Clive Maund bearish, my call on Fresnillo and the Pt:Au ratio breakdown. 2011-10-02

I liked Clive Maund's commentaries on silver recently:

http://www.kitco.com/ind/maund/sep262011_silver.html

As someone interested in the silver miner Fresnillo that is on the UK stock market (I live in the UK and have some Fresnillo shares), I had noticed a magnificent bearish rising wedge pattern that had formed as it made repeated new highs in the face of poor performance from silver and the rest of the stock market:

http://1000gold.blogspot.com/2011/09/is-this-perfect-rising-wedge-pattern.html

This pattern worked out wonderfully and the price crashed to below 1600, the target zone.

I wondered if the target for the deline in gold and silver had been reached after this decline in Fresnillo. So, one might have expected a bounce here, perhaps. Also, there is a gap down in the decline between about 1920 and 1860 that ought to be filled on the upside.

However, the silver chart has looked so ominously like 2008 since May this year, with a tepid post-decline rally being like that in 2008. So I am not sure that it is the end of the decline and it is great to see an important commentator whom I have watched since about 2002 give great charts to show this.

There instinctively looks like a target of about $21, which was the last major high in silver from March 2008, in the same way as the late 2008 silver crash went to the previous major high from 2004 (and 1998) at $8.40 after a brief consolidation in the $15 area.

To my view, the $50 top now = the $21 top in 2008, $32.50 now = £16 in 2008 and $21 now is potentially the bottom = $8.40 in the 2008 crash.

It would also be a magnificent 60% decline from $50 to near $20, the same percentage as 2008. The big worry is that we haven't had big bank failures yet and if we do get them we could easily get a crash to $20 or maybe even lower!

To me the chart of Fresnillo crashed below the 1600 target to less than 1500 - and 1600 now looks to me a bit like potential resistance. If that is true, then things could get very nasty quite soon in the silver space. The signals though are a bit mixed.

More nasty signs are the breakdown of the platinum:gold ratio below the 2008 low of 0.965 and the recent upsurge in the gold:silver ratio.

I am going to watching Clive Maund's commentaries like a hawk to see if he is correct.

I wonder though if silver might hold up better this time, since after going down to $8.40 in 2008, it then went up by nearly x6 to $49.75! I wonder if that might bring buyers in sooner this time, anticipating this possibility. It's a fascinating market; history is being made here.

The bearish rising wedge in Fresnillo was bearish! + 2011=1933? 2011-09-22 2213 UK time BST

Two posts ago I observed the bearish rising wedge pattern in Fresnillo the key silver miner.

Well, that pattern has indeed worked out and was indeed bearish!

Please note: This is not investment advice in any way, merely a market observation about a stock that (unfortunately right now!) I do own to a small degree.

Here's a little idea. If this crash thing in the markets continues with strengthening US dollar, then we are in the second leg of the great deleveraging. That would be like 1933, perhaps.

For me,
1. Year 2000 = 1929 = crash of speculative stock market bubble
2. Year 2008  credit crash in USA etc. = 1931 crash in Credit-Anstalt in Austria, then Germany, then UK off the gold standard leaving only USA on godl standard (most prudent creditor nation). Senior currency GB pound debased while new senior currency US dollar remains prudent for a while.
3. Year 2011 = 1933 = crash in the stronger currency Euro area, Germany being somewhat equivalent to USA in the 1930s as more prudent creditor nation. Greece is on the equivalent of the gold standard in 2011 with no printing press, thus credit collapse moves to those weaker Eurozone nations locked into Germanic tight monetary policy, similar to to crash moving to the USA in 1933 because it remained on gold when all around were debasing.

WATCH OUT! 1933 IS ABOUT!

The platinum:gold ratio a sign of credit crunch #2? 2011-09-20 1858 BST UK time

Here is a great chart. This is the chart of the platinum:gold ratio from stockcharts.com. Recently, the ratio has dipped below 1.0, a rare and remarkable thing for recent years.

I have been wondering whether it would be a good idea to swap some gold for platinum but here in the UK there is a prohibitive VAT tax on platinum of 20%, isn't that outrageous? That tax is on most things by the way; oh, the boundless greed of government!

I just listened to a super interview with Rick Rule on King World News, where he gives his always interesting view of the markets. This time he gives some time to platinum.

