COMMODITIES

The seasonal analysis on gold correctly identified the major summer low and the daily technical studies now indicate that the recent correction is likely over explains MoneyShow’s Tom Aspray.

It was another rough session for stocks Thursday and further overnight selling in Asia will again hit stocks early Friday. The closeness of the major averages to long term support and the oversold technical readings makes an oversold bounce likely by the middle of next week

Just a week ago the precious metals were hit hard as the December Comex gold contract lost over $36 per ounce and the Spyder Gold Trust (GLD) lost over 2%. This drop likely shook out the remaining weak long positions as both gold and silver have since rebounded nicely.

This rally has turned the daily technical studies slightly positive. As was the case last summer the technical and seasonal analysis both favor higher gold prices as we head into year-end. The seasonal chart from July shows that prices typically correct in October before again turning higher in November.

The next major seasonal high typically occurs in February. The December Comex gold contract peaked on February 29, 2012, at $1800.90 and then dropped to a low of $1535.40 in May. As I discussed in August, the monthly and weekly technical action indicates that gold will make new highs in 2013.

The leading gold and silver ETFs could see one more pullback in the next week, which is likely to be another buying opportunity, let’s look at the evidence.

chart
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Chart Analysis: The Spyder Gold Trust (GLD) has bounced 3.5% from the correction lows at $162.30. GLD found support between the 38.2% and 50% Fibonacci retracement levels as the daily uptrend, line a, was briefly broken.

  • The 50% retracement support is at $161.30 with the 61.8% support at $158.29.

  • The daily OBV has moved back above its WMA but is still below the bearish divergence resistance at line c.

  • This divergence warned of the short-term top in early October.

  • The weekly OBV (not shown) tested its WMA on the correction but has now turned higher.

  • The close Thursday was above the 20-day EMA which is just trying to flatten out.

  • There is next resistance at $168.50 and then stronger in the $170-$172 area.

  • The next upside target is the 127.2% Fibonacci retracement level at $177.31.

  • There is minor support now in the $165.60 to $166.50 area.

The iShares Gold Trust (IAU) shows that the daily starc- band was tested on November 2. The low also tested the converging chart and trend line support, lines e and f.

  • On the chart I have drawn in red what a pullback over the next week might look like.

  • There is next resistance in the $17 area and then at $17.20-$17.40.

  • The 127.2% retracement target is at $17.80

  • The daily on-balance volume (OBV) has been stronger on IAU than GLD on the recent rally as the downtrend, line g, is being tested. Volume has been strong over the past few days.

  • The OBV is well above its WMA and it could be retested on a pullback.

  • There is short-term support now at $16.50-70 with the recent low at $16.29.

  • The 50% Fibonacci support is at $16.20.

NEXT PAGE: Let’s Look at Silver Next

Tickers Mentioned: Tickers: GLD, IAU, SLV, SIL