Graceland Updates 4am-7am
Sep 4, 2012
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Some critical technical events have occurred in the gold markets over the past week. Please click here now.
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Friday's price action likely established the $1625-$1645 area as powerful support for the bulls (you). The decline halted at almost exactly $1642.40, and then rocketed towards $1700.
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Please click here now. Friday's price action took the gold price about 3% above the upper green HSR line (horizontal support & resistance).
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This is the first time in almost a year that gold has won a decisive victory against the bears on the "chart battlefield". Key resistance has become key support.
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In the shorter term, any decline could be halted by minor HSR at $1680, basis December futures. Please click here now.
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Many gold and silver investors are watching the overbought RSI indicator on the daily charts. Please click here now.
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Technical indicators aren't guarantees. They are tools used to display a general picture. When silver is flashing buy signals on the monthly chart, as it is now, the amount of "respect" you should pay to sell signals on the daily chart is minimal.
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Silver is more likely to experience numerous intra-day sell-offs than a major leg down in price. I would sell very little silver here ("sell like a bird").
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It's true that the daily chart is very overbought, but does that mean it will necessarily soon become oversold? I would argue that it is likely that the RSI indicator could go only as low as 50 on that daily chart, before rising back to the 70-90 overbought area.
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Please click here now. That's the monthly chart for silver, and the technical indicators are far from overbought. In fact, most are dramatically oversold.
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Gold stocks appear to be ready to dramatically outperform gold. Please click here now. You are looking at the HUI gold stocks index compared to gold, on a weekly chart.
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Note the blue trend lines. They form a bullish wedge, and an upside breakout seems to be imminent. A rise over .30 on this chart could bring in momentum-based trading funds, creating a very exciting time for gold stocks.
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What about the fundamentals for gold? Interest rates in Spain have soared, and CNBC reports that, "On a three-month rolling basis, portfolio and investment outflows from Spain totaled 52.3 percent of the country's gross domestic product (GDP), (that's) more than double the outflows from Indonesia, which reached 23 percent of GDP at the time of the Asian crisis, Jens Nordvig, global head of G10 FX strategy at Nomura wrote in a note to clients on Tuesday."
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Those numbers are an absolute disaster. The ECB is rumoured to be preparing to buy Spanish bonds, to force down interest rates, and add stability to the Spanish financial system.
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Those bonds will likely be bought, at least in part, with electronically printed euros, and that will put more upwards pressure on the price of your gold.
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On top of the ECB action, this Friday features the release of the key "jobs report", and on Thursday the jobless claims numbers are released. While the economy has grown modestly, it is nowhere near enough to offset the growing government debts.
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The rising price of gold seems to be related to a growing institutional view that QE3 is necessary to make the debt situation manageable.
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Food prices have not come down. Soybeans went to another all-time high last night. There is typically a 3-6 month time lag before crop price rises of size are reflected in prices at Asian supermarkets.
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The Chinese government is extremely worried about the effects of rising soybean prices. Their nervousness is likely reflected in the gold price.
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Most gold community investors hold positions in junior resource stocks. Investors should be "thinking big" in terms of upside targets.
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Please click here now. That's a 2 year daily chart of GDXJ. Note the three lows that I've circled.
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The first one is circled in blue because in the biggest picture, a price rise above $22.58 may be view as an activation point for a major bull move higher.
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I'd like to see investors focused on the higher profit booking zones at $27.16 and $29.65. While you need to be prepared to handle growing volatility, the odds of a new decline below the lows at $17.37 are diminishing quickly.
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A commitment to "unlimited QE" is a commitment to monthly purchases of bonds with electronically printed dollars. Several Fed presidents and governors are in favour of this approach. If the Fed officially embraces unlimited QE, then GDXJ and your individual gold stocks could go to new highs!
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St
