Silver Finally Confirms Platinum's Take
Another day, another bearish confirmation.
And I don't even mean (not one but) two breakdown in silver that we see in today's pre-market trading.
Yes, this is bearish. Even if silver moves back up in a way later, the fact that silver moved below the support lines based on the intraday price extremes is already notable. Actually, a move back up (perhaps to the rising support line) before the slide continues wouldn't be surprising at all.
Yes, it is in perfect tune with the signals coming from the platinum.
And yes, it is particularly bearish given what's happening in the USD Index. But before I move to that, let's take a look at gold.
It broke down below its rising support line and continued to decline since that time. Right now, gold is below its late-May high, and with just a little more weakness, June will become a down month for gold.
While gold's and silver's breakdowns are important on their own, what makes them truly remarkable is that they both happened while the USD declined.
The USD Index corrected a bit today, which is quite normal as it encountered a strong, medium-term resistance. While I fully expect this resistance line to be broken given the significance of the recent buy signals (invalidations of breakdowns + the super-strong long-term support from which the USDX rallied), seeing a pullback right now is simply natural.
What is not natural is that both precious metals declined despite that.
Think about it: if gold failed to rally despite dramatic increase in tensions in the Middle East and a new military conflict in general AND despite the decline in the USD Index… Then what could possibly drive its price higher here?
Yes, there are some extreme cases like the financial system meltdown, introducing of a government-backed cryptocurrency that everyone would be forced to adopt instead of using anything else… But aside of those extreme cases, it looks like there's very little that can contribute to further rallies.
I mean, I saw many situations where gold and the rest of the precious metals market was weak throughout 20 years of my precious metals market analysis, but this… This is exceptional.
I wrote about how the platinum market confirms all this, and I'm going to add one more detail today: the price-volume link during the most recent price moves.
Volume peaked when platinum reversed about a week ago. That was the first top. The second top formed on declining and much weaker volume. This is how it looks like when buying power is drying up.
And now, when platinum is starting to decline, the volume is picking up again.
Now, please consider the following: the platinum market is tiny market compared to gold and silver. So, if the investment public entered the precious metals market, the impact was likely felt here in the most dramatic way. This is exactly what I think happened – and we saw the exact same thing at the 2008 top.
This is extremely important (and quite exciting) to see that during the second top in platinum, the volume actually declined. This is like the first crack in the dam. Perhaps in one of the most investment-public-saturated markets, the wave of buying is ending – the buyers get tired. The buying frenzy is over.
And as no new buyers are able to keep pushing the price higher, it can do only one thing – decline. To clarify, when there are no buyers or sellers, the price doesn't stay at the same level – it declines until buyers emerge.
So, as it seems that those that enter the market in the final parts of the rally are not only in the market, but that all of them already entered… It tells us that the rally is indeed over. Not just in this market, but in the entire precious metals complex, and perhaps in many other markets. The 2008 top in platinum wasn't an isolated signal just for PMs, was it?
If you have your gold as insurance and you're happy with your portfolio as it is, you might simply watch out for the trading long positions here (or consider hedging them). Also, speaking of one's portfolio, we recently published a brand new, interactive, Golden Meadow® Portfolio Calculator which might help to put things into perspective – I encourage you to check it out.
Thank you for reading my today's analysis – I appreciate that you took the time to dig deeper and that you read the entire piece. If you'd like to get more (and extra details not available to 99% investors), I invite you to stay updated with our free analyses - sign up for our free gold newsletter now.
Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief
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