Best of the Week
Most Popular
1.RED ALERT: Paris Terror Attacks - What to Expect Next - STRATFOR
2.Paris Terror Attacks, Death Pangs of a Dying Religion, and Impact on BrExit EU Referendum - Nadeem_Walayat
3.Paris Terror Attacks, Islamic State Attempting to Spark Civil War in France - Nadeem_Walayat
4.Three Shocking Charts That Prove Gold Price Rally Is Coming - Sean Brodrick
5.Stock Market Nifty-Fifty Becomes Fab-Five; Return of the 'Four Horseman' - Mike_Shedlock
6.Africa Population Explosion - Why Europe's Migrant Crisis is Going to Get A Lot Worse - Video - Nadeem_Walayat
7.Gold Mining Stocks May Be The Buy Of The Century - Jeff_Berwick
8.Grandmaster Putin Beats Uncle Sam at His Own Game - Mike_Whitney
9.BRICS? No, CRISIS - Raymond_Matison
10.UK Housing Market Affordability, House Prices Momentum and Trend Forecast - Nadeem_Walayat
Last 5 days
Turkey Downs Russian Jet to Draw NATO and US Deeper into Syrian Quagmire - 28th Nov 15
Stock Market Quiet Week as Primary 5 Continues - 28th Nov 15
Black Friday, Weekend for Europe's Migrants - 28th Nov 15
HUI and Gold - Who's Leading Whom? - 28th Nov 15
Gold And Silver - No Ending Action, But End May Be Near - 28th Nov 15
Social and Cultural Distress Dividing The Nation - Fourth Turning - 28th Nov 15
Sheffield Houses Prices 2015, Best Estate Agents As Rated by Buyers and Sellers - 28th Nov 15
Stock Market Top Valuations, at a Critical Juncture - 27th Nov 15
The Top Shopping Opportunity on Black Friday - 27th Nov 15
Economics Is About Scarcity, Property, and Relationships - 27th Nov 15
UK Immigration Crisis Hits New Extreme of 336k Net Migration, up 32% on 2014 - 27th Nov 15
Vauxhall Zafira B Fire Danger Recall - What to Do Video - 26th Nov 15
Triggers In US Dollar Collapse - 26th Nov 15
Apple Stock is a 10-Year Short - Bear Market Environment - 26th Nov 15
U.S. Federal Reserve Rate Hike - 26th Nov 15
George Osborne's War on Buy to Let Sector Trending Towards Doomsday - 26th Nov 15
Will Turkey Drag NATO into War With Russia in Syria? - 25th Nov 15
George Osborne’s Autumn Statement and Spending Review Full Text - 25th Nov 15
Will Fresh QE From ECB Boost Gold? - 25th Nov 15
Sheffield, Yorkshire and Humberside House Prices Forecast 2016-2018 - 25th Nov 15
Investors Watch Out For The Auto Industry… - 24th Nov 15
BEA Revises 3rd Quarter 2015 US GDP Economic Growth Upward to 2.07% - 24th Nov 15
Stock Market Supports Are Being Broken - 24th Nov 15
Is Gold Price on the Verge of a Breakout? - 24th Nov 15
Fed’s Tarullo: U.S. Interest Rates Liftoff Should Wait for Signs of Inflation - 24th Nov 15
Silver Price, COT, US Dollar Updates and More - 24th Nov 15
UK Regional House Prices Analysis - Video - 23rd Nov 15
Crude Oil Swinging For The Fences - A 20 to 1 Option Play - 23rd Nov 15
US Dollar, CRB, Oil, Gas, Copper and Gold - The Chartology of Deflation - 23rd Nov 15
UK Regional House Prices, Cheapest and Most Expensive Property Markets - 23rd Nov 15
Stock Market Rally Losing Momentum? - 23rd Nov 15
Will Gold Price Drop Below $1000 Soon? - 23rd Nov 15
Gold and Silver Sector Big Green Light and Low Risk Entry Setup... - 23rd Nov 15
Limits to Economic Growth - Challenge and Choices - 22nd Nov 15
Long Dollar Trade and Current Copper Price Below Cost of Production - 22nd Nov 15
UK Housing Market House Prices Affordability Crisis - Video - 21st Nov 15
The Fed Has Set the Stage for a Stock Market Crash - 21st Nov 15
Stock Market Primary V Wave Continues - 21st Nov 15
Gold And Silver - Value Of Knowing The Trend - 21st Nov 15
UK Footsie Bulls Set To Foot The Bill - 21st Nov 15
UK Housing Market Affordability, House Prices Momentum and Trend Forecast - 21st Nov 15
GDX Gold Miners’ Strong Q3 Results - 20th Nov 15
End of Schengen, Stock Market’s Technical Strength Grows - 20th Nov 15
Justice for All and The Curious Case of Zambia - 20th Nov 15
Paris, Sharm el-Sheikh, and the Resurrection of Old Europe - 20th Nov 15
Silver Prices and The Management of Perception - 20th Nov 15
Stock Market Nifty-Fifty Becomes Fab-Five; Return of the 'Four Horseman' - 20th Nov 15
Waiting for Goldot Again - 20th Nov 15
Michael Curran Goes Down-Market Shopping for Gold Stock Winners - 20th Nov 15
Why Isn’t This Incredibly Bearish Bond Market Development Making the News? - 19th Nov 15
SPX Appears to have Stopped its Rally - 19th Nov 15
The Great Fall Of China Started At Least 4 Years Ago - 19th Nov 15
Using Elliott Waves: As Simple As A-B-C - 19th Nov 15
Has Deflation Been Ddefeated? - 19th Nov 15
Dow Jones Stock Market Index is Not Going to Crash - 19th Nov 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

Reasons to Get Excited About Japanese Stocks

Gold and Silver Bullion and Stocks Forecast 2013

Commodities / Gold and Silver 2013 Jan 11, 2013 - 06:15 AM GMT

By: Jordan_Roy_Byrne


Gold and Silver Bullion and Stocks Forecast 2013

This analysis is excerpted from part of yesterday's subscriber update in which we presented our outlook for Gold, Silver and GDX/HUI. When making forecasts and writing outlooks, analysts must look at a multitude of things. We usually begin by examining the macro landscape via inter market analysis. How are the various markets trending? Which are lagging? Where are the divergences? As we begin 2013, there has been an important shift in regards to precious metals that few analysts have picked up on. The rest of our analysis filters down from this discovery.

