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During the 12
year history of this bull market in gold, only about 5% of the time did we
see gold trading below its 200DMA, and each time it turned out to be a prime
buying opportunity. (Charts courtesy Stockcharts.com unless indicated).
Featured is
the daily gold chart. The last time gold traded below its 200DMA was during
the autumn of 2008. As soon as the price climbed back above the 200DMA, it
rose from $900 to $1,900. The fundamentals for gold are bullish enough for a
repeat performance. Just make sure you are buying gold and not a
'paper or digital substitute' for gold.
 
This chart
courtesy Jagadeesh Gokhal,
shows the fundamentals for gold quite clearly. Since tax revenues are
inadequate to cover these liabilities, the central banks do what they've
always done - they'll print!
"In the
distance, I see a frightful storm brewing in the form of un-tethered
government debt. I choose the words -"frightful storm' - deliberately to
avoid hyperbole. Unless we take steps to deal with it, the long-term fiscal
situation of the federal government will be unimaginably more devastating to
our economic prosperity than the subprime debacle and the recent debauching
of credit markets that we are working right now so hard to correct." (Richard W. Fisher, President and CEO of the Federal
Reserve Bank of Dallas Texas).
This chart
courtesy Cotpricecharts.com shows the number of 'net short' gold positions
(purple bars), closed at 165,000 last week. The current number is lower
still, since gold fell on Wednesday and Thursday following this report. All
in all this is a bullish chart for gold bulls, as historically when
commercial traders are reluctant to find themselves 'net short', it is because
they expect higher gold prices are ahead.
"Why
then, is gold the unmentionable, four letter word of economics? ... The
answer is threefold: A misunderstanding of the role of money; a misreading of
history; and finally, visceral revulsion to the notion that a metal can do a
better job of guiding monetary policy than a gaggle of finance ministers,
central bankers and well-degreed economists." Malcolm Forbes.
Featured is
the Gold Miners Bullish Percentage Index from the Gold Miners Index ($GDM at Stockcharts). Virtually every time this index rises from
below 30% you can count on a rise in the price of gold (see top of chart)
that lasts a month or longer.
"Over
the course of 600 years, five dynasties in China had implemented paper money
and all five had made frequent use of the printing press in an attempt to solve
problems. Economic catastrophe and political chaos inevitably followed. Time
and time again officials looked to paper money for instant liquidity and the
immediate transfer of wealth. But its ostensible virtues could not withstand
its tragic legacy; those who held it as a store of value found that in time
all they held were worthless pieces of paper." (Ralph T. Foster, Author of Fiat Paper Money - the
History and Evolution of our Currency - P 29).
Featured is
the index that compares gold producers to oil producers. Since October oil
producers have outperformed gold producers. On Thursday Dec 29th the index
produced a powerful 'upside reversal'. Coming off previous support,
technically the expectation is that gold producers will outperform oil stocks
at least until the index reaches the blue arrow, and possibly beyond that
point. The likely scenario is that both the HUI and the XOI will both rise,
while the HUI rises faster.
This chart
courtesy Ewfreshresearch.com shows the latest 'net short' position in silver
contracts to be the lowest since at least 2004. As we indicated in the
'Weekend Report' - "This is a very bullish chart for silver bulls."
We added to our silver stash this past week and hope you did the same.
"Gold is
the money of kings; silver is the money of gentlemen;
barter is the money of peasants; but debt
is the money of slaves."
(Norm Franz from his book: "Money, and Wealth in the New
Millennium)."
Featured is
the daily silver chart. Price is carving out a bullish 'descending wedge'
pattern. A breakout at the blue arrow sets up a target at the green arrow and
a breakout at the green arrow turns the trend bullish again. The supporting
indicators are positive (green lines).
Summary
Shame on those analysts who advise their subscribers to
short gold and silver during a bull market and then charge for their
'advice'. You can do that during a bear market, but not to a market that has
produced a positive year end gains for the past 11 Years!
Last day of
the year gold prices: 2000 =
274.00; 2001 = 279.00; 2002 = 348.00; 2003 = 416.00; 2004 = 439.00; 2005 =
519.00; 2006 = 638.00; 2007 = 838.00; 2008 = 889.00; 2009 = 1097.00; 2010 =
1420.00; 2011 = 1566.00. Remember - "A trend in motion will remain in
motion until it is stopped."
Happy
trading!
Peter Degraaf
Pdegaaf.com
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