In 2012, both the SPDR Gold Shares Trust (NYSEARCA:GLD) and the iShares Silver Trust (NYSEARCA:SLV) underperformed the S&P 500 (NYSEARCA:SPY). The SPY returned 13.47% to investors while the GLD and SLV returned 6.50% and 9.02% respectively. I believe that there are buying opportunities in both GLD and SLV for a move higher in the short term. If you are looking for an area to start building a long term position in precious metals I believe this recent move downward may offer a good opportunity.
Short Term Buying Opportunity in Silver
On December 20th, SLV Traded down to the 61.8% Fibonacci Retracement level at 28.67. The 61.8% support level has held for the last 6 trading sessions and the SLV has started moving higher off this level. Below I have quoted Investopedia.com for the Definition of 'Fibonacci Retracement':
A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going higher). The Fibonacci retracement is the potential retracement of a financial asset's original move in price. Fibonacci retracements use horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before it continues in the original direction. These levels are created by drawing a trendline between two extreme points and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.
Also a major trendline, which should offer strong support, is nearing the current trading price. I believe over the next couple of weeks SLV will fill the downside gaps that took place from December 18th through 20th and return to the short term trendline resistance.
Short Term Buying Opportunity in Gold
On December 20th, the GLD also traded down to and held its 61.8% Fibonacci Retracement support level at 158.36. Since holding this level, the GLD has closed above the 50% Fibonacci Retracement level at 161.39. I see holding above these key levels as bullish sign in the short term for the GLD. As with the SLV, there is a major trendline nearing the current price level. This trendline should act as support and take prices higher. I believe GLD will make a move back up to its October highs at 174 over the next couple of months.
The prospects for gold and silver to make a move higher in the next couple of weeks and months are good. I believe prices will rise due to underlying technical support as well as the normal seasonality in the gold and silver markets. If you are looking for an opportunity to start a long term investment in either of these precious metal I believe now would be a good area to start building or adding.
Disclosure: I am long SLV, GLD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. I am long Jan 2014 33 Calls in the SLV