In an average day at the office I might imbibe about three minutes’ worth of CNBC, most of it gleaned in passing TV monitors on my way to and from the water fountain, or enroute to the Wise-Ex Webcast studio on the far end of the building. On Friday, however, I ate lunch in the company lunchroom rather than at my desk, as I usually do, and this exposed me to twenty Styrofoam-filled minutes of CNBC commentary and reportage, such as it is. I had always imagined that it would be difficult in a bear market for CNBC to fill the airwaves all day, every day, with interesting and worthwhile features. What could they possibly talk about with the economy in a three-year dirge and most stocks unable to rally for more than a day or two at a stretch? Not much, evidently. The two featurettes that I caught received about three times the air time they might’ve gotten during the heady days of the bull market, and in both cases it was a journalistic stretch to make them fit a format geared ostensibly toward investors. Full Story
The tug-o-war between bears and bulls ended with gold lower about $1.5 from last Friday. Early in the week it appeared gold bulls might win the race, but late this week the bears fought with a vengeance, only to be fended off one more time today by the bulls.
Fourth quarter GDP growth came in at about 1.4%, which was mostly benign. Neither event was altogether unexpected, so the financial, currency, equity and precious metals markets were somewhat indifferent. The terrorism alert downgrade yesterday helped to lift the spirits of the US financial markets, and during the session the lure of gold as a safe haven wore off a bit and prices slid lower. What this really illustrates is how emotional markets are right now, including equities, financials, currencies, metals and energies. Full Story
GOLD: The market responded to a decline in war and terrorism fears but the real question for holders of gold is "Is this a temporary easing of opinion on Iraq or a ploy by Iraq to slow the aggression of US and UK war deployment." Stock and money markets around the world took stock in Iraq's offer to destroy missiles. In addition, gold traders took stock in the US announcement of a decline in the terrorist threat. Fears that the weekend Commitment-of-Traders report will show a hefty net long position by the speculator and news that Russia and the US have agreed in a telephone conference to try to resolve the dispute over how to disarm Iraq by taking into account the "interests of the world community". Full Story
DJIA (7884.99): If bulls can get something going today – a doubtful prospect as we head into the weekend – it would have the potential to carry the Dow to as high as 8166, a hidden pivot, by early next week. The first clue we’d have is an easy penetration of a lesser pivot at 7943.12. If that number is breached by more than two points intraday, or if the index closes above it, we’d make the Indoos an even bet to reach our target within the allotted time span. The bearish case has the index falling to at least 7814, or as low as 7552 next week if it doesn’t hold.
APR GOLD (346.20): Yesterday’s drubbing left the futures above last Wednesday’s 342.40 low, but if that support fails today it would leave the April contract in jeopardy of falling to as low as 336.60, a hidden pivot, over the near term. Full Story
During the past three months the US Mint has reported sales of over five million Silver Eagles, the most, in my memory, of any three-month period in the seventeen-year history of the program. What makes these sales different is that the Mint has been buying silver on the open market, having depleted U.S. Government holdings for the first time in the country's history. It's hard to imagine a more bullish situation.
Confirming the strong retail silver demand is the position of the small trader in COMEX silver futures. Even after a 10% decline in price, the little guy is holding the largest net and gross long position in almost seven years. In the latest Commitment of Traders Report (COT), the small trader has become the largest long category, with a bigger long position (around 33,000 contracts or 165 million ounces) than the large speculator and commercial category. Full Story
Gold sank through support and surprised many longs. Initially the market was higher on the heels of weaker dollar and equity markets. However, it seems the terrorism alert downgrade helped to lift the US financial markets, thereby somewhat diminishing the lure of gold as a safe haven. What this really proves is how emotional these markets are right now, including equities, financials, currencies, metals and energies.
April Crude futures almost hit $40 today, their highest level in 12 years. After the terror alert downgrade however, and just as with precious metals, the crude market fell from its perch. There was also talk that Iraq is being more cooperative regarding inspections, but it’s almost certain that it’s another delay tactic. Full Story
GOLD (APR): Support for gold today comes in near 349.30, while resistance is pegged at 358.90. Daily momentum studies are on the rise from low levels and should accelerate a move higher on a push through the 1st swing resistance. The near-term upside objective is at 358.90. It is a mildly bullish indicator that the market closed over the pivot swing number. The market's short-term trend is positive on a close above the 9-day moving average. Full Story
The only thing keeping stocks from falling hard right now, we would surmise, is a dearth of motivated sellers. As much could be said of the manic rallies that have alleviated the otherwise relentless descent of this bear market, now in its fourth year. Nearly all such rallies have resulted from short-squeezes that were brought on by a relative handful of buyers and a temporary absence of sellers. Yesterday’s session was more typical, beginning with an attempt to squeeze the bears on a quiet opening. But the effort quickly failed and by session’s end most issues were trading well below highs they’d achieved in the opening hour. Speaking as technicians, we must always be prepared for “technical” rallies. Such rallies can be triggered by a variety of factors, but a salient element is that selling will have temporarily exhausted itself. Full Story
There were too many hurdles for the bears to overcome, therefore gold nudged higher. The move was not large, but was in synch with how intermarket relationships function. In other words, stocks began to sink, the dollar weakened further, energies rallied (crude up 160 points!), a war is nearing…and therefore gold held its ground.
