Best of the Week
Most Popular
1.Election Forecast 2015 - Opinion Polls Trending Towards Conservative Outright Win - Nadeem_Walayat
2.UK Solar Eclipse - End Time Sign, Judgement Day, Doomsday! - Nadeem_Walayat
3.Gold And Silver - When Will Precious Metals Rally? Not In 2015 - Michael_Noonan
4.Preparing for the Next Stocks Bear Market - Forecast 2015-2016 - Gary_Savage
5.Is a Stock Market Crash Imminent? - David Eifrig
6.Gold Price Slumps as US Dollar Soars, What's Next? - Nadeem_Walayat
7.US Dollar Forex Pairs and Gold Chartology - Rambus_Chartology
8.Election Forecast 2015: The Day Labour Lost the General Election - Nadeem_Walayat
9.The ECB Should End QE Next Month - EconMatters
10.Silver Price Poised to Surge - Zeal_LLC
Last 5 days
Election Forecast 2015 - Debates Boost Labour Into Opinion Polls Seats Lead - 30th Mar 15
Economic Recovery, Geopolitics and Detergents - 30th Mar 15
U.S. Dollar, Commodities and the Gold Miners GDXJ ETF Analysis - 30th Mar 15
Stock Market Short-term Downtrend - 30th Mar 15
David Cameron Election 2015 Debate Facts Check - Employment, Immigration, Debt & Deficit - 29th Mar 15
Stock Market About Ready to Crash! - 29th Mar 15
Reflections in a Golden Eye - Gold Market Rejection, Repatriation and Redemption - 28th Mar 15
Stock Market Inflection Point - 28th Mar 15
Gold And Silver - What Moved Price? Bab el-Mandeb And Uranus Square Pluto. What?! - 28th Mar 15
Stock Market Investment Parachutes; Do You Have Yours? - 28th Mar 15
Peak Gold Misunderstanding, is Gold About to Run Out? - 28th Mar 15
Deflation Watch: Key U.S. Economic Measures Turn South - 27th Mar 15
The Hard-Earned Truth About Recreational Real Estate - 27th Mar 15
Bitcoin Price Still in Important Territory - 27th Mar 15
Stocks Bear Market Conditions - Index Market Range Warning - 27th Mar 15
BEA Leaves Q4 2014 U.S. GDP Growth Essentially Unchanged at 2.22% - 27th Mar 15
Brazil Economy Victim of Vulgar Keynesianism - 27th Mar 15
Gold to Fuel Silver Price Upleg - 27th Mar 15
Gold and Silver Stocks Will Rise Again! - 27th Mar 15
Risk of ‘World War’ between NATO and Russia on Ukraine as Yemen Bombed - 27th Mar 15
FOMC Minutes Turned The Gold Tide - 27th Mar 15
Sheffield Hallam Election Battle 2015 - Lib Dems Go to War Whilst Labour Sleeps - 27th Mar 15
Gold Effect On Mining & Shale Wasteland - 27th Mar 15
How Stock Investors Should Play the 2016 Presidential Race - 26th Mar 15
MidEast Energy Alert: Why the Crisis in Yemen Could Get Ugly Very Fast - 26th Mar 15
Stock Market Downward Spiral of Dumbness - 26th Mar 15
The Monetary Approach Reigns Supreme - 26th Mar 15
Stock Market Large Gap Down, Despite the Algos' Push Back - 26th Mar 15
Crude Oil Surges, Gold price Spikes as Middle East Tensions Escalate - 26th Mar 15
The U.S. Housing Market Recovery Is Fabricated Optimism - 26th Mar 15
Why Yemen Is The Next Saudi-Iranian Battleground - 26th Mar 15
The Crude Oil Price Crash and China Economic Slow Down - 26th Mar 15
Global Financial Markets Are More Distorted Than Ever Before - 26th Mar 15
One More Stock Market Rally and Then a Huge Drop Expected - 26th Mar 15
Danger Will Robinson - Stock Market Crash Warning - 25th Mar 15
Learn the Basics of Corrective Elliott Waves - 25th Mar 15
Why CNBC Is Hazardous to Your Financial Health! - 25th Mar 15
Will Your Retirement Accounts Survive The Coming Tax Code "Revolution"? - 25th Mar 15
US Dollar - Americas Phoenix - 25th Mar 15
California’s Epic Drought: Only One Year of Water Left! - 25th Mar 15
What’s Wrong With Silver? - 25th Mar 15
SPX Futures Appear Weak. WTIC and Gold May Be at Max Retracement - 25th Mar 15
We’re at the Dawn of a “New Energy Age” - 25th Mar 15
A Very Weak U.S. Economic Recovery - 25th Mar 15
Zero UK CPI Inflation Rate Prompts Deflation Danger Propaganda For Fresh Money Printing - 25th Mar 15
Stock Market NYSE Hi-Lo Index Aggressive Sell Signal - 24th Mar 15
Palladium Commodity Price Forecast - 24th Mar 15
Bitcoin Price Gearing Up for a Fall - 24th Mar 15
Safety Deposit Boxes In UK Being Closed By ‏HSBC – Not Closing Gold Vaults - 24th Mar 15
Japan Short Term Gains And Long Term Disaster - 24th Mar 15
China's Fragile Evolution - 24th Mar 15
David Cameron Announces Resignation Even Before Being Re-elected, Handing Labour 6 Seats - 24th Mar 15
City of London's Ownership of American Colonies - 24th Mar 15
Stock Market Reversal May Have Begun - 24th Mar 15
Casey Gathers Top Gold Experts to Share Secrets for Making Money in Any Market - 24th Mar 15
Thoughts on The Current Crude Oil Market - 24th Mar 15
U.S. Economy Still on Life Support - What Your Governments Hiding From You... - 24th Mar 15
UK Election Forecast 2015 - Budget Bribes Fail, SNP Insurgency Catastrophe - Video - 24th Mar 15
Is Stock Market Minor Top Taking Hold? - 23rd Mar 15
Greece and EU Running Out of Time as Bank Runs Intensify - 23rd Mar 15
Stock Market Slightly Negative Expectations Following Last Week's Rally - 23rd Mar 15
This Rising Interest Rates Play Could Make You a Quick 55% - 23rd Mar 15
Platinum Commodity Price False Break Low - 23rd Mar 15
The Real Reason The American Dream is Unraveling - 23rd Mar 15
Election Forecast 2015 - Budget Bribes Fail to Impress Voters, Tory's Lose Seats in Opinion Polls - 23rd Mar 15
Silver Price Reliance During U.S. Dollar Rally - 23rd Mar 15
old Price Outlook Dramatic Improvement Following US Dollar Topping Action - 23rd Mar 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Economy Still on Life Support

