Honest Money Gold and Silver Report: Market Wrap
Week Ending 03/20/09
The following is an excerpt from the full market wrap report available on the Honest Money Gold & Silver Report website. Stop by and check it out.
This past week's action in gold was as volatile as it gets. As I have repeatedly said for months: volatility in all markets is the watchword. Expect more - not less.
Gold closed the week up 22.24 to 952.34 (continuous contract) for a gain of +2.39%. Wed. was a big day. Intraday gold hit a low of 884 and then reversed and rallied up to 948. It closed at 942, a 7% intraday reversal move. Watch 959. A close above it will be bullish.
MACD made a positive crossover and the histograms have moved into positive territory as well. The 50 ma was tested intra-week.
Gold's big move was supposedly caused by the central theme of this report: that the Fed is debasing the U.S. dollar and destroying its purchasing power.
The Fed announced that it will monetize Treasury bonds as this report has discussed in detail. The reverberations could be felt in the dollar (down), gold (up), and other commodities (up).
It is interesting to note that in past reports we have talked about the relationship between the dollar and gold. It used to be an inverse relationship.
This year gold and the dollar have been tracking one another in the same direction. Last week they parted ways. It remains to be seen if this is a one night affair or a long term relationship. Love can be a fickle thing.
Silver had a good week (better than gold) as it added on 0.56 cents to close at 13.78 for a +4.25% gain.
It is interesting to note that the dollar lost 4%, gold gained 2%, and silver gained over 4% - more than the dollar lost. I don't know what if anything it means just yet, but there it is.
Silver looks better to me here than gold, however, the financial system is under tremendous strain and anything could happen at any time.
Any initial major disruptions will most likely cause gold to react more than silver - but it did not this past week, as shown above; however, the events were not what I would call a major disruption. It was disquieting news of debt monetization. There is much worse lurking in the shadows.
I look for silver to perform better than gold in the mid to latter stages of what lies ahead. If gold goes to extremes, many will turn to poor man's gold or silver. A week ago Friday I added SLV to the portfolio.
The chart below shows silver's big move up out of the November low. It was very impressive price action to say the least. The indicators look good.
MACD has made a positive crossover. RSI has put in a triple bottom with higher lows and has turned up nicely through the 50 level and is at 59.47.
Last week's move was a bit sharp and may need to be digested before the Feb. highs are challenged. But one never knows, at least I don't.
Mr. Market does whatever he wants, when he wants, how he wants; that's one of the things I love about him.
Trying to predict what he's going to do is futile at best and dangerous at worst. It's like trying to fool with Mother Nature.
The precious metal stocks had a very good week. The GDX index was up 13%. Price is well above its 200 ma. The 50 ma looks like it is setting up for a positive crossover above the 200 ma. This would be a bullish development.
Volume was good on the big move up, but note it weakened on Friday somewhat. Short term momentum may be abating. We'll see come Monday. Price is bumping up into horizontal overhead resistance. MACD made a positive crossover. The weight of the evidence is bullish.
Note that the gold stocks rallied over 13%, while gold was up 2% and silver 4%. It has been awhile since the stocks have led physical up.
This could be the start of the stocks leading the metal up during the next phase of the gold bull.
The next leg up may be kicking at the door. It should be an interesting week coming up.
When physical closes above the Feb. high just above $1000 - the next leg up begins (unless we get a false breakout).
The latest full-length version of this week's market wrap is available only on the Honest Money Gold & Silver Report website. All major markets are covered with the emphasis on the precious metals. This week's report contains thirty charts for your viewing.
An analysis of the Fed's misguided handling of the financial crisis is provided using a top down macro perspective. Details are then given as to its affect on investing in today's volatile markets (micro perspective). Stop by and check it out.
Good luck. Good trading. Good health, and that's a wrap.
Come visit our website: Honest Money Gold & Silver Report
New Book Now Available - Honest Money