remember well when gold rose from the measly price of $400 to above $700, the
excitement was contagious. Then it rose from $700 to $1000 and the
excitement was marginal. Now as we are at the beginning of the next major
up-leg the excitement is moribund. The only excitement is from select
institutional investors and central bankers, but even they are a rare breed
and certainly not listened to by the masses, but they will.
are three obvious stages to a bull market, smart money accumulation being the
first. That stage is just winding down now. We are only at the
beginning of the second stage where gold climbs the so called wall of worry
as institutions and funds accumulate before telling their clients to get into
may still be years away from the blowoff top which will see gold priced in
the many thousands of dollars and silver in the hundreds. It’s
been a slow and rewarding journey so far, but the real fun is just beginning.
that being said this coming week is the Comex options expiry for gold and
silver. These expiries have been plagued by weakness in the past.
I expect the metals to come under major pressure right off the bat Monday,
but the kicker will be whether the buyers have enough conviction and cash to
keep prices stable or even move them higher. This week will without a
doubt be the most important week of this century when referring to the precious
metals. Don’t blink.
had a subdued move up 0.22% on the week and is trading its way into another
upside move. There are a few observations I’d like to make on the
gold chart this week.
is trading in a tighter and tighter range, between $1,060 and $1,050.
The moves lower are violent and fast when looked at on a 5 minute chart and
being met by a strong large buyer who moves prices up nearly as fast as they
fell. Many of these moves took place after the open market closes at 2
pm EST, which means it’s large, well connected traders fighting each
other. Certain Central banks are whom I believe to be on the buy side,
as well as institutional investors who are not part of the growing, but
losing, shun gold crowd. Many of whom actually
sell gold as their business!?
last sideways pattern in September saw prices trade within the triangle
followed by a quick violent move lower to shake out the weak hands.
Notice the move lower out of the September triangle was stopped at support at
$980. Right now this new triangle looks to be about to make a similar
move. If gold doesn’t head straight up from here, a short move to
support at $1,020 is possible, but it will be short-lived. Once the
$1,070 level is beat, $1,100 will be easy pickings.
indicators are also interesting this week. The RSI has been making
higher lows and higher highs for this move. It is nearing the uptrend
line and suggests that a move higher is imminent. However if a
correction to $1,020 occurs it will annul the uptrend line in the RSI and put
off some technical traders. But that is exactly what the shorts want,
to discourage or shake out as many people as possible so they can cover a
portion of their short contracts.
gold Commitment of Traders (COT) report, which is
cut off on Tuesdays, showed the commercials to have increased the long
position by 154 futures contracts to total 86,225 while increasing again
their short position by 1,721 to total 383,718 futures contracts. Total
open interest is now a staggering 509,678 contracts. We are approaching
all time high open interest again.
the moving averages are in fine shape and likely won’t get the chance
to provide support for a few months at least. The slower moving MACD is
now showing a sell signal but as with the RSI has traced out a pattern of
higher highs and higher lows going back to July. That’s
bullish. MACD would have to move all the way to below 10 from 17 to
annul this pattern. That is highly unlikely.
STO shot a sell signal from overbought ground and is likely to come back to
the middle of it’s range for a few days. The most likely scenario
in my view, but not my desire, is a quick correction over the next week or
two to the $1,020 area before turning on a dime and shooting to at least
$1,100. But for me either scenario is fine since I am fully invested
and will remain so until this move higher is done in up to six months at
which time I will be booking some profits in hopes of loading back up at
lower prices. However I always keep a core position because you just
never know when or what will happen with 100% certainty.
gained 1.20% for the week and is bouncing between the $18 and $17.50
levels. I really don’t see any move below $17 as plausible, but a
move up to $20 in short order as the more likely scenario.
is flat and not giving any signal at all right now. The moving averages
are all trending higher and far below the trading range. MACD is now
flashing a sell signal as well as the Slow STO indicator. The uptrend
line is fast approaching silvers trading range and will most likely push it
higher in explosive fashion.
silver COT saw the commercials increase longs by 359 to
total 28,261 and increase shorts by 937 to total 94,265. Their long
short ratio remains highly short and is underwater. How long they can
take the pain is debatable but regardless, silver is going higher.
higher by 1.60% on the week into new recent high ground. The $1,350
level was broken convincingly to the upside this past week. The
wonderful pattern of higher highs and higher lows is abundantly clear on this
six month chart.
