This column was originally published on RealMoney on Sept. 6 at 3:00 p.m. EDT. It's being republished as a bonus for TheStreet.com readers.
September is usually a bullish month for precious metals and their underlying shares, for reasons that I've gone over at great length in several of my
The month often brings some of the largest rallies over the shortest period of time.
I believe the markets are shaping up in the anticipated direction this year. All of the precious metals have been staging rallies.
The seasonal move may have already started, and the mind turns to the question of how high prices could go.
Here is my current analysis for gold, silver, platinum and palladium.
Gold Leads the Charge
Gold is usually the leader of the pack. If you're looking for fundamentals to support a continued rally in this market, there are abundant positive factors.
The technical picture has turned bullish. My momentum/moving average indicator has triggered a buy signal on the December gold futures chart below.
The MOM/MA indicator values in this case are 28 periods for momentum and a 14-period moving average of the 28-period momentum. I use this combination for shorter-term timing triggers.
Resistance is likely in the $668 area initially. This is what I call the "spike resistance level."
Note that this method is considerably different from the typical trend-line support and resistance methods used by many traders. If and when gold breaks through this level on a daily closing basis, we will look at the next potential target.
The most important thing I can tell you about the history of this seasonal move is that in underlying bull trends, it has been large and volatile.
If history repeats this year, make certain your seat belt is fastened!
Buy Signal for Gold
Since my last article on
silver, the metal has rallied from $12.28 to as high as $13.37 in December futures. If the market continues to perform according to its September seasonal pattern, this move still has much higher to go.
The chart below shows the timing on my MOM/MA trigger along with my spike resistance level, which is currently around $14.50.
While some analysts might consider this to be an optimistic target, the history of silver trading in September supports this possibility. Most of the large rallies in silver have occurred in bull markets during the month of September.
To a certain extent, silver may offer more bang for the buck, given its explosive history in September. Those who favor shares as opposed to futures have a good number of stocks to choose from, ranging from highly speculative issues under $10 to more stable, higher-priced companies.
Note that many of these plays are gold plays as well, since both metals tend to be produced in the same mines.
More Bang for the Buck?
has potential. It is currently trading around $17.60, with support in the $16.30 area. I'd give it an initial upside target of $24-$26 if silver rallies.
Pan American Silver
is a more speculative issue that has had a roller coaster ride since 2001. It's currently trading around the $23.50 area. A drop to support at $21.65 would offer a reasonable entry opportunity with a target of $29 or higher.
There are also quite a few cheaper-priced silver shares listed on foreign exchanges. These tend to be considerably more volatile and risky, but they can make large moves when silver prices rally.
Platinum has most likely started its rally. Since my discussion of the gold and silver seasonal patterns last month, platinum futures have rallied from about $1,230 to a recent high of $1,295. Note that this is a thinly traded market that is not suitable for most traders. The next target is approximately $1,316, as noted on the chart below.
I wrote last month that
palladium was poised to move higher and suggested that investors look at
North American Palladium
as ways to get in on a rally.
Since then, palladium futures have moved up from around $333 to $350; that's not a large move, but it's certainly in the right direction.
North American Palladium has rallied from the $7.25 area to about $8.50, while Stillwater has risen from about $9.30 to $9.60.
I believe North American Palladium could be a better vehicle for the rally, which appears to have started. If palladium prices perform as expected, this is likely the beginning of a larger move.
As the chart below illustrates, the stock's last move took it from under $4 a share to over $12, while the previous bull move went from about $2.25 to well over $14.
I believe North American Palladium is due for another cyclical rally similar in scope to the last two.
North American Palladium
The period for the seasonal rally in precious metals is upon us, and moves appear to have started. Whether you believe they will continue is not nearly as important as being with the trend.
If you choose not to participate on the long side, going short is too dangerous, given the statistics. On the bullish side, the volatile international situation could inspire very large rallies. Note that the precious metals have been rallying even in the face of declining crude oil prices. Should the energy sector reignite, the precious metals could soar.
At the time of publication, Bernstein held none of the stocks mentioned, although positions may change at any time.
Jake (Jacob) Bernstein is president of MBH Commodity Advisors Inc. and Bernstein Investments Inc. He is publisher of Bernstein on Stocks, The Letter of Long Term Trends, Short Term Stock Trader's Hotline, MBH Weekly Commodity Trading Letter, Monthly Key Date Trader, and Short Term T-Bond Hotline. His newsletters and advisory services are read internationally by traders, investors, brokers, financial institutions and money managers. His Internet presence includes: Jake Bernstein on Futures and his stock market advisory 2Chimps.com, Seasonaltrader.com and Patterns4Profit.com. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Bernstein appreciates your feedback;
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