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GOLD
IS STEPPING UP TO THE PLATE Gold Gold had a very good week, advancing $37.70 to $824.70 for a gain of 4.79%. The weekly chart below shows RSI dropping back under the overbought zone, which has acted as a release of a bit of pressure.
The 65 ema still provides formidable support, as does the vertical line at $730.40. Last week’s low of $773.40 broke its bottom trend line; however, it bounced up and closed above its first fib retracement level.
In last week’s market wrap I mentioned and drew the square box seen in the chart below that represents the 50-60% retracement levels. So far gold has kept above its first fib level of $773.11. It will be very bullish if gold holds this level. A drop below the 50% area would herald in an intermediate term correction, while holding steady above the 38.2 fib level indicates a correction of a short term time frame.
Next up is a chart showing the relationship between gold and the U.S. dollar. They are almost a mirror image of one another. If the dollar goes up, gold goes down. If gold goes up, the dollar goes down.
Silver Silver was up .22 cents for the week, closing at $14.73 for a gain of 1.55%. Below is the daily chart of the silver ETF. Price had fallen just below the middle Bollinger Band and has now closed just above. Will it continue higher to the upper ban, or back off to the lower band? RSI bounced off the 50 level and is headed back up, and the histograms are receding. MACD remains with a negative cross. Volume has steadily been declining.
Hui Index The Hui had a big week gaining 17.84 points to close at 429.88 (+4.33%). The weekly chart below shows RSI headed back up. Resistance turned support has held so far, but has not been severely tested. Note the stochastic indicator has put in a negative cross over, which suggests further downside action may be coming.
Next up is the daily Hui chart. Price still remains below its trend line, but is closing in on it fast. If it regains its trend line then the correction is of short term duration; if not then an intermediate term correction is likely – one that will test the box.
Below is the Hui/Gold ratio, which shows that gold has been out performing the gold stocks. The higher the number the better the stocks are acting. The lower the number the better physical gold is acting.
Next is the monthly chart of the Xau Index going back to before the start of the gold bull market. The price channel rises from the bottom left hand corner of the chart to the upper right hand corner – a bullish signature of no doubt. The upper band is above 200, while the lower band is down around 120. The yellow highlighted area represents significant support.
Below is the daily chart of the Xau/Gold ratio. It shows that physical gold has been out performing the stocks. In late October stocks broke above the upper fork, but have since fallen back down.
Summary As those familiar with this report know, I have stressed watching four “indicators” to flash warning signals that all’s not well in the markets. These four indicators are:
Last week the Yen rallied setting off the first warning. Last week the Yen/Euro cross favored the yen over the euro – flashing another warning. Last week saw the TED spread widen to its largest degree yet – a third warning signal. Only permanent open market operations by the Fed were not put into motion last week. Note that this is the most critical of all four indicators. Things are rough out there, so be careful. I strongly suggest you have the safety nets mentioned in these reports in place. Hopefully they will never need to be used. The Yen was up and so the stock markets were down – thank you to the carry trades for that action. This is why the yen is important to watch, as it has fueled the present asset bubbles via the yen carry trades it is employed in. Money is running from the stock market into the bond market – thus driving bond prices up. The path of least resistance appears to be up for prices and down for yields. If it continues, it will be positive for gold and bad for the dollar. Physical gold is by far the safest asset to own (perhaps the only true asset), but the gold stocks do provide a greater return if they do not get caught in an overall stock market debacle. I am of the opinion that a bear market has begun in equities – Caveat Emptor. Congressman Ron Paul has been attracting more and more attention, as well he should, as he is the only statesman running for office – the rest are pure politicians I wouldn’t buy a used car from. Check out Dr. Paul’s message – the message of the Constitution – the message of Honest Money. Moving on we note the French strikes are simmering down; however, the power of the people in the streets was very evident and powerful. It was a reminder for all politicians that We The People have the right to seek redress from any and all opposition, including the government. The following news article shows the mood of the moment, only time will tell if it has any lasting affect. Agnès Poirier, Thursday November 22, 2007, The Guardian: “The French are not amused. Trade unions and the government know they'd better speed up negotiations and find an agreement on the reform of special pension schemes or France will soon reach boiling point. On day nine of transport strikes, the streets are simmering with discontent. Yesterday's announcement that Jacques Chirac is being questioned about l'affaire of the Paris town hall's fictitious jobs has done little to soothe the highly volatile national temper.” Coming this New Year – A New Book – Honest Money
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INFORMATION About the author: Douglas V. Gnazzo writes for numerous websites and his work appears both here and abroad. Just recently he was honored by being chosen as a Foundation Scholar for the Foundation for the Advancement of Monetary Education (FAME). Disclaimer: The contents of this article represent the opinions of Douglas V. Gnazzo. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Douglas V. Gnazzo is not a registered investment advisor. Information and analysis above are derived from sources and using methods believed to be reliable, but Douglas. V. Gnazzo cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. This article may contain information that is confidential and/or protected by law. The purpose of this article is intended to be used as an educational discussion of the issues involved. Douglas V. Gnazzo is not a lawyer or a legal scholar. Information and analysis derived from the quoted sources are believed to be reliable and are offered in good faith. Only a highly trained and certified and registered legal professional should be regarded as an authority on the issues involved; and all those seeking such an authoritative opinion should do their own due diligence and seek out the advice of a legal professional. Lastly Douglas V. Gnazzo believes that The United States of America is the greatest country on Earth, but that it can yet become greater. This article is written to help facilitate that greater becoming. God Bless America. The opinions of FSU contributors do not necessarily reflect those of Financial Sense. |
MACD
is still headed up strongly; however, the histograms are slowly
receding.
