Friday, December 31, 2010

How high will gold go in 2011 CNN

I think one thing that he failed to mention regarding 'paper' Gold and mining stocks is that they will typically drop if the market crashes. While Gold will be more stable and will even go up in times of crises.

If you do own physical Gold bullion at home, tell NO ONE about it. You will also need a good place to store it.

CNBC Gold / Commodities Dec 31st

Thursday, December 30, 2010

Dec 30th Gold

Gold was down ~$10 in today's trading which was expected after a 3 day run to the upside and topping at $1414 on Tuesday afternoon.

Those vertical dotted lines on the chart are Fibonacci Time Zone tool which is stretched from the high on Oct 14th to the high on Nov 9th. It projected another peak on Dec 6th, but was one day early. The 6th was actually an up day and the 7th a down day, but hit the all time high at $1432 an ounce.  The next peak isfor Thursday the 31st, so we will see shortly if it is an up day as well as a possible breakthrough over the $1432 level. (Optimistic thinking for a Gold bull)

Silver closed at $30.51 and is looking quite strong as it is trading above the 13 day short term moving average and has not dipped below for any length of time over the last few months. Investors are looking to purchase Silver at lower prices and they are coming into the market at every opportunity

The $30 level may be becoming a support level instead of a resistance level. Is it too early to say goodbye to ~20 Silver?  I know some people wish that they purchased more last Summer when it was trading between ~$17 and $18 an ounce.

January is a strong month for Gold based on 'seasonal' data. If the financial markets hold up, the miners should do well along with rising metals prices.

Wednesday, December 29, 2010

Dec 29th Gold

Gold broke to the upside in a pretty big way over the last 2 trading days. Similar to the previous wedge formations.  Will the $1400 level become a base for Gold after the sideways action over the last 3 months?  If so, we may head towards the $1450 area and possibly $1500 in January before a pullback occurs.

Silver has also been strong with a closing price of $31.56.  The Gold/Silver ratio is around the 46 area and should continue to drop going into next year.

Monday, December 27, 2010

Gold Dec 27th - Break up or down?

Gold is in a trading range as mentioned in last weeks analysis.  It is forming another sideways wedge between $1422 and $1361. It is most likely going to break up or down in the near future, possibly this year.  Gold is up 27.7% ytd, so a minor correction is expected by some and should not be very deep. If it does correct, it will affect Gold mining stocks much more as many of them have had 50%+ runs to the upside over the last 3 months.

The MACD Histogram has a slight bias towards the center line, so I'll give an edge to a break to the upside.

CNBC Bubbles 101

The lesson for today, Gold is in a bubble...  I think these guys should really short Gold at these levels.(But they know better. They will just watch as it heads higher. There will be +15% pullbacks, but as long as governments continue adding digital dollars, Gold will head higher.

Saturday, December 25, 2010

Wave of Muni Defaults to Spur Layoffs, Social Unrest: Whitney

QE3 on the's not going to be pretty in the next few years... 


60 Minutes state and pension budget crisis

60 Minutes state and pension debt crisis

TARP and QE2 are complete.  This may be the reason why QE3 will be coming sometime in 2011 or 2012.

Wednesday, December 22, 2010

Gold to $6000 - David Tice

Founder of the Prudent Bear fund David Tice on CNN Money.  Talks about debasing the US currency and the Dow dropping lower than Gold

Tuesday, December 21, 2010

Gold in a trading range

Gold has been in a trading range from the beginning of October when it passed $1315 to a high in early December at $1422.  Gold is up +27% year to date and the last 3 months may be a consolidation period before the next move up. With about 8 more trading days for 2010, it looks like it will finish the year between $1350 and $1422. (Unless there is some major catalyst for a upwards or downwards move from here).

Silver has been in a tight trading range over the last 2 months with a slight upwards bias.  Silver is up 73% year to date, so a consolidation period is due. A potential pull back is also a possibility before the $30 is pierced and realized as a support level, not a resistance level.

Monday, December 20, 2010

The Dark Side of the Gold Boom - Part I: Gold ETFs

Bloomberg Investor interviews regarding Gold

Dec. 20 (Bloomberg) -- Investors and analysts talk about their outlook for gold for 2011 and beyond.

Bloomberg interviews Gold analyists

Wednesday, December 15, 2010

Gold Silver Dec 15th, 2010

Gold has been up and down over the past week with no definitive trend in place.  It ended down $16+ today with a close of $1388, below the 13 DMA. If the previous break low of $1372 is taken out, Gold may start a downtrend with support at the lower trend line of ~1368 and the 50 DMA of 1363.

There are plenty of reasons why Gold should end the year strong:
  • European debt issues
  • China and India demand.  China also opened a 'Lion' fund for investment.
  • Christmas jewelery demand.
  • QE2
  • Financial market uncertanty

Silver closed down 1.78% to $29.26, above the 13 DMA. It should stay above the last break low of $28.07 to remain in a upwards trading range and to keep the trend in tact.