The Dow bears are drooling at the prospect of slicing through the nearby low of 7600, and with consumer confidence at a 10-year low, they are getting plenty of help from the mainstream. To most people, stocks right now are about as attractive as the plague! Money appears to be running from equity funds, so the question is…where will it be going next, into gold? Surely gold has benefited from poor equity performance, and the proof is in the $120 gold rally. The trend remains up, and there’s no reason why we can’t be near $400 shortly. Full Story
I've chided one subscriber in particular about his eagerness to second-guess my every gold forecast, but in the case of Royal Gold (RGLD), his bearish call appears to have been perfectly timed. As it happened, we added Royal to our list just as the stock was topping near $29 not long ago, prompting this subscriber -- you know who -- to warn that it was due to take a hit. And so it has - down to a low of 19.18 yesterday, after trading near $26 as recently as last week. In our defense, we should note that we have yet to recommend a long position in the stock; moreover, our most recent target is actually somewhat below the trench Royal carved out yesterday on its intraday charts. We'd speculated that the stock eventually will settle in a rut near 18, presumably waiting for the opportunity to prove the naysayers wrong. Meanwhile, we missed what might have been a good short in the stock. Bullish as we are on the entire gold sector, no bullion stock should be considered sacred. We'll try to catch tops and bottoms, and to go short or long, respectively, as such opportunities emerge. Soon enough, it will probably be time to look at Royal and a few others as ripe for buying. Full Story
GOLD: The gold market failed to hold most of the gains Tuesday, partly because of the delay in the Turkish base deal and partly because talk of last weeks European Central Bank gold sales surfaced. The Central Bank sales were apparently part of the normal sales pattern agreed to in the Washington accord, but seeing 30 tons of gold come onto the market alerts the large spec long position to the realities of supply and demand. We also have to think that the US President somewhat left the door open for diplomacy, as he suggested that Iraq can still avoid war if it fully disarms. With moonless skies seen this weekend and the 2nd UN resolution having almost no chance of passing, the gold market thought the President might say “that time had run out on Iraq”. Full Story
As the fortunes of the dollar come and go, so too does the price of gold. The inverse relationship between the US dollar and gold hasn’t lost a step. The dollar was up about 30 points, and in sympathy gold sold off. Of course gold doesn’t take marching orders only from the dollar, a European Central bank was also rumored to have sold off some reserves, exacerbating the weakness in gold. However, this sale had been planned for several years and was mostly discounted by the gold market, and isn’t likely to have a long lasting impact.
The Dow was hammered once again and challenged the low near 7600 from earlier this month. With US consumer confidence hitting a 10-year low, investors and the economy are clearly distracted by Iraq. Considering money is flowing out of equity funds, where will it be going next, into gold? Surely gold has benefited from poor equity performance, and the proof is in the $120 move over the last twelve months. But, how much steam remains in the golden boilers? Perhaps we could see prices over $400 quite soon? Full Story
GOLD: Apparently the whole issue on the 2nd UN resolution is a moot point, as the US lacks the votes and France, Germany and Russia all look set to veto the issue. In fact, the French, German and Russian block, have come out with their own resolution, with yet another time-table for "step by step" disarmament. Therefore, it would seem that seeking an answer through diplomacy is unlikely. Even with the Chief UN weapons inspector, telling Iraq to destroy illegal missiles and Saddam flatly refusing to do so, France and Germany say war is not the answer. Therefore, we have to think that the US is set to attack possibly into the coming weekend, when the sky will be moonless. Full Story
APR GOLD (356.40): Yesterday’s strong rally brought the futures to within spitting distance of the 360.80 pivot above which they’d be a good bet to run to 379.20.
+ DROOY (3.68): We own 600 shares for an average 4.38. The closest support worth noting is a hidden pivot at 3.61 that has already been tested once. If it is touched again and fails, Durban would likely fall to around 3.40 before bottoming. Full Story
A second resolution to disarm Saddam is making it’s way into the limelight, and the timetable for ousting Saddam seems to be less than three weeks away. As indecisive as gold as appeared over the last week or so, the underlying tone appears supportive to prices. The air remains filled with tension and uncertainty over the Iraq issue and gold bugs are zeroing back in on the yellow metal. After the $40 sell off from the highs near $400, low prices apparently did a good job of attracting new buying blood.
The Euro pounded the dollar once again and stocks reeled in pain, with the Dow lower by over 150 points and the dollar index weaker as much as 60 points. If this continues, gold could end up as one of a few viable investment ideas left standing. Full Story
In a shortened reporting period, open interest declined by 7,800 as large speculative funds continued to exit the market, forcing prices into the low $350’s. Commercials were noted buyers of futures and options as, for the first time in a while, physical demand re-emerged in this market lending a very healthy tone and providing a substantial "floor" to the gold market. I must remark that I am amazed at the resilience and the resolute behavior of the speculative longs in this market, as they have remained in their long positions even as gold plummeted some $40 from the recent highs. The only explanation possible is that we are seeing a new breed of investor in this market, one who is not in the market for the short-term quick buck, but has entered this market for the long term, and will not be shaken out easily on price declines. As such, this logically infers a continuing bull market. Another positive influence is the activity of the commercials, who were ardent buyers in the low $350’s. Please remember that the activities of this group can be taken as a proxy, more or less, for the activities and demand in the physical marketplace.
