After quietly basing at the 50MA the last couple of weeks, Gold appears to be breaking out this morning. The ADX is near 10, and the green line crossed the red line this morning (on GLD). I always pay attention to ADX crossing signals when the ADX line is low because a low ADX line means there is excellent trend potential.
This is corroborated by the Bollinger Band width which is at a several month low, implying a potential BB squeeze play is at hand.
Should Gold punch through the bearish divergence resistance line on the RSI, it would confirm the break out. It's not unusual to see a trend accelerate to the upside when such RSI bearish divergence resistance lines fail.
To illustrate, here's an end of day Gold chart. It won't be updated with today's action until ~5:00 pm central:
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/images/live/s_gold.gif)
![[Most Recent USD from www.kitco.com]](http://www.weblinks247.com/indexes/idx24_usd_en_2.gif)
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Parker, Excellent update! Thanks!
ReplyDeleteSee my entry under "$$ Merry Christmas" heading.
It explains why INflation is much more likely to happen than DEflation.
silver broke strongly out of a consolidating triangle this morning
ReplyDeleteAll accordingly to your's Gold MFT :)
ReplyDeleteRodd
ReplyDeleteWe'll see what kind of follow through we get. My MFTs have Gold and the Euro making cycle highs on ~Feb 8, and the dollar making a cycle low at the same time.
Achilles
ReplyDeleteI wish I could be as certain about inflation as you are. I remember 1980, when gold got to $1,000 an ounce and oil traded around $35-40 per par barrel. The Long Gov bond was trading around 14-15% and every investor knew that the measure of inflation expectation was the price of gold and the long Bond. Inflation was around 10-12%, Then as rates continued high, inflation (as reported by the government) began to decline and eventually, by 2000, Gold was back down to $250-$300, oil was still around $25 per barrel and inflation back to 2.5% annually.
The house I bought in Old Winter Park for $65,000 in 1980 was sold in 2001 for $185,000. The new Pontiac model Grand Prix I bought in 1980 for $5,500 was selling new in 2000 for $24,000
Gold did not seem to have done very well, and certainly did not measure any inflation expectation. Nor did the bond market, as rates had fallen back to around 5%
My real life experience was that gold was a dog, bonds were at least as good as the equity market, and the costs of homes and autos was about to explode.
Now, Gold is in favor again, and the gold is making new highs. But I am not sure it is any more accurate now than it was in 1980.
I have a client who is a very successful commercial RE investor, who I think has the best understanding of the fear of inflation, as least as it is generated by the Gov printing presses. In the Summer of 2009, he was in the middle of the first of 5 refinances due by April, 2010. He was forced to bring $400,000 to closing to complete the refinance. His cash position was nearly wiped out. He could not sell any of his properties...Yet his biggest properties were still due for refinance.
His comment to me was as follows.. "Bill, I don't care how much money they print.. we are going to run out of money".
The fact is that most of the wealth in this country is in residential and commercial property, which by any measure is deflating. The second biggest wealth position is in the Bond market.. and that market sure does not seem concerned about inflation. While the equities markets are still depressed from levels first achieved in 1998.
it is clear gold is appreciating, but it is not clear that inflation is the reason.
Bill
Bill
ReplyDeleteThey say gold is a hedge against inflation. Like you, I can't square that with gold falling from $800 to $200 from 1980-2000 as the prices of other things were going up (way up in some cases).
I've come to appreciate that gold can act like a commodity at times, and like a currency at times. Commodities benefit from inflation (or expectations of inflation). See the 1970s. Cash is king in deflation, and gold is the ultimate cash since supply is constrained.
So, it's unclear to me whether gold's rise the last 10 years is based on inflation, deflation, or the expectation that Bernanke will fight deflation with money printing.
What is clear to me is that investment demand for gold plays a larger role than people give it credit for. Is it just a coincidence that stocks and gold are inversely correlated over the long haul?
In 1929, it took 16 ounces of gold to buy the Dow. That fell to 2-3 ounces in the 40s. In 1966, it took 25 ounces of gold to buy the Dow. That ratio fell to 1:1 in 1980. By 1999, it took over 40 ounces of gold to buy the Dow. We are now back under 10, and if history is any indication, we'll be back to 1:1 (or lower) before the 40 year cycle is done.
When Americans wake up and realize that the Fed is the one buying the U.S.'s debt it is all over. There will be widespread panic.
ReplyDeleteGold is a hedge against devaluation in paper money.
ReplyDeleteThat said, I think productive assets are a better hedge. I would rather own mines and farmlands that produce goods to meet the rising demand of a growing consumer class in emerging economies.
