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Global Trade Desk- Silver and Gold Ready To Break

Daily Client Note

Gold and Silver Bullion Review

Silver and Gold Ready To Break
The last 4-hour chart Silver Bullion (36.40) signal was generated and sent to clients on Jul 11 with a break above 36.15 that targeted 38.90 which has completed its cycle, and now looks ready to hold above 40.00 and test 49.90. The previous Silver Bullion signal was generated on Jul 05 11 with a break above 34.50 that targeted 35.25 which has completed its cycle.

The last Gold Bullion (1530) 4-hour chart signal was generated Jul 05 11 with a break above 1515 that targeted 1525 and subsequently 1575  which has completed its cycle. Gold and silver trade swapped their mixed near-term trends to long across near and mid-term time-frames last week, as highlighted in client notes. This follows violent test of support that recently revealed buy-the-dips patterns of trade on bullion are back in place.

The Daily chart Gold Bullion long signal generated Feb 18 11 with a break above 1395 still has not signaled that it needs to be closed, and is now well enough supported to think that it may just keep plodding higher.

News wires are talking down the value in buying bullion at these levels. Just as they did when gold traded at 675, 795, 990, 1190, 1275, 1350, 1460, 1525, and 1575. The shadow gold and precious metal standard is certainly in place.

Where-To Now: 

    Both Gold and Silver are in a long cycle that will not change until a Weekly chart can close below 1525 and 37.50
    Upside targets will include 1625 on Gold and 41.20 on Silver
    Expect downside moves that hit 1575  and 39.50 to reverse higher, again

This is a technical and sentiment review that is signaling to buy bullion on the major tests of support, and to intra-day trade buying the lows of the previous session that initially target the previous session highs.

Bullion Correlations:
Daily trading range is $18 on gold and $1.15 on silver, which remain below the historical norm, indicating that speculative interest is low on the selling days and that any dips will likely be bought.  The 50-day Simple Moving Average (NYSE:SMA) on gold is at 1525. The 100-day SMA on silver is at 37.60. Gold bullion is losing its 12-month correlation to the euro (Eur/Usd) currency pair.

Previous Signals:
July bullion signals have generated a lot of upside trade potential for clients. The second quarter of 2011 generated eight gold and silver bullion trade signals issued to clients, six of which completed and covered over 19.50 dollars of net movement at Target 1 areas, and 2.10 dollars of net movement at Target 2 areas. The misses came on days that instant volatility hit the global markets in reaction to breaking news headlines. Most signals have been generated from 1-hour chart algorithms. 

Exchange Traded Fund (GLD and SLV) Outlook:
The outlook for GLD (157.80) and SLV (39.90), the exchange traded funds (ETF) that tracks Gold and Silver bullion momentum, is for consolidation above 156.50 and 38.50, and to struggle to easily break  downside support areas. The ETFs are likely to continue to lag behind the main moves seen in bullion futures contract trade, as major price action is taking place ahead of the US session each day.

Strong buying activity was seen at 144.50 on GLD in April, and at 32.50 on SLV in March. These swing point areas have been highlighted to clients, and once again proven to be massive areas of support for mid-term tests of resistance to bounce higher. 

Gold Bullion Technical Section:
The break higher on XAU from 1550, which stood as near-term resistance, has allowed a technical test of 1600 to happen. The sustainability of the move will be determined by the reaction this week to mid-tier economic announcements and more importantly, to breaking news headlines concerning global government debt levels.

Those looking to get on the long side of gold bullion have missed the boat in the near-term, and should patiently wait for a technical pull-back that tests 1550 support. It would seem that buyers will now be entrenched around the 1525 area, which would be a main price point to gauge the strength of the buy-the-dip pattern of trade which has dominated this year.

It was reported to clients over the previous weeks that the 100-day SMA area at 1480 would be a major support point that was unlikely to be easily broken, and a price area to buy gold. It was from that area traders saw the recent bullish run, and an area that is unlikely to be seen again anytime soon.

No new long-term long signals will form on XAU until a Weekly chart closes above 1620. No long-term short signals will form until a Weekly chart closes below 1480.

ABC Potential:
The initial A leg move may be in place, with the move from 1475 t 1615. Any B leg pull-back in price that holds above 1550 this week will set up a potential C leg move that could technically test 1690.

This Week's Call To Action:
Look to buy the next test of support at 1550. The overall outlook on bullion remains bullish, and a buy-the-dip pattern of trade has dominated for two years now. Any short positions need reduced exposure and near-term targets, and should only be taken on the understanding that Gold Bullion trade is currently in a massive bull run that has plenty of support areas.

A 4-hour chart algorithm signal was generated Jul 05 11 with a move above 1520 which targeted 1550, and has now completed its cycle.

Silver Bullion Technical Section:
XAG is at the top of a price channel between 32.00 and 41.00 which was formed in May 2011 that is holding steady after the last test of support found silver bullion buyers. Although not as bullish as the overall Gold Bullion outlook, the potential for Silver movement does draw in a test of 49.00 if the pattern of buying the dips continues through 2011.

The 100-day SMA area at 38.00 has created a solid base for long momentum to build from technically, with little in the way of a potential move towards 42.00 in the near-term.

No mid-term long signals will form on XAG until a Weekly chart closes above 40.50. No mid-term short signals will form until a Weekly chart closes below 34.50.

ABC Potential:
The A leg move from 33.50 up to 36.90 reversed lower to form the B leg with a test of 34.90 support, as highlighted to clients last week. The C leg has tested 39.00 and looks to have completed its cycle. Traders should now be patient and wait for the next test of support to form.

Near-term intra-day signals are all that XAG is offering until a pull-back to support at 37.50 is seen. Buy the tests of support at the previous session low and sell tests of resistance at the previous session high as intra-day trades.

These charts show that a mixed mid-term trend is in place, but also that silver bullion retains a bullish long-term bias.

A 4-hour chart algorithm signal was generated Jul 05 11 with a move above 36.00 which targeted 37.50, and has now completed its cycle. Clients were sent long near-term Trade Signals on XAG and SLV last week that paid out handsomely.

Alternate 24-Hour Trade:
Investors who do not want to wait for their regional cash market to open, or do not have 24-hour access to the market they have open positions in, are able to access the 24-hour currency market. There is potential to analyze and trade currencies in a high-volume market that is supported by the global inter-bank system.

Investors can trade currencies in-line with a rising global market, or trade ahead of a falling cash market open. Being able to use currencies offers the opportunity to be in a trade before the regional market opens.

Traders could trade the currency pair AUD/USD in-line with the potential seen in bullion trade. Buying the US dollar and selling the Australian dollar on days of equity and bullion weakness is a simple process of placing a sell order on AUD/USD. The position can be managed in a similar way that equity-based trades would be bought and sold.

Full detail of any trade signals that form will be emailed directly to clients.