Gold (GCZ25) prices this week hit another record high of $3,824.60, basis December Comex futures. Siver (SIZ25) prices this week scored a 14-year high of $44.77 in nearby Comex futures. Both markets this week have seen bullish upside technical “breakouts” from choppy trading ranges on the daily bar charts. Price action at mid-week is so far just routine profit taking or weak long liquidation from the shorter-term futures traders.
Remember that prices do not go straight up or straight down. Instead, price trends experience “corrections” opposite of the existing trend that are actually healthy for the existing trend to continue.
The powerful-but-mature bull market runs in gold and silver appear to be accelerating this week. That’s one early clue that from a time perspective, major market tops could come sooner rather than later.
However, from a price perspective, there still could be much more room on the upside for gold and silver prices in the near term and during these potential acceleration phases of the mature bull markets, before they peter out for a while. It’s important to reiterate that market action is important not only in price, but also in time. For example, gold may well hit $4,000 an ounce, but will that occur in two weeks, two months, or two years?
If gold and silver prices continue to show acceleration on the upside (significantly larger daily price bars on daily charts) then such would be one clue that both metals may be in their final climactic stages of their major bull-market moves.
So, what are some other technical and fundamental clues that gold and silver markets may be running out of gas? Here are a few.
- Two very big down days in a row would suggest the bulls are exhausted and that market tops are in place.
- A technically bearish weekly low close on Friday would also suggest bulls have run out of gas.
- Divergence in the Relative Strength Index, whereby the market makes a new for-the-move high, but the RSI does not. Such has already recently occurred in December gold and silver futures markets.
- Declining open interest in gold and silver futures on price rallies. Such has not occurred in gold and silver futures as open interest is rising — a bullish signal.
- Fundamentally, gold and/or silver prices selling off following fresh seemingly bullish fundamental news, which would also suggest the bulls have become exhausted. New geopolitical developments that raise anxiety among traders and investors should push safe-haven gold and silver markets higher, and if they don’t, that’s a bearish warning signal.
- Global central banks leaning toward tighter monetary policies (raising interest rates) to tamp down problematic inflation or doing so due to expectations for rising inflation. Higher borrowing costs for consumer and commercial interests would likely crimp demand for metals.
- Slumping crude oil (CLX25) futures prices would be bearish for gold and silver, as crude is arguably the leader of the raw commodity sector.
I know I’ve probably missed a thing or two on this list. Tell me what you think. I really enjoy getting emails from my valued Barchart readers all over the world. Email me at jim@jimwyckoff.com.
