There is a lot to cover before gold and silver begin trading overseas this evening and tomorrow morning in the West. Let’s first look at the Commitments of Traders (CoT) Futures report vs. the gold and silver price action, then view where the precious metals are with annual seasonality in mind, a technical analysis of the weekly gold and silver spot charts, and close shop with a link garden of articles to consider since my last analyses.
The first two graphics below represent one year of gold and silver spot at the Jun. 9, 2023 close, overlaid with the CFTC’s weekly CoT report data from Jun. 6 that was released on Jun. 9. Released data in the CoT report lags by one and a half weeks. The purpose of the overlay is to help identify the near-term price trend based on contract positioning by the commercials (e.g., institutional, hedgers, bullion banks), non-commercial large specs (e.g., hedge funds), and small specs (e.g., retail traders). Note the overall balance between long and short positioning. Open Interest (OI is the green line) does not necessarily mirror price direction. Positioning starts to reverse when price is approaching an overbought or oversold inflection point. Almost without exception, commercial traders build short positions during a rising price trend and add longs when price is falling. Large specs add long and/or short positions to capture a momo play within a price trend. Note on the silver CoT that an exception to commercial vs. large spec positioning occurred in late summer 2022 when commercials were briefly net long and large specs were intermittently net short. That scenario indicates an extreme oversold condition and a powerful rally is usually just around the corner. Silver subsequently rallied $7 (40%) until early Jan. 2023. When large specs were briefly net short in early March, a smaller $6 (30%) rally took place in early spring before the price action retreated into a seasonal downtrend. The current CoT data for gold and silver is unknown and the Fed’s FOMC monetary policy announcement on interest rates is slated for Wednesday (2023 Schedule). The impact on the CoT will not be available until its release on Friday, June 23.
CoT vs. gold and silver weekly chart…
Futures Seasonality for gold and silver as of Jun. 9, 2023…
Below is a technical analysis of the weekly chart for gold and silver spot. Be mindful that a window of opportunity for swing or scalp trading ETFs, mining stocks, or futures contracts does not necessarily equate to timing for buying physical bullion or coins (American Silver Eagle coin premiums remain in record-high territory and Gold Eagle premiums are elevated). A weekly candlestick chart focuses on the potential price movement for a few weeks. To view a larger version of either chart below, mouse over it and select or right-click and choose a view image option.
Gold spot weekly chart as of Jun. 9, 2023 close…
“A Broadening Right-Angled Descending Formation pattern has developed since the 2020 high and subsequent price chop… Upward breakouts from that type of pattern occur roughly 64% of the time. Gold rallied a remarkable $345 within an Up Channel after the pivot off a Triple Bottom consolidation above the $1,611 lateral support… Remain cautious of geopolitical and economic news-driven volatility while scalping intraday trades. Support is currently at the 50 Exponential Moving Average (EMA).”
“There were two weeks of consolidation above $1,810 before a pivot off the 50 EMA… A subsequent thrust to the upside occurred when Silicon Valley Bank news hit the headlines and never looked back, which resulted in a $200 rally that printed a $2,010 high during the afternoon of Mar. 20… The all-time high at $2,070+ is the next major resistance level. Seasonality dictates that further gains are possible before the price action consolidates through mid-spring into early summer… The chart is bullish, but I remain neutral until the current consolidation finds a direction through spring.”
“Gold printed a $2,049 high three weeks ago, a low at $1,969 two weeks ago, and closed at $1,989 last week. The price action has continued upward along the Ascending Scallop until consolidating at the highs within a Flag Tilt since mid-March… There is very little resistance left between $1,980 and the all-time high zone between $2,070 and $2,075 at the Broadening Right-Angled Descending Pattern’s topside trendline… All the EMAs remain lined up in a bullish trend… The chart is bullish, but I remain cautious until the current Flag consolidation finds a direction and the all-time high is left in the dust.”
The Flag Tilt resulted in a new all-time high for gold spot at $2,078 (COMEX Futures $2,085) during the first week of May, but barely breached the Broadening Right-Angled Descending Pattern’s topside trendline. Resistance in the $2,070s halted further gains and the price closed on a bearish Plunger Candle (aka Shooting Star). The pullback found support at the 21 EMA over the last three weeks with a low at $1,932, and this past Friday closed at $1,960 (COMEX Futures $1,977) with an indecisive Green Candlestick below the 78.6% Fibonacci retrace level. Seasonality has held true this year and a summer rally appears to be in the cards. This upcoming week the Fed’s FOMC is slated to announce its next monetary policy move on Wednesday. Since the Eurozone officially announced that its economy is in a technical recession since early 2023, and odds are high that the Fed will pause interest rate hikes that will likely rally gold and silver before the U.S. declares a recession. The ongoing war in Ukraine is a geopolitical wildcard.
