Gold had an incredible multi-year run from late-2008 to late-2011. We noted many times the very steady consistent uptrend in Gold and had traded GLD ETF and individual Gold stocks many times throughout this run. However, we're certainly not "perma" Gold bulls … and we know that trends eventually will break down.
So let's look at the charts and see what they tell us about Gold & Silver. We'll be using SPDR Gold Trust (GLD) for Gold and iShares Silver Trust (SLV) for Silver.
Note below the long-term GLD trend on the weekly chart, where Percent R remained above mid-levels throughout this entire trend. This uptrend was broken in the late part of 2011, and we subsequently saw Weekly Percent R move down to areas not seen since 2008.
The question here is whether the GLD uptrend is over for the foreseeable future or will it have a consolidation and possible rebound in 2012 … at this point the jury is out on this, but I would lean towards the second scenario at this time.
The GLD uptrend never got quite as parabolic as SLV did, although there was some acceleration in Summer 2011. If GLD had taken off parabolically to the upside to 200/250/300 for example, then a breakdown would have been inevitable, sharp and long-lasting.
This pullback, while certainly the most severe in several years, could result in a consolidation and rally in 2012. This isn't guaranteed and more downside could be ahead,, but we have seen a nice bounce in recent weeks after the ETF tested it's Bottom Weekly Acceleration Band. Holding that suport (currently around 150) and also holding above its 40 Week Moving Average (simple and/or exponential), which is around 160, will be important to whether GLD will suffer more downside in 2012 or not.
Gold Weekly Chart
So has Silver been a better choice since Gold broke down? The simple answer is no. Even though SLV broke down several months before GLD peaked, it's actually lost twice as much since the GLD top. See the chart below GLD is yellow & SLV is white.
GLD & SLV Performance Chart
While there is the possibility that Silver may rebound more if/when Gold stages a rebound, at this time we would say to separate these two metals in terms of trading. GLD looks more attractive for potential rebound players and has also shown less downside volatility.
The Gold story looks far from over and we may yet see another big upside move in 2012 … the parabolic rally that many anticipated has to occur sooner or later, doesn't it? Maybe it begins this year … but also remember that parabolic upmoves always end badly. In general terms, it's fine to ride those higher while they last, you don't want to fight a strong uptrend — but limit position size and take profits quickly along the way so you don't get caught holding the bag when they inevitably correct sharply.
