Honest Money Gold and Silver Report: Market Wrap
Week Ending 1/04/08
The recent rally in the U.S. dollar versus the euro appears to have run its course. It topped out in mid-Dec., and is headed down once again.
Gold has paid close attention to both currencies performance.
Gold was up $23.00 to close at $865.70 (+2.73%). New highs were made. Notice the distance on the weekly chart that price is above its 65 ma.
During the second quarter of 2006 gold was extended by about the same degree as it is now.
In bull markets prices can get overbought and stay overbought far longer than it seems possible - or not.
The daily chart below shows gold's recent breakout above both its upper trend line and the symmetrical triangle it had formed over the last two months.
Price has since backed off the highs. RSI has rolled over from an overbought reading above 70.
The dotted red horizontal line shows the first level of support. MACD is well into positive territory, but the histograms have begun to diminish somewhat.
Gold has covered some serious ground in the last month, moving up over 10%. It is due for some consolidation and rest.
Such would not be unreasonable, and it would actually be healthy for the long term viability of the gold bull.
Two steps forward and one back is very difficult to beat over the long term. It is relentless action that does not burn itself out, as does a supernova.
The chart below shows good support resides in the 810-830 area. This does not mean gold will correct to that level - or that it will not go even lower. It simply shows probabilities and nothing more.
When all is said and done, the market goes where it wants, when it wants, how it wants; and it doesn't care what we think or feel about it, or which side of the trade we might be on. It is a law unto itself.
Gold is strongest when it is going up versus all major currencies, not just the U.S. dollar.
Up next are three charts that show gold denominated in Euros, Swiss Francs, and Australian dollars.
As the charts show, gold has broken out and is performing well in all three currencies.
Gold in Euros
Gold in Swiss Francs
Gold in Australian Dollars
Gold's bull market is not a U.S. dollar-centric market, it is occurring versus all currencies. This shows good underlying strength. It also shows how all world currencies are paper fiat debt-money that continually loses purchasing power and value.
All central banks are debasing their currencies, some more than others. One currency can be said to be stronger than another, but only on a relative basis compared to the other paper fiat debt-currency.
Gold tells a different story. It shows that all currencies are losing purchasing power. This is why central banks fear gold: It is the eternal sentinel, always on watch, looking for currency devaluation, and the resulting inflation there from: be it monetary, asset-priced, or directly rising prices of goods and services.
Silver was up 0.57 cents to $15.46 (+3.81%). The weekly chart shows silver's price testing its horizontal support line.
MACD did not put in a negative cross that appeared to be setting up the week before.
Histograms expanded further into positive territory. RSI turned and is headed back up. Several of the major silver stocks went up this week.
The Hui Index forged ahead 29.75 points, closing the week out at 443.75, for a gain of 7.19%. It was the highest weekly close.
The closing daily high for the Hui is 455.93 (Nov. 6/07), and the intraday high is 463.06 (Nov. 7/07).
The Hui Index strongly out performed physical gold this past week, which is a positive development.
On Thursday, when the stock market got hit hard to the downside, the gold and silver stocks were up strongly.
This may signal the start of a decoupling between the precious metal stocks and the stock market in general - a development that would be very constructive for the precious metal sector.
On the weekly chart above, price can be seen powering up and through horizontal resistance at 401-402. RSI has turned up and is headed higher.
Histograms have gone from negative territory to just shy of the zero level. MACD looks like it is about to make a positive cross over, which would be very bullish. This is on the above weekly chart.
The daily chart below shows RSI curling over and other indicators flashing overbought readings as well.
Next up is the daily chart of natural gas. For the week it was up +4.57%. It appears to have put in its seasonal low, which was a bit later than usual.
The gap down from last October (2007) has been filled, and price has broken above resistance indicated by its upper trend line.
The next level to watch is the dotted horizontal resistance line just below 8.50. MACD has made a positive cross over and the histograms are headed back up.
Point & Figure Charts
Below are several point and figure charts for various gold and silver stocks. No comments are provided, as the charts speak for themselves.
All of the charts show either a double or triple top breakout pattern.
Caveat Emptor: I have or have had positions in many of the stocks. Others may be under consideration for accumulation.
Coming in 2008 - the book Honest Money