Silver is up 69.7% year to date while Gold is up 27.3%.
The Gold/Silver ratio is 47.4 and dropping. In Feb of this year, it hit a high of 72.08.

Silver is still trading well below the 1980 high of $50 while Gold surpassed the 1980 high of $850 in 2008.
Investment demand remains strong with all of the US Silver eagles out of stock at the US Mint.

From the US Mint website:

Production of United States Mint American Eagle Silver Uncirculated Coins continues to be temporarily suspended because of unprecedented demand for American Eagle Silver Bullion Coins. Until recently, all available silver bullion blanks were being allocated to the American Eagle Silver Bullion Coin Program, as the United States Mint is required by Public Law 99-61 to produce these coins “in quantities sufficient to meet public demand . . . .”
Although the demand for precious metal coins remains high, the increase in supply of planchets—coupled with a lower demand for bullion orders in August and September—allowed the United States Mint to meet public demand and shift some capacity to produce numismatic versions of the American Eagle One Ounce Silver Proof Coin.
However, because of the continued demand for American Eagle Silver Bullion Coins, 2010-dated American Eagle Silver Uncirculated Coins will not be produced.
The United States Mint will resume production of American Eagle Silver Uncirculated Coins once sufficient inventories of silver bullion blanks can be acquired to meet market demand for all three American Eagle Silver Coin products.

We are accumulating physical Silver and ETF's on all pullbacks.

Tuesday, December 14, 2010

J.P. Morgan Cutting Back Big Bets Against Silver

An article from Murray Coleman from Barrons:

With regulators circling and analysts crying foul, J.P. Morgan (JPM) has apparently cut its short positions in futures markets betting against further rises in silver.
The Financial Times is reporting that JPM is denying that any outside pressures are behind any of its metals moves. At the same time, the bank also wouldn’t comment on specific positions.
But traders and analysts have been openly critical of J.P. Morgan as well as other banks, which seem to be taking rather outsized short positions in order to hedge growing long positions in silver.
The iShares Silver ETF (SLV), which is trading down early this morning by 0.7%, has been on a tear this year. So far heading into today, it was up 74.5% in 2010.
That’s even better than the SPDR Gold (GLD), which had gained 26.8% on the year, according to Morningstar data.
An unwinding in silver shorts by big banks could provide another catalyst for even more growth by SLV in the future.

Another article from Reuters:
JPMorgan cuts silver short;denys 90% copper data

Sunday, December 12, 2010

Avino Silver

Avino Silver is company soon to be in production in Durango Mexico that has an interesting history. The Avino mine from 1974 to 2004 produced 16M ounces of Silver, 96k ounces of Gold and 24M ounces of Copper. The mine was shut down in 2004 due to economic conditions.

Avino has since re-acquired the mine and has explored additional regions with drill results as high as 3,623 g/t Silver and 3.84 g/t Gold.  They have an NI 43-101 estimate of 14.7M ounces Silver. The ET Avino vein is estimated at an additional 8.5M ounces, but is not 43-101 complaint. Total estimated Silver ounces - 23.3M. Avino has the capability to expand the mine and explore for additional resources on their property.

Production is scheduled to start in the near future with infrastructure in place and ready with a initial mill capacity of 1250 tpd.

Share Information
Shares Issued: 23,267,227
Options: 1,895,000
Warrants: 2,400,000
Fully Diluted: 27,562,227

 December 10th price: $2.20

For additional information, go to their website for the latest news, financial reports and a video interview of their CEO, David Wolfin with David Morgan.
Avino Silver

Disclaimer: GSR publishers currently own shares of Avino Silver.

China accumulating Gold

There may be a day where you will be unable to purchase Gold due to high demand in both China and India.


Thursday, December 9, 2010

Prospect Generator Model

Here is a link from an article that Brent Cook wrote and published in Sept 2008 - Prospect Generators- Increasing Your Odds of investing Success.  

This model lets the exploration company find potential Gold reserves and builds partnerships with mid and senior miners which takes a percentage stake in the area. The partner will fund the drilling and additional exploration which allows the exploration company to save their money reserve and not dilute shareholder base by issuing additional stock. The exploration company can then focus on acquiring other potential properties. 

Brent Cook - Prospect Generator Model

Another article written by Matt Badiali in April 2009 on Prospect Generators:

Wednesday, December 8, 2010

Bearish metals markets...

Gold finished down for the 2nd day to the 1383 level which is right on the 13 day moving average. (Why do I use a 13 day for the short term moving average?  Because it's a Fibonacci number).  Gold still  has higher lows until it closes below the 1350 level. This would pierce the lower support trend line and a larger correction may be in the works...?  The MACD Histogram and Stochastics are turning down which suggests lower prices.

