06/06/2011 by Philinje.

Fear and risk aversion have swept through the markets again and silver looks weak while gold is stable, but not as strong as it should be with a declining dollar.

Maybe equities will bounce this week, but the end of QE2 is being absorbed along with the poor economic data out of the US. Friday’s NFP was disappointing, as everyone anticipated. Equities are oversold and oil came down hard. Silver reacted as an industrial commodity and is weak in the face of a falling dollar. So the prognosis is not bullish. In fact, we may get a crash developing before end of June when QE2 ends. The markets seem to be facing up to a failed recovery and the strong likelihood of a double dip - until another dose of QE is announced. The market is like a drug addict at this point.

On the other hand, there could be a bounce. But the momentum is down now. If equities exceed the March tsunami low, they are on their way to a distant bottom. They might bounce right here but be cautious. The dollar is fast approaching its March 08 low and may reverse there.

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18/04/2011 by Philinje.

Gold and silver spiked up then down, and silver went a bit lower than its starting point, but both seem to be settling down - or rather, up. Quite possibly the highs for the day are in. But it’s hard to imagine they won’t move higher again soon.

Here is an interesting article about what may one day be seen as the tipping point for gold:

http://www.zerohedge.com/article/golden-tipping-point-university-texas-takes-delivery-1-billion-physical-gold

The second-largest academic endowment in the US has just taken delivery of 1 billion dollars of gold bullion. That is amazing, and this author speculates that this will cause a chain reaction among institutional investors. That would cause the most interesting market behavior, because paper gold exceeds physical gold by a factor of 100!

Something like this could be what finally causes a run on gold and a default of the Comex. This is not necessarily good for holders of paper gold, so be warned.

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18/04/2011 by Philinje.

Isn’t this interesting. The Euro was in trouble on renewed worries about Greece, and then S&P downgraded US debt. So the Euro stopped sinking against the dollar and guess what? Gold spiked! That was a picture perfect postcard to send home to momma.

What I mean by that is the declining spiral of all currencies is really what is driving the precious metals higher. On a day-to-day basis, it’s not so obvious. But on a day like today, it couldn’t be more obvious. The dollar has been losing its luster as a safe haven. And as that happens, the Euro is the main alternative. But the Euro ain’t that great either.

Some folks might be of the opinion that the spike highs are gonna be it in terms of targets for this week. Heck, silver is not so far from a monthly target of $44.27. If gold gets over $1500, then yes, maybe it’s time to look at a partial exit. But on the other hand, this could be the beginning of a severe decline in equities and a general disgust with both dollars and Euros. So who knows how high gold and silver could go? If we get a convincing close in gold over $1500 sometime soon and stay there, I think $1600  and $50 come into play, for sure.

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15/04/2011 by Philinje.

This excellent article points out something interesting: rate increases by central banks around the world may require more QE in the US. He doesn’t say that - instead, he’s worried about speculation ending abruptly as interest rates rise. But that is a pressure that could keep the Fed stimulus-oriented.

http://moneymorning.com/2011/04/15/rate-hikes-by-foreign-central-banks-could-end-the-party-for-u-s-investors/

Food for thought.

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08/04/2011 by Philinje.

Targets for gold and silver are rising. The gold breakout looks real, but there is still some reason to be cautious. We may be near a turn on the dollar, which so far this year has not materialized. But the Dollar Index is finally down to 75 and now that the ECB has made their expected rate hike to 1.25%, we may see the Euro back off. Then again, we may not.

And even if the dollar does rally, will that be bad for gold? There hasn’t been such a strong correlation of late. One thing to note is how the dollar has not acted like a safe haven in recent weeks. Revolutions and natural and man-made disasters have not caused a flight into the dollar. In fact, even with sovereign debt problems making Europe look bad again, the Euro rallied!

Here is some reading for the weekend:

http://expectedreturnsblog.com/is-gold-rising-because-of-inflation/

http://www.gata.org/node/9789

http://pragcap.com/the-boj-answers-the-trillion-dollar-question-what-is-causing-the-commodity-rally

http://moneymorning.com/2011/04/08/second-quarter-forecast-three-predictions-three-ways-to-profit/

This last one is very thoughtful and makes the case that stocks will rally for a while longer. The end of QE2 will be harsh, but we’re not there yet. The risk-on trade is still in play. Let’s see how far gold and silver go this month.

