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Much discussion has taken
place in recent weeks, regarding the possibility that gold and silver might
continue to sink to lower levels, as the summer doldrums set in. Investors
soon become shell-shocked with negative market analysis that looks at a
half-full glass of water and refers to is as ‘half empty’.
They read about a member of
the Federal Reserve Board who is quoted as saying that he is worried about
inflation, and they interpret this to mean that the dollar is going to rise,
and gold might fall, just because of that single comment. If the man was serious about his
worry, he and his pals would be raising rates, not lowering them! Of course we know that their hands are
tied, as the Fed cannot raise rates until the economy, especially the housing
market, can handle higher rates.
The fact
of the matter is that gold and silver are becoming more of a bargain on a daily basis. The reason is very simple: Every day, the central bank money
spigots are spewing out at least ten times as much money,
as miners are able to produce gold and silver!
Until this situation is
reversed, the fundamentals will support higher prices. Pull-backs or corrections usually
swing too far in the opposite direction to the main trend, thereby providing opportunities
for us to ‘buy the bargains’. This is the situation today.
For some examples of price
increases:
- Platinum has gone from 400.00 to 2,000.00, an
increase of 400%
- Copper from 0.75 to 4.00, an increase of 470%
- Lead from 0.20c to 1.20, an increase of 500%
- Uranium from 0.63 to 63.00, an increase of 530%
- Crude oil from 12.00 to 124.00, an increase of
900%
- Molybdenum from 2.50 to 32.50, an increase of
1300%
- Rhodium from 400.00 to 9,400.00, an increase of
2200%
-
Many of these commodities
are trading at all-time high prices!
By comparison, gold has
crawled, from 260.00 to 880.00, for an increase of 338%. Gold is currently trading at 1/3rd of
its inflation adjusted previous high price.
Silver from 4.00 –
18.00 has increased by 350%. Silver is currently trading at 1/8th
of its inflation adjusted previous high price. That’s right,
silver has to increase by a factor of 8 times to reach 135.00, which is its
1980 price, when adjusted for inflation.
And that’s if you use the official CPI numbers. By using actual inflation data, the
number is even higher. Gold and silver are still bargains!
Charts courtesy www.stockcharts.com
 
Featured is the
daily gold chart. The correction
that started in mid-March ended at the Fibonacci 50% level. Price today broke out above the
current downtrend line (blue arrow), and is now headed for higher
levels. The 3 supporting
indicators are turning positive (green lines). The 50DMA is in positive alignment to
the 200DMA (green arrow), the sign of a bull market. THE FUSE IS LIT!
Featured is the weekly gold
chart. The blue arrow points to
the bottoming of the 7 – 8 week gold cycle. ‘X’ marks the spot where
the cycle missed, due to excessive bullishness. The cycle returned to normal on Friday
May 2nd. The green
arrow points to confirmation of the cycle. Unless gold closes below the thin
purple line tomorrow, the upside breakout (green arrow), coming from beneath
8 weeks of resistance, will confirm the cycle bottom. (The thin dashed purple line connects
the Friday closing prices). The RSI is beginning to rise up from its support
line (black arrow). THE FUSE IS LIT!
Featured is the index that
compares gold to oil. Since the
mid 1960’s the historical average has been 15.4 barrels of oil equals
an ounce of gold. Today this
index touched 7, indicating that 7 barrels will buy an ounce of gold. GOLD IS HALF PRICE COMPARED TO OIL!
The blue arrow points to a positive closing price today. This may indicate
that the trend is about to change.
The index at 7.14 is 26% below the 200DMA, which is extreme. The RSI and MACD are deeply oversold
(green lines). THE FUSE IS LIT!
Featured is the
daily silver chart. The
correction which began in mid-March ended right at the Fibonacci 50%
level. Confirmation will come at
this Friday’s close, providing silver closes somewhere near the green
arrow, above the thin purple downtrend line, which connects the Friday
closing prices for the past 9 weeks.
The RSI is positive, and rising up from its support line (green
line). THE FUSE IS LIT!
Featured is the CDNX
index. The Juniors are ready to
join the party! The index had its
best day in over a month (green arrow), and is bouncing off a triple bottom
(green lines). The 3 supporting indicators are positive (blue lines). THE FUSE IS LIT!
Summary:
When you read a comment
that is negative to a rising gold price, remember Gibson’s
Paradox: “When real interest rates (T-bills less
CPI) are negative, gold will rise.” This will keep you invested, while
the bull rises in saw-tooth manner, ‘up two and down one’. To quote Richard Russell: “He who buys the dips, and rides
the waves, wins in the end.”
DISCLAIMER:
Please do your own due diligence. I am NOT responsible for your trading
decisions.
Happy
trading!
Peter
Degraaf.
Peter Degraaf
Pdegaaf.com
Peter Degraaf is an on-line stock trader with over 50 years of
investing experience. He sends
out a weekly Email to his subscribers.
For a 60 day free trial, contact
him at itiswell@cogeco.net,
or visit his website www.pdegraaf.com.
Information
contained herein is obtained from sources believed to be reliable, but its
accuracy cannot be guaranteed. It is not intended to constitute individual
investment advice and is not designed to meet your personal financial
situation. The opinions expressed herein are those of the author and are subject to change without notice.
The information herein may become outdated and there is no obligation to
update any such information. The author,
24hGold, entities in which they have an interest, family and associates may
from time to time have positions in the securities or commodities discussed.
No part of this publication can be reproduced without the written consent of
the author.
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