Gold was hit with panic selling during the opening minutes Sunday evening, taking the August futures quickly down to a breath-taking 1080.0. The bleeding moderated quickly, however, and the market found an equilibrium somewhat above 1100, but still heavily in negative territory. The most important aspect of the recent plunge is that it brings us to the lowest level in several years. You have to go back to early 2010 to find lower gold prices. We are extremely oversold—even the monthly chart is at its Bollinger Band low—so expect some volatile swings. Historically, gold has been a good long-term value when it is at or below the low of the previous four calendar years, a condition that we haven’t seen since the late 1990s, at a much lower price point. The 1080.0 level now forms an obvious support point. With the damage done recently, the market may be drawn to this level like a magnet.
Silver also fell to new lows, the lowest price for this metal since 2009 on the monthly charts. It’s also oversold, but lower prices are the obvious expectation. With chart resistance much higher, we should be suspicious of any rally.
Platinum plunged Sunday night like gold, and also found enough buyers to lift its head off the mat. We have reached the lowest prices since 2008, when the market bottomed at 761.8. That’s quite a bit lower than current prices, and we are oversold, but there is no long-term chart support between here and there.
Even Palladium, often the odd man out, could not resist falling to new lows. Long-term, Palladium has held up a little better that the others, and we are beginning to approach the 2012 low of 555.90. Lower prices seem likely here over the coming days and weeks.
Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.