Status: thumbs up!

01/05/2010 by Philinje.

Let me repeat the disclaimer I have made in the past. This blog is not trading advice. Your investment decisions are entirely up to you and everyone’s situation is unique. I am not a financial planner and personally, I don’t recommend the advice of most financial advisers, but again, that’s up to you. And let me make this crystal clear: there is no certainty in the markets, no matter what anyone says.

As of Friday, the signs of a near-term peak in gold, silver and the gold mining stocks are good. Meaning, further upside from here within a month or two is still possible. Gold keeps marching higher while silver caught up in a hurry as the sovereign debt downgrades faded quickly from the marlet’s memory. General equities, however, don’t look so good. If I were to give a warning to my friends, it would be to be careful with most stocks.

Also on Friday, the gold mining stocks achieved a weekly breakout and nearly closed above the recent January high. They are within spitting distance of the all-time high last December. So is silver. Gold had exceeded its January high already and looks like it might hit its all-time high fairly soon. One source talks about a reverse Head and Shoulders in the gold mining stocks that projects 600 in the HUI, and if the HUI exceeds 525 (its all-time high), over 800! The HUI closed at just under 464 on Friday.

GDXJ, the new ETF for junior miners, is a handy way to play strength in the mining stoks with even greater movement both up and down. The original GDX is useful for the big miners. Considering that there will likely be a wave of acquisitions by major miners of junior miners, GDXJ is a great way to get diverse exposure to a range of healthy juniors.

Another source sees Monday or Tuesday as the likely time for gold to make a decisive breakout. We shall see. So far, gold has been extremely resilient above $1100 and has been consolidating after tumbling off its all-time high last December. And we have seen it separate from the traditional inverse relationship with the dollar, as it re-gains its safe haven status. So there are a lot of reasons traders have confidence in gold right now. In Euro and pounds, gold has already hit new highs. It would be nice if Euro gold would ease back down a bit to give an ok entry, but sometimes gold just doesn’t allow that to happen.

Because of what we saw earlier this week, I have more confidence in gold than silver at this point in time. The reason is, silver will suffer with risk aversion, along with other commodities. And there is no telling if there will be more bad news out of Europe, or China for that matter.

One thing seems especially likely: if gold sails through $1200, there will likely be a lot of money piling in and causing some big moves up. So, I don’t see the former high of $1227 as a particular target. This would be part of a scenario where gold bumps into $1190 and bounces against $1200 a couple or three times before breaking through. On the other hand, if gold barely makes it to $1200 before sinking $50  to $75, then the picture is considerably worse. As things stand now, the projected peak of $1350-ish, based on a large reverse Head and Shoulders pattern, is alive and well.

Lately, gold has been surging through resistance levels without a lot of fuss, so a lot of strength is already evident. With May starting on Monday, and recent futures and options settled, there could be a big surge as the source I mentioned above has predicted. We’ll see soon enough.

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