A Look at Gold and Silver

Gold and Silver have been in a secular bull market for around 10 years now. Last year both metals topped out, since then they have both been struggling. Technical analysis of commodities are more difficult compared to stocks for the following reasons:

1. Future deliveries have limited lifetimes compared to the theoretically infinite life of stocks
2. A lot of commodities are subject to hedging which makes support and resistance levels less reliable
3. Stocks have a finite volume, whereas future contracts can be theoretically infinite

Despite this technical analysis can still be useful.

As you can see gold topped out in September of last year. Since then it has been lagging and formed a declining triangle with support at $1525.00.

Silver on the other hand topped out last year in April. Since then it has acted almost identical to gold, forming a declining triangle with support at $26.00.

A descending triangle is a bearish formation. On one side gold broke out of a descending triangle in 2006. Moreover, with uncertainty concerning dollar inflation gold can break to the upside. The dollar index does seem to have paused from its recent strengthening.

What makes me think Gold and Silver can go down another level is when you look at other miner indexes and stocks, they seem to be in bearish trends as well. 

These examples like gold and silver cannot be said to be bullish. Of course, all of what has been shown can just be basing out. Either way to trade in any direction one must wait for confirmation.

On a side note a friend of mine pointed this out to me:

These two charts above with many other stocks in the same industry are experiencing multi-year head and shoulders patterns. Large multi-patterns such as this are usually unreliable, but should be watched nonetheless.