Monday, 16 July 2012

Two bullish charts? Try these for size! 2012-07-16

OK, so I am bearish today. Sometimes I think technical analysis as it is called could be a load of old crap.

Here are two charts that do not paint a pretty picture for the precious metals:


However, the signs look poor on the charts for a gold rally. There is an ominous potential head and shoulders pattern that has already broken down from the neckline and tested resistance and been repelled. The the inverse thrade, the US dollar is whoing a lovely cup shaped bottom pattern after achieveing a head and shoulders target last year of about 73. The new inverted head and shoulders pattern has broken out of the necking and back tested it and confirmed it.

Looks like the dollar could be going to 90 and gold to $1300 if these patterns are correct.

The backdrop is a weak Euro in constant ongoing semi-crisis mode.

Thursday, 12 April 2012

Silver near to breakout? Maybe. 2012-04-11

I can't make up my mind whether to be bullish or bearish on gold and sister silver. Nor can most investors in the space, it seems.

I originally called this blog '1000gold' because gold was coming to $800 in late 2007 and was about to make a new all time high - and I thought it will go over $1000. It did, in March 2008. Now the blog name has a new significance, because the gold price has been stuck at just over £1000 in Sterling since last August/September - indeed, for 8 months.

Taking a look at the weekly silver chart on stockcharts, it could look really bullish, even though silver is in the lower part of the trading range. The price is close to hugging the upper downsloping line of the traingle. The breakout point could be around $33-$34:

However, there have been many trading range moves and weakness in gold and silver whenever there is either bad or good economic news! So they are still in consolidation mode.

In 2010 when the Greek crisis erupted, gold and silver were in very bullish mode. gold rose over $1200 and then when Ben Nernanke at the Fed announced QE2 (Quantitative Easing version 2) money printing late in 2010, silver skyrocketed. There were big bullish moves through 2011 with the debt celing of the US government being raised and doubts about the validity of its finances. However, when gold and silver both became very overbought and subject to some wild speculation (silver in May 2011 and gold in September 2011) the prices broke down. Since then, all news seems to send them down. However, this is just mass psychology among investors to get to an oversold condition to start another rally, I feel.

Gold and silver have had nice upmoves today,, gold to $1675, up $20 and silver to $32.40, up 80 cents and they look promising, for the next five minutes anyway!

Its a wait and see game. I saw an article online a couple of years ago that had the phrase "Are we rich yet?" The answer is "No." There is a long time to wait. I wondwer if I will live to see the top in gold or even the big upmove. It is so slow coming. This slow bull market will wear me out. I will not get rich - whoever inherits my metals will maybe get rich instead!

Tuesday, 6 March 2012

Gold breakout annihilated: target now 1610-1625 dollars for this correction? 2012-03-06 2 pm GMT

My downside target for gold for this correction is 1610-1625 dollars. I was drawing this over the weekend but it is already coming true today! Charts to follow below, later today.

Gold is likely either to fall to the 61.8% Fibonacci retracement level (of its upmove from the low to the latest high) which is about £1625 or it might go further to retest the upper line of the pennant pattern that it has formed over the last few months. That would be around $1610.

I fancy that silver is retracing 50% of its recent upmove from the bottom at $26.50 (3rd chart).

Anyway, later today (Tuesday) the gold A-B-C corrective move is obvious on the chart but might just have completed in the 1670s. It still looks to me that it might have a way to run though. The C leg down is still much smaller than the A leg down. The intermediate B up wave was a bit pathetic, only about 38% of the size of the A wave down.

At the moment, 50% (half) of the entire upmove in gold has been wiped out. That is in fact a complete annihilation of the breakout move from 24th January as the chart shows, when there was a spectacular up day.

Bullish news would be that silver is still above its January 24th level and has a final target for the correction to be 50% of the upmove rather than the 61.8% or more for gold. This sort of strength in silver relative to gold might be unexpected if it is the strong dollar and credit problems with tightening credit spreads that are affecting the markets. One might have expected silver to underperform here but that is not the situation we are seeing at this time.

The silver chart has been looking quite a bit more 'perky' than gols as we can see above. Interesting that the big outperformance in silver came just before the crash. I think that has happened a few times before!

Despite all the rhetoric about manipulation, we can see that the gold and silver hiccup coincides with a decent sized rally in the dollar as the Europeans embraced their version of QE to infinity with a 700 billion injection last week, whereas Bernanke pretended to be hawkish in not annoucing QE3 in the USA:

Monday, 30 January 2012

New gold and silver charts ... breakouts? Maybe. 2012-01-30

The charts are showing some kind of breakouts for gold and silver, at least a short term breakout in silver. Gold looks better.

Gold has a fairly clear breakout from the triangle pattern:

Silver does not:

but the daily chart has a breakout from the shorter term downtrend in force since last September:

So, there has been a great deal of improvement since 1 January 2012 but silver is not completely out of the woods yet, don't you think?

Tuesday, 24 January 2012

Deflation / Inflation revisited. Deleveraging vs Hyperinflation; the Fed vs the free Market. 2012-01-24

I have just listened to the ultimate hyperinflation guru, John Williamsd of the excellent on Jim Puplava's Financial Sense Newshour and straight afterwards, I am now listening to the ultimate deflationist, Robert 'Bob' Prechter on GoldSeek radio.

