Possible Head & Shoulders top in gold ... and the Euro? - 2011-01-17

OK, here are a couple of charts, firstly of a piddly Head and Shoulders top in gold that is being made a meal of by some analysts and also of a bigger H+S top in the Euro, which has a potential target similar to Roger Wiegand's commentary on:
http://www.kereport.com/2011/01/14/media-news-gold/
entitled Media, the News and Gold.

Gold has a tiny H+S top at the moment; the target may be around $1283, perhaps? That would still be above the June high of 1265, so not even a test of the breakout point. This H+S is piddly. It's only a 1 month or 5 week formation and a $1283 target would probably take the price about to the 200 day moving average. The price isn't that far from the rising 200 dma already and the 50 dma is still rising (just)::

Although the daily gold chart looks a bit like a rollover in price, you can hardly see it on the weekly chart. In fact, a 1283 target would take you about to the 40 week moving average on this weekly chart:

The weekly Euro chart on stockcharts looks a lot like a Head and Shoulders top with a target of about 1.171. A slightly upward sloping H&S topping pattern but target is close to what Roger Weigand mentioned at $1.185. This is a 6-7 month formation since June last year. The target would be a lower low confirming the 2+ year downtrend in the €:$ exchange rate. Actually, the right shoulder would only just be forming from the last large white up candlestick following the large red down candlestick:

This H+S looks a bit different on the daily chart. Again, it seems that the right shoulder is only just forming, so the pattern is not complete. Drawing the neckine a bit higher, that neckline is at about 1.30, a important level in the Euro from years ago (around 2004 when the Euro was $1.30 and gold was in the $400s) and that pattern has already been aborted so it seems. However, there is quote a pronounced head and shoulders look to the whole formation and James Dines calls this 'visual analysis' rather than technical analysis after all:

Blowing a silver trumpet - review of silver 2010 - 2011-01-16

Well, I am quite proud of my silver $30 target as suggested in

Inverted Head & Shoulders in silver: Target $30? 2010-10-17 . 

The chart was this one:

Now for a look at today's chart (daily ticks) coutesy http://www.stockcharts.com/ .

What happens next?

"I have absolutely no idea!" as Doc Morrisey used to say in the wonderful 1970s comedy series 'The Fall and Rise of Reginald Perrin'.

http://www.youtube.com/watch?v=fWpVJU1K2-c

Carlos Slim richest man and silver / Fresnillo rumour re-hashed, again! 2010-01-04

Wow, talk about old news! I was a bit disappointed when I read about this on the King World News (KWN) blog and then did a google search to see if it was new stuff.

A quick google search shows that this Slim/Fresnillo thing looks like an old chestnut going back to May 2010 ... or even August 2007!

Silver bugs will have to do better than that! It sounds like desperate hype.

Pity. I was thinking about buying some Fresnillo, though I think it might be getting late given the doubling in the last few months. All that upside missed!
Now I am having second thoughts and undecided, feeling a little suspicious of hype, hype, hype.

I have been fascinated by King World News since it started around May 2009 and I think I have listened to every single interview by Eric King on his website. He does get very enthusiastic on gold and silver but I think he overdid it a bit on this one. He has had some brilliant interviews on there over the last year and a half: Michael Berry, Felix Zulauf and, this week for the first time, David Einhorn of Greenlight Capital, as well as resource industry stars such as Rob McEwen, Pierre Lassonde and Sean Boyd and great commentators such as Rob Arnott, Chris Whalen, Bill Fleckenstein, etc., etc., "the top people in the world" as Eric audaciously announces in his outro. That always makes me smile. He gets some truly excellent scoops but this one might be a bit of a scoop of something else.

Latest hype:
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/1/3_Is_the_Worlds_Richest_Man_Getting_Into_Silver.html
,
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/1/4_KWN_-_Worlds_Richest_Man_Entering_Silver_Gaining_Momentum.html
,
http://www.zerohedge.com/article/worlds-richest-man-carlos-slim-entering-silver-fray

Not exactly a scoop when the UK Daily Mail newspaper reported it 8 months ago! A few seconds of research was sufficient to find this!

