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Trading On The Mark

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Trading On The Mark

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Can Gold Follow Silver To New Lows?

In our most recent public article about precious metals, we charted a path for silver that would take price below the low of 2013 and that could reach considerably lower this autumn. Last week, silver achieved a new low, and it is now testing one of our target areas - a support that we think will not hold.

Can gold also break lower? So far, it has traced a path that is consistent with our primary Elliott wave scenario which predicts lower lows. However, our current projection in that scenario suggests that price probably will not fall below the level of the 2008 high near $1,103. Thus, although bearish trades are becoming more risky as we approach an expected autumn low, there may still be an opportunity to profit from the decline on a weekly or daily time frame. A safer, bullish trade opportunity also may arrive before the end of the year.

Turning back to silver for a moment, the weekly chart below shows that, even though the decline is probably nearing completion, silver prices might still have a considerable distance to travel. As of this writing, price is testing our upper target at $17.16 for minor wave iii of (v). However, the next lower target at $15.91 appears more favorable, before we see a pause in minor wave (iv).

Silver Futures - Weekly Chart
Larger Image

We will be able to calculate more precise targets for the end of the decline after we see where wave (iii) ends and how wave (iv) behaves. Based on a bigger-picture analysis, the target range for a durable low in silver is between $14.20 and $11.93.

The price of gold has relatively less far to travel than silver does, but it still should put in another significant and tradable decline this season. As of this writing, price is approaching the target support of $1,201.75. From there, we probably will see a fourth-wave correction before a decline to the next target near $1,163..

Gold Futures - Weekly Chart
Larger Image

Another possible target for the final low of the season for gold is around $1,149 based on measurements on a daily chart. However, as with silver, we will refine the projection after we see where waves (iii) and (iv) end. A more detailed forecast for the path into that low can be seen on a daily chart, which is available at our website.

An important factor in our analysis of both metals is the expectation that they will reach their lows at approximately the same time. The dominant price cycle for gold calls for the low to occur in November. Even though price does not always obey the cycles, the major highs and lows in silver typically coincide with those in gold. Thus, there should be an opportunity to put in a longer-term bullish trade in both metals around that time. At TOTM, we will be watching both markets in conjunction with each other, in order to pinpoint the best areas for long entries.

 

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