Gold and Silver, How Low Can They Go?

Since my last update on gold and silver on April 16th (, both proceeded to bounce somewhat but subsequently gave way to the laws of physics and are now at, in the case of gold, or well below, in the case of silver, where they traded then.  In other words, both of these precious metals staged the proverbial dead cat bounce, followed by continued weakness.

For perspective let me first point to the multi-year charts of both.  Gold, as measured by the SPDR Gold Shares (NYSE:GLD), after breaking its multi-year run-up trend line at some point in May 2012 finally also crashed through lateral support in (red horizontal) in April.  Silver, as measured by the iShares Silver Trust (NYSE:SLV) also broke below its lateral support in April, which in both cases led to an acceleration of the downward press.  While yesterday’s intraday sell-off again brought both precious metals into some lateral support dating back to late 2010, the steepness of the slope of the sell-off and lack of any real bottoming process remains the largest concern for the bulls…at least from a longer term perspective.

gld multi year

slv multi year chart

Closer up on the daily charts of both GLD and SLV, quicker traders now however have defined levels to lean against.

For GLD the support level is the double bottom around the $131 area.  Any clear daily close below there could again accelerate the downside move and go as low as toward $120.

gld daily chart

For SLV yesterday’s (May 20th) intraday lows near $20.80 offers a level to lean against on the long side for a trade, for those quick and disciplined enough.  Yesterday’s bullish outside day reversal could see some follow-through to the upside, yet any more significant bottom building is nowhere in sight.  If SLV breaks below yesterday’s lows on a daily closing basis it could sink below the $20 mark.

slv daily chart

All in all, both gold and silver remain in a downward trend, and while short-term traders may have yesterday’s intraday lows to lean against for a quick trade, both wold need to build solid bottoms if one wants to consider higher probability trades on the long side.



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