Market Wrap
Week Ending 7/6/07
GOLD & SILVER
Gold was up $3.90 for the week, closing at $654.80 (+0.60%). Its weekly intraday high was $661.30 on Monday, and its intraday low was $646.70 on Friday.
Gold was down about $4 an ounce intraday on Friday and came back and closed up just under $4 per ounce. It was pretty positive action.
First up is the daily gold chart. A few positives are that gold closed over both its 50 and 200 moving averages, and a positive MACD Cross over was put in place with the histograms turning up above zero.
Next up is a chart comparing the performance of the industrial metals to gold.
Notice the two separate performance charts for the industrial metals and gold at the bottom of the chart. They look almost identical.
Since May gold has been performing better than the industrial metals, as indicated in the top right corner of the chart.
Now let's take a look at the weekly gold chart and see if anything has changed from last week.
The 65 week ma held support as did the lower trend line. Notice the still prevalent MACD native cross over, however, with the full STO Cross looming, and the fast STO already crossed over - it all suggest that the weight of the evidence falls in the bulls camp this week.
The dominant chart feature still remains the negative MACD cross over. The positive divergence in the stochastic indicators that further positive price action is coming, which would turn the MACD up and positive. We shall see soon enough.
Below is gold/silver comparison chart that shows that gold has been out performing silver as of late. Will it last - yes it will, until it doesn't.
SILVER STOCKS
Silver closed up .28 cents to $12.76 on the week. The daily chart bellows shows that a positive MACD cross over may be pending, and STO has turned and is headed up.
Once again the dominant chart feature is the negative MACD cross, which may go positive this week if the STO pans out. It could easily go either way.
Following the daily silver chart is the weekly. The dominant feature is still the negative MACD cross; however, the stochastic indicator is compressing quite tightly and has my attention, as it suggests that a release of the pressure may be forthcoming.
HUI INDEX
The Hui had a very good week up 23.26 points to 352.61 (+7.06%). It was the highest weekly close in 11 weeks. The intraday high for the week was 354.38 on Friday, and the intraday low was 329.35 on Monday.
The gold & silver stocks strongly out performed the precious metals, thus creating a positive divergence. Now they need to build upon it.
Up first is the daily chart of the Hui. There are many positive features on the chart this week.
The index is above both its 50 & 200 moving averages. Price has broken strongly above and though the falling upper trend line. RSI is headed up very strongly.
A positive MACD cross occurred and has held and histograms have gone positive.
The stochastic indicator has turned up strongly and is approaching the short term overbought 80 (caution warranted).
At the bottom of the chart you can see the hui/gold ratio, which shows a break above its upper falling trend line. All in all it's a pretty good looking chart, and a hell of a lot better then we've seen for awhile now.
Short term RSI is approaching the 70 overbought levels, so caution is warranted. She could still run a ways if she has a mind too.
The index has been up 6 out of the last 8 days for a total gain of 31.43 points or 9.8%.
Don't be surprised or spooked by a short term correction. It is healthy for the market to pause and consolidate its gains, much like us after a hearty meal - the food needs to be digested to extract the constructive energy.
Not a bad looking chart. Up next is the weekly gold chart. There are several positive indicators on this chart as well.
RSI shows a positive divergence, as it made a lower low, yet the price did not during the same time frame. The lower trend line and 65 ema have held support (at least so far).
A positive MACD cross appears to be waiting in the wings and STO already crossed up and over, sporting a positive divergence as well.
Any of the positive indicators could change on a dime. Caveat Emptor.
Next are two charts of the Hui/Gold ratio, the first is the week and the second is the daily.
Notice in the above two charts that the Hui/Gold ratio has broken out on the weekly chart but not on the daily chart. As a matter of fact - the daily chart has a fair amount of distance to move to break above the upper falling trend line.
When that upper trend line is broken and becomes support as opposed to resistance - then the second phase of the gold bull will be confirmed and anointed.
GDX INDEX
The GDX Index had a good week as well. It broke above its 50 ma and its upper falling trend line.
