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GOLD
AND SILVER REPORT Gold
It was gold’s highest close since its 2006 high of $730.40 (intraday) and $715.73 on a daily closing basis. The weekly gold chart below is looking good. All indicators are pointed up and are positive: RSI, STO, MACD, etc. MACD just put in a positive cross over and the histograms just turned positive. The POG has broken above its upper trend line and we wait to see if the break is sustained, or if it is another false break out that retreats back from whence it came.
The P&F chart of gold that follows indicates a quadruple top breakout on September 4, 2007. This is a powerful chart pattern. However, like anything – it can be altered or reversed. Its bullish price objective of $840 is neither written in stone nor is the time needed to get there given. I believe that such will occur, and within the year, but that’s just my opinion – there are plenty who differ and may very well be correct.
GLD had a good week up over four percent. It broke above its upper trend line. RSI has turned up and appears headed for 70. A positive MACD Cross Over has been put in and notice the accumulation/distribution graph at the bottom of the chart. GLD is presently under heavily accumulation. That could change at ANY time, but it is what it is until it isn’t, and right now it’s very positive.
Silver Silver put in a good performance this week, gaining well over four percent. RSI is turning up and looks about to cross the 50 threshold, as is the stochastic indicator. However, silver has failed to regain its lower trend line it broke below, and it is still under the influence of its last MACD Cross, which was negative. Histograms are receding towards zero, however. The signals are mixed with the preponderance of the evidence weighing in on the bearish side.
SLV is pretty much in the same boat as physical silver. The monthly chart below does not look too healthy. RSI has steadily been headed down since April and has just made a slight move up. MACD still indicates a negative cross over as the dominant chart feature, with the histograms expanding well below zero. The 20 ema is being tested as we speak.
Hui Index The Hui Index had a good week, up 30.89 to close out at 358.13 for a gain of +9.44%. Even though it put in an exceptional move up, it still is not out the woods yet, nor far from the gnashing teeth of the hungry wolves. The price has regained its lower trend line, which is very encouraging, and RSI is turning up. Now all we need is for a positive MACD Cross Over to happen.
The P & F chart of the Hui shows a powerful triple top breakout on September 6. A bullish projection is given of 508 - 41% higher than presently.
Below is the monthly chart of the Hui Index. It is not anywhere’s near the bullishness of the weekly chart, and needs much work to turn so. RSI has been headed down since the high of 401.69 back in 2006. It has just recently turned up by the slightest amount – but even a journey around the world begins with one step at a time. Most disconcerting is the negative MACD Cross Over that has been in control of the chart pattern since the third quarter of 2006. Before the next stage of the gold bull can begin in earnest, and with sustainability – the MACD must turn up with a positive cross over. The histograms are receding towards zero, which is encouraging, and may be the start of good things to come.
The Hui/Gold Ratio has just barely poked its head above its upper trend line. It must do better than this if a sustainable rally is to occur. Xau Index The Xau Index was up 10.75 points to close at 151.53 for a gain of +7.64%. The weekly chart below looks promising but the final arbitrator is price and price alone. RSI has turned up and moved across the 50 level (56.63). MACD has made the slightest of positive crosses and needs to follow through higher for confirmation. The chart shows the index falling below its lower trend line down to a low of 120.41 in August, and now regaining its lower trend line and bumping up against its upper trend line. For a break out to occur it needs to clear 153.15 on a weekly closing basis – and then stay above that level. We have already experienced enough false break outs. Lastly, notice the gold/xau ratio at the bottom of the chart. It made a high back in August well above 5 (which level generally coincides with xau bottoms) and has since fallen to 4.68.
Next up is the Xau monthly chart going back to 1995. This is one of my personal favorites of all precious metal charts, as it shows a cup and a handle formation in the making that is 11 years in duration (1996-2007). Presently we are in the far right handle portion of the formation. A break above 155.61 that can be held and sustained – will mark the next stage in the gold bull market.
The Xau/Gold Ratio has broken above its falling upper trend line. This means that the Xau Index is now out performing physical gold. This is a necessary prerequisite before any sustainable move in the gold stocks can occur and hold.
GDX The GDX has been the weakest of the three major pm indices (Hui, Xau, Gdx). RSI has turned up positive and is above the 50 level. However, a negative MACD Cross Over still dominates the chart. Price is still below horizontal resistance at 43.30 by approximately 5%. Histograms are receding back towards zero, which if they cross above may be the start of a more sustainable rally.
Stock of the Week Randgold (GOLD) has been one of the leaders in the precious metal stock sector. Friday it closed at a new 52 week high. As the chart below shows – RSI is very strong but is fast approaching the oversold 70 level. MACD is strong with a positive cross over present. Histograms are expanding above the zero level. Volume has been good on the move up. Lastly, the accumulation/distribution indicator shows the stock under strong accumulation. The only possible negative I see is the stock is beginning to go parabolic. Because of this I sold half my position and booked very nice profits.