If your long, there is nothing to worry about and this may be a buying opportunity for those that are not in the market yet. If your a trader of Mining stocks, this may be more serious as some of these stocks can take large downwards swings in one day wiping out short term gains. I am still in the camp where Gold will rally into the end of the year.

Silver closed on the 13 day moving average as well,,,hmm is Silver following Gold? The last break low was 26.40 on Nov 26th. Silver is still technically in an uptrend until the last break low is pierced. The next support area is the lower trend line which is just a little above the 26.40 level.

Like Gold, the MACD Histogram and the Stochastics are heading down.  Nothing to worry about if your a long term holder.  Swing traders may want to take some money off of the table if the 26.40 level is pierced.

Tuesday, December 7, 2010

Dec 7th Gold

A down day for Gold and Silver, not a big deal or trend changer.  Gold continues to trend up within the channel and it would need to drop below 1350 that occured on Nov 26th area to negate the uptrend.   Gold has been up 6 days in a row and had to take a 'timeout' at some point. 

As mentioned previously, IF the institutions and hedge funds sold in November to lock in gains, Gold should have a up month in December and into 2011.

Silver was also down about 4.6% today and was expected after 6 consecutive up days in a row. Silver in general is more volitile than Gold and one should expect wild swings at times. Just like the forcast for Gold, Silver should have a good month in December if institutions have taken their profits for the year.

Monday, December 6, 2010

Cramer touting Gold on CNBC

Suggests people allocate up to 20% of their portfolio into Gold and suggests that people own Gold Mining stocks like Agnico Eagle (AEM) and Eldorado Gold (EGO).  Novagold (NG) is his speculative play as they are an explorer.
I have a position in Eldorado Gold. They are one of the Mid tier producers that have one of the lowest costs at ~$340 an ounce.  They should have a good 4th quarter earnings report with Gold at $1400+ an ounce.

Sunday, December 5, 2010

Silver ETF SIL from Global X funds

Here is a snapshot of a daily 6 month chart of the Global X Silver Miners ETF SIL.  The fund started in April, 2010 and for that last 6 month period, it is up 87% while the Silver ETF is up 67%.

You can go to the Global X website and see all of the fund details. The Silver Miners that the fund holds as of Dec is listed below.

If Silver continues to outperform Gold and stays in the upward trend higher, the Silver miners and this ETF should do well going forward. The financial markets will also determine how the miners will perform as they are just like any other stock and are subject to market whims and declines. (Sometimes the decline in mining stocks are even worse than your typical S&P500 company, just look at them during the financial crises in 2008/2009).

One thing that I like about this ETF is that it spreads the risk out.  If one of these miners were to publish some news that is not taken well by investors, it can get hammered quite hard and for weeks, months and possibly a year or more. The price of the fund will not take a major hit because of diversification of senior, junior and exploration miners.

Disclosure: Own shares long

Friday, December 3, 2010

Gold Dec 3rd, 2010

That is one upside day for Gold, just $24.93... as the debt worries in Europe and the Euro declines.  Gold has now made a solid move higher that sets the trend of higher highs and higher lows.  It is a few dollars away from producing an all time high and may move to the top channel line within a week or two. ($1450+)

The MACD Histogram is on the move up and Gold should see higher prices over the next week or two.  An X-mas gift from Bernanke....  Stay long!

Silver Dec 3rd, 2010

Silver is on the move to another major bull trend going into the end of the 2010 year with a close on Friday at $29.24, a few cents short of the previous high a few weeks ago.  The MACD Histogram is trending up and it looks like the $30 level will be met next week. The way Silver is moving, it may pierce right through the even number 30 level with little resistance, especially if the institutions that are short muster up the nerves to buy back at these levels.

Silver is still undervalued when you base it on Golds run over the past 2 years.  In 1980, gold hit $850 an ounce and Silver hit a high of $50, partially due to the Hunt brothers attempt to corner the market.  In any case, that was the all time high.  Gold has surpassed the $850 level in 2008 and Silver has not even reached $30 in 2010.  Talk about a discount and deal..... Still a bargain at these prices, especially when it's going to double from here.

Wednesday, December 1, 2010

Goldman Sachs Gold Forcast

Goldman's self fulfilling prophesy (They don't loose too much $$$ on their predictions) 

Gold prices will likely continue to trend higher in 2011, supported by a fresh round of quantitative easing in the U.S., before recording a peak around $1,750 a troy ounce in 2012, Goldman Sachs said in a report Wednesday.

The investment bank said it expects downside risks for the precious metal, which has rallied 25% since the start of the year, to increase as economic growth and real interest rates recover.

“At current price levels gold remains a compelling trade, but not a long-term investment,” it said. “With the current round of [quantitative easing] set to end in June 2011, and our U.S. economics team now forecasting strong economic growth in 2011 and 2012, we expect U.S. real interest rates to begin to rise in 2011, likely causing gold prices to peak near $1,750/oz in 2012.”