Carlos Slim to dig deep for Fresnillo
http://www.dailymail.co.uk/money/article-1273418/Carlos-Slim-dig-deep-Fresnillo.html#ixzz1A6YZeoDO
Mail Online 5 May 2010 ... Mexican tycoon Carlos Slim, the world's richest individual, ... busy running the slide rule over Fresnillo, the world's largest silver producer.
By Geoff Foster
Last updated at 10:36 PM on 5th May 2010
"Rumours that a cash bid in the region of £8.6bn or £12 a share could soon be tabled helped the shares jump 43.5p to 807p."

Or try this old rumour from 2007:
Why the silver price is set to soar Aug 09, 2007
http://www.moneyweek.com/investments/precious-metals-and-gems/why-the-silver-price-is-set-to-soar.aspx
"If only a tiny fraction of these millionaires, ultra-HNWIs and billionaires decided to diversify out of their extensive property and stock portfolios and invest even a very small amount of their portfolios in silver it would result in the silver price increasing in price exponentially."
... Blah blah blah, Meaningless drivel.

Rumours, rumours. Now the Fresnillo share price is 1682p according to Yahoo Finance UK on 4 Jan 2011. (Update: since this article, the shares have dropped to 1,339 as of 21 January 2011 at 13:38 approximately. According to Yahoo, the 52 week high was 1768.)

Would not Mr. Slim have done better to deploy his billions in 2008 with silver at $9 or even in 2010 with Fresnillo at 8 quid instead of now at 16 quid in January 2011?!

Do your own due diligence! I'm sure Carlos Slim has. He didn't become a billionaire by following loose talk on blogs, even on the FT, which ought to know better.

I am rather disaapointed in King World News for pushing this one. The FT blog participation is a bit shocking but it shows that the FT blog appears to be merely a rumour mill with no credibility. I also note that none of those who replied to the zerohedge post had even bothered to do the 25 seconds of due diligence necessary to see that the story is up to 3 years of age!

Sometimes, I wonder why the always interesting Bob Hoye of Institutional Advisors who is a regular on http://www.howestreet.com/ makes so much fun of silver bugs. I think I may be beginning to realise the reason!

Inverted Head & Shoulders in silver: Target $30? 2010-10-17

I just read this article by Bill Downey of goldtrends.net with a few nice charts of the silver breakout.

http://news.silverseek.com/SilverSeek/1287239018.php

I decided to look at the weekly silver chart on stockcharts.com because there seemed to be a likely inverted Head and Shoulders pattern dating back to March 2008, with a breakout in August 2010. Here is my annotated chart:

Anyway, the target here would be around $30 if the Head and Shoulders were to be considered as valid; $30.60 if you take intraday prices, a little lower for weekly closes. The inverted Head & Shoulders is a huge formation, 30 months in the making.

This chart is similar to the first (silver manipulation timeline) chart on the goldtrends analysis on silverseek.com / goldseek.com page linked above. Interestingly, that chart showed daily ticks and, looking at the left hand side, you can see that $19.50 was a key level during for 30 months - it was actually support in March 2008 after the breakout. That support was tested successfully on one occasion and then broke down after gold and silver topped in the credit crunch when Bear Stearns was rescued. Thereafter, until a couple of months ago, $19.50 was resistance!

I was interested to see the fourth chart in that article. It also points to a target of $30, considering the 'upper momentum line' of that chart. Two analyses, same target, not a guarantee but an interesting agreement!