Using historical criteria, the gold market would seem to still be overbought as speculative longs outnumber spec shorts by about a three to one ratio and are NET long about 100,000 contracts, or 10 Million ounces. But, as all markets are more about psychology than fundamentals, perhaps it is no longer fair to use historical criteria as the new gold investor is indeed behaving quite differently than he did in the past. But, as a warning, there is still the potential for an abrupt and violent decline in the price should a major change in investor psychology take place. There is still some "war premium" intrinsic in the price. Full Story
GOLD: The market would seem to have found some support around $350 in the April contract, partly because of the upcoming UN debate on the use of force resolution and partly because of the potential to see a rate cut from the ECB. It would also seem like the outlook for the economy is worsening, with the numbers last week softening and the promise of even more job losses ahead. Therefore, the gold market could be in line for a little macro economic uncertainty but traders have to make sure the economic tilt doesn't degrade into a fear of deflation. The net spec long position in the gold contracted by 20,000 contracts to 87,000 contracts as of February 14th. In other words, the gold market has toned down its overly long speculative position and that is bullish. Fresh longs probably have to risk positions to at least $348.1 basis the April contract. Near term resistance is pegged at $360 and then again at $365. Full Story
At right we feature the S&P 500 Index in terms of the price of gold as well as from the perspective of a Japanese investor. The top chart shows the SPX/gold while the lower chart shows the SPX divided by the Japanese yen.
The SPX/gold chart is scaled logarithmically. It shows that the equity markets have risen consistently at a faster pace than gold and that the ratio has now returned to the bottom of the rising channel. Full Story
"You say the banks will continue to thrive until the day they begin to collapse -- an assertion with which I have always agreed. If you accept that the banks' main business lies in 'manufacturing' and 'servicing' dollars, it is possible to infer that business will be good so long as the dollar itself appears healthy.
"Until recently, it appeared that they couldn't lose, since they've been able to borrow dollars for as little as 1.25%, and to re-lend them to businesses and consumers for up to 15-20%. Judging from the number of 0% teaser loans I receive in the mail from issuers of bank credit-cards, I would infer that the banks are using their 1.25% borrowing privilege to expand loans and increase their customer base. They can hope to recoup the difference in several ways: 1) when customers make actual purchases with these cards, rates of 10% or more apply on the new balance until the amount borrowed at 0% is completely paid off; 2) when the 0% teaser rate expires, the entire balance is shifted to a 10-15% rate; 3) if you are late making a payment, the entire balance becomes subject to such punitive rates. Full Story
GOLD: The bias remains up but the April contract failed to get above the Thursday highs in the overnight action. We have seen a moderate decline open interest since the February high (from 245,682 contracts down to 194,980) and that should have balanced the overbought technical condition enough to leave the market capable of a recovery rally in the weeks ahead. However, as we mentioned yesterday, we think that the market will exhaust itself quickly, mostly because the bull case is almost 90% focused on the war issue. Certainly, the hot PPI reading potentially provides another possible bull track for gold, especially since the core PPI was up +0.9% but for now war is everything. In our opinion, the true inflation threat comes after the issue with Iraq is solved, because existing under the cloud of uncertainty countervails the inflation threat. Full Story
In the previous report, it was pointed out that the parabolic bowl that has lately developed in the gold futures chart (basis April contract) allowed for gold to decline a bit further down to $345-$346 at the lowest before the bowl is violated and gold overshoots the 50% retracement area by a significant amount. This was accomplished on Tuesday, when gold futures traded slightly beneath $345 before climbing back above this critical level on Wednesday. On Thursday, gold closed above Wednesday's high of $350 but beneath its intraday high of $355. Full Story
With so much poor economic news to digest, the Euro pounded the dollar once again and stocks reeled in pain. Upon further equity and dollar weakness it may be that gold could end up as one of a few alternate viable investment ideas in the spotlight. It’s also interesting to note that our rhetorical musings about personal incomes not likely keeping up with the double-digit gains in home values were somewhat substantiated by the fact that unemployment claims hit a 7-week high. How and who continue to press home values through the roof? Yes, rates are low, but one still needs a well paying job to meet those fat mortgage payments. Anyway, just an interesting side note.
Bears dominated energies today, but prices still remain near two-year highs, and unleaded prices are now near 19-month highs. One has to wonder how much more prices can move up before economic growth is truly stifled by the higher costs of this energy “tax.” The anticipation of war has built in a war premium to energy prices. The question is how much more premium remains and if a conflict does arise, will supplies actually be interrupted. If energies find good cause to remain buoyant, gold too will likely remain well supported. Full Story
GOLD: It would seem that the war tilt is back on and the gold market is once again the prime benefactor of the renewed anxieties. We see the basis for the increased war tilt as the UK moved to order its citizens out of Iraq. We also noted some attention given to stories about Iraq possibly trying to import illegal arms by boat and that would certainly turn more of the international community toward the US position on war. It should also be noted that the gold market didn't give the renewed rumors of exile any consideration yesterday probably there is nothing new in the story to convince players that such a solution is possible. Some gold buyers even suggested that gold was up Wednesday because the stock market was down and that is supportive tilt from a totally new angle. Apparently North and South Korea had a slight brush with each other as a North Korean fighter veered into South Korean airspace, which in turn caused a defensive response from South Korea. Full Story
In our AGE Alert of January 16, when gold was $358 per ounce, we told you to expect $370 to $390 as the upside range for gold in the near term. On February 5, gold hit a 6-year high of $390!