In the report, Goldman suggested it is a good time for gold producers to begin scaling up hedging of forward production, particularly for 2012 and beyond.

Tuesday, November 30, 2010

Gold breaks out to the upside!

The Gold Bulls get their way today with a move up $16.50 to close at $1385. This takes out the previous high of $1382 so this may start an upwards trend of higher highs and higher lows for December. 

If hedge funds and institutions have sold this year to lock in profits, most of the major selling may be over...?  If so, we may head up to the $1400 area and beyond for the month of December...  The seasonal trend for Gold in December is generally positive.

Silver Nov 30th.....Bullish Breakout!

The Silver price was heading into the point of the lower and upwards trend lines and something was going to happen, either a break low or a break high.  The bulls had their way today with a close of $28.19 (3.64%), above the last break high of $27.89.  A test of the even $30 area should be within a few days.

I would guess that most hedge funds and other institutional funds may have sold already to book profits for the 2010 year. (50%+ is not bad right?)  If so, we may see a bull rally in December and into the end of the year...  we shall see, stay tuned.

Monday, November 29, 2010

Sunday, November 28, 2010

Gold 2 year weekly chart

Here is a two year weekly chart of the World Gold Index. It is from the 2008 lows of $691 an ounce.  You can see that Gold has had 4 peaks since then, Feb 09, Dec 09, June 10 and Nov 10.

The fall seasonal rally last year (09) started in Sept (2nd) and peaked in early December (3rd), about 3 months.  The rally this year started in August (July 29th reverses the downtrend), one month earlier than last year. If it were to rally the same duration as last year, it would take it to the end of October. But it continued rising another week and a half to a peak of $1424 on November 9th.

Fund managers may have sold and taken profits for the year already. They may see that the current rally started one month earlier and may be ending a bit earlier than last years Dec 3rd peak...?

There is a 'Head and Shoulders' pattern forming which is typically a Bearish formation. (But not always the case). The left shoulder's low is $1315 and if this were to be pierced, we will most likely head into a year end correction. $1388 is the first resistance level that would need to be pierced to produce a bullish trend to make a move to the $1424 all time high.

Wednesday, November 24, 2010

Nov 24th Silver

Silver closed flat at $27.57 on Wednesday, the day before Thanksgiving.  It is above the short term 15 day moving average and off of the lows of last week.

I have drawn a trend line down from the peak a few weeks ago and the lower support trend line. You can see that it is coming to a point which will be a breakout either to the upside or downside in my opinion.

My guess based on QE2, Seasonals and the overall trend of Silver that it will break to the upside.  

On the other hand, Silver has gone up over 62% year to date ! ! !  I would not be surprised if it were to break low because of that fact.  Funds and Institutions will also want to lock in profits for the 2010 year and may be taking profits early and before a drop in the price. (Look at last years Gold / Silver price after December 3rd).

Tuesday, November 23, 2010

Gold Nov 23rd, 2010

Gold was up today with the US Dollar index. North and South Korea have tensions and certain countries within Europe have debt issues.  People flock to safe investments in uncertain times which is why Gold was up $13.50 today.

Gold pulled back to the 50 dma which was also near the Fibonacci 23.6 level of support (Double support!) It may have some resistance going through the $1388 level as it was the previous high a few weeks ago.

Last year in early December, Gold hit a top and pulled back for the rest of the month. It is speculated that funds already had a sizable gain in Gold for the year and wanted to lock in their profits. (It's nice to show a big gain to your shareholders).  Keep an eye out for this potentially happening again.  At his time, Gold has a year to date return of 27.1%.

Monday, November 22, 2010

Silver shooting for $30

World Silver Index, Nov 22, 2010
Looks like Silver will attempt a run for $30 an ounce within the 2010 year!  There was a small pull back at the end of Oct, a run up to $29.34 and another small pull back to the 38.2 fibonacci level.

It's trading above all 3 key moving averages and has fair support near the 15 dma. Silver is on track for a outstanding overall year with a current 60+% return. 

Silver started the 2010 year at $17.17 an ounce.

Tuesday, November 9, 2010

Silver XSLV Short Squeeze

World Silver Index XSLV, Nov 9th, 2010.  9am PST
The XSLV is up yet again today, partially due to investor demand, trend traders, day traders and last but not least, the Shorts that are covering their positions.  Silver has hit the upper trend line and may trade sideways for a little while before rising to the $30 level.
XSLV 2 year chart with upper trend line based on 2009 peaks

With the shorts covering their positions, it may just knife through the upper trend line right to $30...(?)  It will be an interesting month of November for the precious metals and especially Silver to say the least.

