Precious Metals Must Make A Stronger Statement Still

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 |  Includes: GLD, SLV
by: Gary Tanashian

Yesterday was an impulsive looking move and something of a statement in itself. But now technically, the metals and miners need to gather themselves (after a potential pullback on profit taking) and make a real statement.

Yesterday was the booster stage (gap up), and another leg up from here would give the precious metals complex the velocity to do some real damage with respect to upside targets. That is because important resistance zones are now at hand. While a pullback would be normal, gold bugs obviously do not want to see a terminal velocity situation where yesterday's momentum erodes beyond normal profit taking.

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As we have noted in our newsletter, NFTRH, gold has significant visual and moving average (50 day) resistance at and around 1350. The relic always was going to at least pause at this level. Now the real work comes in. Volume, for the ferocity of the price rise, was not inspiring.

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Silver's significant resistance starts coming into play at 21. It must break the flag to the upside and challenge one of the two noted resistance levels.

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HUI did break a flag of its own yesterday, which was something we wanted to see. That after an ongoing bullish divergence by daily MACD. Notably, HUI popped over the 50-day averages for the first time during the post-October bear market leg. So, are the miners leading?

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Well, they are making a move to do just that by rising above the 50-day averages and breaking a trend line in relation to both gold (top) and silver (bottom). This simply must be maintained, no ifs ands or buts, for the precious metals complex to continue looking prospective for upside targets.

There is much more to the picture than the above charts, however. It is simply vital to track gold's relation to assets that are positively correlated to the global economy. That is where the real work takes place in understanding precious metals macro fundamentals, and these signals - which also got a boost yesterday - must remain on track for the rally to attain significant targets and/or morph into a new bull market phase.

Gold-Oil, Gold-Commodities, Gold-Stock Market, etc… That is all the geeky stuff that we will continue to do on a weekly basis so that we can define what is in play every step of the way. If the 'real' price of gold rises, then we've got something cooking - and not just for the precious metals. The implications would spread out to the entire macro environment. So watch everything, not just nominal gold, silver and HUI.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: No positions mentioned, but long the precious metals and would get longer if the sector gives firm signals.