The gains in this major bull rally have been solid and steady. In early December, when gold was at $325, we warned of an immanent breakout in the gold price. Within a week gold passed through the resistance level of $336 and entered full breakout mode. Our next Alert anticipated new resistance at $355, and that’s exactly where gold stalled for a breather before advancing even higher. When the gold price moved to $358, we predicted a surge to between $370 and $390; gold brushed $390 on February 5. Full Story
The 8-week uptrend line in many actively traded gold stocks remains unbroken despite the volatile trading of recent days. Placer Dome Gold (PDG) is still above its rising 8-week uptrend line (which intersects $11.25) as well as its 40-day moving average (currently at $11). Therefore the area between $11.00-$11.25 is a good test for PDG this week and will measure its near-term technical strength. If this area fails to support prices, there is another resort in the larger 12-week uptrend line that currently intersects $10.50. A decline to $10.50 would be a Fibonacci 50% retracement of the latest 8-week leg of rally and a Fibonacci 38% retracement of the larger 12-week rally. As we indicated previously, the latest corrective phase of the gold market appears to have begun, yet it remains uncertain how "deep" this correction will go. A test of the 38% level in many gold stocks this week will provide more insight. Failing the 38% level, the 50% retracement level is probably next.
The 8-week uptrend line in Goldcorp (GG) was being tested on Monday at the $12.50 level. The 40-day moving average is slightly beneath this level at about $12, so the area between $12-$12.50 is important to watch in GG over the next couple of days, especially as $12 is a recent chart pivot. If $12 fails to hold, then its on down to test the 24-week trendline at $11. Full Story
APR GOLD (350.20): A Fibonacci-based support at 344.86 has contained the correction so far, but if it is breached over the next 1-3 days we should expect the decline to continue to at least 340, the lower threshold of a compelling point-and-figure channel. Any close below 338 would put the futures on course for a test of support near 330, where a lengthy consolidation occurred between late October and early December. Full Story
The gold market had rallied on anticipation that we'd be closer to military action in Iraq. We just experienced an example of "buy the rumor and sell AHEAD of the fact". Gold bulls have watched prices move over $120 higher in just about a year, but given the stagnation in regards to the Iraq situation, bulls took an opportunity to bank some profits and bailed out. Now, with a second UN resolution fermenting in the pipeline, it seems that momentum towards disarming Iraq has stalled. This is not what gold bugs wanted to have happen, perhaps they should be groaning to Chirac and his fellow compatriots for causing the evaporation of their gains? Full Story
GOLD: The liquidation pressure continues with the war timing put off into the future without specific dialogue on when a war might be expected. With the UK and US apparently working diplomatic channels for another UN “use of Force” resolution, the trade rightly assumes that an attack won't take place with negotiations ongoing. A number of key countries continue to pull embassy staff from Iraq, namely Russia, which is a bit of a surprise, considering how close the US has been dealing with Russia and how steadfast Russia seems to be against a war. While April gold did fail to hold critical support, by falling below the late December consolidation low, prices did reject that level somewhat in the after hours session Tuesday night and then recovered even more impressively into the Wednesday morning trade. Ashanti mines suggests that its Ghana mining operations is encountering difficult conditions of rising energy costs and declining production. Full Story
APR GOLD (344.30): The April contract has fallen to within less than a point of the 344.86 Fibonacci level that served as our target. If it sinks further we could look for support near 340, the lower threshold of a compelling channel on a point-and-figure chart that was sent to me yesterday by a subscriber. To get the worst case out on the table: Any close below 338 would probably set the futures on course for a test of support near 330, where a lengthy consolidation occurred between late October and early December. Full Story
Silver- hair traders grin and think differently. It's the state of the global economy as well as the geopolitical risks. They look at the forced margin selling on gold which generated a widespread, beautifully orchestrated, temporary scurry to safety. Why "beautifully orchestrated?"
Well all those dealers and bankers and indeed the Fed, who need a strong US$ and a weaker Gold price, must be pretty relieved that the 50 % margin hike arranged by their buddies worked -- this time, for a while. Just the way silver was knocked down in the early 1970s, by doubling of margins. Yet margins alone don't change underlying supply and demand. Full Story
In just a couple of weeks gold has dropped from a high near $390 to a low today of $343, that’s a drop of almost $50! The rally that began over a year ago may not be over, but recent action has certainly spooked many longs off their feet. Market dynamics are such that they discount or anticipate events, and when an event doesn't occur in conjunction with what was anticipated markets become disappointed. In this case, it appears the gold market anticipated we'd be closer to military action in Iraq, and a seemingly accommodating and placating tone from the U.N. and other world leaders has temporarily disappointed gold bugs. Additionally, perhaps gold was moving up on the premise of further anticipated dire stock market and dollar performance. Yes, stocks have dropped and the Euro is holding the dollar on the ropes, but perhaps the magnitude of such moves was less than anticipated. Full Story
GOLD: With the gold market starting the week about $16 below the recent COT report benchmark of $363, we have to think that the net spec long is closer to 96,000 contracts long, instead of the 106,000 registered in the report. The fact that the UN speech last Friday left the world unsure that war would be likely in the near term was augmented slightly by a compromise EU agreement yesterday that in effect gives Saddam another "last chance". According to the EU deal, the weapons inspectors would be given at least another couple weeks to
uncover information, making it possible that "no war" will be seen until after March 1st. Even with the net spec long pared down significantly, we have to think that another delay in the war timing, will force even more weak longs to the sidelines. Gap lower action overnight in the gold, hints at the beginning of a further liquidation tilt that could project a decline in the April contract to $342.5. Full Story
April Gold has retraced roughly 50% of its previous 2-month gains with prices now hovering just above $350, a balancing level in the daily chart. The $350 area is pivotal as the chart below shows, and gold cannot afford to slip much beneath this important level.
