Since my last update on gold and silver on April 16, both proceeded to bounce somewhat but subsequently gave way to the laws of physics. Now, gold is at where it traded then, and silver is well below.
Or, in other words, both of these precious metals staged the proverbial dead-cat bounce, followed by continued weakness.
For perspective, let me point to the multiyear charts of both.
Gold — as measured by the SPDR Gold Shares (NYSE:GLD) — after breaking its multiyear run-up trend line at some point in May 2012, finally also crashed through lateral support (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 Monday’s intraday selloff again brought both precious metals into some lateral support dating back to late 2010, the steepness of the selloff’s slope and lack of any real bottoming process remains the largest concern for the bulls … at least from a longer-term perspective.
Closer up on the daily charts of both GLD and SLV, however, quicker traders now 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.
For SLV, Monday’s intraday lows near $20.80 offer a level to lean against on the long side for a trade, for those quick and disciplined enough. Monday’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 Monday’s lows on a daily closing basis, it could sink below the $20 mark.
All in all, both gold and silver remain in a downward trend, and while short-term traders might have Monday’s intraday lows to lean against for a quick trade, both would need to build solid bottoms if one wants to consider higher-probability trades on the long side.