-- Posted Friday, 27 July 2007 | Digg This Article
7-26-2007
Those that are subscribers to my Twice Daily Market Commentary are aware that I have been making mention of the reversal in the Japanese Yen. The Yen has entered a Bull Market phase, which means that the “carry trade” used to purchase gold by some investors, has to be unwound. The “carry trade” occurs when you borrow using one currency as a base from which to borrow from and buy into another to invest in goods or make the difference in interest rate differentials between the two currencies. I realize that this is a simplistic explanation, but I believe it does an effective job of describing what a “carry trade” does for. Carry Trades have been at work a long time, due in large part to Yen having been in a Bear Market due to Japan’s Central Bank’s decision to maintain a near zero interest rate policy. This is now changing. Some that borrowed using the Yen are finding it necessary to unwind their “carry trades”. Items bought via the “carry trade” typically get liquidated in the process of unwinding the “carry trade”. In part, this may be why the stock market broke down and may be part of the reason why neither gold nor silver has acted as a “safe haven” investment recently.
It’s very evident that investors are not turning to gold or silver as a spot to park their funds as stocks markets around the world are correcting down. Investors have instead run to T-Bonds and Notes as their safe haven. In the process, they are driving the yields of these instruments down.
As I believe that silver and gold are acting in concert together, let’s simply focus this week on gold. I think opportunities lie ahead.
Last week I published the gold chart below which were created by the Moore Research Center. Both the 33-Year and 15-Year Seasonal Studies are plotted on it. The 33-year pattern is plotted in “blue” and the 15-year pattern is plotted in “red”.
On the above chart I’ve highlighted where I think we are now. I’ve labeled it the “Current Peak”. From a historical perspective this chart shows what historically has occurred as the market nears the end of July and enters August. I’ve highlighted the area I want you to focus on in white and have copied it onto the Daily Chart of December Gold below.
On the above chart look at the 15 and 33 year time frames. Historically speaking, gold rallies into late July and from there a downside price correction ensues.
Sound familiar?
Look at chart below. It is a Daily Chart of December Gold. This week’s price break sure fits in with the historical timing picture above.
It cannot be disputed is that gold topped out this past Tuesday, July 24th. Prices broke hard on both Wednesday and again today ending up with a $22 break in but 2-days of trading.
I’ve overlaid part of the Seasonal Study Chart on the December Gold Daily Chart above. As you can see, the patterns so far match up. Until I have reason not to, I have no reason not to believe that this relationship will not hold going forward, given the overall weakness in the Dollar, the unwinding of “carry trades” and high inflation.
On the chart above you can see that the market is trading underneath both the 18-Day Moving Average of Closes, drawn in red and under the 100-Day Moving Average of Closes, drawn in green.
I want you to pay attention to the convergence of these two moving averages as time goes by. Once these averages converge and prices close over both of them I think a strong rally will ensue. By the end of August, history says that prices typically are ready to move higher. Therefore, the question for me is where the low will be and will history repeat itself?
For those that want to play metals, it is time to get your trading account ready to do so. On pullbacks I will soon be recommending how to accumulate December Call Options and when the chart pattern warrants, will be making recommendations in December Gold in my Twice Daily Market Reports.
I expect gold to become very bullish….very soon.
If you haven’t had a FREE 2-Week Trial to our Twice Daily Market Recommendations and access to our nightly videos where we review charts nightly, go to
http://www.iepstein.com and fill out the New Investor Kit Form. We will send the kit and access to our research to you.
As long as you haven’t had access in the past year, you can obtain a Free Subscription to receive access to all of our research, including Nightly Audio/Video Recordings where we cover in detail all the metal markets, when you fill out the New Investor Kit Form on our website.
Free Offering
New Futures Trading Kit
Our FREE New Investors Kit is contained on a CD. It includes:
14-Day Trial to our Charting Software with:
· Live Streaming Quotes from the CBOT and the CME
· Paper Trading
· Price Ladders
· Streaming News
14-Day Access to our Nightly Audio/ Video Report
14-Day Access to our Twice Daily e-mailed Market Research
Brochures, Booklets and much more…all on the New Investor Kit CD
For Self-Directed Traders that want to or are trading the fully electronic Metal Markets and are reading this report, please look below at our commissions. If you’re trading elsewhere, we’re most likely beating what you are paying by a lot.
Simply make mention to one of our representatives when you open your New IECo Trading Account of this “Special” low commission.
As Exchanges and Vendors raise and/or lower rates, those changes are passed on. The Fees and Commission being quoted are on a per-side basis and are all inclusive!
To learn more about us or to get started trading through us simply go to our website at http://www.iepstein.com and fill out the New Investor Kit Form. A CD-Rom will be sent to you. At the same time you will instantly begin receiving access to and instructions on how to access our daily market research, trading recommendations, charts and much more.
If phoning us is easier for you our phone number is 1 800 284 3010.
We handle trading accounts from individuals in a number of foreign countries as well.
Disclaimer: This publication is strictly the opinion of its writer and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is taken from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures and Options on Futures trading involve risk. In no event should the content of this market letter be construed as an express or implied promise, guarantee or implication by or from Ira Epstein & Company or Shatkin Arbor, Inc. that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication of future performance.
-- Posted Friday, 27 July 2007 | Digg This Article