Parker
ReplyDeleteTerry several years ago offered a lengthy observation on the price action of Gold, offering his opinion about whether or not gold was a measure of inflation expectation. He came down on the side that claims gold is a store of value, but that it is not a measure of inflation expectation. His older comments are no longer available, or at least I don't know how to access them. Maybe if you ask him, he could make that article available again. I would be very valuable at this time..... I think it was probably in 2007.
SC has said something about devaluation of currency, and he is correct. I do not want to get into a debate here about whether a store of value is the same as hedging against inflation. It is not... currency devaluations can occur without the classic display of domestic inflation.
Bill
On Dec 22nd and Dec 17th I posted a GLD astro chart that forecasted an up week into the end of this year... Along with #GLD I posted astro charts for #SPX and #USD as well... These charts go out to Jan 20th +/-...I hope to update these charts maybe twice a month if anyone is interested in seeing them...http://bit.ly/e79yIH
ReplyDeleteJustSignals: I am one who viewed those charts. I also Bookmarked your blog then. I just tried to go to your above URL but I got to the bit community where a cartoon page says it could not be found. I do not know what I typed wrong multiple times. Thanks for your info.
ReplyDeleteI recall seeing those charts JustSignals. Interesting.
ReplyDeletehttp://bit.ly/e79yIH
ReplyDeleteCycleguy...I checked this link and it took me to the correct page...I saw that the other link did not...Copy and paste it! ...Do not retype it...That may create a problem...Since some fonts do not always look like the exact letters that they are intended to be...You can also go directly to: http://justsignals.blogspot.com/
And then go to the Blog Archive on the right side...
Thank you for following me...
Parker...thanks for your comment too...I am curious to see how long these charts will continue to produce a decent forecast...
could it be that we are witnessing hard asset (real estate) deflation and commodity inflation at the same time?
ReplyDeleteI tried to post a chart but cannot figure out how to do it. NDX daily has a near perfect MIRROR IMAGE pattern, and it COULD prove to be the old George Lindsey MIRROR IMAGE REVERSAL pattern. The top at the left side of the chart is the 2007 high, the low is a double bottom, a "W", with Nov. 2008 and March 2009 as the 2 lows, the centerfold of the pattern is the Jan. 2009 high.
If it fulfills, there is a potential 12% drop coming in approx. 10 TD.
I can forward the chart to someone if they want to post it. Give me an email address.
All the Bears are back in their boxes...
ReplyDeleteMr Marketlive,
ReplyDeletePlease teach us and enlighten us on your wisdom regarding what you see in the market. Thanks in advance.
Silver seems to be leading gold again.
ReplyDeleteJustsignals,
ReplyDeleteI assume the black line in your charts is the forecast and the blue line is supposed to be actual price data. If so, you need to check your data because the blue lines are not tracking prices correctly.
For example, SPX has been in an uptrend all month and you show it peaking around December 2.
TIA,
Norm
npoire...The price chart is similar to a relative price chart (in blue)...It is hard to place a closing price chart on a horizontal forecast chart (in black)...
ReplyDeleteMost of the trends for the chart appear to be good...Nothing works 100%...The Holy Grail does not exist...But if it tends to display a good track record we add it to our tool bag...
Thank you very much for your comment...
JustSignals
JS,
ReplyDeleteBy relative price chart do you mean relative to one of its moving averages?
Norm
Norm...I am traveling this week and I will get back to you shortly with an answer to your question...
ReplyDeleteHey guys, I was away for the holidays so I missed this post. I actually bought silver on Tuesday morning as the breakout began, so good to see Parker saw things as I did. We'll see what happens, but so far, so good.
ReplyDeleteAs to whether gold/silver trade based on inflation or as a commodity, I don't care at all. I trade it based on price action alone.
Good luck to everyone in this gold/silver trade!
Anyone look at a advance decline t on the NASDAQ with highs on 4/26 low on 8/26 which projects top on 12/26?
ReplyDeleteI learned A LOT the past year. Do not listen to anyone. Always make your own decisions.
ReplyDeleteHeck of a blog though Parker, hats off to you.
Also, if every is thinking the same thing as you on the internet you are wrong.
Norm...
ReplyDeleteThe best answer I can give you is that you are right, but, I do not know the formula...So unfortunately I cannot pass that along to you...Except that I think that it is the difference between two MA's...
In constructing these charts I look to see where the blue lines and the black lines display the best fit...When they do there has been good astro forecasts...
Again these astro forecasts only indicate potential direction and not in any way do they forecast amplitude...
Hope this answered your question...