By Bryan from PitchforkPlayground.com:
The precious metals are in a secular bull market which will likely last 15 to 20 years, perhaps longer. Given its start in the 1999-2001 timeframe, that means the current bull should run until 2014 to 2021.
According to Richard Russell all bull markets have three phases. The third phase is marked by mania and a parabolic rise into a peak that is higher than even the staunchest bull expects.
It is important to maintain a big-picture perspective as this multi-year correction in Gold grinds on. Unfortunately, it appears that we have some more pain to endure since both Gold and Silver are breaking below significant support levels.
Let’s take a look at the Gold and Silver charts and see what’s going on. Most of the charts in this letter use Heikin Ashi (HA) candlesticks, a variation of the traditional Japanese candlesticks. The HA candles filter out some of the noise in a price chart and make it easier to focus on trends.
In this monthly chart of Gold it is obvious that the current trend is down even without the HA candles. Here are the major take-aways from this chart:
- Gold is currently in a downtrend within the black price channel
- There is horizontal support in the $1130 to $1160 range and Gold is currently flirting with the bottom of this
- Gold could spike down to test the $1100 round-number and still remain within the price channel – below
$1100, support at the bottom of this channel becomes resistance
- If support in the current area fails there is no significant support until price reaches $1040 to $1000
- Gold can drop all the way to the long-term trendline and still remain in the secular uptrend that started in the
1999-2001 timeframe – this trendline support is in the $890 to $940 range, depending on how you draw the TL
- Gold won’t return to full-on bullish conditions until price breaks above the red downward-sloping trendline
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