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

Winds of Change Blow for Gold and Silver Mining Stocks

Commodities / Gold & Silver Stocks Sep 14, 2012 - 01:08 PM GMT

By: P_Radomski_CFA

Commodities

Best Financial Markets Analysis ArticleYesterday gold was little changed before the key Federal Reserve policy decision, a day after a German court ruling in favor of a euro zone rescue fund. The decision centered on challenges to Germany’s participation in the 500 billion euro ($639.3 billion) European Stability Mechanism, or ESM. Critics charged that the treaty behind the ESM robs Germany’s parliament of its constitutional authority over the country’s budget and had asked for an injunction to prevent the country’s president from signing it into law. In other words the Court ruled that it is constitutionally permissible for Germany to finance the debt of other nations.


The decision means the eurozone finally has two robust financial defenses against the debt crisis. The bailout fund will take its place alongside plans by the European Central Bank to buy unlimited amounts of short-term government bonds issued by troubled countries. The ESM can support countries by loaning them money, while the ECB bond purchases could lower the painfully high borrowing costs that are threatening Italy and Spain. Additionally, the ESM is also expected to join in purchasing bonds to support the ECB effort. Yet both the ESM and the ECB bond purchases are only stopgap measures. They can give governments time to reduce their deficits and cut debt long-term by reforming their economies so they can grow faster. One wonders if the countries will bite the bullet or to delay once the pressure is off, as they have during previous lulls in the crisis.

The news of the German court decision Wednesday sent bullion to its highest since the end of February. Also investors were hoping that the Fed will announce another round of quantitative easing, (QE3) at the conclusion yesterday of a two-day policy meeting. Such news would be considered positive for gold, as injections of liquidity into the market tend to benefit the yellow metal.

What investors got from the Fed was something much bigger than QE3. What we got was an open-ended QE. $40 billion will be pumped into the U.S. economy each month until further notice. Just as if the endless QE wasn’t enough, the Federal Reserve has maintained its funds rate at 0.0%-0.25% at least until mid-2015.

The above is not important only per say, but also because it is something that exceeded market’s expectations. Consequently, we didn’t see the buy the rumor, sell the fact type of reaction – what happened was bigger than the rumor, so markets got another positive impact.

This is a major bullish fact for the precious metals market. As Europe and the US continue their inflationary race, precious metals rally – and they should rally much higher – endless QE means that they virtually have to.

At this point, it seems that higher precious metals prices will be seen this fall and winter.

We’ve seen some quite bullish developments in the precious metals this and last week. Let's now turn to mining stocks’ technical picture to see whether they’re in a similarly bullish situation as the metals themselves. We’ll start with short-term HUI Index chart (charts courtesy by http://stockcharts.com.)

In the chart, we have a bit (!) of a bearish situation. With the index reaching the psychologically important 500 level this week, a level which has often provided support in the past, we could very well see it serve as resistance this time.

A moderately strong resistance line is also in place, one which is based on two local tops which were quite close together.  The situation would be more bearish if the previous tops were father apart as this would make the resistance line a bit stronger.

At the moment of writing this essay, the HUI Index is at 516, however the breakout is not confirmed and RSI is so extremely overbought that a correction or consolidation is now quite likely.

 Let’s now move on to a very interesting chart that will show us the performance of mining stocks relative to gold.

In the miners to gold ratio chart we also see a breakout this week and this is important and encouraging for mining stock investors. The ratio has been struggling for a month to break out and we finally see a convincing move above the resistance line.

If a correction is seen and the ratio does not break below the support line, this will be a strong signal that miners will outperform gold in the month to follow. In exciting related topic, next week a brand new tool (in our new website; actually two tools: one for gold and one for silver) will be at your disposal for selecting mining stocks and rebalancing your mining stock holdings.

To finish off, let’s have a look at our own in-house developed indicator that serves as yet another confirmation of the recent bullish change in mining stocks.

On September 7th, 2012, one of our indicators flashed a buy signal as it moved to the dashed line.

The medium-term trend is clearly bullish right now. If the correction is seen in the precious metals in the following days, as described earlier, we expect the bottom (and a great buying opportunity) to be confirmed by at least one of our indicators – just as previous important bottoms were (see the above chart for details).

Summing up, the miners are beginning to outperform the underlying metals and this bodes well for the future performance of the mining stock sector in the medium term. However, the following days may not reflect this bullish trend because the HUI Index is extremely overbought on a short-term basis.

The completely new version of our website will be released next week, so if you sign up for our free mailing list with 7-day bonus access to our premium features, you will be among the first investors that are able to use it! We strongly encourage you to do so.

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