Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
USDT Ponzi Scheme FINAL WARNING To EXIT Before Tether Collapses Crypto Exchange Markets - 22nd Jun 21
Stock Market Correction Starting - 22nd Jun 21
This Green SuperFuel Could Change Everything For the $14 Trillion Shipping Industry - 22nd Jun 21
Virgin Media Fibre Broadband Installation - What to Expect, Quality of Wiring, Service etc. - 21st Jun 21
Feel the Inflationary Heartbeat - 21st Jun 21
The Green Superfuel That Could Disrupt Global Energy Markers - 21st Jun 21
How Binance SCAMs Crypto Traders with UP DOWN Coins, Futures, Options and Leverage - Don't Get Bogdanoffed! - 20th Jun 21
Smart Money Accumulating Physical Silver Ahead Of New Basel III Regulations And Price Explosion To $44 - 20th Jun 21
Rambling Fed Triggers Gold/Silver Correction: Are Investors Being Duped? - 20th Jun 21
Gold: The Fed Wreaked Havoc on the Precious Metals - 20th Jun 21
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Dollar Tops, while Precious Metal Stocks Bottom

Commodities / Gold & Silver Stocks Nov 06, 2009 - 02:07 PM GMT

By: Przemyslaw_Radomski

Commodities

Best Financial Markets Analysis ArticleThere’s More to Seasonality Than Summer Doldrums - This has surely been an exciting week for gold and silver investors. The post-Halloween rally that I mentioned in the previous Premium Update, took metals and corresponding stocks substantially higher, and gold itself reached new highs – at least in nominal terms. The mainstream media are now reporting gold-related stories on a big scale and „gold prices“ is the second most often searched for phrase on http://finance.yahoo.com.


The contrarians among us might be concerned about this fact, as we all know what happens, when everyone gets on the same side of the boat. However, gold DID break above $1,000 recently, and also verified it, so the excitement now is quite natural. In other words – there is no divergence that would indicate that a top is in. On the other hand, I’m still receiving e-mails, in which Readers suggest that gold does not have to go up, that its too high, etc. This is encouraging, because it meanst that a certain amount of investors is still out of the market, and can get in, thus fueling further gains.

The divergence that I’m referring to would take place if we were getting close to serious resistance levels after a huge rally without any breather whatsover, and still everyone and their brother would be bullish on gold. This is what I prefer to see, as a confirmation, when timing tops. I don’t know if you recall this, but that was the case before the February 2009 top.

If you’ve been reading the news and following our essays you know that the IMF announced in September that it would sell 403 tons to finance loans to developing nations. It was a foregone conclusion that the IMF would sell the entire amount to central banks rather than flood the open market. Central banks themselves are no longer selling gold. Rather they are holding on to their gold reserves as the value of fiat currencies decline. In some cases they are increasing their holdings as countries like China, with large holdings of U.S. dollar assets, are worried about the declining value of the U.S. dollar.
 
Therefore, we have another signal that the fundamental situation remains favorable. Still, it is not fundamental factors that drive markets in the short- and medium-term – emotions do. This is why we need to turn to charts (courtesy of http://stockcharts.com) and their analysis for more details as to what the next several weeks and months may bring us. Let’s begin with the U.S. Dollar.

The medium-term chart confirms that the „breakout“ has been barely visible, and that it is not a significant development – at least not yet. The previous breakdown below the September 2008 low has been verified by trading for a few weeks within the red-ellipse area, after which it moved once again above this price level. Yet, this rally did not take the USD Index very far – after an intraday spike on Tuesday, dollar moved much lower. The action in the RSI indicator suggest that a local top is behind us.

If we get a move below the 75.5 level – which I consider likely – it would serve as a non-confirmaton of the breakout, and that is a very strong bearish signal. Naturally, it would be a very strong bullish signal for gold. Given the recent strength of the yellow metal it seems that even if we would see USD rally from here, the only thing it would cause gold to do is to consolidate by trading sideways for some time. Going back to the USD Index itself, please take a look at the short-term chart below.

The short term chart reveals that the Tuesday top materialized almost exactly on the day that was indicated by the seasonal pattern (marked with the black vertical line) and it took place just after touching the short-term resistance level. This means that the counter-trend „rally“ phase is already behind us, and that lower prices are to be expected in the next several days (and probably also weeks).

Please note that the „near top“ vertical lines have also marked favorable buying opportunities in gold and silver. These were not necessarily the exact bottoms in the precious metals, but they were close enough for one to be glad that they purchased PMs at that time. Since it was only a few days ago, it serves us as another factor pointing to the necessity of being already in the precious metals market at least (!) with one’s long-term holdings.

However, the sitaution in the precious metals stocks is a little more complicated. Let’s turn to the chart of the GDX ETF (proxy for the sector) for details.

The precious metals stocks moved higher along with the rest of the precious metals market, but the shape of the rallies in the past two months may make you concerned that PM stocks are forming the head-and-shoulders top formation. I agree that the price pattern itself is visible, but I don’t thing that there is much too worry about. The head-and-shoulders pattern is formed when there is simply not enough buying power to push price to higher levels.

In the „head“ part of the pattern the price fails to go much above the previous top, and in the final, third attempt to move to new highs, it doesn’t even go above the previous (head) one. Since there is not enough buying power, the volume is lower with each upswing predecing a top (shoulder/head/shoulder). Without the confirmation in form of declining volume the whole logic behind this formation is flawed. That is precisely the case with the precious metals stocks, as this weeks rally took place on a huge volume – definitely higher than the one on which the „head“ was formed. Therefore, I don’t think that the head-and-shoulders pattern should concern you at this point.

On the other hand, the RSI is not overbought, so further gains are possible and likely. It seems that the bottom has been put exactly in tune with the seasonal tendency (red vertical lines on the chart), and higher prices are to be expected. The volume has been low yesterday, which is a natural during a small consolidation after a quick move. Several precious metals stocks have been lagging the GDX ETF lately, but I wouldn’t worry about this situation, as it is normal, especially near local bottoms.

Summing up, the popularity of gold as an investment has grown in the past several weeks, but this fact by itself is not enought to turn the long-term outlook for PMs bearish. The price of gold is moving higher and central banks begin to accumulate it instead of dumping it on the market, thus invalidating one of the key arguments against holding the yellow metal. The situation in the PM stocks is more cloudy, as this market is more likely to be influenced by a sell-off in the general stock market, but at this point the technical of the GDX ETF don’t point to lower prices in the near term.

In other news, the results of the recent survey for my Subscribers indicate that the „seasonal patterns” (used also in this week’s analysis) are very popular, and therefore I’m beginning to develop additional unique charts/tools based on them. 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, 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.

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 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