Saturday, November 6, 2010

Silver short

Taken from an article that was recently published regarding the run-up of Silver and the short positions in the market:

"Silver is experiencing the kind of demand that marks historic bull markets. Gains of the extent that it is displaying are evidence of distressed shorts being mercilessly attacked by strong handed bulls," wrote Chris Mullen of "Keep in mind that these shorts are not weak-handed, having had their way with this market for many years but it is clear from the extent of the gains being produced that large, well-funded and determined buyers have come into the silver pit with a steely determination to engage their enemies. A large contingent of the silver bears are hemorrhaging seriously and are beginning to abandon the field."

Only the strong willed and determined Silver shorts will stay in this market as November is typically a strong month for Gold and the metals markets. When you add QE2, it bodes well for Silver going forward.  The industries that use Silver for their products will also be taking note of the increase in the price over this year and may begin to purchase the metal now, instead of higher prices next year.

Even if Silver does pull back, It may find support at the first fibonacci level of 23.6 as it did in late October due to strong investor demand. In summary, the major shorts may be destined to lose a substantial amount of money, they just need to decide how much they want to lose when the eventually buy back. 

Thursday, November 4, 2010

Silver (SLV) shining brighter than Gold

3 month daily chart of SLV iShares Silver Trust ETF

SLV has hit the first fibonacci objective 161.8 level based on the 2008 lows and the 2009 high in December. With the Fed's announcement of QE2 yesterday and essentially printing up an additional 600 billion, the devaluation of the US Dollar continues.

SLV was up 5.69% while GLD was up 3.39% today. Silver continues to outperform Gold since the start of this seasonal rally. The Gold/Silver ratio continues to drop and investors that have been long Silver have been handsomely rewarded.

There are still quite a few Comex Silver short contracts that have been loosing money with every penny that Silver goes up.  Most probably thought that last weeks correction was going to go deeper so they could cover, but investment demand proved otherwise. Expect a short squeeze continuing for the remaining of November and possible profit taking in December by large institutions and hedge funds to book in a profitable 2010 year.

A combination of physical Silver, ETF's and Silver miners are the best way to invest in this particular metal. All of the major and mid tier Silver miners have made significant gains over the last 2 months which include:

Pan American Silver
Silver Wheaton
Silver Standard
Silvercorp Metals
Mag Silver
Hecla Mining
Endeavour Silver

Sit tight for the next 18 days (the amount of business days left in November) and watch the rally continue. The shorts should be uncomfortable now and should be covering unless they are waiting for higher buyback prices....

Monday, November 1, 2010

GLD Nov 1st

GLD Nov 1st, 2010
Here is a 3 month chart of the SPDR Gold Trust, GLD.  It started to pull back in the 3rd week of October after a rally that started in August. But, it did not pull back as deep as some have suggested.  It dropped to the fibonacci retracement level of 23.6 which was about the $129.5 area. Is that the end of the pull back and we are up from here? I'm not sure of that, but GLD is starting to creep back up and is not too far away from the all time high.

With the FOMC meeting this coming Wed and the mid term elections on Tuesday, we should see some reaction from the precious metals markets, positive or negative.  I'm leaning towards the positive side as Quantitative Easing is never good for Fiat currency.  We shall see soon.

Nov 1st SLV

Nov 1st SLV
Here is a 3 month view of the iShares Silver Trust ETF.  It had a small pull back in the 3rd week of October that is almost exactly the same time as the pull back in Oct 2009. If SLV resembles last years moves, we will see a rally in November. That is a big IF, nothing is for certain and we can only take a 'educated guess' where Silver and SLV may be going based on fundamental data plus a bit of technical analysis.

SLV currently has made higher highs and higher lows off of the break last week and is trading above the 15 day moving average. A fibonacci 161.8 level is around the $25.5 area which may be reached this month. The base fibonacci levels were taken from the lows in 2008 to the Dec high in 2009.

There is a FOMC meeting this Wednesday that may impact the markets. QE2 is on the way, we just do not know how much money they will be printing and for how long.  The bottom line is that any money that is printed out of thin air bodes well for commodities in general.

The Silver to Gold ratio has been dropping over the last 2 months and if is continues to drop, expect Silver to rise even though Gold is flat.

Tuesday, October 26, 2010

Gold up 514% over the last 10 years

This is an FYI post as I was looking over my 401k account and noticed that Fidelity had a 3rd quarter review of the financial markets. This was a slide in the presentation:

Monday, October 25, 2010

Sunday, October 24, 2010

XGLD Oct 22, 2010

World Gold Index XGLD 3 month daily chart
Gold continues to pull back as quite a few 'experts' expected after a 2 and a half month rally to the upside. There are not too many stocks or commodities that have run up for months without a significant correction of some kind. How significant will this correction be?

