Wednesday, 9 April 2008

Corrections in gold and silver cf oil: 2007-11-13

Tuesday 13th November 2007: 10.04pm

Gold took a bit of a smash hit this Monday and Tuesday to dip below $800 in the spot market, though the London gold fixes were always over $800. Someone took the price down in the New York Access market during the quiet hours when there is less liquidity in the market as a whole, i.e. when most people are asleep! This sort of thing has not been uncommon in recent years and it occurred about 23:00 GMT or 18:00 New York time on Monday. It's clearly visible on the Kitco 3 day chart here, if you catch this before it moves off to the next day!

It looks like we may have to wait a little while before we see any more records tumble. Compare gold to oil though: the 'black gold' had to get past its historic high of $40, seen in 1980 and 1991. On its way up in 2005, it took about three swipes at $40 before breaking above it decisively, then we saw a test of $40 from above and it held there as support. Now we are at the other end of an almost relentless rally at nearly $100, only a couple of years later. Forty seems like a distant memory and it looks unlikely that humans will ever see that price again. The last time near $40 was in December 2005. See this chart at - $40 is at the beginning, $98 is at the end!

Can we learn any lessons from that? We probably shouldn't expect the resistance around the record gold highs to be insignificant. It is the last selling point before hitting the open skies. A few failures at 850 are possible - we have had one so far and counting.

Silver has had a similar time, going above $15 and then doind a little mini-crash from 15.15 to 14.40 and now back just under $15. Move for move in parallel with gold - note the dip! See it here, if you catch this before it moves off to the next day!

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