Best of the Week
Most Popular
1.The Brexit War! EU Fearing Collapse Set to Stoke Scottish Independence Proxy War - Nadeem_Walayat
2.London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - Nadeem_Walayat
3.The BrExit War, Game Theory Strategy for What UK Should Do to Win - Nadeem_Walayat
4.Goldman Sachs Backing A Copper Boom In 2017 - OilPrice_Com
5.Trump to Fire 50 US Cruise Missiles To Erase Syrian Chemical Attack Air Base, China Next? - Nadeem_Walayat
6.US Stock Market Consolidation Time - Rambus_Chartology
7.Stock Market Investors Stupid is as Stupid Goes - James_Quinn
8.Gold in Fed Interest Rate Hike Cycles- Zeal_LLC
9.The BrExit War - Britain Intelligence Super Power Covert War With the EU - Nadeem_Walayat
10.Marc Faber: Euro to Strengthen, Dollar to Weaken, Gold and Emerging Markets to Outperform - MoneyMetals
Last 7 days
Le Pen Shifts Political Landscape- The Rise of New French Gaullism  - 24th Apr 17
IMF Says Austerity Is Over - Surplus or Stimulus - 24th Apr 17
EURUSD at a Critical Point in Wave Structure - 23rd Apr 17
Stock Market Grand Super Cycle Overview While SPX Correction Continues - 23rd Apr 17
Robert Prechter Talks About Elliott Waves and His New Book - 23rd Apr 17
Le Pen, Melenchon French Election Stock, Bond and Euro Markets Crash - 22nd Apr 17
Why You Are Not An Investor - 22nd Apr 17
Gold Price Upleg Momentum Building - 22nd Apr 17
Why Now Gold and Silver Precious Metals? - 22nd Apr 17
4 Maps That Signal Central Asia Is at Risk of War - 22nd Apr 17
5 Key Steps For A Comfortable Retirement From Former Wall Street Trader - 22nd Apr 17
Can Marine Le Pen Win? French Presidential Election Forecast 2017 - 21st Apr 17
Why Stock Market Investors May Soon Be In For A Rude Awakening - 21st Apr 17
Median US Household’s Wealth Has Declined by 40% Since 2007 - 21st Apr 17
Silver, Platinum and Palladium as Investments – Research Shows Diversification Benefit - 21st Apr 17
U.S. Stock Market and Gold, Post Tomahawks and MOAB - 21st Apr 17
An In Depth Look at the Precious Metals Complex - 20th Apr 17
The Real Story of China’s Strong First-Quarter Growth - 20th Apr 17
3 Types Of Life-Changing Crisis That Make You Wish You Had Some Gold - 20th Apr 17
The Truth is a Dangerous Thing - 20th Apr 17
2 Choke Points That Threaten Oil Trade Between Persian Gulf And East Asia - 20th Apr 17
Gold’s Next Downside Target Is Around $700… Even if It Breaks Up First - 19th Apr 17
SPX May be Completing its Corrective Pattern - 19th Apr 17
Silver Production Has “Huge Decline” In 2nd Largest Producer Peru - 19th Apr 17
Soothing East Asia's Nerves as Trump's Administration Reaffirms US Power in Asia-Pacific - 19th Apr 17
The Brexit War - Article 50 Triggered, General Election 2017 Called - Let the Games Begin! - 19th Apr 17
Plungers Big Trade - The Oil Short - 18th Apr 17
The Smart Money Is Piling Into Regenerative Medicine - 18th Apr 17
If You Invest In Stocks Now, Expect No More Than 3% Returns In The Next 20 Years - 18th Apr 17
Maps That Explain Wars In The Middle East And North Africa - 18th Apr 17
Theresa May Calls Snap BrExit UK General Election Capitalising on Crippled Labour Party - 18th Apr 17
Is US Economy at the Cusp of the Next Recession? or Maybe Worse? - 18th Apr 17
US Housing Market Mortgage Delinquency Rates Increase & 3X ETFs - 17th Apr 17
Trump US North Korea First Strike Smoke and Mirrors, China is the Real War Target! - 17th Apr 17
Now Is The Time To Invest In Canada’s Marijuana Boom - 17th Apr 17
History of the Post WWII Crude Oil Price From a Technical Perspective - 17th Apr 17
Stock Market Bounce Coming? - 17th Apr 17

Market Oracle FREE Newsletter

50+ Global Markets. Today's Top Opportunities. (April 12-20)

Gold Mining Stocks on Verge of Breaking Out!

