-- Posted Thursday, 21 December 2006 | Digg This Article
Honest Money Gold & Silver Report
GOLD
Gold had a tough go of it last week, falling $11.90 for a loss of –1.89%. Most of the hit incurred on Friday, when gold fell $11.80 an ounce. Below is the daily chart of gold, which focuses on the short term trend - but also shows the intermediate term as well.
Short term the price has negatively fallen below its rising trend line, however, there is a positive cross over of the 50 and 200 dma’s. All in all the chart looks good.
GOLD DAILY
Next up is the weekly chart of gold. It too shows both the short term and the immediate term trends of gold, focusing on the latter. The break out above the intermediate term trend line from November is still holding and bodes well, especially if it remains intact on Friday’s close. Time will tell as it always does.
Gold Weekly
SILVER
Silver had an even tougher road to hoe then did gold. On Thursday Dec. 15 silver closed at $13.95. The next day Friday the 15th it closed down –0.97 cents to $12.98 for a large 6.87% one day loss.
This week didn’t start off much better. On Monday (Dec. 18) silver lost –0.46 cents closing at $12.52. Finally yesterday (Dec. 19) silver rallied up +0.19 cents to close at $12.71. As of yesterday’s closing price silver is down $1.24 cents from last week’s high of $13.95, which is an 8.88% loss.
As the chart below indicates, silver’s recent intermediate term break out is still intact. It has, however, fallen below its short term rising trend line.
It is also beginning to approach its intermediate term falling trend line, which is at approximately $12.00 - 0.71 cents or 5.5% lower. We want to see the intermediate term trend hold and remain positive.
SILVER WEEKLY
SILVER/GOLD RATIO
Next up is a chart of the silver/gold ratio. As the chart clearly shows – silver has been handily outperforming gold since September up until mid-December. At the bottom of the chart silver is shown to be stronger than the S&P 500 until very recently as well.
What’s it mean – damned if we know. Could be that the markets sense the economy is going to be weakening, while imbalances and strains in the financial markets grow worse – paving the way for the yellow brick road.
All we know is that we wouldn’t bet against gold or silver – the dollar, well that’s a different story – as the charts do show; and even Sir Alan agrees with us about the dollar. Now there’s a scary thought.
SILVER/GOLD RATIO
XAU INDEX
The XAU is acting better then the HUI Index. The test of its recent break out never violated its upper falling trend line. On Tuesday the 19th of Dec. it put in a positive move up. Short term it is bumping against its lower trend line, which we would like to see hold.
There is still a lot of overhead resistance that needs to be worked off, so we would not be surprised to see back and forth action for awhile. Headway is proving to be a bit tougher then we thought it would be. But that’s the way of the markets.
XAU INDEX
The next chart of the XAU shows the fibonacci retracement levels from the May high of 171.71 to the October low of 117.44 (continuous contract). The December high of 149.95 almost made it to the 50% level.
For a sustainable new bull market leg up to begin, we need to take out the 149.95 high, then the 150 level, and finally the September high of 153.15.
It is these levels and the areas between them that are the overhead supply referred to above that needs to be worked off for the new bull leg up to commence. Expect turbulence.
XAU INDEX
HUI INDEX
The HUI violated its falling trend line break out on Monday, but then on Tuesday it closed back above it. As of now things look reasonably good. There is, however, a lot of overhead supply that needs to be worked off before a sustainable rally can begin. As we said above – it is proving to be a most formidable task – tougher then we had originally thought.
It is possible that the recent break out may be another false break, however, as of yet the weight of the evidence says that lower prices are needed to invalidate the break. Such lower price would also need to hold for at least two days and or on a weekly closing basis.
We have said from day one that a test of the break out was most likely and that prices could go below the break out point and still be valid. Our opinion is still the same. This week’s close should show the hand being played out.
The daily chart below shows the break out to still be valid, however, with the tug of war needed to work off the overhead resistance above, prices may gyrate back and forth near these levels until one or the other side finally gives in.
There are many mixed signals on the charts – some positive and some negative. It will take further price action to resolve the divergences to determine which side prevails. Our opinion is that it’s a bull market until it isn’t – as of now it is.
HUI INDEX
Below is a monthly chart of the HUI Index. We have drawn the blue horizontal line that is marked “the bull/bear market line in the sand”. If that line gets broken, then the bull will turn to a bear. We do not foresee that happening. But all things are possible.
HUI MONTHLY
HARMONY GOLD MINING
Harmony Gold Mining (HMY) and Gold Fields (GFI) are two of the stocks in our own personal portfolio. We expect good results from both, and they both have already been very good to us since the beginning of the gold bull market. We have been in and out of both several times.
Below is the chart of Harmony (HMY). Notice the positive MACD cross over as well as the positive moving average cross over. The histograms are also showing positive divergence, and are in positive territory. Just about every indicator on the chart shows positive divergence.
Once the overhead resistance denoted by the blue horizontal line is taken out – things could get mighty interesting. That is just a bit above $16.00 per share.
HARMONY GOLD
U.S. Dollar
Next up is the U.S. Dollar. As the chart below shows, and those familiar with our reports know, the dollar is in a huge bear market, and is one of the walking dead. It is an accident waiting for a time and place to happen – and it is fast approaching that time.
Alan Greenspan had nothing but good tidings for the dollar last week, stating: “The dollar will continue to drift downward until there is a change in the U.S. current-account balance, as it’s imprudent to hold everything in one currency.”
Easy for him to say now that’s he’s no longer on watch. Easy Al – he who screwed the dollar twice over – no make that thrice over, is being naughty not nice. Santa’s not going to be very happy with Sir Alan.
U.S. DOLLAR INDEX
THE EURO
The Euro has had a pullback from very overbought conditions, as the dollar has had a rebound from very oversold conditions. The short term trends will realign themselves with the dominant longer term trends. It is only a matter of time – and it will be shorter rather than longer before it occurs.
EURO
CRUDE OIL
Oil looks like it’s trying to put in a bottom. West Texas Light Crude closed the week out at $64.09 up $2.06 or +3.32%. It looks good enough for us to have taken an initial position in Suncor last week. The first chart below is crude oil, and the second is a chart of Suncor.
WTIC CRUDE
SUNCOR ENERGY
We like the chart of Suncor as it looks about ready to break out. It will turn cold yet this year and when it does oil will go up in price. Our bet is on Suncor – at least for now.
Originally we thought natural gas was going to be a better play – we are no longer so sure of that. Right now we feel more comfortable with Suncor.
