Market Comments

Precious Metals

We are going to concentrate on the precious metals this week due to the critical juncture they are at. It is possible for a violent move to happen either way, and there are many mixed signals.

 

Silver 

As the chart below clearly shows, silver has been performing very well for us. Going back over a month ago we had mentioned that silver looked ready to outperform gold over the near term – and it cooperated very nicely. Silver closed at a new yearly high and a 22-year high at 10.74.

As the chart illustrates, since December of 2005 silver has gone from 8.50 to 10.74 for a very sweet gain of 26% in less than 3 months time. Below the 6-month chart, you will find a long-term chart of silver from 1982 to 2006.

Note the high of 11.10 back in 1987, and the chart high of 13.50 before that. Silver is fast approaching some very significant long-term price levels, which if broken indicate some very profitable returns may be forthcoming. We note: nothing moves up in a straight line – there are always secondary counter-trend corrections in primary moves.

 

Silver 6 Month

 

 

Silver 1982-2006

 

 

Pan American Silver - Weekly

 

  

As the above chart of one of our favorite silver stocks indicates – PAAS has been performing extremely well. We have been in and out of the stock a few times. We are presently out but patiently waiting for a lower entry point to re-establish positions sold in the last couple of weeks. 

We note that PAAS is extended well above both its 50 and 200 dma’s. In strong bull markets stocks can become extended and remain extended for long periods. Nevertheless, we must assess risk versus reward.

Presently there appears to be more risk than reward. For traders that are nimble and quick to react – further upside action may be playable. Once again, it depends on what is a comfortable risk to reward ratio for each individual investor. Only you can decide that.

 

Coeur D Alene Mines - Weekly

 

 

CDE is another one of our favorite silver stocks. We have been in and out of this a few times as well. We were fortunately to originally purchase it under $2 per share, and again back in May of 2005 at under $3 per share.

Once again we have already booked profits in the last few weeks and our not buyers at this level. As with PAAS – CDE is extended well above both its 50 and 200 dma. Further upside potential is possible short term, however, we believe a better entry price remains down the road.

We also note that since May of 2005 the price has doubled. We were content to get 80% of that move. Long term the stock will perform very well with much lower risk entry levels to come. It is impossible to lose money by booking profits.

 

Gold

StreetTRACKS trust shares chart is below. On Friday, the shares just managed to close above their 50 dma. They are, however, still below the upper trend line. A bullish flag appears to be forming. Volume was not that impressive. Mixed signals abound. Further below is the weekly chart for GLD.

 

GLD ETF TRUST SHARES 

 

GLD Weekly

 

  

The upper bullish flag is still visible on the weekly chart. Notice the distance between the closing price and its 50 dma. Obviously, the distance above the 200 dma is even greater – over 25%.

The chart shows an extended rise, however, the sideway flag can work off the froth and provide another “platform” for yet another leg up. We note that the histograms at the bottom of the chart remain below zero. Until they turn positive – upside action is limited.

 

Newmont Mining Daily

 

 

The chart below of the HUI Index shows that it has broken above both its 50 dma and its trend line. Histograms just broke above zero. Indicators signal that the correction MAY be over. See conclusion for further details.

 

 HUI Index Daily

 

 

The XAU chart below has broken above its downtrend line; however, it remains below its 50 dma by approximately 4%. MACD has turned up, as well as the histograms.

The first positive signals in weeks. Are we completely out of the woods yet? – It remains questionable and requires further confirmation. See conclusion for further details.

 

XAU Index – Daily

 

 

On the weekly charts of both the HUI and the XAU the MACD lines remains pointed downward and the histograms remain negative. Mixed signals that should be resolved fairly soon. See conclusion comments.

The last chart we will show is that of the CRB Index of commodities. It recently bounced off its 200 dma and is still below its 50 dma. Both MACD and histograms have turned positive, suggesting the correction may be over.

 

CRB Index

 

 

Conclusion

The gold market is giving mixed signals. There are positive signals as discussed above and there are some negative signals as well. We tend to place more importance on weekly charts as opposed to daily charts. The weekly charts on gold give reason to pause and reflect.

It is possible that a short-term move upwards will continue. If it does, according to the weekly charts this is not an intermediate correction in terms of time or price.

Furthermore, if more buyers hop on the train at these levels it is most probable that after a further short-term spurt up that a more serious correction will unfold.

All of the above is based on fundamental and technical analysis. As we have mentioned many times, and as our current article Gold Wars – Intervention & Manipulation explains, there is today the unseen hand of elite entities affecting the precious metals and other markets.

In our opinion, fundamental and technical analysis is no longer sufficient. Today’s paper fiat world also requires an understanding of interventional analysis together with contarian analysis united with the above fundamental and technical analysis. All tools are mandatory.

 

As we have said – according to conventional analysis, it appears the corrections in the precious metal markets and in commodities and oil may be ending. However, we also sense that a trap may be lurking in the shadows.

The powers that be do not want a gold market breaking out strongly, as that indicates the Fed is doing a lousy job (which it is), and that our currency is getting weaker and weaker (which it is).

We also believe the Fed wants to portray a deflationary climate so that they will not have to raise interest rates much more, and so that they will have a “reason” to lower them as they would prefer. The words caveat emptor come to mind.

 

Gold & Silver Shopping List 

The following stocks are on are watch list. We are not accumulating them yet but are getting ready. As always physical gold is safer than the stocks, although it too may still be subject to further corrective action. We prefer accumulation near 200 dma during intermediate term corrections. Next week we will offer some commodity and energy stocks.

 

Newmont Mining (NEM)

Gold Fields (GFI)

Goldcorp (GG)

Agnico-Eagle (AEM)

Glamis (GLG)

Royal Gold (RGLD)

Kinross (KGC)

Nova Gold (NG)

 

Pan American Silver (PAAS)

Coeur D Alene Silver (CDE)

Western Silver (WTZ)

Standard Silver Resources (SSRI)