Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19
The Narrative About Gold is Changing Again - 2nd Dec 19
Stock Market Liquidity & Volume Diminish – What Next? - 2nd Dec 19
A Complete Guide To Finding The Best CFD Broker - 2nd Dec 19
See You On The Dark Side Of The Moon - 2nd Dec 19
Will Lib Dems Win Sheffield Hallam From Labour? General Election 2019 - 2nd Dec 19
Stock Market Where Are We?  - 1st Dec 19
Will Labour's Insane Manifesto Spending Plans Bankrupt Britain? - 1st Dec 19
Labour vs Tory Manifesto Debt Fuelled Voter Bribes Impact on UK General Election - 30th Nov 19
Growing Inequality Unrest Threatens Mining Industry - 30th Nov 19
Conspiracy Theories Are Killing This Nation - 30th Nov 19
How to Clip a Budgies / Parakeets Wings, Cut / Trim Bird's Flight Feathers - 30th Nov 19
Hidden Failure of SIFI Banks - 29th Nov 19
Use the “Ferrari Pattern” to Predictably Make 431% with IPOs - 29th Nov 19
Tax-Loss Selling Drives Down Gold and Silver Junior Stock Prices - 29th Nov 19
We Are on the Brink of the Second Great Depression - 29th Nov 19
How to Spot REAL Amazon Black Friday Bargains and Avoid FAKE Sales - 29th Nov 19
Central Banks’ Gold Buying and Repatriation Spree - 28th Nov 19
Another Precious Metals’ Reversal Coming Right Up! - 28th Nov 19
Stock Market 100% Measured Moves May Signal A Top - 28th Nov 19
Don’t Look for Investing Advice in the Media - 28th Nov 19
Why You Should Buy Trailer Park Stocks - 28th Nov 19
Will YouGov General Election Forecast 2019 be as Wrong as their REAL Forecast was for 2017? - 28th Nov 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

Subprime Credit Crisis Far From Over - Precious Metals to Benefit During 2008

Commodities / Gold & Silver Dec 16, 2007 - 10:37 AM GMT

By: Joe_Nicholson

Commodities “I've been following a fourth wave triangle consolidation pattern in gold that, as the daily chart below reveals, is still valid. Taking out the 50-day moving average, currently about $784 in the futures, would be a warning sign and indicate a deeper correction to the $759-775 area. Silver also held up well … with the 200-day sma looking like strong support, an intermediate bullish outlook in silver is looking increasingly favorable even as a selloff to $13.50 continues to appear likely.

The Fed will err on the side of caution on Tuesday, likely with a 25 bps cut and … the impetus for explosive new rallies in metals over the short term seems to be lacking unless crisis returns to the financial markets. This is certainly not entirely unlikely between now and next summer, so at least until then one new high in precious metals is likely.” ~ Precious Points: Consolidation in Gold and Silver, December 08, 2007


The Fed did indeed take the cautious route, which only became my expectation after Treasury and the President through their hats in the ring and vowed to do some of the heavy lifting in the war on subprime foreclosures. The Fed did not decrease the spread between its target rate and the discount rate on top of the 25 bps cut, but it did announce a new credit facility designed to accomplish much the same end. The new credit facility that will begin on Monday is not designed to introduce new money into the banking system, as the Fed has been reducing liquidity by letting Treasury holdings mature. It will, however, allow banks to acquire funds at potentially lower rates, at least compared to LIBOR, and this may relieve some of the credit pressure without resorting to the heavy-handed tactic of lowering rates across the board.

So, despite all the belly-aching about the Fed not conceding to the market's every wish, Bernanke may live to see his reputation restored if recession is averted and recovery is not too far off. It's mildly amusing if not outright laughable to think George W. Bush is convinced history will remember him in a favorable light, but a Fed chairman who clearly seeks to redefine the powers and limitations of the institution by utilizing nuanced tools that have never been fully explored may very well find a positive light in the eyes of posterity.

Regardless, the disappointment from the Fed did not bode well for precious metals, though this wasn't entirely unexpected. The selling this week in gold, as shown in the chart below, continued to keep the fourth wave triangle pattern valid with crucial support coming in at the 50-day moving average as described here last week. The selling began on the MACD kissback mentioned to TTC members early in the week.

If the triangle is going to prove correct, the question becomes whether the e wave low is in place or is another small low to come. Either scenario would be bullish for gold as it would make imminent the start of a 5 th wave move to new highs, which a move back above the 5-week sma at $800 would tend to confirm. The black count above is an alternate that keeps the recent selling corrective, but looks for a lower low in the $750-775 range. If long gold, keeping a stop just under the 50-day moving average will protect against this possibility.

Silver has created a much more uncertain but still decidedly less optimistic chart over the past several months than gold, but nevertheless has strong support at $13.50. Should this level give, holding the summer's lows just above $11 maintains the likelihood of a powerful new rally to new highs in 2008.

The question from a fundamental standpoint will be whether the forces causing this consolidation in metals will persist enough to take gold to it's lower target, or strengthen enough to take the bullish shine off silver and metals altogether. Again, as this update has repeated, the forces rallying the dollar are more technical and related to foreign weakness than to dollar strength, though strong retail figures and other bullish data threaten to reverse that pattern.

Another more insidious danger is the very same inflation figures that many believe should be working in favor of the precious metals. Last week outright said that the agencies who create the data have the advantage and can use them to their favor, and now we've seen Bernanke's general inflation focus and unexpected acceptance of headline inflation working to raise Treasury yields and steepen the yield curve, an incredibly subtle but potentially effective approach toward smoothing out the difficulties in the banking and credit markets. As the crisis abates, metals will tend to test the limits of their crisis premiums, ultimately finding support at lower levels but remaining within their strong bull markets.

Still, as belied by Merrill's much talked about mention of Citibank as “the short of 2008”, the subprime problem is far from over and the extent of the Federal Reserve's intervention may yet be unfinished as well. In fact, this “keeping the powder dry”, so to speak, on Bernanke's part may prove wise in months to come. If the crisis returns, metals will again be a likely beneficiary. In the meantime, activity in the dollar relative the euro and the pound sterling may be the most important catalyst in metals through year end.

by Joe Nicholson (oroborean)

www.tradingthecharts.com

This update is provided as general information and is not an investment recommendation. TTC accepts no liability whatsoever for any losses resulting from action taken based on the contents of its charts,, commentaries, or price data. Securities and commodities markets involve inherent risk and not all positions are suitable for each individual.  Check with your licensed financial advisor or broker prior to taking any action.

Joe Nicholson 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

6 Critical Money Making Rules