Commodities / Gold & Silver Stocks Jun 30, 2010 - 10:41 AM GMT

By: Claus_Vogt

Commodities

Best Financial Markets Analysis ArticleThe long-term story for a gold and a gold mining stocks bull market is clear and easy to grasp: Dubious monetary policy and irresponsible fiscal policy with government debt rising all over the world are a surefire recipe for a surging demand in gold.

Toss in stagnant or even declining supply, and you have all the ingredients for much higher gold prices.


But …

I Don’t Like Being a Gold Bull

That’s because rising gold prices are a byproduct of lousy economic and political conditions.

Indeed, gold does not create wealth. Yet it can help conserve your capital in complicated times. Then when the economy finally hits bottom and a new long-term up trend emerges, you’ll be in the ideal position to take advantage of the turn around.

However, now is not the time to dream of the next long-term up swing. Instead, it’s the time to prepare for the next cyclical slump while the …

Recession Warning Is Getting Stronger

That’s the signal the Economic Research Institute’s leading economic indicator is sending us. Last week I drew your attention to this important indicator when it declined to minus 5.7 percent, a reading low enough to be interpreted as a recession warning.

Now … it’s down to minus 6.9 percent, strongly amplifying the message of a coming recession.

With this background the behavior of the bond markets starts to make some sense …

You see, longer-term government bonds would normally be considered extremely risky whenever there are inflationary implications of high and rising government debts, which would send interest rates soaring. And that is indeed our situation today.

But interest rates haven’t risen this year; instead they’ve been falling! Take a look in the chart below.

30 year T bond Chart

So why aren’t interest rates rising?

During times of uncertainty, short- to medium-term buying pressure for safe haven investments, including long-term Treasuries, can trump longer-term inflation fears. And that is exactly what has been going on during the past months, which tells me the economy is headed for a recession.

Gold Bugs Index On the Verge of a Breakout

At the same time Treasury yields have been dropping, gold and gold mining stocks have been rising. How is this possible?

Well,

  • Maybe the gold market is considering the short- to medium-term potential of a double dip recession.
  • Maybe the gold market is already reacting to the longer-term inflationary implications of the above mentioned monetary and fiscal policies.
  • Maybe the two markets — Treasury bonds and gold — are currently playing different time frames. And maybe this decoupling will continue.

At least one thing is crystal clear: On the chart below you can see the Gold Bugs Index is at a very important juncture. It has crept back up towards major technical resistance at the 500 to 520 area.

A breakout above this massive resistance would send a very strong bullish message for the gold market.

Gold Bugs Index Chart

Classical chart analysis tells us that the breakout scenario has a high probability. Price action since December 2009 looks like a triangle. And triangles are trend continuation formations.

In the bigger picture, the price movements since March 2007 looks like a huge cyclical correction ready to break out to new, all time highs.

Bellwether Newmont Mining Looks Ready for a Breakout, Too!

The bullish chart pattern of the Gold Bugs Index gets support from bellwether Newmont Mining (NEM). As you can see on following chart, it’s zooming upward.

Newmont Mining Chart

My suggestion: Keep a close eye on NEM. On Monday it hit a new high of $62.62. If this stock gets enough interest to establish itself above this level, it’ll probably signal the next strong up leg in the gold bull market.

Best wishes,

Claus

Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.


© 2005-2016 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

Catching a Falling Financial Knife