The latest parabolic bowl in the gold futures chart allows for gold to decline a bit further down to $345-$346 at the lowest before the bowl is violated and gold overshoots the 50% retracement area by a significant amount. Full Story
There were many, both analysts and traders, who believed in the validity of the recent gold rally and vehemently argued against any notion of a significant "war premium" inherent in the gold price. Those who held such beliefs have been totally shamed by the market the last week, as prices fell by $18 per ounce, only to fall another $6 or so as of Monday afternoon. JUST THE HINT of a possible delay of a war with Iraq was enough to turn investor psychology negative and to create an absolute avalanche of selling pressure, taking gold from its highs on February 5th of about $390 to today’s market value of $346.00.
This commentary was quite clear in warning of the lofty gold prices recently seen, and strongly recommended using very close stops on all long positions. Clients of the firm and traders who follow our recommendations were spared the financial distress of the rapid declines over the past week, and are now in excellent position to re-establish long positions at levels that are more seemly. While I did foresee the tumultuous decline in this market, I must admit that I could never bring myself to recommend short positions, as the risks of being short gold in this most dangerous of geopolitical situations were unacceptable. Full Story
Gold in terms of commodity prices has fallen almost all the way back to rising channel support. If this holds then downside on gold should be minimal here. Silver looks to hold in the 4.40- 4.50 range with resistance right on 5.00.
At right we show the Nasdaq 100 Index futures (scaled upside down), the U.S. Dollar Index times the euro (which rises when capital is moving into the ‘big’ currencies and away from ‘risk’), and the U.S. 10-year Treasury futures from a Mexican perspective. Full Story
Gold bulls we're probably wishing that Blix had something more concrete to report to the U.N. Security Council. His assessment of the weapons inspections was quite neutral, saying that no WMD had been found yet, but not guaranteeing that they don't exist. He was very deliberate in the use of language of diplomacy as he hedged his comments and couched terms so as not to incite a frenzied atmosphere. This tone of placation is partially responsible for sending gold bulls scurrying today, as gold prefers to feed on more threatening and ominous speech. There was also a report that the recent heightened terror alerts issued last week may have been based on false information. The detained terrorist who was the source of the supposed tip-off failed an FBI lie detector test. The good news for the country that perhaps the terror alert was unfounded was ironically a dose of somewhat bad news for gold bulls. Full Story
GOLD: The gold market returned to bull market status Thursday but it took an extremely visible focus of the US military deployment and rumors that the UN inspectors will slam Iraq with more violations, to rekindle the rally. The Dollar was smashed lower Thursday and that should provide some additional support today for gold in the action today. However, if anything has been learned over the last week, it is that the gold market needs war in order to rally. With open interest correcting from 245,682 contracts to 216,000 contracts, on the $42 correction off the highs, we suspect that gold is in a decent position to rally, even without seeing the COT report readings expected after the close today. Certainly gold is being held back by the fear that a serious terrorist attack could push the world economy back toward a deflationary spiral but in the near term, the war track should be enough to countervail any deflationary selling interest. More gold producers hinted that they would pare back hedge books, in order to benefit from potential price gains. Full Story
The sell off streak ended today, with gold gaining back almost half of yesterday’s losses. After having dropped over $30 from the recent high of $384.5, yesterday’s relatively low prices were just too ripe for buyers to pass up. With the dollar sinking and with the S&P breaking into fresh lows, there was plenty of incentive for gold to recover.
There were a couple of economic figures released that were better than anticipated; retail sales and unemployment. However, the stock market made it clear that the overabundance of negative variables from the geopolitical front are taking precedence. Stocks sank to fresh calendar year lows, the dollar plummeted over 100 points, bonds were over a full point higher, and all the while gold bugs licked their chops as they had plenty of cause to buy into the yellow metal again. Faith in the might of the US economic engine has dimmed as war with Iraq approaches and the war on terror continues. Full Story
Most expect that gold only rises when inflation is a problem so it usually makes sense for gold to be strong when bond prices are falling. Yet, there is a very clear ‘line in the sand’ just over 700 that has acted as resistance since the start of 1981. In other words, while gold has been rising ‘with’ bond prices it appears to have run into a bit of a problem with a rather strange- but definitely formidable- resistance line. If it breaks through it... there is nothing but ‘air’ on the chart until about 900 but keep in mind that a lightening move on this chart (like 1982) still represents a span of many months. Full Story
In our last commentary, we wrote of the danger and risk inherent in the gold market and strongly recommended using tight sell-stops on all long positions. Such advice was well given as the gold market has experienced a violent, vicious sell-off with speculators and large commodity funds bailing out of long positions, pushing gold prices under the $350 price level in the Far East today. We now have fallen over $40 per ounce from price levels reached just 5 days ago.