Gold hit a top of $1388 on 10/14/10 and since then has dropped to a closing prince on Friday at $1323. It is below the 15dma and there are a few levels of support depending on which indicator you look at.
  • A fibonacci drawn from the low and high of this rally brings the 61.8 level at $1300.
  • The Bollinger band (Not drawn on the chart above) is at the $1290 level.
  • The next 'common' moving average is the 50 day which is at the $1285 level.
  • The fibonacci 50% retracement level is at $1270.
Nobody knows for certain where it's going to drop to, but you can use tools to determine possible support levels. Aggressive traders that are bullish on Gold and try to pick 'bottoms' can accumulate positions when they hit any one of these levels. If the price continues to drop, take another position near the next level of support.

Bullish conservative traders should wait until the support is confirmed with the price touching and rising back up. They can start accumulating positions when the price is above the 15dma.

We believe that the price trend for Gold will continue to rise based on the debasement/devaluation of the U.S. Dollar. QE2 may be in process behind the scene.  The US has also recently proposed a 2 billion military aid to Pakistan. Hmm, print up some more dollars...

Seasonally, October has been typically a negative month for Gold as seen in this 'seasonal' chart. Focus on the yellow 1968 to 2010 average.

There are 5 full trading days left in October. (The last Sunday starts off the next trading week for Nov)  The price on Oct 1st was $1309, if Gold closes below that number on Friday Oct 29th, it will be in-trend with a negative October.

There may be some money to be made with the Gold/Silver stocks in November. This recent pull back/correction has lowered many of the stocks in this sector which may have presented buying oppurtunities for those that are still bullish on Gold.

Wednesday, October 20, 2010

XGLD Oct 20, 2010

World Gold Index on Oct, 20, 2010.  Is this the correction that most professional traders have been looking for? Gold is trading just below the 15 day moving average, stochastics have broken to the down side with a close at $1344 an ounce.
Seasonally, there is a correction in Oct and an upward trend going into November. Of course, this does not happen 100% of the time, but something to note when trading the Gold/Silver markets.
With the talk of EQ2 around the corner, this correction may be over soon and viewed as a buying opportunity with Gold and Silver stocks that were depressed.

Monday, October 18, 2010

Money Supply & Inflation

Above is a chart of the US Money supply from 2006 to the current day. You can clearly see the stimulus package of 787 billion that was produced in late 2008 under the Bush administration to 'save' the financial system. Since then, the government (Obama administration) has printed up more dollars in an effort known as quantitative easing. (See the video post last week for an example)

The picture is getting clearer why Gold and Silver as well as other commodities are rising in value. The U.S. Government as well as other countries are printing up fiat 'money' to bail out the economy, banks and mortgages. (Purchasing toxic assets).

The problem with fiat currency is that governments can print up as much of it whenever they want. Fiat currency is not tied to Gold, Silver or any commodity so it is easily devalued/debased when the printing presses are started. The dollar is a piece of paper with ink on it, you can take a match and burn it to ashes. Hard assets such as Gold and Silver are a rare commodity which has been used as a currency for thousands of years and they cannot be reproduced or printed. It may be a few years away before the world realizes that the only real money is Gold or Silver...

With higher commodity prices outside of Gold and Silver - Oil, Gasoline, Corn, Wheat, Soy, Sugar, Coffee, etc, the food manufacturing costs will rise as a result. It's a matter of time before you see rising costs at the supermarket. I know that many people already see the higher costs over the last few years, but we have not seen hyper-inflation yet...

Sunday, October 17, 2010

iShares Silver Trust SLV Oct 17, 2010

iShares Silver ETF SLV, Oct 17, 2010

The bullish trend continues with the precious metals market as seen with this SLV chart. On Friday, SLV was down .28, all of the technical indicators are still intact and suggest a continued trend higher. Stochastics are embedded and the price is above all three moving averages of 15, 50 and 100.
As noted in previous posts and analysis on XSLV and SLV, a fibonacci drawn from the lows in 2008 to the highs in late 2009 sets the 161.8 level at ~$25.60. When and if this level is realized, it often presents a resistance level and may pull back or consolidate before heading onto higher levels.

The bull run from late August 24th of $17.48 to a potential $25.60 is $8.12 per share, a nice little profit for all of those that have invested in this ETF.

Wednesday, October 13, 2010

GLD another high for Gold

SPDR Gold Trust, GLD. Oct 13th, 2010 at 08:15am PST
Here is a chart of the most popular Gold ETF, GLD. It reached a new high this morning at 134.31and there is still quite a few hours to go in the trading day. This ETF price is about 1/10 the spot price of Gold and has the highest daily volume of any Gold tracking ETF.

Stohcastics are embedded and this rally seems to be extremely strong going into October which is typically a loosing month for Gold based on seasonal data. Some may speculate that new shorts that have come into the market over the last week or so are expecting a pullback after a 50+ trading day rally. (Trading days in August, September and the first week and a half of Oct) All professional traders place stops above their shorts to cover as soon as possible to loose the least amount of money when they are wrong. When the stops are triggered and they buy back, it sends the stock/ETF/commodity higher which may be the case here. (Short squeeze)  You can probably bet that after this new high was achieved this morning, new shorts were placed on.