much needs to be said about this metals trading. It’s been nearly
textbook all year long and looks as if it will continue it’s trend of
two steps higher, one step back for the remainder of the year.
leapt 2.72% for the week and is up in the nosebleed section of it’s
channel. The recent moonshot has sent all the indicators into very
overbought ground and I imagine a pullback is about to occur. There is
a band of support at the $335 to $326 area but more likely I think a move
down to $310 will take place before this metal resumes its march higher.
is coming down from near the 80 area. The moving averages remain in an
uptrend. It looks like the 50 day moving average will be able to
provide support at $310 if indeed the price does correct to that level.
is flat and looks ready to turn lower but has yet to provide a sell
signal. Slow STO is also flat and has been in overbought territory for
this whole month of October.
suppose the big story this week is that aid recipients who have yet to pay
back the government, sorry I mean you the taxpayer, will see top executive pay cut by 90% on
average. There is no need to get into the dirty details since these
executives will be paid in lavish bonuses dished out in more creative ways
than I care to imagine. Or they will simply be lured by higher pay to
those companies who have payed back you, the taxpayer. Isn’t that
wonderful. The few who have been able to pay back aid money have reaped
incredible profits as of late due to their inside connections, now they will
have their pick of top executives throughout their industry.
from Latin America agreed to adopt a regional currency recently.
Countries including Venezuela, Ecuador and Nicaragua, all countries I try and
steer clear of when investing in stocks, will be taking part and hope to have
this new currency implemented in 2010 for regional trade. The goal is
to circumvent the use of the USD. Having or conducting business in USD
terms is becoming an increasingly infected thorn in the side of many
nations. Coming up with an effective and practical solution is taking
time, but agreements such as these are becoming more and more
commonplace. Countries have lost faith in the USD and are implementing
or creating strategies to skirt the problem.
life of a fiat currency historically has been about 42 years. Guess how
old the USD is? The last silver coin for circulation was issued in 1969 meaning that from that day
forth the USD has been a fiat currency, backed by nothing but the
“word” of the US
government. No fiat, unbacked, currency has ever lasted, but there are
still some circulating.
also has recently decided to drop the USD from their forex
reserves. This “plan” has been in the works for a few years
now, let’s see if it can finally happen this time. Part of the
same old plan is to open a non-USD bourse to sell their oil and gas in mainly
the above ties into the fact that it’s now public knowledge that many
cash rich central banks are shying away from the US dollar in favour of other currencies and of course
gold and other hard, non-perishable commodities. Over the past few
weeks governments have told traders to stop shorting the USD. Usually
that has a positive effect, but not this time as the USD index has fallen two
points, to 75.47 in under a month and is nearing a major support point at
74. If that falls, just under 72 will be the next stop. That
level is the 20 year low on the chart on the right, and the lowest point ever
for the USD measured against a basket of currencies which comprise the US
Dollar Index. This comes as gold is making all-time highs in USD
terms. That is golds natural role, to hold value as fiat currencies eventually
fund are a good source to follow in term of monies invested, compared to cash
levels. This chart shows that the cash held is now just
about down to 3% again, the level it was just before the 2007 crash.
That in and of itself does not say a crash is again imminent, but there are
increasing signs and talk that it is approaching as complacency and urgency
to get into the rally among the investing public becomes common.
Investing with a contrary mindset is always advisable in my view.
see this link for this weeks list of biggest
losers, or failed banks. I still don’t quite get why banks can
only fail on Friday’s after the market closes, but then again a lot of
what occurs in the markets just does not compute to me as being free and
fair. Seven banks failed this week making it the single largest number
of failures year to date and bringing the years total to 106!
planned, two day miners strike in Peru
went of with a hitch this year. Many workers who are soon to be
entering new contract negotiations, remained on the job while still
supporting the basis for the strike, laws for improved benefits.
accounting for inflation gold still remains well off it’s high
which would be well above the $2,000 level. Gold has not kept up with
the rising price of items like bread, fuel or medical care. Martin
Murebeeld who manages $58.5 billion says “the world’s money
supply has increased and gold hasn’t kept pace. We’re now
in a period of catching up”.
