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

Gold Tilts Towards a Short-term Move Up

Commodities / Gold and Silver 2011 Dec 23, 2011 - 12:12 PM GMT

By: Przemyslaw_Radomski

Commodities

Best Financial Markets Analysis ArticleWhy anyone would rather stuff their Christmas stockings with fiat currency than with physical gold is beyond understanding. To us “dash for cash” seems rash.

There has certainly been very little Christmas cheer for gold bulls recently. The beating is tough, but it’s not the first time we’ve experienced it, nor is it likely to be the last in a secular bull market that has still has years to run. Gold takes four steps forward and then three back. We just have to stay in the game.


We have said it before: corrections are inevitable as death and taxes in a bull market since markets never go up in a straight line. By the time gold put in its most recent high on August 22 after its parabolic rise during August, it had logged a stunning 44% appreciation in calendar year 2011. And even after its recent fall, gold is still 22% higher than it was on its 2011 low, which took place on January 27.  Without a doubt, gold had a white-knuckle year, starting at $1,412 an ounce, hitting a low right out of the gate of $1,314.
 
The past few months have been unkind to the yellow metal, to say the least. Gold tanked 13% in September and 8% in just three days last week as a strong dollar hammered prices. But still, we would much rather have gold jingling in our pockets this season than to be exposed in the stock market or worse, hold depreciating cash.

It’s time to take advantage of the Holiday Season gift of cheap physical gold and silver. From both the fundamental and technical perspectives, gold remains in a bull market, and what we're seeing right now may be the best buying opportunity that we'll see in the following years.

Stress in the financial markets has not stimulated safe-haven gold buying but instead has weakened the euro and indirectly helped drag gold lower. Last week, gold futures climbed 1.3 percent on Friday, but still posted a 6.9 percent loss for the week, making it the biggest decline for gold in three months. Some were quick to pounce and declare the “end” of the bull market in gold, but many investors, including us, disagree. We are seeing end-of-the-year squaring of the books and sales of precious metals to lock in profits. Also investors are reducing positions to lower margin costs as the price falls. There is also the issue of protective stops triggering sales as support levels break down. These are all short term reasons for lower prices. The long term fundamentals for gold are still in place. The global debt deleveraging remains a work in progress. We see very little good news coming out of Europe and the situation is unlikely to improve in the short to medium term. The European Central Bank’s solutions will only buy time; the debt issues will not go away. The U.S. economy remains lackluster and additional deterioration in Europe will make things worse. We would not be surprised to see further quantitative easing, or QE3, in early 2012, which would be bullish for gold.

To see if this is true for the short-term as well, we’ll begin the technical part with the analysis of the yellow metal. We will start with the very long-term chart (charts courtesy by http://stockcharts.com.)

A look at the very long-term chart (if you’re reading this essay at www.sunshineprofits.com, you may click on the above chart to enlarge it) reveals that gold has broken down below the rising support line.

Much has been written recently about gold's breakdown below the rising support line. But, is the technical picture for gold really bearish? No, it's not, and the above chart has been created to prove it. One of the reasons is described right on the chart - gold quite often consolidates in a way similar to what we've seen in the past months. We're not in uncharted waters – we're seeing a quite common pattern in play. However, the most important point – something that deals directly with the breakdown mentioned in previous paragraph - is not described on the chart at all.

The key action that one should take before applying any trading technique is to check if it at least worked in the past. At this moment, you might want to take a few seconds and check the bearish gold analyses that you've read recently which include charts that cover the 10-year or at least a 5-year time frame. Anyway, this is not the first time that we're seeing a breakdown below a rising medium-term support line. We have marked the current support with a gray, dotted line. Other gray lines represent analogous lines in the past – ones that were viewed as key support some time ago. Please take a few moments to examine them and to check what followed the previous “breakdowns”.

What followed was not a plunge that erased the whole bull market. It was not a prolonged consolidation either. The fact is that similar “breakdowns” have been (in all cases seen on the chart) followed by the final bottom of the consolidation (not to far below the line that is has broken), which was in turn was followed by a strong rally. In these cases, lower prices were never seen thereafter.

Please, recall what we wrote in our last essay on the mixed outlook for gold (December 14th, 2011):

In the past, when price levels did not pursue the level of the previous high, declines generally stopped close to the level of the original bottom and then rallied. This would coincide with our $1,550 target level from the bottom seen earlier this year, so there is a good chance that gold will rally if the decline takes it down this far.

This is precisely what we might be seeing now.

Based on the points made above, gold remains in a bull market from both fundamental and technical perspectives, and what we're seeing right now may be the best buying opportunity that we'll see in the coming years.

If the above chart doesn't convince you, there's more. Let's see how gold performs relative to corporate bonds.

We now look at the ratio chart of gold’s price and Dow Jones Corporate Bonds. In the above chart, we compare the size of the current decline to the previous ones. Again, the recent move down is still in tune with previous price patterns. Please note that the ratio declined about 61.8% of its previous rally – just like in 2006. Moreover, the price is now slightly below the 50-week moving average – just like in 2006. The similarity between these two time-frames is quite striking indeed – please take one more look at the previous chart and compare the shapes of the 2006 and 2011 declines. The implications are clearly bullish and the recent price action of this ratio clearly appears to be a mid-term correction, nothing more, nothing less.

Summing up, although recent declines have been sharp, multiple signs suggest that the local bottom is in and higher gold prices are now expected. The precise target levels and their “probabilities” are a more delicate matter and require further consideration based on the full spectrum of our analysis.

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