-- Posted Tuesday, 21 May 2013 | | Disqus
1. After the 1929 crash, the US Treasury & the Fed workedtogether. They revalued gold, and begana program of quantitative easing (QE).
2. Eight years later, in 1937, the Fed started tightening credit byraising interest rates, and America plunged back into economic depression.
3. After the 2008 crash, America entered into a very severerecession, and the Fed began a new quantitative easing program.
4. Recently, the mainstream media and bank economists have been quiteemphatic that the economic recovery is solid enough for the Fed to beginreducing the size of the QE program.
5. While it’s unknown whether a reduction or exit from QE would createan economic crash like 1937, institutional owners of gold have been sellinghard, and shorting it. They believe thata reduction in QE would cause gold prices to fall, regardless of whether theeconomy faltered or not.
6. Sentiment datashows that most gold analysts are very negative now. They are convinced that the price of gold islikely going much lower, and maybe it is, butI’m not so sure about that.
7. The timeless market adage, “Buythe rumour, and sell the news!” may be something to carefully ponder, atthis point in time.
8. Here’s why: A lot of theanticipation for a reduction in QE may already be factored into the currentgold price.
9. The question you may need to ask yourself is, have the bearsdropped the ball, by overplaying their QE reduction card?
10.The dailycharts of both gold and silver are beginning to show some bullish signs. On Sunday night, silver plunged about twodollar an ounce, but there wasn’t muchvolume, which is bullish.
11. On Monday, Moody’s warned they would chop America’s credit ratingif more action is not taken to reduce government debt. That caused a “skyrocket” move in silver, and all ofSunday night’s losses were recovered.
12. Monday’s trading volume was truly enormous, and there is now a “key reversal” day apparent on the dailysilver chart.
13. To view that chart, please clickhere now. Look at that volume bar!
14. Note that while the price of silver went to a new low on Sundaynight, my stokeillator did not, and the two lines are beginning to show signsof a “budding buy signal”.
15. There is also a potential inverse head & shoulders patternforming on this chart. If it iscompleted, silver could blast all the way to $30.
16.The daily goldchart is equally impressive. Please clickhere now. You can see that the leadred line of my stokeillator has arrived at the 20 level, and is beginning to display a bullish hook.
17. There is also a classic double bottom forming, and I’m sure thatmany technical analysts at the major banks may soon begin talking about it, intheir daily commentary to investors.
18. For this double bottom pattern to “activate”, gold must trade at $1490, butif it does, the technical target is…. $1680! There are probably very few gold investors who believe such a move is evenpossible, let alone likely, but marketshave an odd habit of doing what is least expected.
19. There is a big wall of technical resistance in the $1500- $1550 area, but if most of the QE-exit newsis already priced into the market, is it possible that gold’s upside actioncould shock a lot of people? I think so.
20. Traders can sell lightly at $1400, $1420, and $1440, if the pricegets there. It’s good to take regularprofits, like pruning a tree, regardless of how high any analysis suggests theprice will go.
21. To view the short term price action for gold, please clickhere now. That’s the one hour barschart, and you can see that a possible inverse head and shoulders pattern isforming now.
22. Please clickhere now. Double-click to enlarge. You are looking at the 2 hour bars chart forGDX. Most investors in the goldcommunity own a lot of gold stock. GDXmust rise over the highs at $31.27, to trigger technical buying from momentumtraders.
23. There may be an inverse head and shoulders pattern forming, whichcould help push GDX to the early April price of $33.71 this week.
24. Is it possible that just as QE itself is producing “diminishing returns” for the US economy,QE-exit news will soon have minimal effect on the gold price? I think so. Any further QE exit news may be a buy signal for gold!
Writtenbetween 4am-7am. 5-6 issues per week. Emailed at aprox 9am daily.
-- Posted Tuesday, 21 May 2013 | Digg This Article | Source: GoldSeek.com