Summer trading range - 2011

3 year daily chart of Gold, the '09' and '10' May to August months are outlined in PINK.  Historical Seasonals for Gold over the past 20-30 years suggest a sideways trading range for both Gold and Silver.  Based on May/June 2011, it looks to be that way again.

Fundamentally, one would think that both Gold and Silver should buck the trend especially with European debt.  Add in the TARP program and QE2 and both Gold and Silver should be much higher than they are currently trading at.  (The 'paper' spot price)

Based on the past 10 years, the summer Gold slump has provided a good buying opportunity for those long term investors.  Buying the lows in the summer months and holding has paid off handsomely over the last decade and this summer should be no different.

June 25th Gold

Daily chart of the World Gold Index from late January 2011. 

Going through the summer months in a sideways to lower trading range seems like the scenerio for 2011. Seasonals to control the precious metals markets............again. 
Gold did drop below the 50 day moving average. 

Next level of support is the 61.8 fibonacci level ($1475) that is based on the low in late January to the high produced in early May. 
100 day moving average at $1465
50% fibonacci retracement at $1442
200 day moving average and the 38.2 fibonacci retracement at $1410

With Greece, Spain and the other euro countries with hugh debt problems, the only way out is to continue to debase their fiat currency.  The commodity bull market is far from over, it's a waiting game...  The Comex will attempt to raise margin requirements when the PM (and other commodities) go parabolic, but they will not be able to overcome worldwide demand of the phyical market.

Continue to dollar cost average into both Gold and Silver.  Swing trade the miners from the August lows going into the seasonal bull run in Sept to November/December...

Weekly Silver chart, still in uptrend

Even with the huge pullback in Silver in May, the trend is still up.  You can see that after the peaks in 04, 06 and 08, Silver recovered, consolidated and produced a new high. 

This recovery and consolidation may be a bit different this time around.  It took years before the Silver price produced a new high after the top was achieved. With QE2 ending and various European countries approaching fiscal default (Greece / Spain), both Gold and Silver may see new highs before the end of this year.

The Federal Reserve has already mentioned that the economic recover has been satisfactory so far (with the exception of employment) and there is no plans for another stimulus package. Watch the financial markets going into July and we will see for sure if QE2 has no effect on the financial markets and on the economy.  If the financial markets continue it's downwards trend (Since the start of May), this administration may need to talk behind closed doors with Mr. Bernanke.  There is a presidential election in 2012 and Obama may not look so good when everyone's 401k's are cut in half again.

With QE3 (or whatever they will call it), the debasement of fiat currency continues...  There will be some forces that will attempt to keep the PM's down, but worldwide demand will take over and higher prices will be inevitable.

Mike Maloney Gold / Silver movie

It's a long movie that is uploaded to Youtube, it's over an hour long...

S&P500 minor pullback or ???

Look out below or just a vanilla pullback?

RSI is trending down
Lighter volume
15dma crossed over the 50dma
Lower major trendline breached to the downside
MACD dropping
200 dma is at 1253, close to the March 2011 lows (Japan nuclear crises)
QE2 ends in a few weeks....June 30th

If the S&P500 drops below the 3/16/2011 low of 1249.05, there may be some serious selling and additional downside momentum. 

I know that many people do not look into their 401k accounts as they are too busy with their families, work, etc...  These are the people that are on the 'Hold and Hope' investing program.  Those that are interested in preserving their capital in their 401k accounts may want to re-evaluate the funds that they are invested in, especially if this down draft catches on fire. 

With 2012 an election year, this administration does not want to see another financial collaspe.  The fed may do a stealth QE just to keep the markets afloat.......but for how long?  November 2012 is a long way away...

Gold June 9th, 2011

Three month daily chart of Gold

The trend for Gold is up and is above the 15, 50 and 100 day moving averages - Bullish 

MACD Histogram has started trending down towards the mid-line - Neutral/Bearish

Stochastics K line crossed over 80 at 79.3 and heading down - Bearish

The rally in Gold over the past 2 weeks seems to be loosing a little steam. Either the seasonal trends will take over or Gold will break it's all time high of 1577 due to European debt crises/Greece default.  A trading range between 1450 and 1550 is a possibility through the summer months.  

We will continue to dollar cost average / accumulate on a monthly basis. Most of our savings/investments are in precious metals and we will continue to accumulate as long as central banks and the Fed continue to produce more fiat and debase their currencies.

Gold - Gold Miners divergence

Gold up, Gold miners down

Gold is depicted with the dotted line and the Gold miners (GDX in this case) is the solid black line. The Gold miners led Gold from late August 2010 to the end of the year.  Since late April 2011, the Gold miners have taken a back seat to the Gold rally.  These two take turns leading and with the S&P500 in a downtrend, it seems like the Gold miners are following the Index rather than the Gold price.

Silver miners are starting to lag the spot price of Silver which is depicted in the dotted line and the Silver miners ETF (SIL) in the solid black line.

If anyone is long Gold stocks, they may be in for some volatile price swings going into the summer months. With QE2 ending in June, many people are speculating that the markets will drop just like in May of 2010 when the TARP program ended.

The Gold and Silver equities will lead again, but it may be towards the end of the year after the financial markets stabilize after QE2 ends and maybe when QE3 starts...? (Or whatever the Fed is going to call it)

If Gold is selling for $1550 an ounce and a miner is getting the Gold out of the ground for ~650, there is going to be some very good quarterly earnings. Where else can you buy Gold for $650 an ounce?  Of course, the risk level is also much higher with the miners, especially when they trade just like any other stock.  If a sell off occurs like 2008/2009, everyone with a margin call will be forced to sell their shares sending them down even if Gold is up.  Long term investors in quality Gold miners should be fine with a 2-3 year holding period.  2013-2015 should see some major gains in the Gold/Silver/miners market.

James Turk presentation

Here is a video presentation from James Turk of Goldmoney.com explaining why both Gold and Silver are appreciating in price.

Gold Silver Ratio

1 year Daily chart of the Gold Silver ratio.  Silver had the momentum over Gold since August 2010 with the ratio dropping from the high 60's to the low 30's within a 7 month period. 

The 15 DMA crossed over the 50 DMA just after the Silver sell off.  The RSI (Top indicator) was extreamly oversold and eventually corrected itself.  (The ratio or any other stock/commodity could not sustain an RSI at the oversold 10 area for long)

 The ratio is now in a trading range and may be that way through the summer.  Silver led Gold and now the roles are reversed, Gold will lead Silver.

Here is the same chart with Bollinger bands added.  The ratio abided by the 'rules' of the Bollinger band on the way down and is now oscillating around the middle section of the band.

For Silver bulls, it's only a matter of time before the ratio is 15:1 again as mentioned by the Coinage act of 1792.  Coinage_Act_of_1792