Best of the Week
Most Popular
1.Gold Price Target of USD 2,300 - GoldCore
2.Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - Nadeem_Walayat
3.Why British Muslims Are Leaving Elysium Paradise for Syrian Hell - Nadeem_Walayat
4.Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - Nadeem_Walayat
5.Extreme Gold/Silver Shorting - Zeal_LLC
6.European Empire Strikes Back Against Greek Debt Fantasy, Counting Down to GREXIT - Nadeem_Walayat
7.Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - Michael_Noonan
8.Gold and Silver Price Headed for Breakdown - Jordan_Roy_Byrne
9.Greece Crisis OXI - Raul_I_Meijer
10.Flatline Investing and Dead End Debt Schemes - Doug_Wakefield
Last 5 days
SPX Sinking Premarket - 7th July 15
Marc Faber Warns: “Wake Up, People Of The World! Greece Will Come To You …Very Soon” - 7th July 15
The Greek Vote and the EU Miscalculation - 7th July 15
SPX Stocks Index Still on a Sell Signal - 7th July 15
Bill Gross on Greece: 'We're in the Eye of the Hurricane' - 7th July 15
Dow Stocks Bear Market Underway - 6th July 15
Marc Faber Warns of Greece Crisis Contagion Very High Risk - 6th July 15
Greece to Print Counterfeit Euros or IOUs, Hyper-Inflation Beckons - 6th July 15
Stock Market, Investing Big Picture - 6th July 15
“Oxi!” - Greeks Defy EU As Varoufakis Resigns To Ease Tensions With “Partners” - 6th July 15
Stock Market Rally in a Downtrend? - 6th July 15
Silver Price Consolidating Ahead of Another Sharp Drop - 6th July 15
Gold Price Gravitating Lower Towards $1000 - 6th July 15
Syriza Convinces Greece to Commit Suicide, GrExit Beckons, Market Reaction - 6th July 15
Financial and Commodity Markets Become Scary: Crash Point Or Turning Point - 5th July 15
A Revolutionary Pope Calls for Rethinking the Outdated Criteria That Rule the World - 5th July 15
Forget 'Haircut', Instead Syriza Plans Beheading of Greek Bank Depositors, Theft of Deposits - 5th July 15
The Pentagon’s 2015 Strategy For Ruling the World Through Endless War - 5th July 15
United States Celebrates the Disastrous Secession From Great Britain - 5th July 15
Greece Referendum Vote Result Forecast Yes Win, But Depression Will Continue - 5th July 15
The Great Greek Economic Depression - 4th July 15
Happy 4th of July Stock Market Analysis - 4th July 15
The Most Pressing Reason Yet You Want to Avoid Investing in Retail Stocks - 4th July 15
Fed’s Full Normalization and the Stock Market - 3rd July 15
The U.S. Dollar's 2014-2015 Rally: Wave 3 in Action - 3rd July 15
Stock Market Where are we? And where are we Going? - 3rd July 15
Xi’s Anti-Corruption Campaign Is Key to China’s Prospects - 3rd July 15
How the New Iranian Nuclear Deal Will Impact Crude Oil - 3rd July 15
China's Stock Market Rollercoaster Ride Continues - 3rd July 15
Gold Stocks Cheap to Buy but Not for Long - 3rd July 15
Capital Controls and a Bank Holiday in Greece… Here’s How You Can Profit - 3rd July 15
Greece's Varoufakis: I will Resign if there's a 'Yes' Vote - 2nd July 15
The Student Loan Bubble: Gambling with America’s Future - 2nd July 15
Inflation Is Lurking, but This Asset Can Protect You - 2nd July 15
Three Total Wealth Stock Investor Tactics You’ll Need Because Greece Isn’t Over - 2nd July 15
Why This $5.6 Trillion Investor Profit Boom Is Set To Take Off - 2nd July 15
Greek Debt Crisis: "Too late to prepare now" - Video - 2nd July 15
Guaranteed US Dollar Death Dynamics - 2nd July 15
The Greek Stress Test & The Reality Of Incremental Changes - 2nd July 15
Forget Drachmas Greece Syriza Government Could Instruct Central Bank to Print Euros! - 2nd July 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

China Stocks - Where are they going?

