Gold/Silver Newsletter
Wednesday, June 24, 2009 – 12:47 pmFor more information on our gold/silver newsletter and to sign up for it, visit the link below:
Under Construction
Thursday, June 11, 2009 – 8:35 amWe have been really busy lately and haven’t had time to do the updates here as we’ve focused on our consulting and newsletter work, as well as the interviews on thefinancialtube.com. Check back in a week and we should have a new site up with the intent of daily updates.
-Jordan
Gold on the verge of historic breakout?
Tuesday, May 26, 2009 – 9:31 amGreat piece here from MarketWatch.
It quotes some real great analysts including Martin Pring and Richard Russell.
Video Clips from Today
Wednesday, May 20, 2009 – 9:54 amGartman on Gold & Commodities. Still short Gold but thinks it will move higher. Not sure how to reconcile that.
http://www.thefinancialtube.com/video/3612/Gartman-on-Gold–Commodities
Beginning of the End for the Dollar
http://www.thefinancialtube.com/video/3619/Beginning-of-the-End-for-the-Dollar
Jim Rogers: Choose Silver over Gold
http://www.thefinancialtube.com/video/3614/Jim-Rogers-Choose-Silver-over-Gold
Jim Rogers- Markets Yet to Bottom
http://www.thefinancialtube.com/video/3615/Jim-Rogers-Markets-Yet-to-Bottom
Jim Rogers on Ag Commodities
http://www.thefinancialtube.com/video/3616/Jim-Rogers-on-Ag-Commodities
Daily Gold Brief
http://www.thefinancialtube.com/video/3600/Sideways-Action-for-Gold
Brace for Hyperinflation?
http://www.thefinancialtube.com/video/3607/Brace-for-Hyperinflation
Fear Mongering From Peter Schiff
Friday, May 15, 2009 – 11:11 amI’m going to have a full comment on this video later. Yes the dollar is in trouble long-term but Schiff is going way way overboard.
Technical Education- re: Gold, Silver & HUI
Friday, May 15, 2009 – 10:36 amSome technical education is badly needed in regards to the precious metals complex. Some analysts have been calling patterns in these markets while being oblivious to the requirements for these patterns.
It is most obvious in Gold. Everyone seems to be calling the 2008-2009 consolidation a “inverse head and shoulders bottom.” This is not the case. An inverse H/SH pattern occurs following a downtrend- not a top. A cup and handle consolidation is more likely since that usually looks like a big “u” shape. Unfortunately, the bottom of the cup ($700) is way to close to the previous bottom of $640 in summer 2007. The entire formation is most likely what we call a running correction. Corrections are usually three but can also be five legs. In three legged corrections you can have a zig zag, a flat (think of the flag in a bull flag pattern) or a running correction. In the latter, you see the B leg make a new high and the C leg bottom where the correction started. Since 2006 (when many gold stocks peaked), Gold has been in a large primary degree running correction.
In the next chart we show the HUI and Silver as they look very similar. Is the action since September a cup and handle pattern of an inverse H/SH? First of all, a cup and handle pattern is a continuation pattern- it continues the uptrend. It’s not a reversal pattern. Now, in H/SH patterns, we need to realize that these occur after long trends. For their to be a big H/SH bottom, it needs to occur after a long downtrend- not the sort of crash we saw in both the Silver and the HUI. That being said, the price action, to some degree resembles a H/SH reversal bottom. We should be vigilant but not expect anything. The chance of these markets completing a true inverse H/SH bottom is about 25%.
Gold Today and Nasdaq 1995
Thursday, May 7, 2009 – 11:30 amThere are technical and fundamental similarities in all bull markets. In the case of Gold today and the Nasdaq in the mid 1990s, there are several key technical similarities. I will show these in two charts.
In this case there are three important similarities. There is a running correction for a few years, the squeezing in of several bollinger bands and finally, a breakout from the price channel. Below is a chart of the Nasdaq. The running correction occurred from 1992 to 1995. As the market began its parabolic ascent (in 1995), all the bollinger bands (20, 40 and 80 week) were squeezed in which suggests a strong move in all time frames. Each time the market touched the lower 80-week band (1984, 1987, 1990, 1994, 1998) proved to be a very important low.
The same things are evident in Gold’s chart below. The action since May of 2006 has been a running correction. We showed the form in the last chart. (Essentially, the counter-trend “B” move advances to a new high followed by a “C” decline that bottoms right at or near the previous impulsive top, which in this case is May 2006). Secondly, all of the bollinger bands are squeezing in. The market already touched the lower 40-week band, which hadn’t happened since 2005. The market came very close to touching the lower 80-week band. That hasn’t happened since 2001. A correction of primary degree is in the later stages.
Conclusion
These charts show how secular bull markets move from steady and gradual to parabolic. The transition involves a long corrective period that is difficult to correctly diagnose until its later stages. The bollinger bands are extremely helpful as they allow us to measure volatility across all time frames. For Gold, its primary correction is near its end while the short and medium term corrections may have a bit more time to go. We’d like to see volatility in those time frames compress a bit more. Stay tuned for our next update, as we’ll have more insightful charts.
Editorial: Gold Stock Fundamentals
Friday, May 1, 2009 – 9:32 amGold Stock Fundamentals
Since I’ve written about gold more than a few times recently, I thought it was time to check in the gold stocks. Most of the mainstream media seems cautiously bullish on gold yet they offer no position on the gold stocks. While the stocks are well off their highs, there are several key positive developments for the sector. The first is that a new cyclical bull market has started in relative terms.
