Market Lab Report - Discussion of This Week's 7/27/16 Pocket Pivots in GLD and SLV

Published : July 30 2016 at 23:14 ET

This past week we saw the Fed hold steady on rates. Surveys now show that investors don't expect the Fed to raise rates for the next 12 months. Both the SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV) posted pocket pivots on Wednesday in response to the Fed keeping rates where they are.  

SPDR Gold Shares (GLD) 

iShares Silver Trust (SLV)

Comments from Gil and Dr. K:

GM - My general approach towards the precious metals is to look to buy them on weakness. In my view, if one has been playing the GLD or the SLV in 2016, they are primarily doing so on a fundamental basis. In other words, the expectation remains that Fed will continue to keep rates where they are or even eventually lower them again. There have been some strong technical buy signals on the way up, but when the metals get extended, that is generally when they pull back. If one studies a chart of either the GLD or SLV, they can see that there have been several logical pullbacks into areas of support that would offer lower-risk entries on the long side. Here the GLD and the SLV are slightly extended from their pocket pivots coming up through the 10-day moving average on Wednesday. However, they are actionable with the idea of using the 10-day or 20-day moving averages as selling guides.

Dr. K - The precious metals tend to trade in a somewhat sloppy, widely banding manner, so buying on weakness is usually the better strategy. Both gold and silver bottomed early this year, so have been in an uptrend since then. Higher prices can be expected on at least two counts: 1) central banks continue to print money and 2) a growing loss of confidence in governments and central banks. Precious metals are also the fear trade so any future political or economic turmoil can attract capital into gold and silver. 

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