Why Gold and Silver Stocks Are Likely to Rally from Here…

Commodities / Gold and Silver 2011 Nov 05, 2011 - 03:15 AM GMT

By: Przemyslaw_Radomski

Commodities

Best Financial Markets Analysis ArticleIs Greece the canary in the coal mine? Less than a week after European leaders crossed the T’s and dotted the I’s on the debt-restructuring plan for Greece, the prime minister's ruling party called for a surprise referendum on the E.U. debt deal. Then on Thursday he called it off.  Sovereign debt and fiat currencies are all paper.
 
All that is happening only heightens talk about gold as money. But first, let’s have a definition of money, it being a subject that interests almost everyone on the planet. Like Voltaire said: “When it’s a question of money everyone is of the same religion.”


Wikipedia defines money as: “Anything that is generally accepted in payment for goods and services and in repayment of debts. The main uses of money are as a medium of exchange, a unit of account, and a store of value.”

No other commodity has been as universally valued over time and across as many societies as gold and silver. There is an emotional and cultural attachment to it handed down to us through the generations. It is undoubtedly a store of value, it is a unit of account, but is it used as a medium of exchange?

Not really, other than in Utah which took steps recently toward making gold legal tender. Other states have proposed similar measures. But people today are completely unfamiliar with the use of gold as money since everyone uses paper money or bank credit money, such as checks and credit cards.

According to the Austrian economist Carl Menger, its acceptability in trade is the defining property for money and gold does not fit that criteria. According to Menger, while money undoubtedly does serve as a store of value and a unit of account, these properties are derivative, not definitional properties. The reason that a medium of exchange (money) necessarily is also a store of value is the anticipation of its exchange value in the future. The question of whether any particular good is money, can be articulated thus: Is it accepted as the final means of payment for transactions?