I decided to pull the $PLAT:$GOLD chart up again on stockcharts during his interview and lo and behold, the ratio is making a double bottom as I write at a ratio of about 0.97!

The first low was in the credit crunch of 2008 and we are right back at that low again, making an almost perfect double bottom. There has been a very slight bounce but it would be fascinating to see whether the ratio makes a double bottom and rallies or is it breaks down on this current Greek and Eurozone credit distress below 0.97 and plunges to a new low.

At any rate, one might therefore think of the gold to platinum ratio (that way around) as acting like a credit spread; this ratio is making a double top, or maybe it is about to break above 1.03 to a new high. Bob Hoye of Institutional Advisors and Howe Street radio talks of the gold:silver ratio acting like a credit sptread. I am gonna ask him if he thinks the gold:platinum ratio is similar.

Here is the gold:platinum ratio chart (the inverse of the one above).

Is this a perfect rising wedge pattern? 2011-09-12

I was looking at the new highs of silver miner Fresnillo thinking, "Great! I own some of this stock and it's going up repeatedly to new highs!" A little later, I read an article on bearish rising wedges and then I thought, "Uh oh!!"


Here is the chart:

Oh well, the chart won't come up on my stupid computer. Look at it here!:
http://stockcharts.com/freecharts/gallery.html?FRES.L

and tell me that it isn't an amazing example of a bearish rising wedge. Now some analysts say that this pattern is usually found in bear markets though here we have new highs with Fresnillo in a bull market instead.
The target might be about 1600 for Fresnillo since the downmove usually wipes out the entire upmove made while the wedge was forming. Note the lowering volume at each of the new highs, typical of the bearish rising wedge formation.

It will be fascinating to see if this wedge pattern works out or if Fresnillo takes off instead.

1. Wedge formed:

2. Breakdown? :

Gold - are we at Point Z already? P&F and daily charts look like silver

The charts of gold and silver in the last post showed some similarities over a period of a couple of years and my wondering whether the move in gold this August to next May could follow the move in silver August 2010 to May 2011 in a magnificent top.

The gold move has been more parabolic than the silver move was in the early stage of its rally from $18 to $50. The action in gold is a bit like the ending action in silver near $49 if you look at the http://www.stockcharts.com/ daily and point and figure charts in gallery view.

Silver at $49.50 or so did a double top within about a week. The first top was on Sunday night followed by a $5 drop all of the next day to the mid-40s level. The next top was the next Sunday night followed by the $6 drop in 11 minutes and a follow through drop to $32. They are chronicled in other posts and charts on this blog.

If gold is at point Z, ie at the top like silver was near $50, then it has happened much faster in gold than it did in silver. Silver took 8 months to get to $50 while gold has topped at $1920 in as many weeks.

Pierre Lassonde says "September is always a good month for gold" inhis KWN interview and sees an attack on $2000 in September.

The alternative case would be an ABC type correction in gold (A-wave down already happened and we are in wave B up, then the C wave would be to follow) or we could double top at $1920 like silver did at $49.50 and have a crash and burn for a while in gold.

This could prepare for a credit crisis crash in all assets this autumn with gold to $1400 and silver to $20 or so and an Au:Ag ratio of 70:1.


The alternative scenarios are that gold is at an earlier stage in this move. Interestingly, the first correction in this move on the gold daily chart doesn't even show on the weekly chart. This second correction is obvious on the weekly chart, a bit like the Christmas 2010 correction in silver. In that case, gold could have much further to run.

There are limits to 'Visual Analysis' as James Dines describes 'Technical Analysis'. Gold looks overbought at $1900 so needed a pullback, if only for a few days or weeks.

I find this move to $1900+ a little scary. The gold price topped £1000 sterling during the GATA conference in London, when it also topped Jim Sinclair's $1650 too. Soon gold was at $1900 or £1130. Amazing. A bonfire of all the currencies, except gold. We are in deep crisis with 'new levels of government with whole new powers' sa quoted on Jim Puplava's show this week. Unfoirtunately those powerful people seem powerless to stop the wreckage of our lives. Or maybe they want it.

Two similar charts - gold and silver a year apart: possible gold target $2690. 2011-08-17 22:22 BST

Take a look at these two charts. Look at the similar features. They are stockcharts.com public weekly charts in the gallery view mode for Gold and Silver. i noticed the uncanny similarities a couple of months ago and labelled the features. Then I lost them! So now the breakout has occurred, I re-did them and the similarity seems to gel.