The DMI-ADX is in an extended power trend setup within a second upside wave since January, StochRSI is partially oversold, Momentum, Money Flow, and the Commodity Channel Index (CCI) are relatively flat but elevated, the CoT report data stagnated last week, seasonality indicates more consolidation, and sell Volume was falling through the current pullback which is positive. The chart is bullish, but I remain cautious until $1,980 and the all-time high are taken out decisively on strong buy Volume.
Silver spot weekly chart as of Jun. 9, 2023 close…
Excerpt from the Mar. 1, 2023 weekly silver chart analysis:
“Silver is neutral until the overhead 50 EMA is taken out again and the Descending Broadening Wedge’s topside trendline is decisively breached. Remain cautious of geopolitical and economic news-driven volatility while scalping intraday trades.”
Excerpt from the Mar. 31, 2023 weekly silver chart analysis:
“Following two weeks of consolidation below the 200 EMA, silver blasted through the 50 EMA without hesitation on the SVB implosion. The rally has not had a breather on the weekly chart but has hit a $24.15 resistance at the Descending Broadening Wedge’s topside trendline just above the 50% Fibonacci and lateral resistance due to the choppy price action from Dec. 2022 and Jan. 2023. The next resistance level is $25.70 to $26. Seasonality dictates a pullback beginning in mid-April until early summer and a reason to be Johnny-on-the-spot… There could be a powerful rally if silver leaves the Descending Broadening Wedge’s topside trendline in the dust. The chart is bullish for early April but neutral into mid-spring.”
“Silver breached the Descending Broadening Wedge’s topside trendline during the first week of April and tapped the $26 resistance three weeks ago at the 23.6% Fibonacci level. Like the gold chart, the price action continued upward with the Ascending Scallop but is consolidating within a Half-Staff Flag instead of a Flag Tilt. Last week’s candle closed as a bullish Long-Legged Doji that could be indecisive in the near-term leading to a bit more downside or lateral chop… Recessionary pressures could temporarily suppress silver’s price since 50%+ of its demand is industrial use. That scenario could mirror any downside in gold if large speculators sell gold contracts for cash liquidity to cover margin calls in a plunging stock market… The EMAs are still lined up in a bullish trend, but the volume remains unremarkable. The next resistance level is between $27.50 and $29. The chart is bullish, but caution is warranted until $29 and $30 are decisively left in the dust.”
An Up Channel formed that’s in a second wave and printing higher lows and highs since last fall’s low. Silver’s Half Staff Flag rallied to a $26.13 high in early May and morphed into a Loose Flag, then a Throwback formed a bullish Falling Wedge that printed a $22.68 low two weeks ago where the price action pivoted off the Descending Broadening Wedge’s topside trendline and 50 EMA. Last week’s high was $24.52 on a Green Candle that closed above the Falling Wedge’s topside trendline at $24.29 on Friday.
The DMI-ADX is still trending positive, StochRSI is partially oversold but attempting to recapture an uptrend, Momentum, Money Flow, and the CCI are relatively flat but elevated, the CoT report data stagnated last week, seasonality indicated more downside or consolidation, and sell Volume was falling through the current pullback which is positive. The chart is bullish, but I remain cautious until resistance at $26 and $27 are breached, and $29 & $30 are taken out decisively on strong buy Volume.
Let’s close shop tonight with a few articles to consider since my last analyses:
- Mexico expeditiously approves strict mining reform laws – Reuters
- The Air Has Come Out of the Dollar – WSJ
- Gold rush: Why Egyptians are paying sky-high prices for gold – Ahram
- Gold Demand Trends Q1 2023 – World Gold Council
- Central Bank Gold Buying Off To A Record-Breaking Start – ZH
- De-dollarization means gold has a ‘long way to run’ – Market Insider
- Ancient Ukraine Coin brings $5 million+ at Auction – Armstrong Economics
- JPMorgan recommends adding to cash and gold holdings – Bloomberg
- Poland Resumes Buying Gold – Peter Schiff
- The new gold boom: how long can it last? – Financial Times
- Iraq Boosts Gold Reserves by 2% in Single Day – Bloomberg
- With New Round of Demonetization Indians Turn to Gold – Peter Schiff
- Americans Rank Gold as Second-Best Long-Term Investment – Peter Schiff
- Jim Rickards Drops Bombshell – Daily Reckoning
- China’s Gold Binge Extends to Seventh Month – GoldFix
Silver Institute Outlook On Silver Demand, Prices & More – CNBC, May 8
UPDATE June. 13:
Gold Could Reach $2,500 Amid A Flight To Safety – Blue Line Futures
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