fewer were trading; and added to that the hoarding of commodities by banks that had bought the domestic warehouses and pushed prices up by withholding release of the commodities to their corporate owners. Whatever the reasons, the price patterns continue to suggest lower levels ahead.



Courtesy: Louise Yamada

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