Precious Metals: The New Global Reserve

Global precious metal markets have found the energy to bounce off recent tests of support, which came in reaction to a realignment of risk after social, economic, and physical challenges that hit the global markets. Further to recent client notes that highlighted that global reserves look to be building a move away from the US dollar and towards a precious metal-based system, it would seem that the global market is more than willing to buy any dip in precious metal trade.

Gold bullion dropped on Mar 15, 2011 to test support at the 50 and 100-day simple moving average area around 1380, then consolidated for two periods of trade before moving higher to test resistance at the 20-day simple moving average around 1420 on Mar 21 11. The last two sessions of trade have managed to push gold bullion up to test $1440 an ounce for front month futures contracts. The gold trend is bullish, momentum is strong to the long side, and gold bullion has once again proven to be one of the most reliable investment-grade asset classes that any investor has seen over the course of the last decade. For those not already long gold bullion now may not be the right time to open a position; instead patience should be exercised as the next test of support is monitored, and then bought. Signals will be issued to clients whenever gold drops down to test 1420, which is the 20-day simple moving average area.

Front month silver bullion futures contracts have staged a dramatic move higher from a test of support at the 20-day moving average around 34.00 on March 17. Unlike gold, the move lower in silver was not dramatic, and was quickly bought in very strong fashion. A five-day period of trade has seen silver move up to test 38.00, which has created a very bullish trend, and a very strong momentum read to the long side. Now may not be the time to initiate new long positions in silver, and signals and alerts will be issued after the next test of support is in place so that those who missed the long-silver move will have a chance to participate.

Global tensions, and supply and demand questions, have seen dramatic moves higher in crude oil prices over the course of the last five days. West Texas intermediate, the most liquid of futures contracts in the oil market, saw a move up to test $107 a barrel in trade on Thursday. It is very unusual to see price gaps in WTI futures trade, but three of the last four trading sessions have seen dramatic moves higher in very short periods of time. Near-term upside technical price points of note will be 109.10, and 111.90, which look to be areas that traders could push WTI price up to test. Any downward movement looks to be very well supported at the 101.50 area, which is the 20-day simple moving average price point. At that time traders will be looking closely at the reaction in global market trade. It is unlikely that any signals or alerts will be issued on WTI until early next week.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.