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07/04/2011 by Philinje.

I have a theory for what’s going on with gold and silver: the short sellers are out of breath. Absent the wild stampedes induced by the big guys, these markets look downright placid.

It’s funny to say this, considering how gold just broke out to new highs. But believe me, compared to even one year ago, both metals are very calm these days. They keep moving up, slowly and relentlessly. It’s as if the buyers are trying to buy some more, waiting for their hands to get slapped, and it doesn’t happen. So they buy some more, still fearing that painful sting… then they buy some more… etc.

Very rarely, like when the NFP report last Friday gave the big guys a suitable excuse, there is a slap down. But the ball keeps bouncing back to the surface. Look at silver last Friday. By end of day it was right back to where it started. It was as if nothing had happened.

Having said all this, it still makes sense that the metals will take a rest at some point. Just exactly when is not clear. Seasonal patterns would normally say about now a correction would start and by mid-April there would be a short-term low. But this situation feels different.

Possible targets are $41.20 for silver and $1475 for gold. And when would this happen? My guess is by end of April. We might get some consolidation before or after end of this month. Like today, both metals are practically retracing their exact relatively flat movement of yesterday. That is simply amazing. I have watched these prices every day for the past 10 years and I can tell you I have never seen that before. It’s the most non-volatile consolidation imaginable.

The reason I am thinking about end of April is because of the Fed. In the recently released meeting minutes, it became clear that several Fed governors are intent on removing financial stimulus in the form of QE. This means that in June, QE2 will likely end. And this will be announced at end of the month.

You can read about this in detail here:

http://www.caseyresearch.com/cwc/casey-report-s-david-galland-major-policy-shift-ahead

If this change occurs, there will be a fairly violent reaction in the markets, and it’s likely all assets will correct pretty hard.

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06/04/2011 by Philinje.

One day can make a big difference. Before yesterday, gold was looking tired and ready to take a break. Yesterday, it broke through its all-time high on strong volume. It’s hard to say why exactly. Some possible causes were the Fed meeting minutes, the Moody’s downgrade of Portugal and the raising of bank reserve levels by China. Oddly, the Euro popped up again to recent highs.

Silver made it easily through $39 and looks like it might head all the way to $41.50. Or, both gold and silver could take a break here for a couple weeks.

Here is a site that maps out the near future in gold:

http://thetsitrader.blogspot.com/2011/04/fibonacci-gold.html

This projects $1639 in June. Fibonacci relationships are open to interpretation but the good thing about this analysis is that it covers a long time period with several stages, so the overall relationships are more reliable.

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05/04/2011 by Philinje.

Gold may have topped last week but silver is still going strong. It looks like it will hit $39 today.

There is a cycle top due for silver this week. So that means a short-term top may arrive any day now. But silver is so strong that it may keep going anyway. Regardless, $39 is likely to be strong resistance and we can expect some retracement from there.

Longer term, silver may be looking at $41.50, possibly after a lull this month. The biggest danger at present to silver is weakness in gold and the mining stocks. But since equities seem to be strong, that could outweigh the negative influence of gold.

We might also see a short-term top in equities this week. The QE2 orgy continues, but how much longer? If QE3 doesn’t arrive in timely fashion, I’d hate to see the temper tantrum Mr. Market would throw!

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08/03/2011 by Philinje.

Also from the same author, an excellent analysis of the NFP numbers:

http://news.coinupdate.com/a-double-dose-of-deceptive-unemployment-statistics-0711/

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21/02/2011 by Philinje.

Not to rain on the parade but this article is an amazing collection of all the bad things going on at present in the US:

http://theeconomiccollapseblog.com/archives/what-is-wrong-with-the-u-s-economy-here-are-10-economic-charts-that-will-blow-your-mind

The schizophrenic attitude regarding the markets reflects the dire fundamentals as described in this article, vs. the paper pumping QE orgy to push up stock prices. How will this all end? That’s for you to guess. So far it seems that hard money is a good start at self-protection.

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