|
November 2007 Weekly Updates
November 25, 2007:As expected, the gold price has stabilized this past week, short as it was, and has even bounced considerably, which I did not really expect. I just considered it a possibility. A very positive surprise. Both the HUI and the XAU ave confirmed this move, although the XAU did so to a lesser degree, which is possibly the result of it containing silver-related stocks.   Silver has lagged the latest up-moves in gold and gold shares quite a bit, and now does so again. In the following three-way comparison chart you can see clearly see the purely gold related HUI (green line) pull away from the pack, while silver and the XAU have moved in sync.  The Dow has broken below its short-term support level .as shown in the following chart, and it is not yet in oversold territory. It therefore may still have a while to fall before it has a corrective bounce. It it falls significantly below the support line and does not convincingly bounce back above it, watch out! The next target if it fails to bounce is "Dow 12,000" (fat gray line), and then 10,000-10,500 range. If that breaks, it's back to 2002 levels at 7,500.  This chart has "blood" (red lines) all over it. However, stock futures are up before the Monday open and Asia is up significantly, so Monday, at least will likely be an up-day for US stocks. The market reportedly expects continuing Fed rate cuts, well into next year. If this trend continues, we will probably see several half-point cuts among them, and that will get us closer to the “zero-bound” at which Bernie has indicated he will buy longer term treasuries.
The question remains whether that is enough to counter the deflationary forces in the market, as he expects. Oil has led this latest gold recovery. Now, there is OPEC talk of boosting production to help ease world prices - but prices for the rest of the world haven't moved up much at all, as is indicated by this chart comparison between dollar-oil and euro-oil:   Measured from the last peak in 2006, that is. One great argument for the middle eastern producers to shift from dollars to euros. That shift is an all but foregone conclusion, now. The discrepancy you see here may also be a way for the Washington contingent of the world elites to force the US into alternative energies, which of course could be a good thing - if it wasn't pursued by government policy. Artificially raising the pain threshold for Americans by letting the dollar slide so that oil becomes more expensive just isn't "nice", is it? November 18, 2007 Update:Is this the end of gold's correction? I think here is a slightly better than 50/50 chance that it is. The downdraft will continue to affect prices next week, but we should at least see a stabilization, if not a actual bounce - however slight. Gold had two big down-days, two little ones, and one up-day. Its RSI now rests exactly on the middle line at 50, although the momentum (MACD) still points downward.  The Dow has had a series of brutal down-days during the first half of November, right up until gold was hit last week, but the relief expected from the gold hit only barely materialized.  In the longer term picture, the Dow is in serious trouble. It broke below its two-year uptrend channel during that time, and is only a couple of few hundred points away from support near 12,800. If that level is breached, watch out!  Both oil an dthe HUI, however, had an oup-day on Friday, and the HUI has bounced off its support line at 400.  Silver has also turned up just a tad and is hanging right below its own mini-support line.  If it climbs back above it next week, and oil and the HUI continue to bounce, things will be looking up for gold, regardless of what the actual gold price does in the next few days. Since oil and the HUI are both decent short-term lead indicators for the direction of gold, and silver to a lesser extent, it seems that the worst is over, and the next upleg will start soon, if not already next week. All of this is of course somewhat thrown into question by the official intervention factor. In the very near term that factor can turn things on their head, and it is difficult to predict from day to day when the elites will intervene or when they won't. November 11, 2007 Update:As you know, gold powered through the $800 level last week, went above $830 within days, and stayed there while taking a well-deserved breather.  On the chart it is now well in overbought territory, and its momentum has started to decline as shown on the MACD. Whether or not it will work its overbought status off as it did in early October with a single $20 down day or not depends on the dollar. However, if there is one thing fairly clear about the dollar, then it's that it will decline further. Looking at the chart, I am shocked to find such a smooth downward curve on both of its 50 day and 200 day moving average (MA). In all the time I have looked at charts, I have never seen anythng like it.  But take a look at the XAU: STill nowhere near overbought territory, even after jumping and staying above the 180 level. The same is true for the HUI, which jumped above the 400 high made in 2006 and is now already at 450! The WTIC is likewise in comfortable territory despite its tremendous recent advances.  What is most striking about today's financial markets is the multi-year triple bottom and subsequent breakout from its multi-year downtrend of the 10 year US Treasury note.  That means somebody's money is pouring out of something else and into US treasuries like a torrent. Where is it coming from - and why? It's unlikely to come from China, which has recently announced it's official dollar-aversion. This bears further investigation. One thing is clear, however: the resulting lower yields and therefore long term interest rates are not helping the economy or the Dow very much. And that means the Fed's Titanic has lost its rudder. The iceberg is clear ahead, and Bernie is out of ammo. No wonder he looked so embarrassed when Ron Paul gave him a public grilling recently. Interest rate policy (i.e., the ability to manipulate interest rates at will) is the Fed's greatest power - but now, it isn't working anymore. That bodes ill for the financial markets, and for stocks. The stock markets have truly become addicts to the Fed's low interest rate 'crack'. The slightest indication that another rate cut might not immediately follow sends the markets tumbling these days. Tonight (Sunday night), gold started diving in Hong Kong - but that can change in a heartbeat during the day tomorrow. My expectation for this coming week is that it will be erratic, mostly to the downside. Gold should be consolidating for a while, now. The oil price, however, can make it go the other way. Talk to you next week. 11-04-07 Update:There is no real need to tell you that gold shot above the $800 mark on Friday. Even with that tremendous rise it only barely touched overbought territory.The rest of the financial world is going to hell in a hand basket. It will be a hot and painful ride to the bottom. Here is something to watch out for that current members have already received in an email alert, but new members need to know about: "There is another important issue, highlighted in a recent article that can be read here:http://www.monash.edu.au/news/newsline/story/1231 I touched on the subject in the last Monitor issue. Gold mines are yielding less and less, and production costs are rising. There will soon be a time when the mining stocks begin to decline even during strong rises for the metal itself. Naturally, that will bode well for physical gold. The old law of supply and demand, you know. I do not feel this change is imminent, but it will happen. For your safety, and for those with a low risk tolerance, I recommend selling about ten percent of your gold stock holdings each month and changing the proceeds over into physical holdings or online gold. If you want to continue to ride the current bull run for a while, I understand, but please be on the alert. Many will mistake the beginning of this new phase for the typical scenario where a gold shares decline presages a short term decline in the physical metal. As a result, gold will drop as well. That will be a tremendous buying opportunity - but be aware that the falling stocks will cause you to incur losses if you should decide to hold on to them until that point. The absolute safest thing to do is to get out of gold stocks/mutual funds now (or within the next month or so) and buy physical while it's still cheap. You will "lose" a portion of the not yet completed bull run in stocks - but you won't be shocked when the coming decline turns into a rout."
|
