Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
GOLD HAS LOTS OF POTENTIAL DOWNSIDE - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Beginning of The Gold Plunge, or Just a Golden Breather?

Commodities / Gold and Silver 2010 Nov 20, 2010 - 04:35 AM GMT

By: Przemyslaw_Radomski

Commodities

Best Financial Markets Analysis ArticleIt’s no secret that the U.S. is borrowing too much, that China manipulates its currency and that Europe’s fiscal troubles are growing at the same time that “the luck of the Irish” is running out. There does not seem to be any international political will to cooperate to rectify any of these imbalances.
 
The G-20 meeting in Seoul, South Korea, achieved nothing to improve global imbalances and end the currency conflicts.


Not that we had great hopes.
 
Is it any wonder that investors are feeling like the other shoe is about to drop? This week European officials, increasingly concerned that the Continent’s debt crisis will spread, were warning that any new rescue plans may need to cover Portugal as well as Ireland to contain the problem they tried to resolve just six months ago.

And gold? With the $1,400 per ounce mark under its belt, after it corrects, gold will most likely shoot up for the next target and again you will see newspaper headlines saying that gold broke all time highs.

When you see headlines like “Gold sets record high” on the front page, take it with a grain of salt. As we have pointed out in the past, gold is at a record only if you don’t adjust for inflation.
 
The actual record was set 30 years ago, when the price of gold, in today’s dollars, hit more than $6,000 (taking static way to measure inflation into account), or over 340% higher than it closed on Thursday.

The price of gold began rising a decade ago, around the same time that oil prices began rising. Both fell sharply in the 1980s and 1990s, but began to increase around 2000, partly due to economic growth in Asia raising demand for commodities.

When the financial crisis occurred in 2008, oil and gold both fell, although gold’s fall was milder and it soon began rising again. Over the last two years, it has nearly doubled in price, and with the recent stimulus money flowing (inefficiently, but still) into the economy, the currency war is becoming more tense, as various nations try to save their way out of trouble by holding (or aiming to have) a weak currency. With nations racing for the weakest currency (and also highest inflation), we may see another strong upswing in the price of gold and other precious metals.

However, not necessarily right away. In order to gain additional insight, let's take a look at the charts. This week's free commentary includes several general stock market charts and the one dedicated to describing their influence on the price of the yellow metal. Let's being with the long-term S&P 500 Index chart (charts courtesy of http://stockcharts.com.)

On the above chart we see that a correction to the breakout above the declining trend line (marked above with blue) is underway. The 61.8% Fibonacci retracement level based on 2007 through 2009 has once again provided resistance for the rally. Further slight declines may be seen before the current decline is over and stocks resume their rally - thus finally breaking above the abovementioned resistance (currently at 1233).

Let's zoom in for more details.

The short-term SPY ETF chart this week shows a level below the previous high of 120, which can be viewed as support at this point. Still, only 2 days fell below this level before an intra-day move back above it (actually, right to it) was seen, so the breakout to the upside has not been invalidated.

Consequently, the bias remains bullish for the main stock indices and - as mentioned a few paragraphs earlier - it will stay bullish even if stocks move lower temporarily as long as they stay above the declining long-term resistance line.

The Broker Dealer Index chart measures the strength of the financial sector. This week it is clear that the breakout above the multi-month resistance level has not yet been verified. It seems likely that further declines from the present 111 level may be seen. It was often the case that the financials lead other stocks, so at this point the fact that they did not move below their important support levels can be viewed as bullish.

So, the situation remains bullish for the main stock indices, and it will continue to be bullish as long as stocks are above their long-term support line marked on the first chart featured in this essay. But what does it mean for gold and silver Investors? Please read the description below the following table for more details.

This week’s Correlation Matrix shows that short-term coefficients for gold and the general stock market are similar to those seen for silver and mining stocks (the description is visible above). In other words, bullish news for stocks is bullish for gold, silver and mining stocks as well.

The 30-day column shows that correlations with the USD are mixed. There appears to be a tendency for reversal back to the long-term tendencies - that is the correlations being negative. In other words, it seems that the precious metals sector will once again trade again rise along with dollar's decline.

A local top in the USD Index will likely influence gold, silver and mining stocks in a positive manner. The local bottom seen for metals will likely be followed by a rally. Overall the Correlation Matrix confirms points made earlier in this update and suggest that caution is necessary when the short-term is concerned.

Summing up, the general stock market at this point appears to still be bullish. Currently we are seeing a correction of the breakout above the long-term declining resistance line. It is not clear at this time whether this correction has completed. Strong support level, have not been reached, but they may not need to be reached as the move below the previous high has not been verified.

The implications for precious metals are similar but it is important to note that any declines seen should not be of major concern for long-term investors as long as stocks don't break below their long-term support line. While we have suggested selling a part of the long-term precious metals investments to our Subscribers on Nov 9th, when gold topped, we believe that this capital should be already employed once again and long-term holdings should be repurchased (in fact we suggested doing so on Nov 16th, after gold had moved almost $100 lower). As far as details of this consolidation are concerned (targets), we will leave them to our Subscribers.

To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, I urge you to sign up for my free e-mail list. Sign up today and you'll also get free, 7-day access to the Premium Sections on my website, including valuable tools and charts dedicated to serious PM Investors and Speculators. It's free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

P. Radomski
Editor
Sunshine Profits

    Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

    Sunshine Profits provides professional support for precious metals Investors and Traders.

    Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits’ Premium Service gain access to Charts, Tools and Key Principles sections. Click the following link to find out how many benefits this means to you. Naturally, you may browse the sample version and easily sing-up for a free trial to see if the Premium Service meets your expectations.

    All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

    By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Przemyslaw Radomski Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in