Saturday, April 30, 2011

Gold / US Dollar ratio

A 3 year chart of the Gold/US Dollar Ratio suggests that Gold will continue rise and the US Dollar will continue to decline.

Gold/US Dollar Ratio = Takes 21.4 of the US Dollar Index to equal 1 ounce of Gold

The current trend of the ratio is an ascent with the US Dollar in decline and Gold in a bullish rally. The RSI is overbought and the MACD is at the upper portion of the scale. The ratio may continue to rise a bit more, then plateau before the next ascent. (Maybe after QE 2.5/3 or whatever vernacular the Fed will dream up next time.)
Many suggest to scale out of any cash in savings accounts and dollar cost average into either Gold or Silver.  In essence, you are just trading out of one monetary asset/currency and into another, NOT investing in precious metals like many think. It's just that one currency is going down (all fiat) and the other is going up. 

Wednesday, April 27, 2011

FOMC continues the USD Index drop

Investors in the US Dollar did not like what they heard from the chairman of the Federal Reserve board today. The dollar is continuing to sell off and has breached the December 2009 low of 74.24.

Here is a live screen shot of a 1 minute chart of the USD, Wednesday at 5:15 PST:  It has dropped to 73.28.........and looks like it may continue to head down...

It's great that you know what the Federal Reserve and Central banks are doing and that you have converted your savings accounts into both Gold and Silver.  Most people that I have spoken too have no clue what is going on and do not know what TARP or QE2 is.....or for that matter, why Gas and food prices are increasing....

James Turk mentioned that Silver is still in backwardation, even at these levels. Silver is still undervalued at $50 as Gold broke the 1980 high of 800 in 2008, but Silver is still under the 1980 high of $50 in 2011.

Tuesday, April 26, 2011

Peter Schiff talks PM's on CNBC

Silver - potential fibonacci levels

With the run up in Silver prices, it was inevitable to have a pullback at some point. Silver reached $49.82 in early Sunday trading which may be a temporary top.

Depicted above is the World Silver Index and a fibonacci draw from the low on March 15, 2011 to last Sundays high of 49.82.  Potential retracement levels would be:

23.6 - $46.00
38.2 - $43.50
50.0 - $41.75
61.8 - $39.75

We are already in the last week of April and heading towards May and the summer months which are typically flat for both Gold and Silver. The high last Sunday may be a short term top before the seasonal bull markets that start in September.

With the UD Dollar Index weakness over the past several months, it is possible for the Silver and Gold market to be stronger going through the summer season. These markets are very hard to predict because there are factors that directly affect this market that no one fully knows when or if they will occur.

QE2 ends in June, what will the fed do if the financial markets start to crash?
What is the federal reserve going to do with interest rates?

In any case, if your looking to add to your position in both Gold and Silver, wait until they are 'on sale' and near the short term lows. One way is to divide the amount of capital to invest into segments and enter the market gradually on the pullback.  Or just dollar cost average into the metals each month on a specific date. 

With the debt levels rising for all countries, both Silver and Gold should be at new all time highs towards the end of this year.

Sunday, April 24, 2011

Silver Climbs to $47.98 Sunday April 24th

In Sunday evening trading, Silver reached 47.90 and still looks bullish.  When the NYSE opens on Monday the 25th, SLV, PSLV, SIVR, AGQ should see a gap up with the increase with the spot price from the closing last Thursday.

Just after I updated the blog, Silver increased to $47.98, so it's moving fairly quickly.  Will Silver reach $50 before a potential pullback?  How deep will the pullback be?  How long?  Will it be shallow?  These are all questions that many Silver traders and investors would like to know...   Keep an eye on the charts and we'll try to use a bit of technical analysis to try to answer these questions...

There is high volume with the double short Silver ZSL. Some traders are anticpating a pullback and it looks like they are continuing to pile into ZSL.  (Silver RSI is extremely overbought) The higher the Silver price goes, the more 'pain' they will endure. Who said 'The market can remain irrational longer than you can remain solvent' ?

CNBC staff talks Silver.......

