All That Glitters Isn't Always Gold

When it comes to trading the metals, gold and silver have always been been in the limelight. Everyone seems to be focused on these two metals but if you're brave enough to look beyond gold and silver you'll quickly discover that copper, platinum and palladium have been on a tear over the past few months.

In the above chart you can see how platinum, palladium and copper have been performing better than gold and silver since late February. One possible reason for this strength may be due to the stimulus package but as a technician I really don't care why, I'm more interested in reading the charts. Money has been leaving gold and silver and moving into base metals such as copper and zinc. Platinum and Palladium seem to also be in demand and are in obvious uptrends.

I'm sure at some point gold and silver will turn around and head back up but for right now the choice metals appear to be copper, platinum and palladium.

Silver- The Choice Metal

One of the strongest ETFs out there right now has been SLV (silver). This ETF has been moving higher since last November but has really accelerated to the upside over the past 4 weeks. Gold has also rallied nicely but silver has outperformed gold and is the choice metal in my opinion.

Part of the reason for silver's strength over gold is due to the long-term chart below. What we have here is a ratio chart of Silver vs. Gold over the past decade. As you can see, this ratio has held major support and is now moving higher. What this chart is telling us is that silver is undervalued compared to gold and that silver should now continue to gain over gold in the month's to come.

If we look at the chart above you will see that silver is now testing a resistance area which means this is NOT a good place to get long especially since silver is overbought. What I'm looking to do is buy a pullback to the 50 day moving average followed by some kind of buy trigger such a stochastic buy signal or a bullish candlestick formation etc.

Whether the metals continue to rally remains to be seen but if they do maintain their uptrends I think silver will be the metal to buy.

Platinum Futures Consolidating

Platinum is a market that most people do not follow for various reasons but I prefer to keep an eye on this metal because it sometimes can be a leading indicator for gold and silver. For example last June Platinum began showing weakness ahead of the collapse of gold and silver. A trader who was watching platinum futures would have been tipped of to the coming decline in the metals.

In the above daily chart of platinum futures you'll notice the contracting bollinger bands which usually means a trending move is about to unfold. I think it would be wise to watch this market for a breakout as this may give us a clue to gold's next move.

Gold Moving Higher

Today gold had a nice move to the upside making a 2 month high. As you know I've been bullish on gold since June 24th based on several technical factors. I think we'll see new highs for the year in this metal so I'm going to sit tight with my long position. My protective stop is not right below the June 25th low.

HUI Gold Bugs Index Looking Bullish

I think the above chart needs no explanation so I'll just say that the inverse head and shoulders bottom is bullish for gold stocks.

Platinum Makes A 10 Week High

As you know I've been bullish on Platinum based on its relative strength versus Gold and also because it's in a long term uptrend. Earlier this month I posted a chart of
Platinum vs Gold and you can see that chart by clicking here.

Platinum appears to making a move up and has made a 10 week high. Platinum is clearly the strongest metal and my upside target for this market is the highs from March.

Platinum Continues To Be The Strongest Metal

Two weeks ago I wrote a few comments as to why I was bullish on platinum. As you can see in the above chart, platinum continues to remain strong making a new high for the month while gold got hammered today.

Watch Platinum

If you're trading gold or silver, it's always a good to watch the entire group of metals for divergences at turning points.

Above is a daily chart of Platinum, Palladium, Silver and Gold. As you can see they all trend together but if you look closely you can find divergences. For example: On March 17th both gold and silver made a new swing high but platinum and palladium did not. A few days later the metals all sold off sharply. Now we have silver and gold taking out last month's low but platinum and palladium did not. In my opinion this is bullish and I think we may see a rally in the metals in the next few days.

Which metal am I the most bullish on? It would have to be Platinum. Platinum has been the leader of the metals and that's why if you are trading gold and silver you should also be watching platinum.

Platinum Makes New Record Highs

Has anybody seen what Platinum has done lately? Over the past 2 days Platinum prices have exploded higher on increasing supply problems in South Africa.

Above is a daily chart of Platinum and below is a 7 year weekly chart. As you can see, platinum is one of the strongest metals right now. Platinum has also pulled gold and silver higher as all 3 metals tend to trend together. I personally feel gold is vulnerable to sell off, but I will NOT look to pick tops, I'll just remain on the sidelines and observe.

Gold Stocks Leading The Way Higher

Gold stocks were one of the strongest groups today as GDX rallied over 4%. I've been posting numerous times over the past few weeks how these gold stocks should rally and now we're beginning to see money flowing into them.