Is a pull back inevitable? Can this rally be sustained by a dropping US Dollar?

'Markets can stay irrational longer than you can remain solvent' - John Maynard Keynes.

Tuesday, October 12, 2010

One major reason why Gold/Silver is going up and heading higher

You have heard it on the news and maybe even 'Helicopter' Ben Bernanke speak about QE or Quantitative Easing. Here is a good video on the details on QE:

And another:

Monday, October 11, 2010

XGLD Oct 11, 2010

World Gold Index, October 11, 2010. 9:55 pst.
The World Gold Index is hovering around the $1344 an ounce level on Monday, Oct 11th, 2010. Last week, it reached a all time high of $1364.60 an ounce.

Gold has been trading inverse to the US Dollar Index over the last 2 months or so. If we continue to see the dollar weakness, Gold may continue to rise in price. (As you know, nothing is for certain in financial markets. Gold does not always trade inversely to the dollar).

Most markets consolidate after a run-up which is what may happen. A small fast correction may also be realized before a run-up towards the $1400 level before the end of November.

If a pullback is going to happen, what level will Gold drop to? Where is the support? You can find it at the moving averages of the 50 day and 100 day. A key level is going to be the even number of $1300. A fibonacci retracement of the recent run-up has the 61.8% retracement at $1285.

Fibonacci retracement of the run-up from July 28 to Oct 7th.
The next price peak based on the fibonacci retracement at the 161.8 area is around the $1563 level on a longer term basis. The points taken to derive this number is taken from October 2008 lows to the December 2009 high. When will this occur? Will it occur? If the US Government continues it's quantitative easing (Printing money), the next level should be realized. When?

Weekly chart of World Gold Index
Based on the trend line drawn on the weekly chart, it suggests that the World Gold Index _may_ hit the 1563 level next year around the April time frame.

Sunday, October 10, 2010

US Mint increases the premium for Silver Eagles

Earlier this week, the U.S. Mint increased the premium of the 1 ounce American Silver Eagle coin. Will this increase in premium also increase the value of Silver Eagles that were minted in prior years? If so, your holdings of this coin just increased without the price of Silver going up.
Written by Luke Burgress
The U.S. Mint has increased the premium charged for American Silver Eagle bullion coins from $1.50 to $2.00 per coin due to higher production costs.
The Mint does not sell American Silver Eagles directly to the public, but distributes the coins through a network of Authorized Purchasers, who resell the coins to other bullion dealers, coin dealers, and the public.
The price for American Silver Eagles sold to Authorized Purchasers is determined based on silver content plus a premium.
The last time the Mint increased the premium for Silver Eagles was February 2009 when it was increased from $1.40 to $1.50 per coin. Prior to that, premiums were raised in October 2008 from $1.25 per coin to $1.40 per coin.
The U.S. Mint's American Eagle series of bullion coins has become very popular over the past few years. Sales of the American Silver Eagle increased 191% between 2007 and last year.

Maria Bartiromo interviews Jim Rodgers on CNBC

Jim Rodgers chimes in on commodities ('Gold to $2000 is a given'), Ben Bernanke and the US economy going forward. (For those who do not know who Jim Rodgers is, he founded the Quantum Fund which had returns of 4200% between 1970 and 1980 while the S&P500 returned 47%)

Tuesday, October 5, 2010

Silver at another 30 year high, next peak at ?

2+ year chart of the World Silver Index
The World Silver Index chart above has a fibonacci retracement drawn from the low in 2008 of $8.46 to the December high in 2009 of $19.50. This places the fibonacci level of 161.8 at $26.25 which is where the next high may be.

~2  month daily chart of the World Silver Index
It's easy to see that Silver has been in a bullish run since late July, early August. The stochastics are embedded and the trend suggests higher prices going forward. It may be safe to assume that most of the readers of this blog understand that no investment will continue to rise without a pull back or consolidation. Look for one sometime in October, then a continuation to the suggested fibonacci 161.8 level of $26.25.

The higher Silver (and Gold) prices are related to a combination of factors.
  • Seasonals
  • Indian marriages and the holiday of Diwali
  • U.S. Debt and the continuation of the debasing of the dollar currency
  • Financial uncertanty
  • Industrial demand (The economy actually looks better than expected)
  • Short squeeze
  • Investor demand. (There is much more coverage of Gold and Silver in the headlines). Larger investors that did not have exposure to the metals markets over the last 10 years want to increase their exposure to Gold/Silver positions to ~10%. (Suggested by some financial advisors now as high net worth individuals have questioned them as to why they have not seen the returns that Gold and Silver has provided over the past 10 years).

GLD/Gold at another all time high

GLD SPDR Gold Trust on Oct, 5th, 2010 @ 8:40am PST
The GLD chart above does not need too much technical analysis as most people can read it for themselves. (GLD tracks the spot price of Gold and is roughly 1/10 of the price).  Gold is in a major bull run that started on July 29th, 2010 at $113.50 for this trust.

