Welcome to the end of a volatile year like no other that was jam-packed with financial market mayhem while in the throes of a global pandemic that has tested humanity’s will to survive. Relatively speaking, my wish is that we are nearer to normalcy than not and the challenges we will ultimately face in the near future will be written in history books as a time when a light at the end of the tunnel emerged. Aside from the pandemic whose virus is currently marching toward a more contagious mutation (Twitter thread), do not lose sight of the contested presidential election that was wrought with fraud and a resolution (or revolution) that will take shape on Capitol Hill between the Electoral College vote on Jan. 6 and the Jan. 20 inauguration ceremony.
While learning fusion analysis for trading and investing, one of my mentors taught me how important discernment is while assessing position decisions within any investment class. If you plan to risk your capital, the ultimate bottom line is price and percentages. No matter what industry your preferred equity or asset revolves around, there will be elements of media-driven noise and fund-a-mental-cases that will distract you from technical due-diligence, such as conspiracy-driven sentiment vs. an earnings report and what a technical analysis of the price chart is telegraphing. I have followed that same line of thinking while learning and writing about the pandemic by focusing on gene sequence evolution and how global governance reacts vs. rampant “covidiocy” that lacks common sense.
Let’s move onto a brief overview of gold and silver’s 2020 price action and a follow-up to “Gold and Silver are Primed: Technical Analysis” (Twitter thread), published on Dec. 8. To view a larger version of any chart below, right-click on it and choose your “view image” option.
“Technicians often ask fundamentalists… ‘Do you want to be intellectually correct or do you want to make money?’” – @RealMoney
Gold Spot weekly and daily chart as of the Dec. 31, 2020 close…
In 2019, the price of gold closed at $1,549 per ounce and in 2020, it printed a low of $1,451 in March and a high of $2,074 in August, with a close at $1,893 (futures at $1,901) today. 2020 ended with a 34% gain at the August high and a 23% gain at today’s close. Despite all the noise and whining from the bleacher seats, gold had an excellent year with numerous chances to scalp or swing a hefty profit and opportunities to ladder long-term core positioning in this bull market.
Excerpt from the Dec. 8 chart analysis:
“I suggested that the metals would get a boost as soon as Capitol Hill finalizes a CARES Act II ‘stimulus’ bill to keep the economy afloat due to the pandemic’s second wave taking its toll… The price action in gold and silver is making some upward progress as we approach the holiday season, but they are not yet out of the woods or breaking out… After an extended period of chop and consolidation since the Aug. $2,074 high, the odds are high that gold printed a bottom at $1,764 on Nov. 29… If the price action can sustain upward momentum through the $1,880 overhead lateral, the previous all-time high of $1,920 and the Flag’s topside trendline will be an easy target without much resistance. If that scenario plays out, a retest of $1,980 can arrive quickly.”
Take note of the 50 Exponential Moving Average (EMA) position on both charts.It acted as support for the weekly candlestick on Nov. 30 at the $1,764 low/pivot and is currently providing support on the daily chart since Dec. 17. The daily price action is traveling within a narrow Up Channel since Nov. 30 and today’s closing price is only a few dollars shy of the Half Staff Flag’s top-side trendline at around $1,905. The DMI-ADX on the weekly chart remains indecisive, but on the daily, it is trying to set up a power-uptrend Alligator Tongue. The StochRSI on the daily is already bouncing around overbought territory with the recent rise in price where it could remain for an extended period, but it is just beginning to show an upward trend on the weekly. Volumes are steady across the board but a downtrend continues since the Aug. $2,074 high and needs to reverse. As noted on Dec. 8, the chart is bullish and ripe for intraday scalps, with caution until $1,980 is taken out decisively.
Silver Spot weekly and daily chart as of the Dec. 31, 2020 close…
In 2019, the price of silver closed at $18 per ounce and in 2020, it printed a low of $11.22 in March and a high of $29.82 in August, with a close at $26.27 (futures at $26.52) today. 2020 ended with a 66% gain at the August high and a 46% gain at today’s close.
Excerpt from the Dec. 8 chart analysis:
“The price action in silver remains sticky between two sets of Fibonacci confluences… the price of silver is already testing the topside trendline of a Flag pattern drawn back to its Aug. high.”
The Flag pattern was decisively breached to the upside on Dec. 16 after taking out the 50 EMA with a large buy Volume spike on the daily chart. The StochRSI setup on the daily and weekly is nearly identical to gold’s, but the DMI-ADX on the weekly is less indecisive with a slight upward trend. Despite the two spikes that propelled the price above the 50 EMA and Flag’s topside trendline, the overall Volume trend remains downward. The silver chart is in a better position for near-term gains as long as gold continues a steady uptrend into the New Year. Trade cautiously until the topside Fibonacci confluence is taken out with conviction.
Jim Rickards: Brace for a Great Escape from the Dollar and a Flood of Money into Gold and “The New Great Depression” – Stansberry Research, Dec. 21
Plan Your Trade, Trade Your Plan
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