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Buy signals for gold and platinum
Colin Abrams
Posted: Mon, 19 Mar 2007
[miningmx.com] -- WITH world stock markets in a vulnerable state (though oversold), we take a look at two of the main precious metals, platinum and gold.
Both charts look fairly similar, having been in consolidation phases for many months. However, it appears that’s now changing.
Indeed, both metals have broken out of multi-month consolation patterns, have pulled back in the short term and should now be looked at for buying.
The platinum price is outperforming the gold price on a relative basis at the moment.
While the individual shares don't always respond directly to their metal’s movement, platinum shares are still favoured above gold shares on the JSE.
Please note: For more recommendations and charts by the author on shares, stock indices and commodities, please go to www.themarket.co.za.
PLATINUM ($) – bullish breakout
Click on image to enlarge
Trend: Medium term up. Short term neutral.
Strategy: Buy on a pullback towards line 3.
Platinum has broken out of a large channel (lines 1 and 2), but not altogether convincingly yet. Having pulled back (in the short term) to test support lines 2 and 3, the price is vulnerable to another short-term pullback to line 3 at $1168 (spot closing price) before moving up again in earnest.
The daily relative strength index (RSI, on top) is neutral but can have another dip to its oversold level before reversing up again.
The general strategy however is to buy pullbacks. Therefore, buy a pullback towards line 3 ($1,168), but wait for a sign of it reversing up off/near line 3 before entering.
The medium-term upside target is $1,370, which is measured as the height of channel 1-2 projected up.
When buying on a pullback to line 3, place your initial stop-loss as a closing price below $1,160 (spot price).
GOLD ($) - on upward trend
Click on image to enlarge
Trend: Medium and long term up. Short term down, getting oversold.
Strategy: Buy the gold price itself (ie bullion).
The dollar gold price broke out of a large channel in January (lines 1 and 2). The price has now pulled back to retest line 2.
It’s also trading in a rising channel (lines 3 and 4). Line 3 is important short-term support at $640 on its spot price.
The daily relative strength index (RSI, on top) is quite oversold but can have another dip to the oversold level before moving up again in earnest.
Nevertheles, the strategy now should be one of buying on pullbacks. Closest support is line 3 at $640. Buy gold futures on an upward reversal as close to there as possible.
The upside targets are currently $690-$710, as well as a more medium-term target of $750, ie the height of channel 1-2 projected up. The stop-loss when buying on a pullback is a closing price below $634 (spot price).
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