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1. Gold functions like an alarm clock.
A rising gold price usually indicates that financial uncertainty and
volatility are the dominant market themes.
2. Inflation that begins to get out of
control can cause the price of gold to rise almost vertically, but during the
transition period from deflation to inflation, bank stocks and financial
companies tend to be the best leading indicators.
3. Please click
here now. You are looking at the monthly chart of the XLF financial
sector ETF. The $16 area is one of strong resistance.
4. A correction is to be expected, but there are signs that the financial sector is on the verge of a
substantial trending move to the upside.
5. Please click
here now. I’ve highlighted a large bullish ascending triangle in
green. Note the blue circle around the current price. XLF appears to be trying to stage a breakout.
6. The target of the triangle pattern
is roughly the previous highs in the $26 area.
7. If financial stocks begin to surge
higher, it would likely signal an end to deflation, and a beginning of
inflation. That would be very good news for your gold
and gold stocks.
8. I’d like you to take a closer
look at the current price action of financial stocks. Please click
here now. You are now looking at the XLF weekly chart, and I’ve
highlighted an upside breakout from what appears to be a truly monstrous
inverse head and shoulders pattern.
9. That breakout suggests that a
“reflation of the world”
theme is probably now set to replace the deflationary mindset held by most
investors.
10. In regards to gold: "People seem to be universally bullish, but the price isn't
moving…" – Reuters News, Jan 8, 2013, quoting
Ross Norman, the top-ranked LBMA gold forecaster.
11. Ross has a good track record, but I
have some concerns about his view that most people are currently bullish
about gold.
12. He’s obviously correct that
the gold price is stuck in a quagmire, but rather than “universally bullish”, I see most investors as bearish and demoralized.
13. Please click
here now. That’s the latest Hulbert “Gold Sentiment
Chart”. He surveys a large group of gold timing services.
14. I see overwhelming bearishness on
that chart. Hulbert uses his survey as a contrary opinion indicator, and it
has a superb track record of calling intermediate term movements in the gold
market.
15. Silver is the metal most likely to
benefit from a “reflation of the
world” theme. Platinum and palladium should also do well.
16. If you have 100 units of risk
capital to allocate to the metals market, I think 70 units for gold and 30
for silver is a good way to handle real risk and potential reward.
17. Reflation can lead to
hyperinflation, and gold is the metal you want to hold the most of, in such
an environment.
18. Central banks tend to take very
drastic action when inflation starts to go out of control, and that can hurt
metals like silver, platinum, and palladium.
19. Regardless, it’s silly to
worry about the popping of an inflationary bubble when it is just beginning
to get inflated!
20. At this point in time, silver is my
“metal of choice” for
fresh buys. Please click
here now. That’s the daily chart for silver.
21. After bursting above the black
downtrend line, the breakout was confirmed by a 14,7,7
Stochastics series crossover buy signal.
22. It’s normal to take several weeks, or even
longer, for intermediate trends to really get going, after such buy signals
appear on a chart.
23. Amateur investors have a tendency to
want to rush things a bit, and then throw in the towel just as the real move
gets underway.
24. Silver looks superb at this point in
time, and the budding breakout in financial stocks may be the surprise
catalyst that makes every silver investor’s upside dream come true!
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and I’ll send you my free “Golden Head Fakes” report. Learn
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Thanks!
Cheers
St
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