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

Will Gold and Silver Go Up Along with the General Stock Market?

Commodities / Gold and Silver 2011 Oct 28, 2011 - 01:21 PM GMT

By: Przemyslaw_Radomski

Commodities

Best Financial Markets Analysis ArticleThe yellow metal, money for more than three millennia, has a close relationship to other forms of money. Some argue that it isn’t gold that has risen in value in the last decade, as much that fiat currencies have lost value against gold. Ever since gold began its spectacular rise a decade ago, the U.S. dollar has lost over 80% of its purchasing power. The other currencies have not fared much better. The euro and the Japanese yen have lost over 70%. Gold is the only form of money that governments cannot create out of thin air which is why the supply of fiat currencies is expanding exponentially faster than gold supplies, which increase by about only 3% per year.
 


We like to pay close attention to currencies and to the multi-front currency war because of the effect on gold.

In the “currency war,” neutrality does not pay as Switzerland discovered when it recently had to set a floor rate at 1.20 franc per euro by selling francs. The Swiss currency had gained because it was considered a safe haven. Now that the luster of the franc has dimmed somewhat, gold is more attractive than ever as a choice for wealth preservation.
 
The latest battle in this currency war is heating up between the U.S. and China and a trade war between the two most important economies in the world is certainly a cause for worry. For much of the past two years China has been under pressure from the US to allow the yuan to appreciate. For its part, China has accused the U.S. of lowering the value of the dollar by printing so much of it. Others suggest that both China and the US are “winning” the currency war by holding down their currencies while pushing up the value of the Euro, Yen and currencies of some emerging economies.

To see if you might win in the precious market in the following days, let’s move on to the technical part of the essay, namely to the analysis of the long-term US Treasury interest rates chart (charts courtesy by http://stockcharts.com.)

We start with the 30-year US Treasury long-term interest rates chart (if you're reading this essay on SunhineProfits.com, you can click the above chart to enlarge it) since it is instrumental in putting everything which follows into proper perspective.

We have been including this chart pretty regularly in recent weeks since it is truly influencing most, if not all of the markets that we cover on a regular basis.

There was only a minimal change in rates this week but the rate-of-change (ROC) Indicator did move higher because rates held their previous gains and makes our current situation more closely resemble what was seen in 2008.

This was the only time where long-term rates declined as severely and then bounced sharply. The precious metals markets started a long-term rally soon thereafter. It is possible that we will see this once again (note that no market moves in a straight way either up or down).
 
Having said that, let’s move on to the general stock market.

In the long-term S&P 500 Index chart, we see that the 50% Fibonacci retracement level recently provided support and stocks have moved higher since reaching this level. A very strong resistance line based on 2007 and 2011 tops will be in play very soon however. This will likely cause at least a pause in the current rally and the present upside target level for the S&P 500 Index is between 1330 and 1340.

In the short-term SPY ETF, the recent price action has been very bullish. After declining, prices moved back up quickly on significant volume suggesting that there is buying power out there. It appears likely that higher prices will be seen in the near term and then a strong (combined with the long-term one) resistance line will come into play. If Thursday's performance is duplicated Friday or Monday, the target level will likely be reached and a local top will likely be seen. The general trend however is still to the upside partly influenced by the long-term interest rate situation.

In the Broker Dealer Index (proxy for the financial sector) chart, strong price action was seen on Thursday, but the index is not above its declining resistance line yet. The trend of the rebound suggests higher index levels are likely but there is an important resistance line slightly above current levels. A pause in the rally and period of consolidation are therefore likely to be seen soon. A subsequent move to the upside would then be possible.

Now, let’s take a look at the correlations across the PM market.

In this week’s Correlation Matrix , we see rather mild signals.

The short-term, 30-day column values are quite weak at this time as no relationship is apparent. The 10-day column however shows more of a tendency which suggests that the general stock market is more likely to confirm the bullish scenario for metals in the immediate term.

This is in line with our recent essays. For instance, in our latest essay (21st October, 2011) on the possible rally in gold we wrote:

We are inclined to think that we’re relatively close to an upswing in gold. The point here is if a decline is seen before the upswing, it could simply be the formation of a double bottom with the rally yet to come. So a short move down did not invalidate any rally this week since the rally had not yet begun. We have simply seen a rebound after an initial bottom with a second bottom now being formed. As long as the two support levels in the $1,600 range hold, the outlook remains bullish.

What happened with gold afterwards largely confirmed what we had written. As of now, we are still inclined to think that in the very-short term a move up in gold is more possible than not. This obviously doesn’t alter our long-term bullish outlook in any way.

Summing up, the analysis of long-term interest rates and of the general stock market suggests possible higher prices across the PM sector in the immediate (!) term.

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, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us today and additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. 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 Radomski 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