Breakout in HUI Gold Bugs Index at last? P&F chart. 2010-10-13

Although a breakout in the HUI Gold Bugs index of 'unhedged' gold miners has been touted for a few days, a quick look on stockcharts.com revealed today that the Point and Figure chart is now actually showing an 'Ascending Triple Top Breakout' as of 13th October 2010. Here is the webpage - the P&F chart is the bottom one in this gallery view of daily, weekly and P&F charts:

http://stockcharts.com/charts/gallery.html?$HUI

$941 MAGIC NUMBER for gold for Jon Nadler and Jeffrey Christian 2010-10-09

$941

The MAGIC NUMBER for gold

I listened to the interview with Jon Nadler, dubbed the "uber bear" on gold somewhat unfairly perhaps on the Korelin Economics Report last week. The interview can be found here:
http://www.kereport.com/weekendshow/weekendr-oct0210-seg4.html

It was quite interesting because he recommends 6-10% of one's portfolio in gold as insurance but refuses to be bullish. In fact, he repeated his prediction of the end of the gold bull market within 12 months and stated that the financial crisis has already ended. In other words, 2008-2009 was the financial crisis.

His more specific predictions were given on Kitco radio the week before as discussed in my previous post on my blog:
http://1000gold.blogspot.com/2010/09/jon-nadler-dragged-out-for-bearish.html

The radio commentary is here:
http://media.kitco.com/weeklyreport/JNadler-Sept-23-2010.mp3

He said gold may overshoot on the upside and top in the next 9 months. That is his 'sell by' date on the gold market.

He stated that he wouldn't give a price and timing at the same time, but he went on to say that gold may 'overshoot' to $1320 to $1380. He just couldn't resist it.

Furthermore, he asserted that it's leveraged speculation with hedge funds that is driving gold at the moment. Maybe he is right; I don't know. Others say it's physical demand, but they are goldbugs like James Turk, it has to be admitted.

Jon Nadler then discussed the 1980 $850 top in gold with the presenter and told us that inflation and general conditions were much worse in 1980 than now and therefore the spike in the gold price was more 'justified' in 1980 than it is now.

He warned that investors could soon see a top (within 9 months) and then suggested that a 8% annual drop for 10 years could then occur. Well, I got my Windows calculator out and calculated 0.92 to the power of 10, which is 0.4344, so gold could drop to 43.44% of its top value. Taking his top figure of $1380, 0.4344x1380= $599.45.

I decided to make a comparison with Jeffrey Christian's commentary on the future price of gold, since they both seem to be true believers in the power of central bankers and 'the system' to right itself without further crises. Jeffrey Christian of CPM Group has given a decade average forecast for gold at $941 per ounce.

What would be the average price of gold predicted by John Nadler using his model? Here are the yearly prices of gold during his 10 year decline of 8% per year, starting at $1380, to find the average. Adding them and dividing by the number of prices, i.e. 11, gives:

1380+1269.6+1168.03+1074.58+988.62+909.53+836.76+769.83+708.24+651.58+599.46

--------------------------------------------------------------------------------

 11

=

... wait for it ...

$941.47

$941. Isn't that AMAZING! This is just the same figure given for the post-bull market average by Jeffrey Christian recently by a different method.

Here is his expert page on FSN:
http://www.financialsense.com/contributors/jeffrey-christian

From my notes from one of his internet interviews, Jeff Christian as I understood him said that the average gold price would likely be $941 in this coming 2010-2020 decade. He compared that to the average price from roughly 1980-1997, which was $390, with fluctuations. He also said that gold might spike higher in the iterim (as it did in 1980) before settling on this average.

In other words, it might spike higher than $941, much higher. If $390 in 1980-1997 is equivalent to $941 in this next decade, then the 1980 $850 spike would be equivalent to 941*850/390= $2050 spike this decade.

So Jeff Christian appears to have admitted implicitly that gold could reach $2050 in a price spike sometime during 2010-2020 without the world coming to an end (after all, we survived 1980).

I find it quite amazing that these two guys make forecasts that give the same average price for gold over the next decade. Look out for that $941 magic number!