And the best part is it did it on expanding volume - always a plus.
The chart below is also a daily of the GDX, but for a shorter time frame. It zooms in on the last four months on the chart above.
Once again there is a break above both the 50 ma and the upper falling trend line, as well as a positive MACD cross over and the histograms are positive and expanding.
All in all it's a pretty good looking chart, and lately we've seen worse.
XAU INDEX
The Xau closed up 9.05 points to 145 (+6.66%) and as did the Hui and the GDX - out performing the precious metals with a positive divergence confirmation. Now let's see if this one holds, as we have seen others fail.
Up first is the daily chart, which shows the upper falling trend line being broken through quite explosively.
A positive MACD cross over was put in and the histograms have turned up into positive territory as well.
The Xau/Gold ratio shows a break above its upper falling trend line - a most constructive development if it maintains.
Next is the monthly chart of the Xau. The 20 ema has held support again, and a positive cross over of the STO indicator was put in place.
The Xau/Gold ratio has also broken out. Once again - let's see if they hold and build thereon.
POINT & FIGURE CHARTS
Below are some point and figure charts for the gold stock indexes.
Note the double top breakout on July 6th on the daily Hui chart with a price projection of 420. The Xau daily shows an upside target of 170.
The weekly Hui shows the same double top breakout occurring on July 2nd with a bullish price projection of 484 (wouldn't that be sweet).
INDIVIDUAL GOLD STOCKS
Last up are the charts of four precious metal stocks: Gammon Lake, Golden Star, Taseko, and Coeur D Alene.
I either own the stocks and or are considering accumulating positions in them if the right set ups occur. Caveat Emptor. Do your homework.
The charts are self-explanatory so no further comment will be offered.
SUMMARY
Stock markets are still floating on a sea of paper fiat liquidity. Except for the precious metals, energy, and commodity stocks - I care not to indulge. I remain skeptical and cautious of asset bubbles and crack up booms. After every crack up boom comes a crack down bust, as surely as night divides the day.
Bonds have been in a bull market for decades, and their time has come. I expect any and all surprises to be for higher interest rates, which means lower bond prices. Caveat Emptor.
It looks like the dollar rally is over. Interest rates are rising around the globe, as is inflation. If rates continue to rise in other countries it will put further pressure on the dollar.
The Fed can only defend bonds or the dollar, it can't defend both - it must make a choice between the two.
If the Fed tries to defend the dollar with higher rates - bonds take a hit. Lower rates that defend bonds will take what little support remains away from the dollar.
The Fed is damned if they do, and damned if they don't. They have painted themselves into a corner. This is one fine mess you've gotten us into Ollie.
Oil is going strong. Suncor is the preferred play - on a pullback to support. Gas has been getting killed. It usually puts in a summer low. In the cold of the coming winter you can bet prices will go up.
Commodities in general are going up. Look for higher food prices coming to a store near you (as if they haven't already arrived). BHP is one preferred play (on a pullback to support that holds).
Precious metals are the place to be, as paper fiat grows weaker by the day. Higher rates are the warning of what comes. Subprime is just the tip of the derivative iceberg that waits to melt down and release its toxic waste. Real estate has not yet seen reality, but it too is coming.
Physical gold and silver is safer than the pm stocks, although the stocks have much more potential for gain, however, with added potential comes additional risk. Caveat Emptor.
Newmont Mining closed out its hedge book and its new President had this to say:
Newmont's CEO
Mr. Richard O'Brien
"With the elimination of our gold hedge book, we have renewed our commitment to maximizing gold price leverage for our shareholders. In addition, we are focused on delivering improvements in our operating performance and cost structure going forward. We intend to realize the value from a significant portion of our non-core, Merchant Banking portfolio and use the proceeds to fund the development and growth of our core gold business."
Perhaps now is the time to have wire transfers on all accounts in place that allow same day transfers into physical gold and silver that will then be delivered in hand. It's insurance that costs nothing but a bit of time to set up, and it could be the saving grace of any accumulated wealth. Just a thought.
Invitation
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