Yesterday, I listened to Ian Gordon on Jay Taylor's show and before that I have listened to the always interesting Bob Hoye on - Ian Gordon is a deflationist who thinks the dollar will collapse afterwards (so he seems to have a foot in both camps) and Bob Hoye is also somewhat in that camp, thinking that the US dollar will be strong for at least a period during the deflationary/deleveraging process.

It is difficult to reconcile these two types of view, because I can see both points of view. One basically believes that the Federal Reserve can continue to debase the dollar ad infinitum until there is hyperinflation and the others basically are saying that the Fed is "not omnipotent" (Bob Prechter's words) and, as Bob Hoye says, the dollar will not be repudiated but the policies of the Fed and the interventionist economists will.

I am not entirely convinced by either argument actually.

Bob Prechter thinks that the setup now for gold and silver is like 1974 when silver crashed and gold went on rising before crashing by 50%.

Bob Hoye and his colleague, technician par excellence Ross Clark, see a stong dollar rally coming soon with a break well above 80 on the US dollar Index (the USDX). This rally may have started from the downturn in the general markets in the credit crisis around March 2008 and might last for around 10 years.

I can see that we may see a reconciliation of the deflationist/inflationist point of view here. As debt collapses in Europe for instance, money flows into US dollars, as Bob Hoye says, because most of the debts in the world are payable in the pimary financial centre of New York, in US dollars. During the deleveraging process, similar to a margin call in the futures market, the debtor or loser has to pay off the debts in an awful hurry and has to sell alkmost anything to raise US dollars to pay them off.

Prechter sees some very negative changes in social mood and mass psychology, irrational behaviour, anger, riots and even massive political changes, such as states seceding from the union in the USA.

Prechter sees the repudiation of the Fed as already in process with politicians and citizens criticizing Chairman Ben Bernanke, whereas they all sucked up to his predecessor Alan Greenspan and treated him as a demi-god. So, maybe Bob Hoye is right that the Fed will be repudiated, together with governing class of bankers, Keynsian economists, politicians and central bankers as a whole.

The great James Dines, in his interview on King World News last weekend, is seeing many changes towards the dark side in social mood. These would be illustrated by the riots all over the world and the revolutionary changes in the MENA (Middle East North Africa) countries.

A major rally in the US dollar would be what Bob Hoye describes as the worst thing for central bankers - an "outbreak of sound money," which increases the purchasing power of the debt, screwing debtors into the ground by making them sell off even more of their other assets to find US dollars to pay off those debts. This applies to individuals, companies, financial institutions and countries!

His technician colleague Ross Clark spotted the nascent rally in the dollar restarting before Christmas during the market crash from a level of 74 to the 82-82 level just now. However, the gold guru Jim Sinclair is asserting in his interview on KWN last week thatr the dollar will top at 82.

A major rally in the US dollar would be in line with the 40 year trend channel, which slopes down gradually and has major declines lasting 6-8 years followed by major 8-10 year rallies. The last decline was from late 2011 to early 2008 and the bottoming process may have been completed with choppy action at the 71-80 level recently. The deflationists scored a massive coup in this intellectual battle by predicting that the dollar would strengthen on a credit crisis and it has, somewhat, despit e all the money printing (Quantitative Easing, QE1 and QE2) as well as all the backstops of bad debtors carried out by the Fed since late 2008.

In the 2008 markert crashes, the dollar index rallied from 71 to 90 and then began another decline as the money printing came back in. However, the dollar did not make a new low below 71. The decline stopped at 74 and the dollar is now up at 81.

The 'reconciliation' of the deflationist and inflationost points of views might come from the situation where there are many other countries, financial institutions, companies and individuals in the western world and elsewhere that are basically bankrupt.

The sovereign debt crisis in Europe could collapse the Euro. If it does, then one could see a large flight into the US dollar as varioous countries undergo currency collapse. If any or all of Greece, Portugal, Ireland, Spain and Italy are forced to leave the Euro, their new national currencies would be likely to collapse under an orgy of money printing to pay off the national debts and/or support their unsupportable socialist policies. With the people heavily enfranchised into socialism and wealth tranfers and many millions employed direcutly and indirectly by their governments, money printing would likely be demanded and hyperinflation would probably ensue as worlwide creditors cut off those countries and collapse their currencies.

In that case, the dollar could have major rallies as this unfolds. It might take several years. The US government would have plentiful sources of funding for its extremely excessive spending. It would only be when the European issues and other national currency collapses of countries outside the USA (such as the British Pound in the UK) that the speculative inflow of money fleeing into the US government could cease, leading to a government default and currecny collapse in the USA a few years from now.

It is all very conjectural. John WIlliams sees hyperinflation in the USA beginning as soon as 2014. OK, it might, but if we get an 8-10 year dollar rally and it started in 2008, we might not see a top in the dollar until about 2017 and then perhaps the US dollar hyperinflation and collapse.

This would be all very very disappointing and a long wait for gold bugs and silver bugs, who are always expecting the dollar to collapse and the gold price to go to the moon at any moment.

I will post the links to all these interviews on this article soon. The combination of interviews has been particularly good in the last couple of weeks, at a key moment in financial and monetary history!

What is certain is that the future is uncertain!