William, who calculates economic statistics base on the formulas used before
the days of hedonics, and swapping steak for burgers as prices rise to keep
the perception that inflation is lower than in reality, says that gold would
have to rise sixfold in order to top it’s record 1980 high. I
couldn’t agree more and expect an even higher price eventually as this
bull market turns into a bubble. As they say, there’s no rush
like a gold rush.
robbers in the Washington
area are now targeting Indian families since they have a
high affinity for high quality gold.
world’s largest gold miner undertook an internal review over the summer
and has decided to cut 80 jobs mainly at the corporate head office in Toronto.
Good, those paper pushers got the company into massive hedges below $400 an
ounce and cost the company huge dollars. The company, just in the past
two months, rose $3.75 billion to try and close out their remaining
hedge-book and that figure will likely not be enough as the gold price
continues it’s rise. I am happy to say I am not a shareholder in
that company, nor would I want to be after such poor management.
Shouldn’t a gold company be bullish on gold and want exposure to a
higher gold price? It seems they do now, but will be penalized heavily
to gain that stance and take years to benefit.
an interesting scheme to get hold of physical gold which will likely be given
back as cash later. Gold will now be gladly accepted as collateral for
trades. The group states that “a lot of participants were holding
physical gold and this was proving costly to them, they were interested to
find out of they would look at accepting gold as collateral as an alternative
to debt or equities”. The gold must be physically deposited in
their depository rather than pledged with paper certificates. This
makes no sense to me. Why would anyone give their gold up to someone
else? It will prove to be a very bad decision on their part in
time. This defeats the whole purpose of holding physical gold in my
view. Why not give them certificates, and keep the gold at your current
gold investors are truly becoming just that as they increase their buying of gold coins and bars, shunning the
traditional investment of jewellery which has a very high premium.
Investment for coins and bars is predicted to surpass the traditional
investment of jewellery in 2 to 3 years. Even this years festival
season saw increased coin demand, up over 30%, nearing
jewellery demand, according to some sources. In 2008, jewellery
consumption was 501.6 tonnes with investment demand rising to 211 tonnes.
gold prices first crested the $1,000 level in 2008, Indians ceased buying
gold and sold their unwanted or scrap gold. Now that the prices are
once again solidly over $1,000 they have once again slowed buying, but are not selling unwanted gold. The article
pontificates that demand will not return in earnest unless gold returns to
$900 to $950 an ounce, a scenario I find highly unlikely.
the other hand this article tells that during a one week
festival period in October sales, while gold was over $1,000, up 6% year over
year to 56 tonnes versus 53 tonnes last year.
Chinese economy only grew at 8.9% year over year in Q3. China
has had a staggering growth number for years now even while most of the world
posts negative numbers. Simply amazing.
favourite of mine, Niall Ferguson, says that the USD is done and the Chinese are dumping it
right now. I’ve been talking and showing evidence of this weekly
for a long time now. China
and other cash rich companies are spending billions every week to buy hard
assets and partner with developing countries in order to spend their USD
reserves as quickly as possible.
is another pice of evidence. The Chinese
Gold Group which is state controlled is planning to step up their already
growing presence in Central Asia, Russia
and Africa. The details are still
murky and we won’t know which deals they are working on for a while but
is going at full speed to find and do deals that are accretive to their
prefers investing in Australia
but that country has given them a hard time lately as they gobble up as many
assets as possible. Canada
is also high on the Chinese list, a
weeks sad but true is that banks are soon to begin charging you for paying off your credit cards on time every
month. This will be a trial ballon at first with only selected groups
being targeted but it will spread. What’s next? Look to be
charged to login to your bank account online one day.
good documentary can be found at the link and is a must watch for
more insight into how we got into this mess. Many people warned about
the coming crisis but none were listened to. Perhaps those who saw it
coming should have some say in how to get out of it rather than those who
didn’t see it and only admitted it once it was far too late, even then
reluctantly. Sadly it will be the same old story until the people rise
up against the dark forces lurking behind the curtain of government.
that was entertaining. The youngest was at his cousins a few houses
down the road and had a grouse fly into the window and perish. Since
he’s been out with his grandpa getting grouse last weekend, he
naturally took it home and did a fantastic job of gutting it and getting the
breasts. That’s a job I haven’t done in years and don’t
envy, but he seems to almost enjoy it, actually he does enjoy it. Maybe
it’s a kid thing, since he’s in the army and guns phase. I
guess it’s grouse for dinner!
week this letter rolls out easily and quite quickly, this week was not one of
those weeks. Let’s hope for a better next week.
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Until next week
take care and thank you for reading.
by Warren Bevan
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