Gold Price Trend Forecast Into the End of 2013

Commodities / Gold and Silver 2013 Oct 07, 2013 - 10:09 AM GMT

By: Clive_Maund

Commodities

The reason for posting a new Gold Market update at this juncture is that we appear to be at an optimum 'buy spot', for gold, silver and Precious Metals ETFs and stocks, as both gold and silver have dropped back in recent weeks to mark out the Right Shoulder low of what is believed to be a large Head-and-Shoulders bottom.


After posting the 1-year chart for gold shown below on clivemaund.com a couple of days ago, a subscriber wrote and protested, saying how could I recommend buying the sector when it hasn't even completed the H&S pattern, which could abort, and that it would be far better to wait for a breakout, and then buy on a post breakout pullback. There are 2 points I would like to make about this. The first is that if we can be pretty sure this H&S pattern is valid, then why wait until gold is $100 higher to buy? The second point is that because we have clearly defined support right beneath the current price, we thus have an excellent risk/reward ratio, because we have the option of placing stops beneath this support. If the interpretation that this H&S bottom is valid, then gold is going a lot higher from here, and we will be in for most of the ride, if incorrect, we are out for a trivial loss. The experienced pure trader will instantly recognize this as an acceptable and attractive setup. The fact that a lot of investors are moaning about how awful the PM sector is and how they have no confidence that it will ever perform again is great to hear, because this is just the mood we expect to prevail at an important market bottom.

Gold 1-Year Chart

The long-term 13-year chart is, or should be, most heartening for gold bulls as it shows that the long-term uptrend remains intact and further that upside potential from here is very substantial, which should not be so surprising given that the cornered Fed has no choice but to continue with QE or even expand it, unless that is it wants to watch the markets implode and the economy collapse.

Gold 13-Year Chart

The latest COTs for gold (not shown) are bullish, although not at the bullish extremes that we saw late June - early July.

We can see the battering that the PM sector has suffered on the long-term 18-year chart for the HUI index below. It is now not that far above its 2008 panic lows, which means that it is way oversold relative to gold, which is still getting on for twice its price at its 2008 lows. Here we should remind ourselves that at times of extreme optimism characteristic of a top, stocks are more popular than bullion, while at times of extreme pessimism characteristic of a bottom, bullion is more popular than stocks (or less unpopular), which is what we are seeing right now.

Gold versus HUI Index 18-Year Chart

We can of course chart this mood swing between stocks and bullion by simply plotting one divided by the other as shown below. This startling chart of the HUI index over gold reveals that this ratio is even beneath its level at the 2008 panic lows - and we know what happened after that - and is incredibly approaching its level in late 2000, which is before the gold bull market even began! Go back again and compare the price of gold now to what it was back in late 2000 at the top of the chart above and you should be able to appreciate how out of whack and mad this is. It strongly suggests that the sector is forming a major bottom here, because let me assure you that there is going to be a gold mining business in the future.

HUI/Gold Ratio 18-Year Chart

The situation for the big gold (and silver) stocks relative to gold is even worse (better for buyers), as the 20-year chart for the XAU index plotted over gold below makes clear. This shocking chart shows that big gold and silver stocks are far more undervalued relative to gold not just than they were at the 2008 panic low, but than they were at the late 2000 low pre the gold and silver bullmarket. This is again another strong indication that we are either at, or very close to the lows. Here we should note that if the broad market tanks soon, the PM sector, which has been performing contra-cyclically to the broad stockmarket all year, and has already tanked, is expected to continue to perform contra-cyclically and rally.

XAU/Gold 18-Year Chart

I am going to end this with a very important message. We have seen that gold and silver are very probably completing Head-and-Shoulders bottom reversals, with prices having dropped down to suspected Right Shoulder low buy spots. In addition, and most importantly, we have seen for ourselves in this update the insane undervaluation of stocks relative to bullion, which is characteristic of a major sector bottom. What this means is that you can go ahead and buy large and mid-cap gold stocks now, and juniors with strong balance sheets that are either producers or close to production, with confidence, and quit worrying about day to day price movements afterwards, because you know that you are buying either at or very close to a major low. So rather than buy the sector and then sit on the edge of your chair biting your nails as you staring at changing prices on the screen, do what Smart Money does, buy them, bank them, and then go fishing or playing golf or whatever you enjoy doing with your leisure time, confident that you have bought stocks that are ludicrously undervalued and that it is only a matter of time before they rally to become more fairly valued.

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2013 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

© 2005-2015 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

Biggest Debt Bomb in History