Here they are:

The first feature I noticed was that both charts had a quadruple rolling top formation around the November timeframe: silver in 2009 and gold in 2010. I then looked for other similar features. They are:

1. A new Spring high for the upmove followed by a lower high in an A-B-C type correction;
2: A new rally with a higher peak mid year.
3: The quadruple rolling top formation centred around November.
4: A new May high for the upmove followed by a lower peak in a small A-B-C type correction;
5: A magnificent breakout.

When I heard James Turk and Ben Davies talking about big mid-year rallies in gold for 2011 (James Turk talking about $1800 gold and Ben Davies talking about a +$400 move), I wondered if the similar patterns hinted that gold might have a similar breakout to the one we experienced in silver from August 2010 to May 2011. The gold breakout has now followed in August 2011, true to the pattern. No guarantees that it will match silver's move, but what if it does?

Gold has had its initial breakout and we seem to be in the repair mode of a correction since I made these charts. Gold topped at about $1820 and corrected to around $1725. It has now repaired the price to about $1780. Interestingly, this correction (so far, as of 17/8/2011) doesn't even show up as a single down candle on the weekly chart.

That recent breakout move up to $1820 has a bit of a parabolic look to it. Dan Norcini has said that as the price moved up to $1800, there was considerable covering of short positions. Then there was the correction to $1725 and the subsequent repair to $1780 as of today (17/8/2011). So, where might the equivalent point on the silver chart be? I have marked these points on the silver rally X, Y and Z.

X would be the point where the move in silver accelerated. I called that the November 'Fireworks' in silver around November 5th 2010 with increased volatility. Interestingly, the period after that was a period of increasing silver prices with some small corrections with short covering and long liquidation observed closely by Dan Norcini in his blog at the time. That would be a good parallel to gold right now and was at the $27 price range in silver.

Y would be the point where silver started a potentially parabolic move in the high $30s price range, say around $35 and it had a small correction and consolidation there.

Z would be the really undeniably parabolic move in silver to the top at $49.75 with the large corrections (a $5 drop in one day followed by a double top formed over $49 and the 11 minute $6 plunge to $42 and then price crashing to $32 over the next few days.

However, gold has dropped since reaching $1820 over a few days to $1725 or so intraday and now rallied back more than the Fibonacci 61.8% retracement of the downmove and gone to nearly $1780+. In fact, 75%of the fall has been retraced in the rally. maybe gold is forming a bullish flag pattern (a oennant) or maybe it is going to move through to a new high soon, similar to silver at points X and Y.

The most optimistic scenario would be to say gold is currently at point X ad the rally could last until next May.

So, what might be a target for gold based on these charts?

Start of silver rally was $18. Point X = $25, Point Y = $35, point Z = $40.
X, Y and Z are 39%, 94% and 177% above the starting point.

If we assume gold is at Point X now at about $1780 and the rally started at approx. $1520 (the average of the last short term high and low). Point X is an increase of 17%.. Proportionately therfore, points Y and Z could be at 41% and 77%. On this model, Z would be the top of the rally before a big correction. If gold goes to point Z it could reach :

$1520x1.77 = $2690 by end of May 2011.

Do your own due diligence! No advice is meant or implied by this blog. I have long positions in gold and am excited about it right now.

We know that over here, Lord Keynes said that gold was a barbarous relic but he is a dead western economist and he's irrelevant now. It's what the Asians think that matters most.

Robin Griffiths on Jim Puplava's Financial Sense Newshour last weekend:

Technician Robin Griffiths is Bearish on Equities, but Likes Gold

"We know that over here, Lord Keynes said that gold was a barbarous relic but he is a dead western economist and he's irrelevant now. It's what the Asians think that matters most."

Tonight he is proved correct. Gold opens in the Asian market on Sunday night up $20 at a brand new all-time high with a big gap up and a big green candlestick. This gives a jump from $1663 to $1689, so +$26 in 30 seconds. The old high was about $1680.

ABout 4 minutes later, the top of this spike was $1695. Now it has pulled back to about $1685.

Robin Griffiths is proved right in 4 minutes. The Asians evidently want gold!