Summary Watch the yen, as almost all other markets are keying off it – in an inverse manner. If the yen goes up, they go down. If the yen goes down, they go up. So far US Treasuries have bucked the trend (as when the yen goes up they go up), and now gold seems to be doing the same. Gold and the gold stocks MAY be decoupling from their long held relationships with other markets. The stock market went down hard this week while gold went up. The gold stocks joined in as well, putting in a strong performance. Follow through is needed and we shall see what the new week brings. Caveat Emptor - it is possible that the powers that be are engineering a large take-down of most players via a stock market fall, a commodities fall, a gold and gold stock fall, etc. Everything except the US Treasury Market. I’m not saying this is the case, but it is a possibility that should be known. Why would they do this – see next paragraph. Bonds are also key here. The Fed must protect the US Treasury market or all hell will break loose. So far their plan seems to be working. If bond prices continue to go up (bond yields go down) then the stock market is in big trouble. This is why I differ with those who say the stock market looks good here and is about to enter another bull market leg up. The Fed must save the Bond Market – at any and all costs, including the cost of the stock market. If bond yields (interest rates) continue to go down, the dollar will get hit hard to the downside, which means gold will blast off upwards. The gold stocks one can never be sure of, but they could very well be about to launch into their next bull phase upwards, or not. Physical gold is by far the safest asset to own, but if gold stocks do go up the gains will be spectacular – at least 3 times that of physical gold. Real estate continues to get hit, and it will continue to get hit for years to come – along with the mortgage backed debt market that financed it – or was supposed to finance it. Most of the big name real estate brokers will be hurt badly; the big name mortgage companies will get hit; banks and insurance companies that either lent money or invested in the junk debt, etc. There is going to be a lot of pain before it even starts to get better. The Fed may decide to throw caution to the wind and to just create more money and credit like there is no tomorrow – and to continually throw the newly created credit at the subprime and related crises. This will only make matters worse, as the bubbles of all bubbles is the overabundance of U.S. Treasury Bills, a.k.a. – dollars. It has been and will remain the over issuance of dollars that has created the worldwide asset bubbles and its siblings about to follow. If the Fed looses control and creates too much credit too fast, hyperinflation will take hold, and the currency and the financial system based on it will come to a halt. One possible course of action that would stall the inevitable end would be to call in the currency and to reissue another in its place – say $1000 existing dollars for every one new dollar bill. So, it is possible to first get a deflationary episode of unknown length and severity, followed by a hyperinflationary period that can only have one effect: the total destruction of the currency and the system based on it. One possible course of action to try to stop this event from happening would be to reissue a new currency, but there are so many imbalances built into the system now that even that might not have any affect, aside from cutting what little wealth we have to shreds. The only real and long term solution is Honest Money of Gold & Silver Coin as mandated by the U.S. Constitution: Honest Weights and Measures. What to do to protect oneself and family from such events:
Most will be best served to be very conservative and concentrate on the return of your capital rather than the return on your capital. The following news clips support the above contentions. September 7 – Financial Times (Javier Blas): “Developing countries face serious social unrest as they struggle to cope with soaring food prices, the United Nations’ top agriculture official has warned. Jacques Diouf, director-general of the UN's Food and Agriculture Organisation, said surging prices for basic food imports such as wheat, corn and milk had the ‘potential for social tension, leading to social reactions and eventually even political problems’. Mr. Diouf said food prices would continue to increase because of a mix of strong demand from developing countries; a rising global population, more frequent floods and droughts caused by climate change; and the biofuel industry’s appetite for grains.” September 5 – Financial Times (Richard McGregor and Peter Smith): “China’s soaring energy demand has forced it back into the global natural gas market in search of cleaner burning though potentially more expensive fuels to power industry and provide residential electricity. Hu Jintao, China’s president, presided over the signing of a 20-year agreement between PetroChina and Royal Dutch Shell in Perth yesterday for liquefied natural gas from the Gorgon project off Western Australia.” Greenspan: We've seen this turmoil before Report: Economic bubbles can't be defused through interest rate adjustments, he suggests in speech. September 7 2007: 1:34 PM EDT NEW YORK (AP) -- "The human race has never found a way to confront bubbles," Former Federal Reserve Chairman Alan Greenspan said Thursday in reference to the euphoria that can precede contractions, or reactions, like the current market turmoil, according to a published report. Greenspan, speaking to economists in Washington, D.C., compared the turmoil to that of 1987 and in 1998, when the giant hedge fund Long-Term Capital Management nearly collapsed, the Wall Street Journal reported on its Web site. "The behavior in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998, what we saw in the stock-market crash of 1987, I suspect what we saw in the land-boom collapse of 1837 and certainly [the bank panic of] 1907," Greenspan said at the event organized by the Brookings Papers on Economic Activity, according to the Journal. Greenspan, now a private consultant, said euphoria takes over when the economy is expanding and leads to bubbles, "and these bubbles cannot be defused until the fever breaks," the Journal said. Bubbles can't be defused through incremental adjustments in interest rates, he suggested, the paper reported. The Fed doubled interest rates in 1994-95, and "stopped the nascent stock-market boom," but when stopped, stocks took off again. "We tried to do it again in 1997," when the Fed raised rates a quarter of a percentage point, and "the same phenomenon occurred." Invitation Stop by our website and check out the complete market wrap, which covers most major markets, including stocks, bonds, currencies, commodities, and energy, with the emphasis on the precious metal markets, both physical and stocks. There is a lot of information on gold and silver, not only from an investment point of view, but also from its position as being the mandated monetary system of our Constitution - Silver and Gold Coins as in Honest Weights and Measures. On the main homepage are papers and articles by some of the best out there to be had. There are audio and videos on banking, the Constitution, and cutting edge news of serious interest. Many articles are archived, while others are linked. Live time quotes on gold and silver and precious metal stocks are available, including charts for most world currencies and futures. Links to the World Bank, central banks, international monetary fund, the United Nations, and much more are offered. There is also a live bulletin board where you can discuss the markets with people from around the world and many other resources too numerous to list. Drop by and check it out. Good luck. Good trading. Good health. And that's a wrap.
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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. |
Gold
gained $27.80 for the week to close out at $709.70 (+4.08%). 