Stochastics are embedded and upside strength going forward is still intact. All of the moving averages are in line with a typical bull run.  There was a break in the stochastics on Sept 9th where the K line dipped below the 80 level and the D line followed. Since then, they have both recovered back over 80 on Sept 21st and have been embedded.

Most traders know that every bull runs come to an end at sometime and need to get out. A pullback sometime in October is a possibility and consolidation before another bull run in November. Long term Gold investors can sit back and enjoy the current run.

Sunday, October 3, 2010

Gold Silver Ratio below 60

The Friday closing price of both Gold and Silver has placed the ratio below the 60 level, (59.72, It takes 59.72 ounces of Silver to purchase 1 ounce of Gold). 

The lowering ratio reflects a few scenarios at this time in the markets:
  • The price of Silver is increasing faster than the price of Gold. (True)
  • The price of Silver is increasing and the price of Gold is relatively flat. (False)
  • The price of Silver is flat with a decreasing Gold price. (False)
  • The price of Silver is increasing and Gold is decreasing. (False)

The precious metals market, specifically Silver is still a ways from the 3rd phase which is the 'mania' phase. It's hard to place a time-line on this as there are a lot of factors to consider. Government, geo political, economic, worldwide demand, investment demand, industrial demand, short covering, etc...

I've recently seen a few Silver investors that mentioned that we are at the start of phase 2 in the silver market which is the bullish run before the mania stage. There are still great Silver related oppurtunities to get into this market, both on the physical ETF and stock sides of the market.

Precious metals stocks, an interview with a guru

Not a new video release, but one that is interesting to watch as Al Korlin interviews David Morgan which is a longtime Silver bug/guru. (July 7th, 2010) David mentions that the metals markets are much smaller than the currency or stock markets and if there is enough physical metal purchased, they will not be available for delivery. People that still want to get into the metals market will need to purchase the stocks of the miners which may drive them higher. (He specifically mentions the juniors for some reason?)  There are various precious metals investors/gurus/advisers that suggest that the quality junior miners outperform the larger miners in a bull market. GSR - we are still a ways away from that happening.

Wednesday, September 29, 2010

Save those old Silver coins    website
If you happen to collect old US Coins in the denominations of .10, .25, .50 and $1, check out the website as they list the value of the coin based on it's Silver content.

Coins produced in certain years have higher Silver content than others. You will typically find that the older coins have a higher Silver content like the 1878-1921 Morgan Silver dollar which is 90% pure Silver.  Compare that coin to the Kennedy Silver Half Dollar which is 40% Silver.

Some people are purchasing as much of these coins as they can to hedge against a possible hyperinflation environment in the coming years.  These people believe that they will one day be able to use these coins to purchase groceries at the market as the precious metal inside (Silver) will have purchasing power compared to the US Dollar. (Which is a piece of paper with green ink on it)

Tuesday, September 28, 2010

US Dollar Index

U.S. Dollar Index
Here is the US Dollar Index which is on a trend down which bodes well for the precious metals market, specifically Gold. (They typically trade opposite of each other) It closed at 79.33 which is the first time since March 2010. If the index should trade below the 70 level, Gold should continue to increase in value due to the dollars devaluation.

Although this is typically good for precious metals investors, it's not good as far as inflation. Prices for consumable items such as gasoline, food and daily personal hygiene items will continue to rise in price. I'm sure most people already realize this after a trip to your local grocer. Prices have gone up and product volume has gone down. It is something that you'll need to get used to should the dollar index continue to fall and Gold continuing to rise...

Gold to $1500 before the end of the year...?

Bloomberg news:

Monday, September 27, 2010

Gold Sept 27, 2010

World Gold Index, Sept 27, 2010. 7:50 PST
The chart is fairly self explanitory, a bull trend since late August 2010 with higher highs and higher lows. No significant pullbacks yet. There is some resistenace at the $1300 level, but I think that will be short lived. As long as the stochastics stay embedded (both K and D lines over the 80 level), Gold should be trading over the $1300 level within a few days/week. If the K line stochastic breaks below 80, we may see a short term pull back before closing above the $1300 level.
The goverment / Obama administration continues to print up money to get this economy in favorable shape going forward. The only way governments can assist is to print up more money to help failing businesses and bail out major corporations (like the auto industry). Another $42 billion is going to be 'borrowed' from small businesses to help put 500k people back to work and assist with the unemployment rate across the nation. It is something that is needed as people want to work. I'm not sure if these loans will get paid back, especially if the business that receives the loan continues to struggle.

$42 billion small business bill signing by President Obama on Monday With government money printing presses going, Gold should continue to rise in U.S. Dollars. As Gold goes up, you can also see it as your dollar losing value.