We are speaking of the decoupling that has taken place between the equity market and the precious metals complex. This is significant because it began nearly 17 months ago. (Decouplings of three or six months are not significant). Since the Euro crisis in summer 2011, the equity market has rallied nearly 30% and reached a five-year high. During the Euro crisis both Gold and gold shares were trading at all-time highs. GPX, an index of precious metals prices, was at an all time high. Since that time, the gold stocks are down by more than 30%. This is what a decoupling looks like. It's not obvious over short periods but over long periods of time.

SPX versus HUI and GPX

This decoupling means that precious metals cannot begin an impulsive sustained bull move if the equity market continues to move higher. The equity market has to struggle with resistance and begin a mild cyclical bear move. While over the near-term precious metals can confirm a higher low, the 2013 success of the sector depends on the struggles of conventional stocks. What would make stocks struggle?

That is where the fundamentals come into play. At present, capital is moving out of bonds and into stocks. The consensus conventional view for 2013 is one of continued growth with a chance of increase but no threat of inflation. Yet, if interest rates rise the debt burden would increase dramatically due to the current huge debt load but low cost of service. If the cost of servicing $15 Trillion in debt is 2%, then a rise to 3% equates to an extra $150 Billion in interest expense. In other words, interest rates cannot be allowed to rise materially. At somepoint rising interest rates would become bullish for precious metals and bearish for the stock market. Moreover, if interest rates cannot effectively be managed downward, then that would be even more bullish for precious metals and bearish for conventional assets like bonds and stocks.

Its important to note that both the economy and the equity market have little margin for error. The economy has picked up statistically in recent quarters and is getting some help from emerging markets. Yet, it is only churning along (like a camel in the desert) due to massive deficits and continuous debt monetization. At the same time, the equity market (S&P 500) is now at a five-year high and very close to massive resistance. In any event, it is very clear that the decoupling will continue. You must decide if and when the markets will shift.

Turning to the technical outlook, we find Gold well entrenched in a consolidation. While momentum is turning higher, Gold is unlikely to breakout anytime soon due to the strong resistance at $1750-$1800. If Gold is able to firm up here and now then it has a good shot to rally back to $1750-$1800 over the next few months. If we get the bullish scenario and a fundamental catalyst shift then expect Gold to break past $1800 in Q3. That would mean that Gold consolidated for two years which would be its longest consolidation on record. The longer the consolidation, the more explosive the breakout. A breakout in the second half of 2013 (with momentum already rising) would bode extremely well for 2014.

Spot Gold

Silver is in a much larger and slower consolidation. It will take longer to evolve but eventually build stronger momentum than Gold. The initial upside target is obviously $35. Assuming Gold breaks past $1800-$1900 then Silver should break past $35 and at least test $44, the August 2011 high. It is very encouraging to see the silver stocks outperforming Silver (bottom row).

Spot Silver

Turning to the shares, we love the clarity from the monthly candle chart. It details just how important the key levels are. Note the strength of support at $40. In addition, we see that while the market has been weak, it has failed to close below $45 in each of the past three months. If GDX is able to close at or above $46 this month then we believe the secondary bottom is in. In that case, look for GDX to test $52 (extremely important pivot point). As we've written in recent updates, the $52-$55 area for GDX stands between the current market and an impulsive advance that could last a few years.

Market Vectors Gold Miners

Over the short-term it appears that the gold stocks are forming rounding bottoms. These are slow bottoms that take time to form. At the same time, the action in Gold and Silver is looking more and more constructive. Generally speaking, we see precious metals starting the year well and potentially finishing the year very well. However, do realize that while this could be the low for 2013, it could be many months before precious metals experience their next breakout. Conventional investments still have momentum and it will take some time for that relationship to shift. The bad news is, you are going to have to continue to be patient. The good news is we see this being the most explosive breakout since 2005 and you have plenty of time to try and identify the mining stocks poised to be big winners when this cyclical bull begins in earnest.

If you'd be interested in professional guidance in this endeavor, then we invite you to learn more about our service.

Good Luck!

Service Link:

Bio: Jordan Roy-Byrne, CMT  is a Chartered Market Technician, a member of the Market Technicians Association and from 2010-2013 an official contributor to the CME Group, the largest futures exchange in the world. He is the publisher and editor of TheDailyGold Premium, a publication which emphaszies market timing and stock selection for the sophisticated investor.  Jordan's work has been featured in CNBC, Barrons, Financial Times Alphaville, and his editorials are regularly published in 321gold, Gold-Eagle, FinancialSense, GoldSeek, Kitco and Yahoo Finance. He is quoted regularly in Barrons. Jordan was a speaker at PDAC 2012, the largest mining conference in the world.

Jordan Roy-Byrne Archive

© 2005-2015 - 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

Biggest Debt Bomb in History