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Precious Metals - Why Less Is More

June 24, 2020

From the desk of Tom Bruni @BruniCharting

When it comes to the analysis of Precious Metals, we can make it as simple or as complex as possible. There's no shortage of ratios, risk appetite measures, individual stocks to analyze, etc.

In this post, we're going to take a step back and focus on the assets we're trading rather than all of the other junk.

First, let's get a long-term view of the trend in Gold. A CMT Designation is not needed to see it's clearly higher...and that's in US Dollars. Look at Gold in all the other G-20 currencies and you'll see a similar picture of strength.

Click on the chart to enlarge view.

And here's Gold's daily chart that has frustrated many participants for the last 6-8 weeks. Despite its lack of upward progress, there's nothing bearish about this consolidation. Prices held in above support while the other "safe haven" assets sold off...and momentum remained in a bullish range.

Yesterday we made new daily closing highs, signaling that prices may be ready to emerge from this "bull flag" consolidation. Could this initial push fail? Absolutely, but as long as prices are above support near 1,670-1,680, then the short-term trend in Gold remains intact.

Here's Silver back at the top of its range after a failed breakdown below 13.70 in March. It's been rangebound for the last 6 years, so until we get a decisive move above 19.00, there's really not much to do here. It was a great trade when it got back above support, but our target was back at the top of the range...and we're there.

On a daily timeframe, Silver's action remains constructive. As long as prices are above 17.00 then this "bull flag" remains intact, working through the overhead supply at 18.90-19.00 over time.

Given the preceding trend is higher, Silver is innocent until proven guilty by prices breaking below 17.00. At that point, we can question the integrity of the Precious Metals' rally, but for now, a little patience continues to go a long way as there's no reason to be long OR short until this range resolves.

Here's Platinum. After a massive failed breakdown, the bias is higher as long as prices are above support at 750-775. Is it messy long-term? Absolutely, but the case for being long is much stronger than the case for being short as long as prices are above support.

And here's Platinum's daily chart. Less tight than the consolidations in Gold and Silver, but still above its highs from mid-April to mid-May. As long as prices are above 790, the bias is still to the upside.

I didn't mention Palladium here since we did a piece on it recently, but the level there is 1,740. If Palladium is above that level, then patience continues to be the best course of action as the bias is still to the upside.

As a person who sometimes likes to overcomplicate things and is frequently impatient, the recent action in Metals and Miners has absolutely driven me nuts. It's tempting to look at every ratio and intermarket relationship in our book in an attempt to find out if these consolidations in Metals are the real deal or if they're bound to fail.

And by tempting, I mean I've looked through them all.

Guess what? Rather than clearing up the picture, it created a hot mess of mixed signals that distracted me from paying attention to what the prices of these assets are actually doing.

As a result, let's keep it simple. Based on the charts above...Metals are simply consolidating their recent gains and setting up for their next move. Gold has been the leader, so if it heads higher then the rest should participate. If, however, this breakout fails then we'll watch all of the downside levels we outlined as that would invalidate these "bull flags" and suggest a meaningful change in the space could be developing.

Given the consolidation in Gold is currently resolving higher, our comprehensive piece on Gold Mining stocks and quick piece on the debate of owning Gold or Silver from early May both remain relevant today.

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Thanks for reading and please let us know if you have any questions!

Allstarcharts Team

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