The 'Fast Money' crew on CNBC give their .02 on the Silver market last Thursday. (Market was closed on Friday)  Fast forward to the 11 minute mark, they do talk about the US Dollar before their switch to Silver.

Friday, April 22, 2011

Gold Silver Ratio, US Dollar Index

The Gold Silver Ratio is dropping extremely quickly with a current value at 32.31.  In February 2010, the ratio was at at 72.81, a drop of just over 40 in 13.5 months.

The RSI is extremely oversold at 9.95.  I'm looking for Silver to level off or maybe pull back and consolidate which will bring the 'technicals' back to a 'normal' state. With the current market conditions, it is a possibility that Silver can reach $50 by next week.  While the US Stock market was closed on Friday, Silver traded and closed on Friday up another $1.22 to $47.78.

One of the catalysts for the Silver ascent is the US Dollar Index weakness over the past several weeks/months. As of April 22nd, it is trading at 74 which is below the December 2009 low of 74.23, not a good sign. IF the index should continue down, the next level of support should be the July 2008 low of 71.79 then the May 09 low of 71.22. 

With a continued drop in the US Dollar Index, inflation going forward is inevitable. Some people may want to stock up on daily consumables when they can find the items on sale. Some that want to hedge against inflation may want to look into storing food staples such as rice, pasta, beans and wheat in large Mylar bags. There are quite a few videos on this topic on Youtube and you can find Mylar bags and Oxygen absorbers on Amazon.

With Gas at $4+ a gallon, you'll want to squeeze out the best mileage from your vehicle as possible. Make sure it is tuned up at least once a year.  I see that most people drive around with low air pressure in one or more of their tires. Filling them to recommended air pressure will improve your overall gas mileage.  Other items would be to clean out your air filter and watch the way you drive. Coasting a bit more will give you a little more miles per gallon....

Thursday, April 21, 2011

Silver to the parabolic phase?

World Silver Index for Thursday, April 21st, 2011.  Silver has had an 'up' day 13 out of the last 14 days which has the price riding along the upper bollinger band. How long can Silver sustain such a rally is anyone's guess.  When you add in the shorts that have had enough 'pain', this market can continue to go higher.

On the other hand, new shorts will come into the market and the bears will have their way for a little while before worldwide demand takes over and hand the reigns back over to the bulls.

RSI is overbought
It is trading over the upper bollinger band which suggests that it will come back within the bands soon.
Stochastics are embedded again.
MACD Histogram is at the upper end of the range.

This rally is what all Silver bull have been waiting for...  Will we see $50 before the first half of the year?

Wednesday, April 20, 2011

Eric Sprott at NYSE Close

If you missed it, here is Eric Sprott at the NYSE close on April 5th.

Tuesday, April 19, 2011

Physical metals outperforming miners

The title says it all for the last few months for many of the Gold and Silver miners compared to the physical metals.  The people that only invest in physical metals have had better returns for the first 4 months of 2011. I believe that most of the investors that purchase shares of the various miners also have a position in the physical metals, so it's not all bad...

Here is a chart of the Global X Silver Miners Index SIL in the dotted line vs Silver which is the solid black line.
And the performance of Silver which will be represented by SLV vs the Silver miners SIL year to date.
YTD SLV - 42.47%
YTD SIL  -  5.9%

Here is a chart of Gold in the solid black line vs the Gold Miners Index GDX with the dotted line.

And the performance of Gold which will be represented by GLD vs the Gold miners GDX year to date.
YTD GLD - 5.2%
YTD GDX - .28%

There is a general correlation between the physical metal's spot price / comex price and the miners. But there are times when the physical metal outperforms the miners and vise versa. The overall 'health' of the stock market plays a role in the miners shares as well which was clearly seen in 2008/2009.  With the summer months approching and QE2 ending in June, one may want to be very selective when taking a new position in a Gold or Silver equity.  You should also determine if your entry will be a trade or an investment.

Gold hit a all time high intraday today of $1500, Silver hit a 31 year high of $44.18, USD lower at 75.06.

Monday, April 18, 2011

Gold April 18th, 2011

World Gold Index for April 18th, 2011.  Based on a fiobonacci retracement / projection that I had drawn last week, there was potential resistance at the 1470 level.  That apparently did not provide very much resistance as Gold has easily gone through to a closing price today of $1491.

