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GOLD
& SILVER VS. FUNNY MONEY Gold Gold had a good week gaining $17 to close at $785.40 – a +2.21% gain and a new 27 year high. Not bad for a barbarous relic.
MACD and the histograms remain strong and pointed upwards. Note the distance that the price is above its 65 week moving average. This suggests that a consolidation/correction could happen at any time. However, in strong bull markets prices rise and stay overbought for much longer and at much higher levels than normally. Caveat Emptor.
Two European Central banks have been sellers of gold in the last two weeks or so, with euro 126 million of gold sold last week (approximately 7.5 tonnes); and 6 tonnes the week before. The market readily absorbed all supply and then some. Gold is up over 24% for the year. Silver Silver had an even better week, moving up 0.60 cents to $14.23 for a +4.39% gain. Silver has yet to better its highs from last year, but is performing better than it has been. The second chart below shows that silver has recently begun to out perform gold – a most interesting development.
Hui Index The Hui was up 15.77 points to close at 420.59 for a gain of +3.90% for the week. This was gold’s highest weekly close, however, it made a higher intraday high last week of $423.16. RSI is at 66 so it has room to rise before entering the 70 overbought level; and it can always rise far above the 70 level and stay there longer then seems possible. So there are no guarantees either way. MACD and the histograms are strong, although the histograms appear to be leveling off. Price is bumping up against its upper Bollinger Band. The middle BB should provide initial support if a correction were to occur.
Xau Index Next up is the monthly chart of the Xau Index, which shows a well defined rising channel going back to the beginning of the bull market in 2001. Price rises from the bottom left hand corner of the chart to the upper right hand corner – a bullish signature as good as it gets. Notice that price has a ways to go to bump up into its upper band. All the indicators are positive and at the bottom of the chart the xau/gold ratio has broken above its upper trend line.
GDX Index Below is the daily chart of the GDX Index. It closed at its highest weekly close, but last week it made a higher intraday high of 49.74. RSI has plenty of room to move to the upside if it so chooses. MACD still shows a negative cross over, however, it looks like it may be starting to turn up. Time will tell. Histograms have not yet turned positive. The chart shows more upside potential is possible – but not guaranteed.
Hui/Gold Ratio The Hui/Gold Ratio is below its overhead horizontal resistance line, but has put in a higher low and is now headed up towards it. The outcome remains uncertain, but favors a positive resolution.
Xau/Gold Ratio The Xau/Gold Ratio has broken above its upper trend line, signaling that the Xau is starting to out perform physical gold. This is a positive development for the entire precious metals index.
Summary The Dow point and figure chart has issued a buy signal. The Transports are lagging behind with a non-confirmation and negative divergence. All financial related sectors of the market are doing poorly, and the subprime and related mortgage problems have only just begun. The weight of the evidence is stacked against the market, but the market has behind it the largest historical bubble of asset and credit inflation known to man – propelling it forward. The battle rages on. So far, the Fed has handled the bond market quite deftly – with a little tweak here and a minor adjustment there, and the Greenspan put lives on in the ghost that walks the halls of the ever vigilant watchtower – Big Ben. As is the custom, once interest rates change direction, they usually stay in that direction for some time, as things tend to take the path of least resistance. For now that path appears down. But before all is said and done, however, the long end of the market may march to a different drummer. Time will tell. Japan and China are being well paid – for a job well done. The Wall Street Crowd, led by its famous jokester, is whooping it up for a new multi-billion dollar fund to bail out all those poor multi-millionaire lost souls who have been led astray into the land of subprime – the ghoul haunted land of Weir, from whence no man returns. Watch the yen for an unwinding of the carry trades – that will most likely be the trigger. The LIBOR rate and spread will react very quickly, as will the euro/yen cross. Keep a sharp eye cast about. Permanent open market operations will be the nail that seals the coffins lid. Many markets remain extended and susceptible to corrections. Blow-off tops are still possible in a few of them. There is much talk of war. It appears to be the rattle of sabers clanging in the wind. Even the jesters can’t be that foolhardy, although they can and do put on a good act, but that’s what jokers do. Of more concern would be the rising moons of two femme fatales beckoning for center stage. A cold altar they offer for man to rest his weary head upon. It would be best to turn the other way. There is one who speaks the truth – one who wants to and can help. His name is Congressman Ron Paul, and he is running for President of the United States. Check him out – you just might like what you see and hear. See the market indicator table below. There were no changes to the gold portfolio. 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. |
