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PRECIOUS
METAL STOCKS GETTING READY TO BREAKOUT Gold
The weekly intraday high was $671.00 (Thurs.) and the intraday low $660.30 (Tues.). Gold did not close the week out on its daily closing high – that was put in place on Thursday at $668.30. The daily chart below has a mixed bag of indicators, some are positive and others are negative. It remains to be seen which win out and the price action brings the others back in line. RSI (relative strength index) is showing a negative divergence. This is indicated by the upward sloping trend line (blue line) that connects the higher highs or tops of the RSI index. While the RSI indicator has been strong enough to make a new high, while the price of gold has not. This is negative divergence, as the two are at odds with one another. One of the two will change to be aligned with the other.
On the positive side of the ledger – gold did gain for the week and it also put in a positive MACD Cross. In last week’s market wrap it was mentioned that a positive cross looked eminent. Histograms are also quite strong and positive, perhaps getting near overbought levels; although RSI shows plenty of upside room left to rally into. Significant overhead resistance is shown by the yellow zone bounded on either side by blue horizontal resistance lines. A break above the upper blue line would be huge. Silver Silver closed the week out at $13.11, up .35 or +2.77%. It was the highest weekly close in 4 weeks. Silver’s intraday high was $13.23 and its low was $12.76. Its weekly close on Friday at $13.11 was not the daily high closing for the week – that occurred on Thursday at $13.18. The daily chart of silver shows it closing back above its lower trend line, which is a very positive development. It regained the high ground during last week’s action. In last week’s market wrap it was suggested that a positive MACD Cross looked like it may be in the making. Well, lo and behold it occurred this week, and the chart now sports a positive MACD Cross, which is another positive development. Histograms have gone positive and are rising and STO is strong as well, although getting near to short term overbought levels. There is still much work to be done, but all in all a pretty good looking chart.
HUI Index The HUI Index put in a good week advancing 4.21 points (+1.19%) closing at 356.82. It was the highest weekly close in 12 weeks. The intraday high for the week was 359.63 and the low was 351.02. Friday’s weekly close of 356.82 was not the highest daily close of the week – that distinction went to Thursday’s close of 357.06. The daily chart below clearly shows the overhead resistance level the HUI needs to break above. The other chart indicators already have broken above overhead resistance trend lines.
In last week’s market wrap the possibility of a positive MACD Cross over appeared quite probable, and as luck would have it – it came to pass. The MACD indicator just barely crossed into positive territory this past week and the same for the histograms. Still more work to be done, but progress is definitely being made.
XAU Index The XAU had a good week, closing at 151.06, up 6.08 points or +4.19% - a very strong follow through to last week’s advance; something that has been missing from the gold stock action of late. It was the highest close since April 26, 2006 – over one year ago. This is not an insignificant occurrence, and to treat it as such would be folly. There’s something happening here, and we best stop and try to get it clear.
Heavy overhead resistance on the monthly chart is being encountered in the 150 area. This trend line goes back 20 years and it will be a huge moment when it is broken through and resistance becomes support. The next leg up in the gold bull will then be underway. The next chart focuses in on the above data to give a closer look to the most important part of the chart.
I’ll be darned if that doesn’t look like a cup with a handle on it – one that’s 11 years in the making no less. Could get mighty interesting around here. FSO
note: individual stock considerations removed due to compliance
requirements. Summary Stock markets continue to rise around the world. Aside from precious metal stocks, energy stocks, and commodity stocks – I’m not interested. There is a worldwide asset bubble taking place because of easy money – fiat money – junk money – money that is debt and nothing more, which will eventually be found out. Even investing in real things is wrought with risk from the imbalances within the world’s financial systems caused by excessive credit and debt creation. Only physical gold and silver is not subject to this risk – it is protection from this risk. This is why the system fears Honest Money; it is outside of the system, beyond its control. Gold and silver are no man’s debt or obligation; it is free and Honest Money. Bond markets had seen rates rise quite high, quite fast; a respite was more than due. However, just as dawn ends the rest afforded by sleep, so to will the recent rally in bonds end and realign itself with the bearish primary trend. I will be watching the rally for an entry point to short bonds via Rydex Inverse Bond Funds. Currencies are doing what fiat currencies do best – lose purchasing power, as all the world’s monies are debt obligations. Some lose purchasing power slower than others, and thus are thought of as being the stronger currency, which is true in a sense, but it is in the sense of being less weak – not of being stronger. The difference is immeasurable. Commodities are doing well. It is amazing to see the use of the CRB Index as a proxy for the commodity markets, when the CCI represents the commodities so much fairer and equitably. Any allusion to the CRB as being representative of the true performance of the commodity markets is utter nonsense. Gold and silver having been doing well, gold and silver stocks have been the better performer. This is positive divergence for the precious metals complex as a whole. Short term a consolidation may be needed before moving on to higher ground. The action this past week by the Xau was very constructive and hints at higher prices in the near future. The most likely scenario sees a test of the old highs coming in the near future. There may or may not be a consolidation before the test. The odds favor a consolidation. The second most likely scenario is that the market goes down to test the recent lows. This is not that far out from being a fairly high probability event. Such action would catch most off guard and out of position, which is what the market does best. After a positive test the assault on the old highs would then commence. The third most likely scenario is that the precious metal markets begin down in earnest and just keep going down, entering into a bear market. This scenario is very unlikely – very, at least at this present time. In closing I’d like to bring to your attention one of the most unbelievable statements I have ever heard uttered by a human being, and I’ve heard some good ones. Remember this quote when you read my rants and raves about a paper fiat system run amuck – because this comes straight from the horse’s mouth. July 10 – Financial Times (Michiyo Nakamoto and David Wighton): “Chuck Prince yesterday dismissed fears that the music was about to stop for the cheap credit-fuelled buy-out boom, declaring that Citigroup was ‘still dancing’. The Citigroup chief executive told the Financial Times that the party would end at some point but there was so much liquidity at the moment it would not be disrupted by the turmoil in the US subprime mortgage market. He also denied that Citigroup, one of the biggest providers of finance to private equity deals, was pulling back, in spite of problems with some financings. ‘When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing,’ he said… ‘The depth of the pools of liquidity is so much larger than it used to be that a disruptive event now needs to be much more disruptive than it used to be. At some point, the disruptive event will be so significant that instead of liquidity filling in, the liquidity will go the other way. I don’t think we’re at that point.’”
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INFORMATION About the author: Douglas V. Gnazzo is CEO of New England Renovation LLC, a historical restoration contractor that specializes in restoring older buildings that are vintage historic landmarks. He writes for numerous websites and his work appears both here and abroad. Just recently he was honored by being chosen as a Foundation Scholar for the Foundation for the Advancement of Monetary Education (FAME). Disclaimer: The contents of this article represent the opinions of Douglas V. Gnazzo. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Douglas V. Gnazzo is not a registered investment advisor. Information and analysis above are derived from sources and using methods believed to be reliable, but Douglas. V. Gnazzo cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. This article may contain information that is confidential and/or protected by law. The purpose of this article is intended to be used as an educational discussion of the issues involved. Douglas V. Gnazzo is not a lawyer or a legal scholar. Information and analysis derived from the quoted sources are believed to be reliable and are offered in good faith. Only a highly trained and certified and registered legal professional should be regarded as an authority on the issues involved; and all those seeking such an authoritative opinion should do their own due diligence and seek out the advice of a legal professional. Lastly Douglas V. Gnazzo believes that The United States of America is the greatest country on Earth, but that it can yet become greater. This article is written to help facilitate that greater becoming. God Bless America. The opinions of FSU contributors do not necessarily reflect those of Financial Sense. |
