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Gold and Silver
Update 4th November 2012
1. Personal Note
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Arguments for lower prices:
- 3rd attempt (within 11 months) to take out heavy resistance around US$1,790.00-1,800.00 failed and Gold clearly broke down from bearish wedge
- Gold & Silver are now in established downtrends
- COT Data still bearish for silver, but high volume sell off on Friday is not yet included... (COT Data should be much better next friday and commercials surely used the 4% mini crash in silver to cover shorts...)
- Gold/Silver Ratio breaking out above 54
- US-Dollar completed base pattern and moved up to 200-MA, now facing strong resistance
- Recession in europe, slower demand from china
Arguments for higher prices:
- Gold & Silver now strongly oversold and hit downside targets
- High Volume washout day typically marks the end of a downtrend
- Gold closed outside lower bollinger band (statistically only 2.5% of market action happens outside lower bollinger band!)
- The monthly middle bollinger band (US$ 1,656.26) offers massive support and has been violated only once during deflationary crash 2008
- Former resistance around US$1,640.00 is now extremely strong support
- 200-MA (US$1,665.76) offers massive support and should initiate at least a bounce from oversold levels in the coming week
- 61.8% (US$1,670.66) Fibonacci retracement has been more or less reached, so far this confirms "correction" within uptrend
- Gold's daily Slow Stochastic trying to embed again but did not confirm new low on Friday (first positive divergence)
- Miners outperforming gold since a couple of months
- Silver stocks (e.g. Cour D Alene, Silver Wheaton..) have been extremely strong and did not correct at all
- Slow stochastic indicator for HUI Goldbug Index is not confirming new lows last friday
- New uptrend in precious metals since August 2012 that should carry gold up to US$1,850.00-1,920.00 until spring 2013.
- US-Dollar Death Cross (long-term 200-MA broke above its short-term 50-MA in mid of october). This signals dollar weakness not euro weakness!
- November very bullish seasonals. Seasonality until spring very promising.
- Never fight the FED. Unlimited QE -> money printing all over the world will push asset prices in all sectors higher...
- Throughout history, periods of massive money creation have always been inflationary and this time should be no different.
- Santa Claus Rally is coming
- Syria conflict escalating again
- Last Friday evening my "contrarian midterm keep it simple gold swing system" issued first buy signal since mid of may 2012 !!!
- I am turning strongly bullish now. Gold hit initial support on friday evening. I believe despite not so good looking COT Data we are in the final stage of this correction and close to a great entry on the long side. The sentiment has become fearful last friday which is great. There could be another US$10.00-30.00 more downside risk but US$1,640.00 should definitely hold. Actually I believe US$1,658.00-1,665.00 is more likely to be the maximum drawdown. If we see a selloff in gold monday morning in asia followed by a recovery/strong opening into europe's session the worst should be behind us. But there might be some more confusing price action and downside pressure until US-election is settled. This is the time to start scaling in on long positions.
- Another possible scenario of course is that gold is still stuck in this sideways range between US$1,525.00 and US$1,800.00 and we are on the way back down to US$ 1,535.00. And yes, there are surely some arguments for deflation and lower prices. But I personally can not find any signs of an immediate massive down move. For example the Baltic Dry Index does not signal further economic slowdown at this point. And the US-Dollar is not in an uptrend. Instead the moving averages pointing to a weaker US-Dollar in the coming months - maybe due to US debt ceiling end of 2012... Looking at the NYSE Bullish Percent Index it looks like the stock market rally since 2009 will not last much longer - maybe until early 2013. short-term the seasonality turns very favorable and I believe that most participants are getting ready for a santa claus rally starting within november.
- Nothing has changed
- Precious Metals bull market continues and is moving step by step closer to the final parabolic phase (could start in 2013 & last for 2-3 years or maybe later)
- Price target DowJones/Gold Ratio ca. 1:1
- Price target Gold/Silver Ratio ca. 10:1