Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21
Last Chance to GET FREE Money Crypto Mining with Your Desktop PC - 2nd May 21
Will Powell Lull Gold Bulls to Sweet Sleep? - 2nd May 21
Stock Market Enough Consolidation Already! - 2nd May 21
Inflation or Deflation? (Not a silly question…) - 2nd May 21
What Are The Requirements For Applying For A Payday Loan Online? - 2nd May 21
How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part1 - 1st May 21
INDIA COVID APOCALYPSE - 1st May 21
Are Technicals Pointing to New Gold Price Rally? - 1st May 21
US Dollar Index: Subtle Changes, Remarkable Outcomes - 1st May 21
Stock Market Correction Time Window - 30th Apr 21
Stock Market "Fastest Jump Since 2007": How Leveraged Investors are Courting "Doom" - 30th Apr 21
Three Reasons Why Waiting for "Cheaper Silver" Doesn't Make Cents - 30th Apr 21
Want To Invest In US Real Estate Market But Don’t Have The Down Payment? - 30th Apr 21
King Zuckerberg Tech Companies to Set up their own Governments! - 29th Apr 21
Silver Price Enters Acceleration Phase - 29th Apr 21
Financial Stocks Sector Appears Ready To Run Higher - 29th Apr 21
Stock Market Leverage Reaches New All-Time Highs As The Excess Phase Rally Continues - 29th Apr 21
Get Ready for the Fourth U.S. Central Bank - 29th Apr 21
Gold Mining Stock: Were Upswings Just an Exhausting Sprint? - 29th Apr 21
AI Tech Stocks Lead the Bull Market Charge - 28th Apr 21
AMD Ryzen Overclocking Guide - 5900x, 5950x, 5600x PPT, TDC, EDC, How to Best Settings Beyond PBO - 28th Apr 21
Stocks Bear Market / Crash Indicator - 28th Apr 21
No Upsetting the Apple Cart in Stocks or Gold - 28th Apr 21
Is The Covaids Insanity Actually Getting Worse? - 28th Apr 21
Dogecoin to the Moon! The Signs are Everywhere, but few will Heed them - 28th Apr 21
SPX Indicators Flashing Stock Market Caution - 28th Apr 21
Gold Prices – Don’t Get Too Excited - 28th Apr 21
6 Challenges Contract Managers Face When Handling Contractual Agreements - 28th Apr 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Precious Metals Stocks on Major Buy Alert

Commodities / Gold & Silver Stocks Aug 14, 2008 - 05:59 AM GMT

By: Clive_Maund

Commodities Best Financial Markets Analysis ArticleIf you take a stroll around the financial district of any big city such as London, New York or Tokyo, you will walk past countless well dressed and groomed men, in smart suits and ties with tidily coiffured hair and neatly clipped nails, and if you listen to their conversations you will observe that many of them speak softly in measured tones. The image conveyed is one of poise and professionalism. Yet beneath the veneer of civility and reasonableness there frequently lurks a seething cauldron of greed, lust - and fear, a fact which many women are instinctively aware of and which business women are able to turn to their advantage.


If you do not believe this you only have to pay a visit to some of the seedier nightspots that are not too far away, and not just at night but even in the lunch hour, and observe the same people "letting their hair down", but even more effective and convenient is to simply observe action in the stockmarkets, where absurdity and irrationality have free reign.

This is the arena where all the anxiety of those countless worried looking commuters you see at the train station reading newspapers and peering into their Blackberries, and the trigger happy performance driven stressed out types in dealing rooms around the world is distilled into action. Want an example? - you need look no further than the action in the gold and silver market in recent weeks and especially in recent days, and especially in Precious Metals stocks, where worried selling has cascaded into the blind panic that we have witnessed over the past few days.

Market panics are a "harvest time" for seasoned speculators who, armed with a war chest of cash, coolly watch from the sidelines as the great unwashed masses push and shove and beat their way towards the exits, gripped by blind fear that the world is coming to an end, at least as far as their investments are concerned, and that if they don't sell immediately their previously cherished holdings, they will get much less for them later and perhaps nothing. They jettison everything, regardless of fundamental or intrinsic value, and as the panic approaches maximum intensity and prices accelerate into a vertical descent, the Smart Money moves in and vacuums up all the trashed securities at firesale prices and then sits back and relaxes, assured of huge profits as prices stabilize ahead of the next long upleg.

The investment masses, lying battered and bruised on the sidewalk, take a sideways look up to see the Smart Money limousines pulling smoothly away, their occupants chuckling with contented glee, and acknowledging their benefactors out on the street with a final "Thanks suckers!". That is exactly the situation we find ourselves in with respect to the Precious Metals sector right now, and especially with respect to Precious Metals stocks, which are close to or at a historic extreme low relative to the metals.

The oversold extremes and extremes of negative sentiment that we are now at are abundantly obvious on many charts. If we take a look at the chart of the XAU index going way back to 1990 we can see that that the steep plunge of the past couple of weeks has resulted in its MACD indicator, shown at the bottom of the chart, dropping not just to its normal oversold extremes, but way, way beyond them, so that it can reasonably be described as being insanely oversold, and as the index is likely to drop in the early trade to even lower levels, after last nights losses in the metals in the Far East, that take it into our target zone, this indicator will hit even lower levels.

On this chart we are also afforded the perspective of seeing the entire Precious Metals stock bull market in its entirety from the trough late in 2000. This enables us to see that despite the savage losses that have just occurred, the long-term uptrend in the index remains unbroken and with it now approaching its long-term uptrend line, underpinned by the strong support level shown, and incredibly oversold, we are very close to or at a major buy spot.

While on the subject of oversold we would be remiss in not keeping the spotlight on the extreme disparity that now exists between gold stocks and gold itself. As many readers will not need to be reminded the drop in gold stocks in recent months and especially in recent days has been out of proportion to the drop in gold, a fact made clear by the long-term chart for the XAU index relative to gold shown below. The time period selected for this chart is the same as that for the XAU chart above, i.e. back to 1990 to enable direct comparison.

On this chart we can see that after smashing through relative support in the 0.18 area a few days back the ratio has dropped to even lower levels and is now arriving at the freak low of late 2000. What this chart makes clear is that gold stocks are now grossly undervalued relative to gold itself, making them doubly attractive, and this is just the large gold stocks - if we stop to consider the junior and exploration stocks, they have been almost vaporised by the latest declines, and the better ones, which can lay claim to real resources, must now be very attractive to predators.

Precious Metals stocks are expected to drop into our target zone below 300 on the HUI index and below 130 on the XAU index very soon now, and possibly in the early trade this morning. As these indices can be expected to bounce very strongly once their targets are met - and could turn a little above the target levels - it is thought wise to start buying ahead of the bottom.

 

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2008 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund Archive

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


Comments

matias
14 Aug 08, 15:00
GOLD - It is thought wise to start buying ahead of the bottom.

it is definitely not wise to start buying/selling ahead of any presumed bottom/top !

This is something any technical analyst knows and should not induce people doing so.

Sincerely,

Matias


Post Comment

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