As you can see in the above chart GDX is much closer to breaking the year high than gold is (see previous post for a chart of GLD). Gold stocks are clearly stronger than gold. If you look in the lower pane you will see the ratio line of gold stocks vs gold. A rising line indicates gold stocks are outperforming the metal. The ratio line rose again today even with gold being up 8 dollars which goes to show how strong these stocks really are.

Gold Stocks May Be Getting Ready To Rally

As you know I am bullish on silver and gold (mostly silver) but now I am also becoming bullish on gold/silver stocks as well.

Above is a dialy chart of HUI (gold bugs index). What I've noticed is that this index tends to make bottoms every 3 or 4 months. It appears to me that the last cyclical low was made last month which means gold stocks should begin to rally soon if I am correct with my analysis.

In the lower pane is the stochastic oscillator which has been very helpful in identifying the cyclical lows. Every time this oscillator moved below 20 and then turned back up above 20, the HUI index bottomed and a rally followed.

If I am correct, the HUI index should rally to at least 370 which would be a new year high.

Silver Getting Ready To Rally?

I'm profitable on my long silver position again as both gold and silver were up today.

You'll notice in the above chart that silver is showing relative strength compared to gold. Gold took out last month's low while silver is putting in what appears to be a higher low. I take that as a sign of strength and a sign that maybe a rally will take place in the very near future.

I'm going to sit tight with my long SLV position even though there are many people who are negative on the metals. We'll see what happens.

Silver And Gold

Silver and gold were up today and I am now showing a small profit on my long SLV position.

The last week or so I've been saying that silver should become stronger than gold and if you look at the above chart you will see how much stronger silver is compared to gold.

Last week the metals had a sharp sell off with gold taking out last month's lows but if you look at silver's chart you will see a higher low. This to me is a clear sign that silver is becoming stronger than gold. Hopefully these metals will continue to rally in the weeks to come.

Silver Forming A Bottom?

I usually don't post before the open due to the lack of time, but I wanted to post this chart of Silver because I will be watching it today and the days to come for a possible buying opportunity..

Notice in the above chart how Silver tends to make bottoms around its 200 day moving average. Every bottom over the last year has developed at this moving average.

In the lower pane is the stochastic oscillator. Notice how every bottom coincided with the stochastics moving below the buy line (red line) followed by a turn up in the oscillator.

Over the last few days Silver has formed a small 1-2-3 pattern which on its own can signal a possible buy. When you combine the 1-2-3 pattern with the oversold stochastic reading and the 200 day moving average support level, I think the odds favor a possible rally in the near future.

I think the risk reward is good on this trade. I'll be a buyer of SLV if point 2 is taken out.

I also would like to say just because things are lining up does not mean this trade has to work. Always risk a small amount of money relative to your account size on every trade and always use stops. My protective stop for this trade will be below point 3 should I get long this market.

Palladium About To Move Higher

Above is a weekly chart of palladium. This metal looks like it's about to breakout of a weekly consolidation pattern. Notice the low ADX reading and how palladium has been consolidating at the 360 level. I think a move above 360 could send this metal back up above 400.

Silver Up, Gold Down

Just the other day I wrote about how silver should become stronger than gold and today was a great example of that. Gold was down $3.70 today while silver was up 5.50.

You can see the ratio line is moving higher as money moves into Silver. I think both metals will trend higher, but silver is the one I really have high hopes for. We'll see what happens.

Watch Silver

As you know I am bullish on both Gold and Silver and I'm long GLD and SLV which are the ETFs for gold and silver.

In the above chart we have silver compared to gold (black line) and SLV in red. In my opinion I think we are going to see silver begin to outperform gold in the coming weeks.

The relative strength line has made a 4 week high today which means silver is becoming stronger than gold. I think Silver will be the better metal to be long.

Gold And Silver

I'm so tempted to buy Gold and Silver next week but my fear of a rising yen is holding me back from taking action. I think if the Yen has another leg up, money will move out of the metals causing them to go lower. I don't feel like getting caught.

What I like about the above chart is that the long term trend is up which we can all see by looking at the very large swings on a weekly chart (not shown). As long as the swings are making higher highs and higher lows, the long term trend is up. The reason I'm tempted to buy the metals next week is because now the short term trend appears to be moving higher. Silver just put in a higher low and is making a higher high, gold looks like it is about to do the same. So now we have the daily trend possibly turning up while the weekly trend is still up. Maybe I'll buy some metals next week...I'll see how they hold up if the yen rallies. Decisions... Decisions.. Decisions...