Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19
US Corporate Debt Is at Risk of a Flash Crash - 10th Aug 19
EURODOLLAR futures above 2016 highs: FED to cut over 100 bps quickly - 10th Aug 19
Market’s flight-to-safety: Should You Buy Stocks Now? - 10th Aug 19
The Cold, Hard Math Tells Netflix Stock Could Crash 70% - 10th Aug 19
Our Custom Index Charts Suggest Stock Markets Are In For A Wild Ride - 9th Aug 19
Bitcoin Price Triggers Ahead - 9th Aug 19
Walmart Is Coming for Amazon - 9th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Gold and Silver Stocks Breakout May Be Imminent

Commodities / Gold and Silver 2010 Oct 04, 2010 - 03:16 AM GMT

By: Clive_Maund

Commodities

Best Financial Markets Analysis ArticleTwo of our three requirements for a major uptrend developing across the Precious Metals sector that were set out in the last Gold and Silver Market updates have now been met - first silver has broken out to clear new highs, then gold broke out above the top line of its potential bearish Rising Wedge - the only condition remaining to be fulfilled is a breakout by the stocks indices - and that may be imminent. The important complication is that both gold and silver are now critically overbought as a result of being in unbroken uptrends for many weeks and we will come to the implications of that shortly.


On its 4-year chart we can see how gold has broken above the top line of the potential Wedge drawn across the highs from last December. The pale blue trendline shown, drawn from the early 2008 highs, does not mark the top boundary of a true Wedge, but is believed to have some significance and MAY trigger a temporary reaction, which the current critically overbought condition certainly makes very possible. Gold is deep into critically overbought territory on its RSI indicator shown at the top of the chart, but still has substantial upside leeway on its MACD indicator shown at the bottom of the chart, which it should be noted can get overbought and stay overbought for a long time as the price continues to ascend.

So, we have a situation where gold is in position to accelerate away to the upside, but is at the same time critically overbought on various short-term indicators, but is nowhere near so overbought on intermediate indicators. What are we to make of this? The probable scenario here is that now gold has broken out above the resistance at the top return line of the Wedge, as described, it accelerates away to the upside, the advance being punctuated by brief "air pocket" reactions that could be increasingly violent. The current critically overbought state makes such a reaction likely either immediately or very soon. These reactions may be deeply unsettling for those long, but if the reason for them is known in advance and they expected, they can be used by traders to pyramid positions at better prices. The MINIMUM target for this advance is the lower parallel return line shown, which is currently in the $1500 - $1600 area, which is Jim Sinclair's long-standing target that looks not just easily achievable but actually quite modest - our upper parallel return line gives a MUCH higher target. Small wonder then that PM stocks look so attractive here, as despite their gains of recent weeks, they haven't even collectively broken out yet!. Many big weighty gold stocks look set to make their biggest gains in a long time and their gains can be leveraged by means of options, and the better juniors and mid-caps look set to go ballistic - we haven't been able to write them up fast enough on clivemaund.com

The 1-year chart for gold shows recent action in more detail. On this chart we can see that although the RSI is showing a critically overbought extreme calling for consolidation or reaction soon, the uptrend to date has been steady and considerably less steep than that of last Fall or the big 2007 - 2008 rally shown on the 4-year chart , circumstances which we interpret as allowing for acceleration of the uptrend, despite a probable "air pocket" reaction soon. Thus the advance is likely to steepen considerably, with occasional scary but brief reactions along the way. It is thought that it will be a good strategy to buy aggressively on any such sharp down days, as gold is likely to turn on a dime and go roaring up again.

With the Precious Metals so strong in recent weeks, it is hardly surprising to observe on our 6-month for the US dollar index that it has been in ragged retreat. The US has always had a reputation for doing things in style, and when it comes to currency debasement no one is going to steal a march on them - while other countries are frantically trying to keep up with their own competitive devaluations and can be expected to increasingly follow the US example and indulge in a little QE (Quantitative Easing) of their own, compared to what the US is doing this is "lemonade stand" stuff - for as we can see on the US dollar index chart, the dollar is definitely winning the "race to the bottom" at this time. The US has every incentive to win this race, as it has racked up astronomic debts and obligations that are best dealt with by devaluing the currency.

An outright headline grabbing Sovereign Default by the US would certainly not be what one associates with Triple A ratings and might result in the country being "put in the doghouse" economically, not to mention getting the Tea Party mob stirred up, so it's far better to engage in a creeping default by simply creating more and more money. With most other countries aiming to follow suit it's small wonder that the outlook for gold and silver is now so rosy. It's kind of sad really for the naive, trusting overseas holders of US Treasuries. The deflation dragon, which had been lurking menacingly in the background earlier this year, is being suffocated in a sea of newly created cash. Hyperinflation? - "We'll deal with that problem when we come to it". When the United States is completely bankrupted the surplus holding Asian Tiger economies will ride to the rescue, buying up corporations and vast tracts of Real Estate at pennies on the dollar - and put America to work again - for new masters OUTSIDE the country, albeit at decidedly competitive rates of pay. See? - no big military required.

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2010 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

Susan B
04 Oct 10, 10:23
Clive Gold

Your above commentary does not match what you wrote during September

19 Sep 2010 - False Trumpeting of Silvers Breakout? (1165 Reads)

19 Sep 2010 - Gold and Silver Breakout Failure? (2283 Reads)

14 Sep 2010 - Silver Breakout (1958 Reads)

14 Sep 2010 - Gold and Silver Bull and Bear Case (1765 Reads)

http://www.marketoracle.co.uk/UserInfo-Clive_Maund.html


Post Comment

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

6 Critical Money Making Rules