At present almost all the nations have their own fiat money or else they belong to a currency union such as the European Union. Some nations use the US dollar. Hardly anywhere do we see gold accepted as a means of payment. So gold must fail the definitional test of being money.

So gold is not really money anymore (not yet?), but keep in mind that it does have most of the desirable properties of money. It is durable, portable and easily divisible into bars and coins that share uniform properties. It is easily recognizable. Gold's value and purchasing power are stable over time, as its supply grows slowly and it cannot be created ad infinitum as fiat paper currency can be.

For nearly three thousand years since the first gold coins were struck in Lydia in 700 BC, Gold's primary use has been recognized as a medium of exchange. The history of gold as money in coin form spans 2630 years, from 700 BC to about 1930 AD. In comparison, the history of paper and base metal and silver coin in circulation spans only about 40 years, from 1930 to 1970. And the history of paper and base metal coin with no connection to Gold or silver, also spans a period now approaching 40 years - from 1970 until today.

So it’s 2, 630 years of history for gold as money versus about 40 years for fiat currencies not tethered to gold.

Leaving history alone, let’s see how the situation looks in the precious metals market this week. We’ll begin the technical part of this essay with the analysis of mining stocks. We will start with the very long-term XAU chart (charts courtesy by http://stockcharts.com.)

In the very long-term XAU gold and silver miners’ index chart, we see that index levels are once again trying to move above their 2008 highs. Once this is accomplished, the next stop appears to be considerably higher, and an upside target levels of 220 and 230 (previous highs) seems reasonable. We have a bullish situation at hand.

In the long-term HUI Index chart, the outlook is also bullish. It’s important to note that the RSI level here is still not yet in the overbought range. In the past, tops have previously formed when the RSI level was close to 70. This is not the case today, and although price corrections along the way have been significant, the time that it took was pretty insignificant.

Gold stocks are now close to the 600 level and once this is taken out will likely approach 640. This is the trading range of the September highs and could very well be reached again. The situation here remains bullish at this time.

In the short-term GDX ETF chart, we have seen a breakout which has not yet been confirmed. Based on this factor alone, the situation is only slightly bullish. However, other factors mentioned earlier (XAU and HUI charts) suggest that a move higher is more likely than not. The next target is at the $67 level - at the previous highs.

As far as analysis of the junior mining stocks is concerned, we take the long-term approach, so in most cases we review it on a monthly basis. While we will leave our stock picks to our subscribers, we would like to provide you with a quick overview of the whole sector. We will use the TSX Venture index as a proxy for the junior sector.

Over a month ago, our SP Long-term Junior Indicator had flashed a buy signal which suggested moving back to the junior sector, and so far it appears to have been a profitable move.

The above indicator flashes a buy signal when it moves below the lower dashed line and starts to rise and it flashes a sell signal when the indicator is above the upper dashed line and starts to decline. In this case, we’ve seen the former and it the outlook for juniors is bullish.

As you see, the outlook for juniors reinforces the outlook for senior mining stocks. This is also in line with our outlook on precious metals themselves. The latter was reflected in our latest essay on precious metals and the stock market. In that essay, we wrote the following:

As of now, we are still inclined to think that in the very-short term a move up in gold is more possible than not. This obviously doesn’t alter our long-term bullish outlook in any way.

(…) the analysis of long-term interest rates and of the general stock market suggests possible higher prices across the PM sector in the immediate (!) term.

The situation was bullish last week and continues to be so today. At present, this is also backed up by the developments in miners.

Summing up, the gold and silver mining stocks appear poised to move higher across the board. This is additionally confirmed by the information coming from the junior market.

To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us today and additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. It's free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

P. Radomski
Editor
Sunshine Profits

    Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

    Sunshine Profits provides professional support for precious metals Investors and Traders.

    Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits’ Premium Service gain access to Charts, Tools and Key Principles sections. Click the following link to find out how many benefits this means to you. Naturally, you may browse the sample version and easily sing-up for a free trial to see if the Premium Service meets your expectations.

    All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

    By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Przemyslaw Radomski Archive

© 2005-2015 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

Free Report - Financial Markets 2014