25/11/2010 by Philinje.

Mostly it seems that cycles are suggesting gold may bottom this week and then head higher into next year.

However, there are technical signs that warn of a possible drop in gold, and some folks see little relevance in the fact that gold moved up due to Euro weakness this week.

I don’t know. My view is that gold recently achieved a new all-time high due to panic in Euroland. And most Americans wouldn’t be aware of that.

Anyway, here is an article urging caution:

http://goldstocktrades.com/blog/2010/11/24/important-relationship-between-u-s-dollar-and-gold-signals-trend-change/

Posted in Gold | Print | No Comments »

23/11/2010 by Philinje.

Here is how the markets look in this moment of risk aversion:

Gold is spiking because of Euro weakness, which means dollar strength, which is being driven up by safe haven buying, and clearly that applies to gold as well. So gold and the dollar are both going up. It may be that the Euro is coming back to exert more influence on gold than the dollar.

Equities could be turning over for a decline, but that may not be too severe. It seems that expert opinion is shifting toward the view that equities will rally into early next year. But maybe they have a correction coming first.

Silver is looking very strong. We might get a few wobbly moves lower by midday Friday, when the US markets close for Thanksgiving weekend, but chances are that will be it before some big moves up.

Mining stocks on the other hand might be rolling over with equities. But if gold and silver are going up, any decline in mining stocks will be muted. Anyway, there may be a month or so of a correction for the mining stocks, and that could be the last great buying opportunity for them.

If the dollar gets past 80 on the dollar index, there could be more upside. But it no longer looks like that will damage gold and silver.

All of this is speculation, of course. The latest scare in Korea might blow over in a day or two, and then next week equities could get back onto their recent rally. Then, if the dollar drops, gold might do ok but silver will probably do better. So either way, silver is a good bet, and gold is not bad and less volatile.

Posted in Gold | Print | No Comments »

22/11/2010 by Philinje.

Looking at a daily chart of silver, it seems clear that a semi-parabolic top has corrected significantly, from $30 to $25. Now we are back to $27 or so.

Silver is looking strong. For a reasonable and logical analysis of where the price could be headed, see:

http://thetsitrader.blogspot.com/2010/11/how-high-could-silver-go-in-december.html

This makes a very conservative projection around $35. But that does not take into account the ultra-long consolidation that just occurred prior to this current rally.

Plus, there are the underlying factors regarding the short position by JP Morgan and the coming position limits by the CFTC. It just seems like silver can’t be held down the way it used to be.

This week is critical. If gold and silver can hold current levels, we may see some acceleration upward very soon. Gold hitting $1330 and silver $25 last week may have been the lowest prices we’ll see in a long time.

Posted in Gold | Print | No Comments »

12/11/2010 by Philinje.

It seems we may have finally seen the turn up in the dollar. Given the latest upside surprise in Non-Farm Payrolls, there will likely be lots of debate about QE2 at the G20 mneeting this weekend. That in itself could put enough fuel in the dollar’s turn to confirm it.

But the dollar seems pretty tired and a new uptrend might not get much past 80 on the dollar index. We’re at 78 already. 80 would be the equivalent of a dead cat bounce. However, if markets start crashing, then maybe the dollar would cruise higher.

At this point it’s hard to imagine a major decline. There is so much inflation baked into the cake that assets will head up as the dollar heads down. Pretty much everyone sees that now. Well, there may still be some deflationists out there, but they are a dying breed, thanks to Bernanke and QE2.

Near term, we could finally get a small dollar rally and a decent low in gold, but not that low. It might not even drop much past $1300. Sure, there could be a black swan event, like a major default by a bank or country, which causes panic into the dollar. But it’s becoming all too clear that the dollar is not a safe haven, and US Treasuries are registering that change in opinion loud and clear by dropping as QE2 was confirmed.

So as currencies compete to devalue, gold remains the only safe haven. That’s why it’s climbing upward so relentlessly. It’s also far from a mania-drive top. But it was way overdue for a breather. Let’s see how much of one we get.

Posted in Gold | Print | No Comments »

04/11/2010 by Philinje.

Now that the Fed has officially launched QE2, right on the heels of the midterm Republican wins, the market has reacted by selling the dollar and buying stocks, bonds and commodities. The reflation trade is back on.

Considering how widely opinion was converging on a correction in gold and silver, it seemed a near certainty that gold would drop to at least $1300. Right before the Fed announcement, there was a spike down to $1325, but that was as low as it got before recovering quickly and now heading back toward its recent all-time high around $1387 spot.

The dollar Index has broken 76 to the downside and therefore it looks like a double bottom around 76.5 may not occur. That could mean the dollar will quickly fall to 74, its low a year ago, and then if it keeps going, to its all-time low around 70. Probably it will break that level and head to the 50’s, eventually.

But there is reason to be cautious. The dollar is losing versus the Euro and pound but not other currencies and its recent decline already accounted for QE2 to an anticipated level of about $500 billion. The announcement was for $600 billion, so possibly most of the announcement is already baked into the price. The dollar index has moved slightly lower but it’s still in the territory of a long-term rising trend line.

We might see about a week of follow-through from the announcement, especially if there are no surprises in the NFP numbers this Friday. Probably most of the market is waiting for that final indicator to see if it really does make sense to short the dollar at this very oversold level, right on a rising trend line.

Playing the NFP will be especially tricky this time if there is a surprise. A really negative surprise could cause a risk-averse safe haven move into the dollar, even though in theory that would guarantee more low rates and reinforce that QE2 was justified.

But that’s the problem. Most of the announced QE2 is already in the dollar price. And what about a positive surprise? Well, then it could look like the Fed will raise rates sooner than anticipated and maybe even throttle back on QE2. Frankly, I think a positive surprise is more likely. The ADP figures this week were surprisingly positive and corporate earnings have been on the rise. If we get a big positive surprise, that could trigger a dollar rally.

In the meantime, here is a thought-provoking piece that contemplates one way China could defend itself against a falling dollar. Which makes sense. It’s another version of the new gold standard argument.

http://blogs.forbes.com/investor/2010/11/02/opium-wars-revisited-will-china-corner-the-gold-market/

Posted in Gold, Dollar Collapse | Print | No Comments »