Jon Nadler dragged out for bearish propaganda on gold - 2010-09-27

If you want to throw up, listen to the latest interview with gold 'permabear' Jon Nadler.

http://media.kitco.com/weeklyreport/JNadler-Sept-23-2010.mp3

I do recall that he was looking for $740 gold in 2009-2010, wasn't he?

Anyway, he says gold is coming into mania / bubble territory. Get this. He says gold may overshoot in and top in the next 9 months. That is his 'sell by' date on the gold market.

He then says he won't give a price and timing at the same time but he then goes on to say that gold may 'overshoot' to 1320 to 1380. He just can't resist it.

Furthermore he says that it's leveraged speculation with hedge funds that is driving gold at the moment. Maybe he is right; I don't know. Others say it's physical demand but they are goldbugs like James Turk, it has to be admitted.

Jon Nadler then discusses the 1980 $850 top in gold with the presenter and says that inflation and general conditions were much worse in 1980 than now and therefore the spike in the gold price was more justified in 1980 than it is now.

He warned that investors could soon see a top (within 9 months) and then suggests that a 8% annual drop for 10 years could then occur. Well, I got my Windows calculator out and calculated 0.92 to the power of 10, which is 0.4344, so gold could drop to 43.44% of its top value. Taking his top figure of $1380, 0.4344x1380= $599.45.

So be careful folks! Nadler is warning that gold could grind down all the way to $599 when this bull market is over, starting in the middle of next year.

He does say that dollar cost averaging is a good idea and that people should have 6-10% of their liquid assets in gold but one wonders, what is the point if his forecasts are correct. Why not just hold US dollars under the matress?

I love it that he has denied that gold is even in a bull market and then goes on to say that it is now in a mania or bubble! That is so intellectually inconsistent. Nothing can be in a bubble without being in a bull market first, surely! Think of stocks in the 1920s, gold, silver and oil in the 1970s, stocks in 1982-1999, technology in the 1990s, real estate from the 1990s to 2007 and so on and so forth (as Dr. Marc Faber loves to say).

However, Kitco's resident expert on gold says that gold is the one asset that can be in a mania without even being in a bull market!

Come off it, Jon.

Of course, it is possible that gold is becoming very overbought as the COT reports show record open interest and close to record commercial net short positions. However, in 2009, record COT levels were reached in the rise past $1000 and the market went to $1224 before really correcting. If we do get a major spike up in 2010-2011 there could easily be a major correction. This could happen especially if we get a reversal of government policy if the Democrats are thrashed in the US elections this year and a stop to the bailouts, i.e. as Bob Hoye says, if we get an outbreak in sound money. Alternatively, a renewal of the banking crisis and some deflation with heavy deleveraging could also have a similar effect, with a rise in the USD and a market-driven outbreak of sound money. Interestingly, the dollar might be at a low after its recent fall to 79-80 on the US Dollar Index and some expect a turnaround any moment now.

I see some risk of a spike and a mini-mania this time around, followed by a substantial correction. I would not dare to guess what the spike price would be. All I know is that $1299 this weekend was about 26% above the $1030 spike in March 2008, which was 2.5 years ago. Less than 30% up in 2.5 years doesn't sound like a bubble to me, not yet.

I am just listening to Bob Campbell on http://www.howestreet.com/  and he says that interest rates are likely to remain very low and gold and bonds have been attractive at these times,. As Bob Hoye said on Howestreet, Treasuries in the senior currency and also gold are the two liquid assets in a post-bubble credit contraction. Nadler never mentions any of these factors. I think he is short on history and economics.

Jon Nadler droans on about Indian jewellery demand as he often does, saying the falloff is a bearish factor. What it surely really means is that investment demand is pricing out jewellery demand. This has happened before, several times. So what?

However, I do like to listen to him to get an idea of the bearish case. Hearing his interviews helps to get some balance. If I can't pick holes in all his arguments, I start to worry about the gold bull market. And I am a bit worried at the moment, but not very much, yet.