-- Posted Monday, 1 October 2007 | Digg This Article
Honest Money Gold & Silver Report
Gold
Gold had another stellar week moving up $11.10 per ounce to close the week out at $750.00 for a gain of (+1.50%). First up below is the daily gold chart, which shows the price to have broken below its very steep bottom trend line.
This along with overbought RSI readings and receding histograms hint that a short term correction may be around the corner. MACD looks like its getting reading to make a negative cross over, however, one day of strong action can negate all these indicators.
The weekly gold chart looks solid. A new high has been registered, RSI is not yet overbought (although it’s getting there).
MACD has recently made a positive cross over and the histograms are positive with plenty of room to run it they want to. STO is showing an overbought reading.
India reported its January-August imports were 664 tonnes or 87% more than a year ago.
Central banks sold about 460 tonnes of gold during the latest Central Banks Gold Agreement year that ended on Wednesday.
This is 16 per cent more than last year and the second largest disposal of official sector gold reserves since the agreement began in 1999.
The increase in supply had no negative effect on the price of gold, as the market readily gobbled up all supply it was offered. Sales have been strong enough to set price records going back 20 plus year. Also adding to the mix – South Africa’s production has collapsed to an 85-year low, thereby reducing the amount of supply in the market.
The Bank of Spain sold 149 tonnes of gold so far this year, however, Italy and Germany have both hinted that they may increase their sells in the near future just to meet regular operational budget restraints.
Silver
Silver was up 0.30 cents on the week to close at $13.92 for a gain of +2.20%. On the daily silver chart below silver is performing well but is starting to run into overbought resistance
The weekly chart of the silver exchange traded fund (SLV) looks better than the daily silver chart above. RSI is positive and rising and has plenty of room to run if it chooses to.
The fund had a strong week gaining 1.76% and has broken well above its upper trend line.
A positive MACD cross over has been made and histograms are expanding in positive territory with much room left to go if they so choose.
Next up is a daily chart comparing the performance of gold with that of the dollar. As you can see they are pretty much inverse mirror images of one another.
At the bottom of the chart is the Euro which can be seen steadily rising as is the price of gold. The Euro and Gold trend in the same direction; and both trend in the opposite direction of the dollar.
Gold & Silver Indexes
First up is the Market Vectors Gold Miners Index (GDX). The daily chart shows that price has broken above resistance that is now support.
However, RSI has hit the 70 overbought level and turned down. Also note that the histograms have receded back towards zero and MACD.
The majority of the evidence hinting that a correction is most likely, but as we have seen lately – the markets are very volatile and change course from one day to the next.
Next is the weekly Hui chart. It shows a new high being made during the week, however, the index closed back below that level.
RSI is positive and has plenty of room to rise higher if it chooses. MACD has put in a positive cross over and the histograms are rising above zero.
At the bottom of the chart is the CCI Index, which shows an overbought condition. The signals are mixed.
The monthly chart below of the Xau shows our favorite cup and a handle formation. The horizontal trend line connecting the two rims of the cup is at 155.61 with the weekly closing price at 168.75.
As of now I consider this to be a break above the trend line – NOT a break out, as it has not continued on in a sustainable move upwards. It may or it may not – now or later.
Hui/Gold Ratio
The ratio has broken above the above fork of the Andrew’s pitchfork which is short term bullish; however, for a new phase of the bull market to be sustainable price would have to break above the upper blue horizontal line.
Xau/Gold Ratio
The higher the number on the chart, the stronger the Xau index is performing compared to gold.
As you can see, the ratio put in a double to that is connected by the blue horizontal line, and has since turned back down, meaning that gold is now out performing the Xau.
Summary
With the rate cut by the Fed most markets seem to be chugging along, however, many markets are also overbought: commodities in general with wheat, oil, and precious metals in particular; the Dow is near its recent new highs as are the biotech’s and consumer staples.