Gold is trading above all three moving averages of 15, 50 and 100.
Stochastics are flirting around the upper level near 70/80.
It is trading along the upper Bollinger band.
RSI is overbought at 81.

If Gold should continue on it's bullish trend of higher highs and higher lows, the next short term fibonacci level is around the $1532 level. 

Silver continues to climb and closed at $43.40 and continues to defy the odds with an RSI reading of over 70+ since April 4th. How long can it remain over 70 is anyone's guess. A pullback is probably due, but with the high demand combined with other 'bullish' factors may just provide a shallow pullback for investors and traders to get back in.

One last chart to view which is the US Dollar Index....  Not much to review here aside from the bounce today as the Dow/S&P/Nasdaq were all major losers.

Quite a few of the Gold and Silver stocks have been under performing the physical metal. I've heard on some radio shows that some hedge funds are shorting junior Gold and Silver companies but are long the physical metal.  They must be really good at trading because shorting a Gold or Silver miners while the metal is going up is not a great combination IMO.  But what do I know, I'm not a hedge fund manager or a professional trader.

Friday, April 15, 2011

$42+ Silver and heading higher

Daily chart of the World Silver index from late January 2011. 

At this time, the Silver market does not want to break down and pull back even after the massive rally since August 2010.
A fibonacci retracement is drawn from the low of 26.30 to the recent peak high of $36.75. The 161.8 fibonacci projection is around the $43.50 area which should provide resistence before a potential pullback is realized.
Technically Bullish
Silver has been trading above the 15 day moving average since March and is riding along the upper bollinger band.
RSI is overbought, it has been over 70 since April 4th. (How long can it stay there?)
Stochastics lost it's embedded status but the K line is heading back towards the 80 area.
It is producing higher highs and higher lows.

In early Friday morning trading (Before the NYSE open), Silver has hit $42.71. The right combination of factors to drive the Silver price higher.
  • Gold Silver ratio going back to its natural level of 15/1  (Currently at 34.7)
  • Industry demand with improving economy
  • Investor demand
  • Poor mans Gold, much easier for people to invest a few hundred dollars in Silver compared to $1475 Gold
  • Worldwide demand - China, India. Inflation worries growing.
  • Backwardation - Current price is higher than future prices
  • Shorts getting "Squeezed"
  • Silver has been outperforming Gold on a percentage basis since late August 2010 (attract more investors)

    One chart to leave you with is the Silver/US Dollar ratio. (An earlier post was the US Dollar/Silver ratio, this time it is reversed)  How much of the US Dollar Index does it take to purchase one ounce of Silver.

    The ratio is currently at .53 (.53 of the US Dollar Index to purchase one ounce of Silver)  I expect this ratio to hit 1:1 sometime in the future.  When and at what level is anyone's guess. I'll take a shot and state that it will be within 1 year and around the 65 level.

    Tuesday, April 12, 2011

    Silver potential pullback levels + Video

    Here is video on Silver which covers the shortage, consumption, industrial demand and ratio to Gold.

    The current PM markets are pulling back with the overall markets with marginal 1st quarter earnings and Japan's nuclear issues.
    I know that most people do not like buying a a stock or other types of investments when it is in a decline, but if you look at all of the pullbacks in Silver since October 2008, they have all been buying opportunities.

    Since Silver has been in such demand, the recent pullbacks have been very shallow with the exception of the January 2011 decline. Use a fibonacci tool to determine the pullback levels based on the current rally and you can accumulate positions at each level if you are looking to purchase more to add to your position.

    Similar to the fibonacci retracement tool drawn on this chart.  While it's accuracy with the projection on pullback levels are not perfect, it is often very close.

    Silver Shortage Video

    Sunday, April 10, 2011

    Silver near term high $43.50, pullback to ?

    World Silver Index, closing price of $40.61 on April 8th.

    Since the start of the breakout in late August 2010, the pullbacks in Silver have not taken out the last major break low.  Silver is currently trading along the upper Bollinger band and may reach $43.50 (the Fibonacci 161.8 level) before the next pull back.  The Fibonacci on the chart is based on the last breakout low from late January of 26.30 to the high in early March of 36.75.

