The Good, the Bad and the Ugly

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Looking at price changes today across the board in the precious metals complex, you might think that there is nothing good about it, and in the short-term that is probably correct. So, let’s begin today’s article with the bad.

The Bad: Technically Speaking Major Chart Damage Has Occurred

The precious metals took a steep decline with gold having smallest percentage drawdown, however it still declined by 1.59%, which translates to a loss of $20.90 per troy ounce. Currently the most active April Comex contract of gold is fixed at $1289.50. There was major chart damage sustained in that the current 50-day moving average at $1308.80.

At the same time both silver and platinum gave up about 2% on the day.  Silver broke through a key psychological level of $15 per ounce. After giving up 2.05% (-0.313), silver futures are currently trading at $14.985. In the case of silver, on a technical basis pricing had already broken through its 50-day moving average on March 1st.

Silver prices had opened just above the 50-day moving average at $15.63, but once sellers took the market below $15.55 (the 50-day moving average) a cascade of selling orders came in taking the market to $15.27 by the close of trading. That close rested just at the 200-day moving average.

Platinum futures suffered a price decline of $17.80, which is a drop of 2.08%, currently a troy ounce of platinum is trading for $838.70. On a technical basis platinum suffered the least amount of technical damage as current pricing is still above all three major averages which include the 50, 100- and 200-day moving averages.

The Ugly: Palladium Loses $100 Today

The ugly truth is the 14% price decline in palladium prices which have resulted in over a $200 drop over the last two trading days. Yesterday palladium gave up roughly $96 of value, and that was followed today by a loss of $104.40. On a technical basis yesterday’s decline took current pricing to just below the 50-day moving average. Today’s decline included an intraday low of $1303.20, which is only two dollars above the 100-day moving average. Most alarming is this could be signaling a parabolic melt down. Yesterday’s article focused on palladium pricing, where we asked the question as to whether or not history will repeat itself. The simple fact is that the last time palladium prices rose in a parabolic manner, prices declined parabolically giving up almost all the gains realized during the rally.

The Good: Recent Federal Reserve Monetary Policy

While it might be difficult to find any good out of today’s severe decline in the precious metals across the board, John Reade, the chief market strategist of the World Gold Council said, “Investors should look past gold’s short-term volatility and focus on its long-term potential. He explained that a recent report from the council shows that Fed’s abrupt shift in monetary policy should push gold prices higher within the next 12 months.”

According to an article penned by Neils Christensen, editor at Kitco News, the latest WGC research looked at gold prices during the end of the last two Federal Reserve rate hike cycles. This research indicated that the first month after the U.S. central bank stopped hiking rates in 2001 gold prices fell 0.6%, within three months were down 3.4%, but within 12 months gold prices were up 3.6%. The research also stated that when the Federal Reserve stop raising rates in 2007 gold prices were up 7% in the first month, but up nearly 20% 12 months later.

While it is highly probable that today’s decline, which resulted in technical chart damage could take the precious metals lower short-term, However, according to the long-term data and studies provided by the WGC, market participants could witness extreme price advances in the months and year ahead.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer