Yesterday was 'wicked pissah!" as we say in Boston. The day before, a colleague sent an email talking about a gold breakout. Where he got that from I don't know, but it is indicative of how quickly sentiment can change in this sector. Everything is 'steady as she goes' in my book and buying the deeply over sold HUI-Gold ratio appears to have been a good strategy. In fact, if the HGR does what it did during the August bottoming process we may get another chance to add positions as it retraces maybe 50% of yesterday's hysterical gain.There are US Dollar bulls coming out of the wood work now and our dear old uncle with the major debt load in his shorts may indeed rise more in the short term, but here are some factors that could fuel gold's rise to 900+ in the near (next 2 months) term: 1) The USD is even more over bought than it was on the chart that was shown a few days ago, 2) Gold's RSI shows significant room to rise, 3) Weekly & daily symmetrical triangles project gold to 900+, 4) Sentiment appears to be panicking back into the inflation trade and the 'January effect' story in the broad markets, 5) We got what we needed; an utter wash out of momo's who had no idea why they were doing what they were doing and 6) In a world where utterly debased funny munny propels paper assets ever higher in a macro Ponzi scheme of epic proportions, well, you just never know when the gold market is going to say "enough of this #@%!, I am outta here!" and propel higher, not to return until societies change the root mechanics of how they create, deploy and bastardize what we call 'money'.
Nothing is fool proof, but at least a set up appears to be in place for the next several weeks to months. Good luck, enjoy your holidays and keep your head screwed on straight - HUI has not yet negated the 'potential' head and shoulders top although the XAU appears to have done just that as of this writing.
Edit (12:30) Sandro, thank you again for your generous donation and for those you've made in the past. To the others as well who have thrown a coin in the cup in the past... thank you! I thought long and hard about commercializing a newsletter service, but I just cannot justify it because on top of running a business, website, 2 blogs and trying to be a good dad I now have got to learn some fairly confusingly arranged original songs on guitar lest I be excused from my duties as 2nd guitar player in what seems to be becoming a band.
goldbug sentiment finally came down with the dollar rise early last week, and finally gold did not follow the dollar(when all were posting that it does!) as gold finishes up over +2% on the week and the $USD finishes up
ReplyDelete+0.37% on the week...gold looks more precisely like the similar crude oil triangle now(inflation!)...i'd expect tax loss selling in all miners that are so far off their highs late next week and monday 12/31...love your charts and merry Christmas!
Seems to me since you've only got a few really important things going, that you should start a new book. You write with a most unique, humorous, to the informative point, include everybody, style that I find irresistible - it would surely be a bestseller and provide you with a good way to fund all of your interests and what is, I'm sure, a great band! :-) Can't wait for the first song post.
ReplyDeleteDec. 24, 2007
ReplyDeleteHello Gary,
My Gold baromete, while remaining in bullish territory, has been loosing altitude for a couple of month, but is now turning up again supporting your bullish stance.
The main reason for this is the unprecedented move by the Fed of cutting rates in the face of rising headline inflation. As you can see in the attached chart, this action is unprecedented and has the consequence of sharply reducing the Real Fed rate, a prime condition for Gold prices to rise.
A second important,and related reason is the striking event we witnessed this year, namely the morphing of Oil into a major currency with the price marked inversely to the exchange rate of the USD. This means that any weakness of the USD translates immediately into higher Oil prices, higher gasoline prices at the pump, and higher headline inflation. No need to wait for the famous “second round effects”.
As the recent USD rally topped out, Oil prices rebounded sharply this past week practically guaranteeing a sustained headline inflation in the months immediately ahead. This trend threatens to reduce the Real Fed rate to zero or even to negative readings. Since the 70s, all major Gold bull moves have been fueled by extremely low or negative Real Fed rates.
Under these conditions, the Gold barometer will gradually gain altitude in the next three months with Gold prices of $1,000+ projected during this period.
Beast regards,
Claude
Hello Gary,
ReplyDeleteA note of caution concerning the Gold HUI ratio now around 2.2 and considered bullish or "oversold".
It would be prudent always to keep in mind that the devastating 1996-2000 PM sector bear market started precisely with the ratio at 2.2! The ratio kept climbing year after year till the bottom of the Gold bear market in 2000 when the ratio reached a wapping 7.5!.
The circumstantial context of several other factor are much more important than the levels of the ratio. For instance during the 1996-2000 bear market the REAL FED rate kept climbing reaching a poisonous level for Gold of over 4%compared with a normal 2.5%. Now, REAL FED rates are declining to near zero and threaten to become negative. Very bullish for Gold!.
I wish I could show here a chart of the ratio from 1996 to the present which is quite revealing and informative. If you wish I will be glad to send it to you separately. It should be kept in view by anyone using the ratio for timing investments in the PM sector.
Claude
Hey Bud,
ReplyDeleteI think you are overstating bearish sentiment in the gold sector. All I see here and elsewhere are bullish articles and commentary that are obsessing on the hoped for bullish resolution of this triangle formation. And speaking of sentiment, it was only a precious short few weeks ago that "THE ECONOMIST" came out with its bearish cover about the dollar. There is something to be said for not shooting your wad too early in the foreplay, as it were.
That triangle you guys are going so ballistic over has exceeded the 2/3 rule in the distance it is traveling toward its apex. In the past, this has been a danger signal, by the accounts of many with technical expertise. Just my two cents, but I would sure feel better about this if everybody I was reading was not so cock-sure that the August lows were ancient history, never to be revisited.
Good Christmas to all. Hope your optimism pays off, but you think this administration is going to be satisfied in going down in history as the one who killed the dollar, comparable to Jimmy Carter? The inflation scam is fooling less and less folks every day. The powers that be are concerned. And Ron Paul raising $12 million in one day speaks very loudly at the margin.
You fellows scare the hell out of me more than a reversal in the HGR. Tell me how do you "panic" people into gold, and not recognize it as continuing BULLISH sentiment? -- By way of disclosure, let me just say I'm holding a sh#t load of GSS that I "hope" goes to $15, but I think there is something to be said for leaning a little more heavily toward the realistic in terms of some of the assertions flying around these days. Take it easy.