    If Silver should reach $43.50, it may pull back to the low $38 level which would be a  50% retracement between the current low and the potential high of $43.50.  This may be the area to accumulate more Silver if your looking to add to your current position.

    With the US Dollar Index in a decline, Silver may hold it's ground through the spring and summer months before the next breakout towards the upper $40's / $50.

    Thursday, April 7, 2011

    April 7th Gold Silver

    Daily chart of the World Gold Index from mid February, 2011.

    Gold has broken out from the previous highs around the $1440 area and is slowly gathering momentum.
    Gold is trading above the short, mid and longer term moving averages.
    The MACD Histogram has crossed over the mid line and is on a ascent.
    The RSI in on an uptrend.
    With the start of inflation seen at the gas pump and at the supermarket, more people should recognize both Gold and Silver as the best way to retain wealth. Add in the unstable financial countries in Europe, the middle east issues and China accumulating Gold and the price should have no problem going to $1500 in the near future.

    Daily chart of the World Silver Index from late February, 2011.

    What can you say? The price has been on the ascent and hugging the upper bollinger band, Silver is trading above all three moving averages, the Stochastics are embedded to the upside. $40 is a few cents away...

    The RSI is overbought at 90.  How long will it stay in this area is anyone's guess, but it will drop down sooner or later. There should be some major resistance at the even number of $40, but with the strong demand for the undervalued metal, a rise to the $41 or $42 area before a pullback is a possibility. 

    All of the pullbacks with Silver have been shallow with the exception of January, 2011. (This was after a 80% gain in 2010)  The last break low was $33.64 and when Silver does pull back, it should not take out this low. 

    Tuesday, April 5, 2011

    Mike Maloney with a tip on when to sell precious metals

    First, Silver hit another 31 year high today at $39.33 stochastics are embedded to the upside, Gold broke out of it's trading range and hit a high today of $1458. Technically, they both seem to be heading higher in the short term.

    Monday, April 4, 2011

    Silver at 30 year high

    Daily chart of the World Silver Index for April 4th, 2011 since November 2010. Silver hit a high today of 38.62. I know that everyone that has been investing in Silver is satisfied with the performance so far this year. Silver is up about ~24.5% since the start of the year, compare that to the Gold return of about ~1%.

    Technically, it is in a solid bullish formation with the price over the 15, 50 and 100 day moving averages.
    Stochastics have embedded over 80. (Looks like the uptrend may continue)
    The RSI is overbought at 89.  Note: The past rally has had portions of the uptrend in the overbought area for over a week span, so it may continue in the overbought area in the coming week.
    Upside resistance would be the top of the Bollinger band which is 38.73, another .24 cents.

    The Gold Silver ratio is dropping at a fast clip, now at 37.18. Just last August, it was at 68.24.
    The RSI is oversold, how long can it run under 30?  (The longer the better for the Silver bulls)

    Is this another short squeeze rally? Coupled with strong physical demand by Asian/Chinese buyers?
    Are the buyers for Industry locking in their price and accumulating before Silver reaches $40?
    Is $1433 an ounce for Gold too much for the small bullion investor and $37 Silver more attractive? (More ounces for the buck)

    Maybe it's all of the above...  I'll continue to accumulate on pullbacks and dollar cost average on a monthly basis.

    Friday, April 1, 2011

    April 1st Gold

    World Gold Index from November 2010
    Seems like a glass ceiling near the $1440 level with Gold. If you look at a weekly chart over the last 9 years, you will notice a few occasions where it traded in a range for 6 months to up to a year. If there is no catalyst, Gold may be in a trading range through the summer until August/September where the seasonals start to kick in.
    The RSI is in a downwards trend which suggests that a pullback may be in the near future...? If the US Dollar Index continues to remain weak, it may prop Gold up over the $1440 resistance level and onto $1500. 

    Gold is averaging around 17.4% over the last 10 years and it started 2011 at $1388.  Add 17% and we have a potential ending price around the $1623 level, a $235 gain.