Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Samsung Galaxy S20+ vs Galaxy S10+ Which One to Buy? - 26th Feb 20
Gold Is Taking on $1,700 amid Rising Coronavirus Fears - 26th Feb 20
Is This What Falling Through the Floor Looks Like in Stocks? - 26th Feb 20
Gold Minsky Moment Coming - 26th Feb 20
Why Every Student Should Study Economics - 26th Feb 20
Stock Market Correction Over? - 26th Feb 20
US Bond Market Yield Curve Patterns – What To Expect In 2020 - 25th Feb 20
Has Stock Market Waterfall Event Started Or A Buying Opportunity? - 25th Feb 20
Coronavirus IN Sheffield! Royal Hallamshire Hospital treating 2 infected Patients, UK - 25th Feb 20
Dow Short-term Trend Analysis - Coronavirus Trigger a Stocks Bear Market? - 24th Feb 20
Sustained Silver Rally Coming? - 24th Feb 20
Should Investors Worry about Repo Market and Buy Gold? - 24th Feb 20
Are FANG Technology Stocks Setting Up For A Market Crash? - 24th Feb 20
Gold Above $1,600 Amid FOMC Minutes and Coronavirus Impact - 24th Feb 20
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Gold and Silver Short-term Dip Still Likely

Commodities / Gold and Silver 2012 Feb 17, 2012 - 11:25 AM GMT

By: Przemyslaw_Radomski

Commodities

Best Financial Markets Analysis ArticleWe like Warren Buffett. We respect Warren Buffett. We’d love to sit and have lunch with him one day. As an investor, Warren Buffett is in a class all of his own. But the Oracle of Omaha just keeps bashing gold at every opportunity.

In an article published in Fortune Magazine, based on his upcoming annual Berkshire Hathaway shareholder letter, Buffett again dismissed the yellow metal. It is hard to argue with a man whose bank balance is a zillion times bigger than yours. Obviously he has been right plenty and has the bank balance to prove it. But meantime, all the while that he has been bashing gold, it has bulldozed its way up and gold bugs have been laughing all the way to the bank.


Buffet attacks gold with the usual weapons in the anti-gold arsenal: gold has no inherent value; it underperforms stocks over time and has merely become a self-inflating bubble in its long climb to record highs.

Buffett observed in a 1998 speech at Harvard that "Gold gets dug out of the ground, then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

At the time of his Harvard speech, the price of gold hovered at around $300 an ounce. If Buffett had invested just one of his many millions in gold that year, he would have $5.7 million today, that’s an average return above 13% a year.

And yes, it does make sense to keep gold in a vault. It’s valuable and rare. You keep it safe from theft-- it keeps you safe from inflation, banking collapses and the devaluation of fiat currencies.

Since we’ve touched on currencies, let's begin the technical part with the analysis of the USD Index. We will start with the very long-term chart (charts courtesy by http://stockcharts.com)

Our first chart is the very long-term USD Index chart. There is basically no change this week as the daily index movements have been too small to be visible from a 20-year perspective. The situation is still somewhat unclear for the long term but appears to be more bearish than not.

The short-term situation, however, is not that bearish. The USD has been moving slowly higher in the past days and this trend may continue for some time.

In the long-term S&P 500 Index chart, we see that a local top may already be in or is about to be reached. The significant rally of the past month without a meaningful correction increases the likelihood of a local top being formed soon. Markets simply cannot continue to move higher indefinitely without corrections.

As we compare recent trading patterns with the 2010 upswing, similarities are still in place. A continuation of this anomaly would imply that a correction is quite possible soon and we are near a local top now. Although it can’t be seen on the above chart, the Dow Jones Industrials and the Japanese Nikkei have both reached important resistance levels as well, a fact which also points to an end to the recent rally (or at least a pause) for these markets and the likely formation of a local top.

In the Broker Dealer Index (proxy for the financial sector) chart, we have some bullish implications, but it must be kept in mind that these are for the medium term, not the short term. At this point, we could still see a correction in the main stock indices and a verification of the breakout here. The financials then could move back to the previously broken declining resistance line based on several 2011 highs.

The situation in the general stock market is bearish for the short term, as important resistance lines have been reached or are now close at hand. After a significant rally without a meaningful correction, a downturn would be in tune with previous trading patterns and current investor sentiment.

The financial headlines across the Internet have generally shown that the media is very bullish for stocks at this time (General Motors’ profits highest in years!). Combining this fact with our bearish technical indicators suggests that a local top is very close.

The Correlation Matrix is a tool which we have developed to analyze the impact of the currency markets and the general stock market upon the precious metals sector. The metals and currency markets are negatively correlated while gold and the general stock market show a positive correlation. The pending local top in the general stock market is therefore likely to be bearish for the precious metals sector.

This is also in line with our previous comments from our essay on the short-term bearish outlook for gold (February 14th, 2012):

So, will gold decline from here? Most likely yes, but not very far. The additional confirmation of the short-term bearish case comes from the general stock market, as gold has been recently moving in tune with stocks. Consequently a turnaround in stocks could ignite a move lower in gold as well.

Summing up, the two main short-term drivers of the precious metals sector, stocks and currencies are both providing rather bearish influences at this time. Although the long-term fundamental picture is the most important (and the long-term trend for gold and silver are up), the short term columns here should not be ignored when the coefficients show significant strength with precious metals and other markets.

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

© 2005-2019 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