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
BREWING FINANCIAL CRISIS 2.0 Suggests RECESSION 2022 - 28th Jan 22
Financial Stocks Sector ETF XLF $37.50 Continues To Present Opportunities - 28th Jan 22
Stock Market Rushing Headlong - 28th Jan 22
The right way to play Climate Change Investing (not green energy stocks) - 28th Jan 22
Why Most Investors LOST Money by Investing in ARK FUNDS - 27th Jan 22
The “play-to-earn” trend taking the crypto world by storm - 27th Jan 22
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold and Precious Metals September Trend Analysis and Forecast

Commodities / Gold & Silver 2009 Sep 06, 2009 - 02:32 PM GMT

By: Przemyslaw_Radomski

Commodities

Best Financial Markets Analysis ArticleIt was a blockbuster summer for the bulls on Wall Street but September is historically the market’s worst-performing month and already as the month has just began we’ve begun to see some sharp pullbacks. Interestingly enough, on the flip side of the coin, September is historically the best month for gold.

I mentioned buying precious metals mining stocks two weeks ago - if you did, you would have made about 14% profit so far if you diversified in many stocks (HUI Index), and about 19% if you put your money in the top 3 stocks that my leverage calculator suggests as a speculative proxy for gold.


The price of gold has risen in 16 of the 20 Septembers since 1989. And as this September began we have already seen some tangible proof as the yellow metal makes new forays toward quadruple digits.

Source: U.S. Global research

At the moment gold is on course for its biggest weekly gain since late April.

While September is a good month for gold, it is historically a great month for gold stocks as measured by the NYSE Arca Gold Miners Index. After the typically weak summer months the gold miners start to perk. Since 1993, when it was created, the GDM has been up 11 times in September and down just five times.

September is also historically a miserable month for the U.S. Dollar, a bullish sign for gold since gold trades at an inverse relationship to the dollar (More on that later.)  Looking back 39 Septembers going back to 1970, the dollar has seen negative performance 26 times, more than any other month of the year. 

So what’s behind this predictable September pattern, as far as gold goes?
Several gold-demand drivers converge all at the same time this month.

  • The post-monsoon wedding season begins in India..
  • The Indian festival season begins.
  • American jewelers begin restocking in advance of Christmas.
  • Ramadan ends in late September in the Muslim world with a period of celebration and gift-giving.
  • And, in China, the week-long National Day celebration starts October 1. Already in China gold jewelry demand increased 6% in the second quarter as we reported in a recent Premium Update.

While just about everyone in the world is getting ready to celebrate, the price of gold (charts courtesy of stockcharts.com) is getting ready to perform its own celebration dance.

In the Market Alert that I sent out on Thursday I pointed out that we have just seen a significant breakout from gold triangle pattern to which I had referred in the past. The move took place on a very strong volume. This is exactly the type of confirmation I like to see in a breakout.

The RSI Indicator, proven to be a very valuable tool in timing the gold market local tops, suggests that gold may need to take a breather before moving higher. Should that be the case, the most probable scenario is a test of the upper border of the triangle pattern.

Still, in the short term prices may rise a little higher before correcting.

Analysis of the short-term chart suggests that although prices have risen high and fast this may not be the end of this rally. First of all, the volume is not low. It was lower on Friday than during the previous two days, but it is still considerably higher than the average during the past few months. Low volume would indicate that the buying power has dried up and price is ready to plunge. We do not see this yet.

Also, please take a closer look at what happened at the end of May. The RSI was very close to the 70 level in the 4th week of the month, but the price pulled back only for two days, and then rallied further. While I can’t say for sure that this will happen here, I can say that there are no clear signs of a top yet.

Moreover, taking into account the 1.618 ratio that is also very useful in predicting the range of future price moves, we might expect the GLD ETF to reach levels marked with a red rectangle. This would correspond to gold breaking above $1000. Should this move materialize, I would expect it to be volatile.

Gold and gold stocks move together most of the time (what is confirmed by high correlation coefficient values between gold and HUI in the correlations table), so we can say something about gold by analyzing the performance of gold stocks - here - via the Gold Miners Bullish Percent Index (a market breadth/momentum indicator that is calculated by dividing two numbers: the amount of gold stocks on the buy signal (according to the point and figure chart) and the amount of all the gold stocks in the sector).

 

The GMBPI itself is currently trading at the overbought levels that in the past sometimes meant that a top is in. However, that is only part of the story.

Please remember that if during the second half of May 2009 an investor hastily acted solely on the popular use of the RSI that says to sell once it gets above the 70 level, he would have missed a $50 move in the HUI Index.

It’s usually a good idea to put every indicator/tool into the proper perspective before acting on it. Keep in mind that the people who design an indicator want it to work in many markets and usually don’t fine-tune it for a particular market. Investors need to make the appropriate adjustments themselves.

Here, when you consider the local tops that materialized when both the RSI and William’s %R indicators were in the overbought territory, it becomes clear that these tops did not form immediately after the overbought levels were reached. Conversely, the HUI’s value usually moved higher for several days/weeks before topping. I have marked with vertical, dashed lines each time gold stocks took their time before reacting to the “overbought-sell-now signal”.

So, even though the probability of a correction increases it does not mean that it will take place very soon.

Summing up, your approach should depend on your investment perspective and risk preferences. The trend is up for the PMs, but there are a few signs that some kind of breather is likely. This does not need to take place instantly, so the question is whether or not to hold your positions in this market.

The fundamentals have not changed, so I don’t think that selling one’s long-term PM investments is a good idea right now, however the short-term speculative capital is another matter. If you are risk-averse, I would suggest exiting at least a part of your speculative positions right now, and re-entering during a consolidation. Those of you, who accept high risk in order to reap biggest gains, may want to wait for PMs to move a little higher (to levels mentioned above) before closing your speculative positions.

To make sure that you get immediate access to my thoughts on the market, including information not available publicly, I urge you to sign up for my free e-mail list. Sign up today and you'll also get free, 7-day access to the Premium Sections on my website, including valuable tools and charts dedicated to serious PM Investors and Speculators. It's free and you may unsubscribe at any time.

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 RadomskiArchive

© 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