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

Marc Faber on Gold

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.