This technically driven long liquidation was simply the result of a complete imbalance in the market, creating great risk. The bullish consensus was quoted in the last commentary as being 89%, shouting to all would listen that virtually everyone who wanted to buy gold already had done so. Open interest, the number of contracts outstanding on the exchange, had reached levels not seen in a decade and the physical marketplace was simply awash in gold. All it took was slightly lower price levels, and the gold price started snowballing down, in an avalanche of selling, as speculative long positions starting being liquidated. The lesson to be learned here is when everyone is on the same side of the boat, it is best to move to the other side, with a firm grip on the railing. Full Story
Dow 2561? Compared to Bob Prechter’s prediction that the Industrial Average eventually will trade well below a thousand, 2561 is a relatively upbeat estimate of how bad things might get. The forecast comes from longtime subscriber Gary Van Zandt, whose imaginative logic is tied to the performance of…Coca-Cola (KO). This is one I am sure you will want to savor. Gary writes as follows:
“Dow 2,561 – is it possible? I decided to take just one stock, Coca-Cola (KO), and see how low it might go in a real stock-market crash. At its mania top KO was selling at about 60 times trailing earnings yet it was never worth more than 20 times earnings, which means that it was selling for about three times what it was worth at its peak. According to my "rubberband theory," a stock that sells at three times what it's worth should someday sell for a third of its worth. Taking this year's (Dec. 2003) estimated earnings of $1.93 and multiplying by a 6.67 PE gives a price of about $12.87 per share. Today at Dow 7,864.20, KO closed at 39.53. Therefore, KO has a downside potential of 67.44 %. The equivalent decline in the Dow would result in a Dow low of 2,561. Full Story
Gold traded lower for the 6th consecutive session, and down over $30 from the recent high of $384.5. Why the seemingly sudden collapse in prices? Who can say for sure, but with so much media hype being showered upon the yellow metal recently, many unseasoned investors leapt in to press prices higher. However, these speculators had a "weak grip" and therefore weren't able to stomach any setbacks. When prices stalled a bit the weak longs bailed out causing additional weakness, and to make matters worse for bulls, sell stops exacerbated the selling pressure, therefore causing more longs to raise the white flag. This type of action is common during uptrends, as conditions become overbought, meaning that most of the willing and able buyers were already in the market. After all, if everyone has already bought, who is left to buy and press the market higher? Is it now going to be all bad news for gold bugs? Doubtful. Full Story
GOLD: This market continues to hover near critical downside breakout points on the charts and it would seem that the chance of war hasn't improved but a concern for widespread deflation might be ready to surface. We fear deflation because of the recent terrorist warnings. Certainly the threat of war isn't downgraded completely, but it continues to suffer from a lack of imminent war expectations. It is possible that $360 in the April contract will be respected as support, but we are a little concerned about the slight "lower low" for the move in the overnight action. Forced to make a call, we suspect that the next $3-$4 move in gold is probably down. Full Story
APR GOLD (363.00): No change. We’ve projected a pullback low near 358.90, a Fibonacci-based level, but with less confidence for purposes of bottom-fishing than if it were a hidden pivot. To keep things in perspective we should mention that a correction to as low as 344.86 would not even blemish the bullish look of the intermediate- and long-term charts. Full Story
There was quite a tug-o-war going on today. The NY session started out just slightly ahead, sank to the session low of $361, battled higher to a peak of 366.2 and then sold off in the last hour to end moderately lower. We’ve dropped over $13 in the last several sessions, and considering many long positions had accumulated prior, it’s not such a bad thing to have prices correct and perhaps shake out some of the easily spooked bulls. After all, lower prices are what could attract more bulls. Full Story
Since September last year I have been recommending Energy in the range R35 to R45 as a company which will benefit from a soaring oil price and I have often stated my view that the Free World has no alternative but to go into the Middle East to prevent being held to ransom with the major part of the world's oil reserves. By not doing anything -- religious dynamics mixed with nasty dictators suggest that Iraq and Iran will build nuclear and biological /chemical weapons and the means to deliver them. Both countries support Muslim fundamentalists. Iraq has shown every behaviour consistent with the willingness to attack surrounding countries which are oil producers or are seen as sympathisers with the U.S. Full Story
GOLD (APR): Support for gold today comes in near 356.73, while resistance is pegged at 375.73. Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The next downside objective is now at 356.73. Daily studies pointing down suggests selling minor rallies. The market's close below the 1st swing support number suggests a moderately negative setup for today. The market's short-term trend is negative as the close remains below the 9-day moving average. Full Story
The “Dirty Dozen” list of fools-gold stocks is rapidly taking shape. We received nearly two dozen suggestions on Monday, possibly owing to the wide circulation of MarketWise Black Box at some of the more popular gold sites on the Web, including www.321gold.com, www.gold-eagle.com and www.goldseek.com. So far, one company stands out as purveyor of the gold stock you most love to hate: Silverado (SLGLF). The Alaska-based miner has fluctuated between 8 cents and 90 cents over the last few years, but its rallies to the high end of that range have been relatively fleeting. Most recently, it has fallen from a high of about 70 cents earlier this year to an eight-month low last week of about 20 cents. Small wonder, then, that the stock is foremost in the minds of gold investors who are looking for revenge. Full Story
