Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Downward Pressure Increases for Gold Stocks Over the Summer

Commodities / Gold & Silver Stocks Jun 13, 2007 - 07:29 PM GMT

By: Donald_W_Dony

Commodities There will be a time when gold and silver stocks shine in performance, but that time is definitely not now. After over 12 months of flat performance, investors will have to endure at lest another 6-8 weeks of weakness.


Downward Pressure Increases for Gold Stocks Over the Summer

Investors have had a long wait for gold and silver stocks to perform equally with many of the other commodity-driven sectors. Base metals and energy are both in long-term up trends with brighter future numbers predicted. Gold stock investors have clearly been left out of the party for many months. They have pegged much of their belief of higher prices on the frail and failing fundamentals of the U.S. dollar. Yet, though the currency has declined over the past year, gold stocks have rigidly traded within a horizontal range with no indications of breaking out. Recent technical evidence now suggests that this pattern will stay fixed until at lest early August.

Upward progress for gold in 2007 has slowed considerably. Since January, gold (see Chart 1) has only consolidated lethargically above the key $640 support level and not forged higher. After each frail attempt to move through the key $690 resistance line, gold has drifted back down again to support. And this weak action occurred at the same time that the Greenback plunged from $0.855 to $0.812 (Chart 2).

As the U.S. dollar and gold have a very tight correlation, expectations from investors of higher gold prices on the back of a falling dollar did not develop. Why? Is gold reacting to the U.S. dollar correctly? Chart 2 seems to answer some of those questions.

The American currency has plunged into the $0.80-$0.82 zone five times in the past and each time there has been a sizable upwards rally. As the Greenback is now reaching into this strong supportive band for the 6th time, expectations of renewed strength should occur. And this is exactly what is happening. In the first half of June, the dollar waded down to $0.81 and buying pressure quickly developed. Current technical data now points to stabilization and slightly higher pricing up to the $0.84 level for the dollar over the summer. Though the long-term picture for the dollar presently remains negative, the outlook for the next few months is definitely improving. And the influence on gold and precious metal stocks is the exact opposite; flat to downward pressure is anticipated for the next 6-8 weeks.


Gold and silver stocks (Chart 3), much to the displeasure of many precious metal investors, have remained pinned within a broad trading band for over 18 months. All evidence now indicates a continuation of this pattern. The Philadelphia Gold/Silver Index, which has been traded between 120-150, is anticipated to retest the lower levels later in the summer. The TSX Gold Index (Chart 4) has a similar depressed outlook. Renewed strength with the U.S. dollar suggests that this sector will remain in the bottom level (250-260) of its trading band throughout most of the summer also.


MY CONCLUSIONS: Gold and Silver stocks normally enter summer months with listless performance. This seasonal pattern appears to be developing earlier this year. Technical evidence indicates weakness throughout June and July for precious metal stocks and the expectations of testing lower levels. On a brighter note, this sector typically begins to strengthen in September and a wave of advancing prices develops throughout the 4th quarter. However, with a solid historical support zone now clearly underneath the U.S. currency, the trading action of the dollar throughout the rest of 2007 will likely be the main deciding factor for the direction and extent of any growth in gold stocks.

More information is in the June Technical Speculator newsletter.

Your comments are always welcomed.

By Donald W. Dony, FCSI, MFTA
www.technicalspeculator.com

COPYRIGHT © 2007 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present.  He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.   

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms.  He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

Donald W Dony 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