Why the technical chartists will be wrong again on gold and silver

Posted on 25 April 2013 with 7 comments from readers

While we like to consult the technical charts when making forward predictions on asset prices these charts do only tell you the past story and have limited use in trying to discern the future.

We recall at the end of last year when the charts showed an imminent price collapse for silver that actually turned out to be a price rebound. So often these graphs prove misleading, and ArabianMoney reckons that is again the case now for gold and silver.

$1,000 gold?

Technical analyst Clive Maund is particularly gloomy at the moment and can see gold falling back below $1,000 and silver goodness knows where. But which chartist spotted the price plunge coming this month? None of them.

How could they when the central banks of the US and Japan did it deliberately as an adjustment to allow the Bank of Japan to launch its $1.4 trillion-a-year money printing program?

Gold Analyst is a person who is attempting to look into future of the gold market. There are many complicated processes influencing the gold prices and so it can be very difficult for anyone to predict the future of the market.  Systems like Ethereum Code are capable of interpreting the markets well.

Then again can chartists account for the reaction of the general public to this totally artificial price reduction in gold and silver? What we have now is a battle royale over price setting between the Comex futures market and the man-and-woman-in-the-gold-shop.

We looked amazed last night at buyers in a shop in Kowloon in Hong Kong where canny local dealers have increased their premiums for physical gold by 2.5 times in a week. Is the retail buyer just late to the bull market for gold or still getting in on the ground floor at a bargain price?

That’s a dilemma for serious investors counting their profits after a 12-year bull market and wondering if they might sustain further losses. Perhaps they ought to reflect on why all these retail buyers are snapping up bullion.

People fear inflation is coming and they also know that there has been far more inflation of general prices than anybody is admitting. They not unreasonably fear this is going to get worse before it gets better, and that the same central banks that gave them bargain gold this week are going to make it happen.

Bank of Japan

Back to Japanese money printing, that was the biggest thing to hit financial markets this year. Sure the central banks acted appropriately to dampen gold and silver prices temporarily to fool us on inflation. But how long can this last? The money printing is only accelerating.

The retail gold shops of the world are about to get a great deal busier and only when we see queues down the road and gold at $5,000 an ounce in a huge price spike will all this be over. We are not there yet.

Besides the chartists ought to know that such investment bubbles end in a huge price spike and then a plunge, not an artificially manipulated price slump after a sideways movement.