Best of the Week
Most Popular
1.The Greatest Stock Market Crash Of Your Life Is Just Ahead… – Warns Harry Dent - GoldCore
2.Budget 2016: Borrowing, Lifetime ISA, House Prices, Economy, Syria, Brexit and Stocks - Nadeem_Walayat
3.Gold Price Intermediate Top - Clive_Maund
4.Brussels Terror Attacks, Death of the European Union, BrExit Wake up Call - Nadeem_Walayat
5.Stock Market Maybe This Time is Different? - Tony_Caldaro
6.UK House Asking Prices Break Above £300k! Housing Market Paralysis - Nadeem_Walayat
7.A Big Reason Why Silver Price Is Set To Soar - Hubert_Moolman
8.The Financial Crisis Has Just Begun; Is The American Dream Is Over? - Chris_Vermeulen
9.Gold Stocks Spring Rally - Zeal_LLC
10.GLX, GLDX, Baby Gold Bull Market Stillborn? - Rambus_Chartology
Last 7 days
Gold Commitments of Traders and More - 1st May 16
The Magic of Gold Ratio Charts - 1st May 16
Consensus Forming: China Heading Back Into Financial Crisis - 30th Apr 16
The Next Technical Price Targets for Gold & Silver - 30th Apr 16
Stock Market Downtrend Should be Underway - 30th Apr 16
Gold And Silver – A Clarion Alarm Call For All Paper Assets - 30th Apr 16
US Economic Statistics LIES, LIES AND OMG, MORE LIES - 30th Apr 16
Stock Market Strong Elliott Wave Relationship is Developing - 29th Apr 16
Fed's Kaplan: Brexit to Factor in US June Interest Rate Decision - 29th Apr 16
Silver Miners Strong in Grim Q4 - 29th Apr 16
Is Silver a better bet than Gold in the Near Future? - 29th Apr 16
How to Use the CoT Report in Gold Investing? - 29th Apr 16
Sri Lanka is Intriguing: Areas to Consider for Value Investing - 29th Apr 16
Gold “Chart of The Decade” – Maths Suggest $10,000 Per Ounce Says Rickards - 29th Apr 16
Are We or Are We Not in a New Gold Bull Market? - 29th Apr 16
Silver: The “Five Year Plan” and the Great Leap Forward - 28th Apr 16
Michael Hudson: The Wall Street Economy Has Taken Over The Economy and Is Draining It! - 28th Apr 16
AUD/USD - Trend Reversal or Just a Bigger Pullback? - 28th Apr 16
A Gold Revaluation Could Transform Your Financial Status - Overnight - 28th Apr 16
Monetary Policies Misunderstood - 28th Apr 16
Gold Bullion vs Gold Miners - 28th Apr 16
OECD Suggests BrExit Would Cut Net Migration by 1.2 Million by 2030 - 28th Apr 16
MP Naz Shah Punished for Tweets Made During Israel's Genocide of Gaza Palestinian People - 28th Apr 16
Global Recession in 2016 and Beyond - The Obvious Evidence - 27th Apr 16
Why Gold Bugs Need to Stop Listening to The Fear Mongers and Start Thinking for a Change - 27th Apr 16
BlackRock’s Fink: Fed to Raise Interest Rates by Quarter Point ‘at Best’ - 27th Apr 16
Gold More Productive Than Cash?! - 27th Apr 16
Donald Trump Will Fire Janet Yellen and Be Trapped - 27th Apr 16
Money Saving Gardening by Propagating Roses From Cuttings - Propagating Rose Plants Over 2.5 Years - 27th Apr 16
Facebook Censors Pro Trump and Negative Hillary News - 27th Apr 16
This is the Era of the Democrats and Your Taxes are Going Up - 27th Apr 16
Long Awaited Gold Price Breakout - 26th Apr 16
Crude Oil Price Double Top or Further Rally? - 26th Apr 16
Madness in the Crimex Gold and Silver Trading Pits - 26th Apr 16
Britain's Prospects: GBP and BREXIT - MAP Wave Analysis - 26th Apr 16
CRB, Gold, Oil, Cotton, Coffee - 7 Must See Commodities Charts - 26th Apr 16
Gold Price Target is $3,000 and Silver is $75 per Ounce - 25th Apr 16
Parameters for a Stock Market Sell Signal-in-the-making - 25th Apr 16
Stock Market Dangerous Divergence - 25th Apr 16
Gold Miners Nub is the Sweat of the Sun - 24th Apr 16
US Dollar Price Forecast - 24th Apr 16
Stock Market Upside Objective Reached - 24th Apr 16
Why Leftist Greeks have more reasons than Liberals to favour Entrepreneurship and Support Entrepreneurs - 24th Apr 16
The Dow Jones is a Catalyst for Misplaced Stock Market Optimism - 24th Apr 16
Why Russia Harasses U.S. Aircraft and Ships - 24th Apr 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Catching a Falling Financial Knife

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