It was a wild and volatile week in the precious metals, as those precious metals that are currently wearing the mantle of "industrial metals" came under severe selling pressure as the market now judges that any global economic recovery is not as likely as previously thought. Consequently, silver plunged 21 cents per ounce (highly correlated with copper prices which also fell by 4% during the week), and palladium, which shed about $8.50 in value. But the market action was very different for the precious metals with a "monetary" nature, with the gold market violently moving to the $390 price level as the bull market in global tension peaked, only to plummet some $20 from its highs to close up 60 cents for the week. Platinum, while still volatile and still seeing significant demand from the Far East, added $14.50 to the price. This commentary has been strongly recommending platinum and last week justified our persistent bullishness. Full Story
GOLD: The market seems to have found some support around $370. However, with the COT report registering a 140,000 contract long last Tuesday, the market is significantly overbought. Furthermore it would seem as if the US is fighting an uphill battle in getting the UN to agree to an attack of Iraq. Apparently France, Germany and Russia want more time for the inspectors and unless the US releases more damaging intelligence, or the inspectors find a smoking gun, an attack will be delayed, or the US will see a massive political cost of a unilateral attack. In fact, there are reports that some countries might ask for a UN Peace keeping force to be put into Baghdad, which in a sense could serve as a barrier to a US attack. Full Story
RGLD (26.27): Stochastic indicators for the long-term charts are bending down from very overbought levels, so we are cautious about initiating a long position up here. That said, it would not be unusual for a stock in a powerful bull market to simply shrug off incipiently bearish stochastic influences and continue higher. Royal’s most recent top, at 28.80, fell within six cents of an important hidden pivot, but if that resistance is exceeded by even a penny, we’d look for the rally to continue to at least 34.23. Full Story
Many long positions have climbed into this market over the last few weeks, and plenty of air has escaped from the sails of the good ship "Gold Bull" in the last couple of sessions. The damning evidence Powell unleashed had obviously been discounted somewhat by the gold market over the last couple of weeks, leaving a situation ripe for some profit-taking. However, the tension regarding the Middle East continues on the forefront of investor's minds and will likely offer a floor or support. Full Story
We have repeatedly stated that investors should position themselves for an upside move in small cap, junior stocks when the bull market in gold begins to mature. Realistically speaking, gold bullion must exceed $350/ounce to attract investment interest in junior mining and exploration stocks. During the first upwave, when gold bullion moved from $250/ounce to $350/ounce, we stated that large and mid-tier gold companies would lead the way. As stated, this is because little interest is given to new exploration opportunities and juniors when gold bullion trades below $350/ounce. That is why throughout 2000 and 2001 we predominantly purchased stocks in large and mid-tier gold companies and not juniors. Full Story
We were looking for a correction to around $359 in the April gold contract but did not see it playing out within the space of just a few days, as it appear to be doing. The forward-month futures contract is two-thirds of the way there now, down from a fleeting high of $390.80 achieved on Wednesday. That’s what bull markets are all about: wicked swoons that fool fence-straddlers into thinking they’ll get even better prices if they sit back and wait for just another day or two. Typically, though, such bargain days are few and far between. More often, the corrections terminate abruptly with an after-hours leap that, in the case of gold, would push it back above $390 before would-be buyers can react. At this point they are understandably less than eager to pay $390+ when they could have had an ounce of gold for just $370 a day earlier. Bullion prices, ever oblivious to their pain, will continue to rampage, unencumbered by the many who missed buying down near $370. That will be the best buying opportunity they’ll see for many months, but the lesson will be all but forgotten when gold swoons once again from just below $500. Full Story
Powell’s convincing presentation to the U.N. is behind us, and now that all those who will never be convinced of the need to disarm Iraq are stewing on even higher heat, the gold market has found cause to take a breather. Many long positions have climbed into this market over the last few weeks, and plenty of air has escaped from the sails of the good ship “Gold Bull” in the last couple of sessions. The damning evidence Powell unleashed had obviously been discounted somewhat by the gold market over the last couple of weeks, leaving a situation ripe for some profit-taking going. However, the tension regarding the Middle East continues on the forefront of investor’s minds and will likely offer a floor or support. Full Story
In the last commentary, it was made very clear that I envisioned very significant risks in the precious metals markets, and yesterday bore out the danger of holding long positions in the market without close stops. It was the classic "Buy the rumor, sell the fact" scenario. As Colin Powell made his presentation to the United Nations, it became clear that there was no "smoking gun", that while his arguments were very convincing in their presentation of circumstantial evidence, it became apparent that the imminence of war had receded, and the longs in the market started to liquidate. Full Story
GOLD (APR): Support for gold today comes in near 366.48, while resistance is pegged at 389.48. The daily stochastic's gave a bearish indicator with a crossover down. Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. The next downside objective is now at 366.48. The market's close below the 1st swing support number suggests a moderately negative setup for today. The market's short-term trend is positive on a close above the 9-day moving average. With a reading over 70, the 9-day RSI is approaching overbought levels. The rally brought the market to a new contract high. Full Story
In our most recent gold futures update for Feb. 3, headlined "Gold breakout expected Monday," we noted the bullish factors weighing in gold's favor, including a 2-week uptrend line in the tick chart. Gold rallied strongly this week before meeting selling on Wednesday and is now about to meet that uptrend line. Thursday's gold trading session will be all about gold's interaction with its critical underlying chart pivots. Full Story
