1. Some critical technical events have occurred in the
gold markets over the past week. Please click
2. Friday’s price action likely established the
$1625-$1645 area as powerful support for the bulls (you). The decline halted
at almost exactly $1642.40, and then rocketed towards $1700.
3. Please click
here now. Friday’s price action took the gold price about 3% above
the upper green HSR line (horizontal support & resistance).
4. This is the first time in almost a year that gold
has won a decisive victory against the bears on the “chart
battlefield”. Key resistance has
become key support.
5. In the shorter term, any decline could be halted by
minor HSR at $1680, basis December futures. Please click
6. Many gold and silver investors are watching the
overbought RSI indicator on the daily charts. Please click
7. Technical indicators aren’t guarantees. They
are tools used to display a general picture. When silver is flashing buy
signals on the monthly chart, as it is now, the amount of
“respect” you should pay to sell signals on the daily chart is minimal.
8. Silver is more likely to experience numerous
intra-day sell-offs than a major leg down in price. I would sell very little
silver here (“sell like a bird”).
9. It’s true that the daily chart is very overbought, but does that mean it
will necessarily soon become oversold? I would argue that it is likely that
the RSI indicator could go only as low as 50 on that daily chart, before
rising back to the 70-90 overbought area.
10. Please click
here now. That’s the monthly chart for silver, and the technical
indicators are far from overbought. In fact, most are dramatically oversold.
11. Gold stocks appear to be ready to dramatically
outperform gold. Please click
here now. You are looking at the HUI gold stocks index compared to gold,
on a weekly chart.
12. Note the blue trend lines. They form a bullish
wedge, and an upside breakout seems to be imminent. A rise over .30 on this
chart could bring in momentum-based trading funds, creating a very exciting
time for gold stocks.
13. What about the fundamentals for gold? Interest rates
in Spain have soared, and CNBC reports that, “On a three-month rolling basis, portfolio and investment outflows
from Spain totaled 52.3 percent of the country’s gross domestic product
(GDP), (that's) more than double the outflows from Indonesia, which reached
23 percent of GDP at the time of the Asian crisis, Jens Nordvig,
global head of G10 FX strategy at Nomura wrote in a note to clients on
14. Those numbers are an absolute disaster. The ECB is
rumoured to be preparing to buy Spanish bonds, to force down interest rates,
and add stability to the Spanish financial system.
15. Those bonds will likely be bought, at least in part,
with electronically printed euros, and that will put more upwards pressure on
the price of your gold.
16. On top of the ECB action, this Friday features the
release of the key “jobs report”, and on Thursday the jobless
claims numbers are released. While the economy has grown modestly, it is
nowhere near enough to offset the growing government debts.
17. The rising price of gold seems to be related to a
growing institutional view that QE3 is necessary to make the debt situation
18. Food prices have not come down. Soybeans went to
another all-time high last night. There is typically a 3-6 month time lag
before crop price rises of size are reflected in prices at Asian
19. The Chinese government is extremely worried about
the effects of rising soybean prices. Their nervousness is likely reflected
in the gold price.
20. Most gold community investors hold positions in
junior resource stocks. Investors should be “thinking big” in terms of upside targets.
21. Please click
here now. That’s a 2 year daily chart of GDXJ. Note the three lows
that I’ve circled.
22. The first one is circled in blue because in the
biggest picture, a price rise above $22.58 may be view as an activation point
for a major bull move higher.
23. I’d like to see investors focused on the
higher profit booking zones at $27.16 and $29.65. While you need to be
prepared to handle growing volatility, the odds of a new decline below the
lows at $17.37 are diminishing quickly.
24. A commitment to “unlimited QE” is a
commitment to monthly purchases of bonds with electronically printed dollars.
Several Fed presidents and governors are in favour of this approach. If the
Fed officially embraces unlimited QE, then GDXJ and your individual gold
stocks could go to new highs!
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