For equity bulls, the nightmare is over for now. For gold and silver bugs it’s just beginning. If yesterday’s price action was concerning, the overnight news from Japan has opened the trap door for both metals, which has seen them plunge in early trading, as the Bank of Japan sent shock waves through the market announcing an acceleration of its bond buying program. As a result the US dollar surged upwards breaking through the 86 region on the dollar index chart to trade at 86.74, at time of writing, and now preparing to take out the 86.87 high of early October. With the yen selling off heavily and overnight equity indices rising sharply, the metal markets have been hit hard, with gold falling dramatically through the $1200 per ounce level to currently trade at $1172 per ounce on heavy selling volumes. Yesterday’s volume was also high and reflected the negative sentiment for gold which I have been forecasting, as the precious metal closed the session with a wide spread down candle, breaking through the secondary support level in the $1205 per ounce region, a price now left far behind.
For silver, the technical picture is much the same, with yesterday’s price action closing as a wide spread down candle and ending the session at $16.42 per ounce on ultra high volume, further validating the bearish picture. Overnight the metal has fallen further, currently testing the $16 per ounce level which looks increasingly vulnerable, all neatly summed up by the monthly chart, with the deep area of resistance now clearly defined overhead with the red dotted line, and the potential support platform now waiting below in the $13 per ounce region. As I outlined in yesterday’s post for silver, any move through here could then see silver return to single figures in the longer term, and for gold, a test of the $1120 per ounce region now seems increasingly likely. Both metals are now heavily bearish and likely to remain that way for some time. Whilst equity traders will be grateful for the V shaped reversal over the last few weeks, for gold and silver investors, such a dramatic recovery is something of a pipe dream at present.