The following e-mail message from our own Wrong-Way Corrigan (by now, most of you will know who I’m talking about) has given me a terrific idea -- “Rick’s Fool’s Gold List.” More on that below, but first the subscriber’s charming little note: “I spilled my coffee this morning when I read you were buying [Royal Gold] RGLD. This is the same stock I will be shorting Monday morning. I follow americanbulls.com and they gave a sell signal on it. I use this site for some very accurate short time activity. You should read the chart on RGLD and you will see why it is a good short. It was six bucks a year ago and has gained over 350 percent.” Full Story
Buy the rumor and sell the fact! Early on gold had climbed over $5 to another contract high, and did so in spite of a strong bounce in the US dollar. As Powell was speaking to the U.N. the gold market was as jittery as a long tailed cat in a room full of rocking chairs, and after the presentation gold bugs seemed unimpressed and prices collapsed. Do note that after posting a 373 low with several minutes remaining, gold rallied to end off the lows. Full Story
GOLD: The wild action reported in Tokyo gold overnight, hints at the potential for volatility in the coming two weeks. Supposedly, gold rocketed higher and then encountered massive selling before managing to finish the session several Dollars above where the US gold market finished its action Tuesday afternoon. Apparently some buyers in the US and Japan were buying gold because of fears of some type of confrontation with North Korea. It’s probably a given that gold is also being driven the upcoming UN testimony. With US gold $7 above the prior New York close this morning and $15 above the last COT report mark off, we suspect that the net spec long is roughly 140,000 contracts. Full Story
APR GOLD (379.90): The futures bettered our $382.90 target by a hair, implying that the short-term rally cycle has farther to go. However, we found a previously unnoted hidden pivot at 383.70 that could stop this surge, if only for a short while. If not and the futures simply rampage higher today, here is a succession of pivots you can use for targets: 388.60, 392.50, and 396. If a target is exceeded even slightly, you should infer that the next is all but clinched. Full Story
Headline: New contract HIGHS as gold hits highest level since late 1996! The tension regarding Iraq is being reflected in gold prices, not to mention the US dollar, equities and energies. The US dollar took another nosedive and equities joined the bearish party. After all, who wants to be long stocks right now? Full Story
We will see the statistics later on in this commentary, but speculative interests on Comex have now amassed the largest net long position in history, perhaps as much as 13 million ounces as of this date. And, with the drums of war beating loudly, and the imminence of conflict approaching, no one cares much for short positions in gold. This newsletter has been commenting for months and months that this is a "new" gold market, that the price is being determined not by the actions of the users or producers in their purchases/sales of physical product, but by the psychology of the investor/speculator in their purchase/sale of derivatives and futures. Physical product remains completely unloved and lease rates, in gold, remain at virtually zero, while the price of gold screams higher and higher. This is neither good or bad, it is simply the driving feature of the market at this time. But, since investor psychology can turn instantly in response to geopolitical events, it is important to understand that more short-term risk is now more intrinsic in this market than we have seen for decades. Full Story
GOLD: Apparently the gold market isn't going to wait for the actual testimony to the UN on Wednesday, to bid gold up in anticipation of a war. Overnight Japanese buyers were evidently chasing gold because new leadership at the BOJ didn't give off an air of confidence and because many Japanese think the currency action will prompt even more buying interest in gold. We suspect that another wave of war longs is in the process of entering the market. Considering the last 6 months price action, we predict that every $10 in gold gains, could result in another 10,000 spec longs entering the fray. In other words, we now assume that the net spec long position in gold is 135,000 contracts, which is getting closer to our topping target of 150,000 spec longs and a nearby gold price of $390 to $415. Full Story
FEB GOLD (370.80): Our minimum projection is still to 378.10, but if that price is exceeded by more than a couple of ticks we’d expect the short-term bull cycle to continue up to at least 382.90. The move to these targets will be in the booster stage once the futures have traded above 372.80, a hidden pivot, intraday. Full Story
It wasn’t a cake walk for the bulls today, as early on the market was pressured lower with help from a stronger US dollar and a small equity bounce driven by positively construed economic data. The tragic loss of the Space Shuttle Columbia was obviously an influence to the markets, but it’s difficult to know how such an event will manifest itself in regards to prices. The late surge in gold has put us near fresh contract highs, it appears the bullish freight train remains on the tracks. After all, would you want to be short gold right now? Full Story
Would you believe that the late, great Cisco has been boring us for nearly two years? The stock first dipped below $20 in early March 2001 and has moved between $10 and $20 ever since, drifting like a mass of kelp on a quiet tide. The good news is that we have swapped it for a bull-market stock, Royal Gold (RGLD), which has the kind of chart pattern that will help freshen our outlook. The subscriber who drew my attention to Royal is Barney D, who evidently has been having one heckuva good time trading it: "It's been a terrific performer for me over the last year and looks poised to continue on into the future." We agree, and that is why we've added it to our list. Meanwhile, although we will continue to hold a small, very leveraged position in Cisco by way of some Feb 17.50 call options, we won’t comment further on them unless the stock pops above 15. If not, the calls will die a quite death and we will book a small trading loss. Full Story
February gold futures closed the month of January slightly beneath the $370 level in an overall erratic week of trading. Gold prices have been coiling in a triangle-shaped pattern between $365-$372 the past few days and have now approached the theoretical point, or "apex," of the triangle and should break out directionally on Monday. Full Story
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