Gold And Silver Prices — Mapping Short-Term Volatility

After years of paying attention to the price action and not the mainstream market commentary. — Thanks in large part to Ted Butler and GATA — here are some of the dominate forces that currently seem to be determining price movements in the precious metals:       

Downside Probability

Jobs data comes out every few weeks. This almost always puts downside pressure on the market, with about a 90% probability. Also, presidential press conferences tend to have a 70% downside probability.  The powers that suppress the precious metals prices cannot have metals surging while the president speaks.

The Fed’s FOMC meetings and the following minutes have greater than a 90 percent downside probability, unless a surprise QE announcement is made. The surprise has been effectively quelled by taper signaling and the Summers versus Yellen issue.

The beat of war drums is another factor. Interestingly, the closer that the country gets toward war or crisis, the more likely precious metals are to head counter-intuitively lower.

Options expiration dates are also notable, as well as the times immediately before or after they occur. Rarely do precious metals options expire for the benefit of the buyers.

Whenever the price of gold is strong, but the price of silver is weak the day before, this is another pending downside signal.

The performance of the NYSE Arca Gold BUGS (Basket of Unhedged Gold Stocks) Index or HUI Index (an index of the stocks of companies engaged in gold mining) also seems to be influential. Gold shares may lead the way up or down. If PM shares are weak on an up day for the precious metals, the next day’s follow through is rare, and the subsequent price action is often downward.

Daily Gold Price Movements

The downside for assets like silver and gold may be unlimited, but true upside potential of these assets is rarely demonstrated. The upside is rarely more than 2%, and often reverses lower on the nose or just below that percentage gain. (The gain and intraday moves on Wednesday, September 18th, 2013  were of the largest ever).

In sideways rather than trending markets, the upside it typically limited to only 1%. Also, intraday upside reversals seem extremely rare.

Furthermore, the phenomenon of “overnight dumping” is almost always synonymous with New York selling pressure. This can occur in a bull market unless recent support levels were already cleared out in a technically oversold period.

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