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GOLD
& SILVER: CORRECTION OR CARRY ON? Gold Gold put in another good performance gaining $6.60 on the week to close at $753.80 surpassing its 2006 high of $730.40. RSI is bumping up against the 70 overbought level. MACD and the histograms are up strongly, while the CCI indicator at the bottom of the chart is flashing an overbought reading, although it has backed off considerably from its recent higher overbought level.
The price of gold denominated in euros is trading near its recent highs just under EUR 525. A break above EUR 530 would be very bullish for gold, as it would be further evidence that gold is not just in a U.S. dollar-centric bull market, but in a world wide currency bull market – precipitated by a global devaluation or debasement of all paper fiat debt currencies.
The Bundesbank said that further gold sales are not presently planned. The World Gold Council issued a statement that "unless a major new seller emerges, it is likely that gold sales [in years 4 and 5 of the Agreement] will be well under the 500 tonne annual limit." I would watch what they do, as opposed to what they say. Often time’s central bankers will say one thing only to do another. Next up is the weekly chart of the Gold Trust Shares (GLD). In keeping with gold’s performance the Gold Trust Shares recently put in an all-time high. Note the powerful accumulation/distribution indicator. Several of the other indicators are in overbought territory.
Silver Silver had a good week closing up 0.41 to $13.90 for a nice 3% gain. Any further upside gains from here would suggest silver is going to test its high as gold has done. RSI has plenty of room to run to the upside if it has a mind to. A positive MACD Cross is in place, and the histograms have just turned up and positive as well. All in all silver is starting to look much better, as it has been under performing for awhile. It looks like it may want to run higher.
Next up is the weekly chart of the iShares Silver Trust. It is above its upper trend line and RSI is headed up and has plenty of room to move before the 70 overbought territory is reached.
Hui Index The Hui had a big week – gaining 19.35 to close at 413.34 for a gain of just under 5%. On Thursday the index was up over 18 points intraday and then gave back 60% of the move before the close. RSI is strong but still has room to move higher if it wants to. MACD and the histograms are looking good. The CCI index and STO are flashing overbought and the STO look like they may be getting ready to put in a negative cross over to the downside. For the year the Hui is up over 22% - not too bad for stocks that mine a barbarous relic. Maybe relics know something that most do not.
The GDX looks pretty much like the Hui; however, its volume readings have been falling during the recent move to news highs – not the best of situations.
The monthly chart of the Xau is still sporting a break above its long term horizontal resistance level that coincides with a huge cup and handle formation. As of now I consider this to be a break above – not a breakout, at least not as of yet. I’m from Missouri and I say show me. The above chart has HUGE potential.
The Xau/Gold ratio is doing better, but still has a lot of work ahead of it.
The same goes for the Hui/Gold ratio. It’s improving but needs to improve more.
Summary I don’t care for the stock market at the present time, as it is an asset bubble of the first degree, and the non-confirmation and negative divergence of the transports is flashing “warning”. The subprime loan debacle is what it is – a contagion of toxic waste that has only just begun. The Fed is scared stiff or they wouldn’t have dropped rates to the degree they did. Watch the yen and the LIBOR rates for first warnings of more impending losses. The dollar continues to fall but looks like its due for a counter-trend rally of sorts. Interest rates have been rising across bond land even after the 50 basis point cut in the Fed Funds and Discount Rate (100 bps cut). There may be more to come in the way of Fed cuts; and there may be more to come in rising bond yields, regardless of what the Fed does, or perhaps in spite of what they do is more appropriate. One might as well put the blame where the blame is due: and that is squarely upon the shoulders of the Fed. Overall many markets are near or at overbought levels, which at first blush would hint that corrections may be forthcoming; however, in strong bull markets the markets can stay overbought for longer and at higher levels than one thinks possible. As long as the trend remains up, staying the course is prudent, as is being ready for the first signal that a correction is unfolding. Taking some money off the table by booking partial profits is a decision that the individual investor must make for themselves. One market that is not overbought is natural gas. I have repeatedly mentioned that it usually puts in a seasonal bottom sometime in the fall. It then embarks on a rally in anticipation of the cold winter season to come, and the resulting demand for fuel for heating. The chart of natural gas does not look at though it has bottomed; however, the charts of several gas stocks have broken out and appear ready to run. The following are a list of some candidates: Natural Gas Stocks
This is not a recommendation to just run out and buy them. I have not yet begun to establish a position and when I do I will do so incrementally – not in one fell swoop. Due diligence and all that other good stuff is warranted. Safety still remains the watchword of the day. For me this includes a T-Bill Only Money Market Fund for short term holdings and to be used to sweep funds for trading in and out of. It would be prudent to have a month’s supply of cash on hand and some physical holdings of gold and silver; just in case the banks decide to take a short holiday, which they have the habit of doing when pressed with their backs to the wall. To have wire transfer capabilities on all your accounts can not possibly hurt and could help if push comes to shove. Taking it one step further are wire transfers in place to a gold bullion depository. Hopefully none of these safety measures will ever be needed or used. But as with all insurance – it’s better to have it in place before any accidents occur than afterwards, cause then it’s too late. Lastly, things are heating up in the forthcoming Presidential race. In contrast to all other candidates Congressman Ron Paul espouses the beliefs of a true patriot – the return to individual freedom and liberty as mandated in the Constitution – over and above the dictates of the state for the state. Please note that the concept of the state is NOT the same as the concept of government – the latter is elected to serve the people, the first is what some would call organized conquest and the resulting edifice built thereon. Take the time to check out what the Congressman has to say. He is very well grounded and his message is a breath of fresh air in an atmosphere polluted with the same old hot air of politics grown stale and stagnant. It is time for a change and one is coming – if not today than tomorrow. The choice is ours if we choose to make it.
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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. |