The subprime contagion continues unabated, spreading now to banks in Europe and England in particular. The following news clip indicative thereof:
September 26 - Financial Times (Jane Croft ): “As the dust settles after the Northern Rock crisis, the spotlight will shift to other small banks such as Alliance & Leicester and Bradford & Bingley, as well as the UK’s 59 building societies. The Northern Rock debacle has increased worries about the banking sector, particularly those institutions that rely in part on wholesale funding. Questions have been raised about how UK banks, particularly small mortgage banks without the comfort blanket of large balance sheets, will access wholesale funding - given that capital markets are in effect closed for business…”
The trickle down effect has only just begun. The game has many innings left to be played. There will not be as many players left standing when the game ends as when it began. Caveat Emptor.
Any significant pull back by physical gold will be a gift from the gods to add to positions. Physical in hand is better than two in the bush.
Although the stock market continues on I care not to play except for selected commodity and energy plays and gold and silver. I leave the rest for those much smarter than I.
One more round of rate cuts by the Fed is likely, and then the market is going to start to lay down the law as to how things really are: rates will begin to rise as the falling dollar (perhaps after a counter trend rally) begins falling to new lows speaking in tongues of inflation to come, in turn causing bond buyers to seek more interest to be compensated for the attendant risk.
Foreign holders of bonds will be losing on both sides of the trade and will cut back on purchases, putting more pressure on rates to attract buyers. God forbid if the yen ever starts to rally during all this, causing years of carry trades to be unwound in a myriad of dust devils swirling across the land.
The beating of drums and the howling of the dogs of war can be heard piercing the night sky – it appears to be more for show than the real deal. I do not see the US attacking any major foes – at this time.
There is, however, the possibility that one “ally” of the US may attack Iran or Syria. I pray that the world’s destiny does not include such folly and heartache, but one never knows. It would be a grave mistake and unsettling to the balance of things as they are. They would be rebalanced but the work would be great and consume much energy that could be spent in more directly productive ways.
Invitation
Stop by our website and check out the complete market wrap, which covers most major markets, including stocks, bonds, currencies, commodities, and energy, with the emphasis on the precious metal markets, both physical and stocks.
There is a lot of information on gold and silver, not only from an investment point of view, but also from its position as being the mandated monetary system of our Constitution - Silver and Gold Coins as in Honest Weights and Measures.
On the main homepage are papers and articles by some of the best out there to be had. There are audio and videos on banking, the Constitution, and cutting edge news of serious interest. Many articles are archived, while others are linked.
Live time quotes on gold and silver and precious metal stocks are available, including charts for most world currencies and futures. Links to the World Bank, central banks, international monetary fund, the United Nations, and much more are offered.
There is also a live bulletin board where you can discuss the markets with people from around the world and many other resources too numerous to list.
Our gold stock portfolio with all buy and sell orders is posted in the public domain for viewing. See which stocks we own, have sold, and bought most recently.
Drop by and check it out. Good luck. Good trading. Good health. And that's a wrap.
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This We Do Not Need
About the author: Douglas V. Gnazzo writes for numerous websites and his work appears both here and abroad. Just recently he was honored by being chosen as a Foundation Scholar for the Foundation for the Advancement of Monetary Education (FAME).
Disclaimer: The contents of this article represent the opinions of Douglas V. Gnazzo. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Douglas V. Gnazzo is not a registered investment advisor. Information and analysis above are derived from sources and using methods believed to be reliable, but Douglas. V. Gnazzo cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. This article may contain information that is confidential and/or protected by law. The purpose of this article is intended to be used as an educational discussion of the issues involved. Douglas V. Gnazzo is not a lawyer or a legal scholar. Information and analysis derived from the quoted sources are believed to be reliable and are offered in good faith. Only a highly trained and certified and registered legal professional should be regarded as an authority on the issues involved; and all those seeking such an authoritative opinion should do their own due diligence and seek out the advice of a legal professional. Lastly Douglas V. Gnazzo believes that The United States of America is the greatest country on Earth, but that it can yet become greater. This article is written to help facilitate that greater becoming. God Bless America.
Douglas V. Gnazzo © 2005 – 2007 All Rights Reserved Without Prejudice
-- Posted Monday, 1 October 2007 | Digg This Article