Below we show the HUI along with some ratios: HUI vs. S&P 500, HUI vs. Emerging Markets and HUI vs. Commodity Shares. When it is tough to get a read on a market, one should compare it to other markets. In both relative and nominal terms, 2008 was a major bottom for the gold stocks. Relatively speaking, the stocks had actually been in a four-year bear market! And that was during a period (2004 to late 2008) when Gold advanced nearly 70%! Turning to the present, we see the HUI successfully retested its “relative” breakout against the various stock sectors.
Relatively speaking, it is clear that a new bull market in the gold stocks is underway. As I have learned and previously written about, a rising gold price isn’t what matters for this sector. Gold Stocks outperform or underperform based on the relationship between the price of Gold and their various costs. Gold Stocks underperformed from 2004 to 2008 because their costs were rising in tandem with price inflation and commodity prices.
Recently, Gold has soared against anything other than Treasuries, Dollars and Yen. This includes the cost inputs of mining, such as Oil and Steel. In the chart below, I try to show Gold’s performance against some of its cost inputs and compare it to the gold stock/gold ratio. From 2001 to 2003 when gold stocks outperformed Gold, Gold was advancing against Oil, Base Metals (my proxy for Steel) and Commodities. Gold stocks had leverage to Gold because Gold was rising faster than cost inputs. Thus, gold stocks outperformed. From 2004 to 2008, Gold fell against Oil and Base Metals while trending sideways against Commodities. During that period the gold stocks underperformed as their cost inputs rose to quickly.
Finally, we should take notice of the mega-breakouts of Gold against Oil, Base Metals and especially Commodities. These breakouts portend to further outperformance by Gold and thus, a further expansion of the margins of gold producers.
There is another very positive point in regards to the fundamentals of gold stocks. The action in the currency markets, namely a strong dollar, is also boosting the margins of the gold producers. Since most mining and exploration occurs outside of the US, a strong dollar equates to weaker local currencies, which means lower costs. Essentially, if you are a gold company operating outside of the US, strong gold and a strong dollar benefits you the most.
In the chart below I show the price of gold in the local currencies of gold mining hotbeds such as Canada, South Africa, Mexico, Brazil and Australia. In every case, the price of gold in these countries has exceeded its 2008 high. In the bottom three ratios, one can see that the gold price increased only marginally from 2003 to July 2007. It is the local price of gold that matters.
Conclusion
In regards to the gold stocks, the talk of inflation or deflation is missing the point. What matters most is the local price of Gold and the relative price of Gold (Gold against its cost inputs). Let’s look at these things since March of 2008 when the HUI peaked at 519. Since then, the local price of Gold in every case except for the US and Japan has advanced to new all time highs. Meanwhile, even though the official and US price is 14% off its high, mining input costs (Oil, Steel) have fallen much farther. The gold stocks, at 40% off their highs, are clearly undervalued. Should Gold blast through $1,000/oz without the help of a falling dollar or an inflationary tide (in which everything rises), then the gold stocks will be primed for a violent advance.
We are working on developing a newsletter product specific to the gold stocks where we regularly monitor each individual stock based on technicals and sentiment data. If you’d like to know when this service is available or would like to receive any related updates, you can sign up for our email newsletter at our website.
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Taiwan’s Taiex is up 50% from bottom
Wednesday, April 29, 2009 – 11:02 pmTaiwan was our top country pick for 2009 and for beyond. I wouldn’t buy it here but long-term there is no other market that offers the kind of risk-reward that Taiwan does.
China Makes First Taiwan Investment as Relations Thaw
Taiwan’s benchmark Taiex index surged 5.7 percent, the biggest gain since Oct. 30, today on speculation more Chinese companies will invest on the island. The NT$17.8 billion ($529 million) purchase, announced by China Mobile yesterday, underscores how warming political relations between the two sides are leading to closer economic ties.
“This is a landmark deal. China Mobile will lead the way for other Chinese companies that have been waiting to invest in Taiwan but were hesitating,” said C.Y. Huang, vice chairman of Polaris Securities in Taipei. “This will open the floodgates for more Chinese investments into Taiwan.”
The Chinese government said this week it would end a ban on investments in the island on May 1 following an agreement to open cross-border operations for financial-services companies, expand direct flights and cooperate in fighting crime.
Taiwan Stocks Rise Most Since 1991 on China, Currency Rallies
Taiwan’s Taiex index, the world’s third-best performer this year, climbed 363.27, or 6.5 percent, to 5,977.33 as of 9:45 a.m. local time, headed for the biggest gain since August 1991. Stocks in the island are subject to a 7 percent daily trading limit. Only three of the 602 stocks on the index fell, with all 28 industry groups advancing.
Taiwan’s dollar rose 1.2 percent to NT$33.27 against the greenback, the biggest gain since Oct. 30, according to Taipei Forex Inc. The currency is heading for a appreciation of 1.9 percent this month, following an advance of 3 percent last month.
Civil War
Ties between Taiwan and China have improved since President Ma Ying-jeou took office in May and dropped the pro-independence stance of his predecessor, Chen Shui-bian. The island has enjoyed self-rule since Chiang Kai-shek’s Nationalists fled the mainland in 1949 after losing to Mao Zedong’s Communists in a civil war.
The Chinese government said this week it would end a ban on investments in the island on May 1 following an agreement to open cross-border operations for financial-services companies and more than double weekly direct flights to 270 from 108. Taiwan’s tourism bureau estimates 87,000 Chinese visited from the mainland in March compared with 42,000 in February.
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