Update 17th of June 2013
Arguments for lower prices:
- Still valid MACD sell signal for Gold on the monthly chart.
- Gold still in well defined downtrend.
- If Gold moves below US$1,340.00 we should see a test of US1,320.00 followed by a break of the multi-year uptrend. Already hourly close below US$1,359.00 would be critical.
- Investors still moving out of Gold ETFs. The SPDR Gold Shares Fund (GLD) is now holding only 1,003.53 tons of Gold .350 tons of Gold have been sold since beginning of this year.
- During Fed Meetings Gold tends to be very weak.The next FOMC Fed Meeting will be held this week during June 18th & 19th. The rate announcement will be on wednesday 19th of June.
- India increases tax on Gold imports again. This could cut down indian gold demand by up to 75%.
- Although gold and silver performed contra-cyclical in recent months (when compared to stocks), the correction in equities could push down precious metals as well (risk off...).
Arguments for higher prices:
- Gold seems to be working on some kind of double bottom. Confidence in a new rally is still very small therefore every attempt to rally is quickly being sold. But despite the recent sell off one week ago, gold is holding well above US$1,375.00 so far. As well US$1,340.00 has not been violated. Gold is producing first series of higher lows and higher highs.....
- Bollinger Bands are tightening. Current range is US$1.361,87 to US$1,416.31. A big move is brewing.
- Weekly SAR indicator gives a buy signal with a weekly close at US$1,423.00. This would be first buy signal since october 2012 !!
- Potential W-formation shaping in gold. Confirmed if gold closes above US$1,480.00.
- On the daily chart for the Dow Jones/Gold ratio the indicators MACD & RSI are not confirming latest new high at 11.30 points. Negative divergence points to a trend change!!!! Between mid of november 2012 and mid of may 2013 the Dow Jones Index outperformed Gold and the ratio went from 7.286 up to 11.297 points. The RSI indicator on the weekly chart for this ratio has never been more overbought since mid of 1999 !!!!
- Strong positive divergences (RSI & MACD) in HUI Gold mining-Index increases chances that the bottom indeed is in place. Short-term we are seeing some weakness but after current minor correction the index should soar.
- The latest Commitment of Trade (CoT) reports have improved again (especially for silver). According to www.sentimenttrader.com every time speculators were holding a combined position below 75,000 contracts Gold was on average 22.2% higher a year later. Personally I haven't seen a more bullish setup anytime in the last 10 years. Sentiment continues to be at oversold extremes (Gold Public Opinion & Hulbert Gold still at multiyear lows).
- If gold & silver should continue to move contra cyclical towards stock-markets, a recovery is in the cards as the stock-markets are starting to correct.
- Germany changes VAT for silver coins. From 1st of January 2014 germans will have to pay 19% VAT on all silver coins. The new tax rate applies to silver bullion coins such as Chinese Panda, Australian Kookaburra, the austrian Silver Philharmonic and as well on silver collector coins. It could lead to a spike in silver coin demand in Germany until end of the year.
Conclusion
- Guys, as you know I am writing these free analysis since 2009 more or less on a bi-weekly basis. I am into the precious metals sector since 2002. I started investing in 1995. Based on my experience & knowledge I have never ever seen a more bullish setup in gold and silver as of today. I think there can be made fortunes in the next couple of years. The sector is completely beaten down. Especially the Dow jones/Gold Ratio reminds us of the bigger trend still in place.
- Soon or later the market will realize that the FED and other central banks can not withdraw from QE. They have maneuvered themselves into a dead end. You should read the following statements from the last "Record of Meeting of the Federal Advisory Council and the Board of Governors": "There was nearly unanimous consensus that the sequestration has had little direct business impact so far. With the specific exception of the Washington, D.C., metro area, no member indicated material measurable impact from the sequester. Two members noted specific impact on major defense contractors' activities in their regions. One suggested the impact of sequestration would be difficult to assess, with only 3% of business respondents reporting a direct effect.... There is also concern about the possibility of a breakout of inflation, although current inflation risk is not considered unmanageable, and of an unsustainable bubble in equity and fixed-income markets given current prices."... Further, current policy has created systemic financial risks and potential structural problems for banks.... Uncertainty exists about how markets will reestablish normal valuations when the Fed withdraws from the market." Now it is clear that there will be no recovery in 2015 and that central bankers have run out of tools to patch over the structural problems and the can can no longer be kicked down the road. The emperor has no clothes.
- Gold & Silver are bottoming out and are at least due for a technical bounce up to strong resistance at US$1,485.00 and US$1,525.00. The current week might see some more initial weakness but as we are moving closer and closer to july the expected rally should start very soon. I personally believe that this will be the beginning of a wave that ultimately will Gold catapult towards US$5,000.00 to US$8,000.00 within the next 4 to 5 years. The conditions now are so extreme that this sort of move is becoming more and more likely.
Long term:
- Nothing has changed
- Precious Metals bull market continues and is moving step by step closer to the final parabolic phase (could start in autumn 2013 & last for 2-3 years or maybe later)
- Price target Dow jones/Gold Ratio ca. 1:1
- Price target Gold/Silver Ratio ca. 10:1
- Fundamentally, Gold is still in 2nd phase of this long term bull market 1st stage saw the miners closing their hedge books, 2nd stage is continuously presenting us news about institutions and central banks buying or repatriating gold. 3rd and finally parabolic stage will bring the distribution to small inexperienced new investors who then will be acting in blind panic.
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Florian Grummes
About the author: Florian Grummes (born 1975 in Munich) is studying and trading the Gold market since 2003. Parallel to his trading business he is also a very creative & successful composer, songwriter and music producer.
The Midas Touch Gold Analysis & Strategy Newsletter is free of charge and will be published from time to time as it fits the author's busy schedule.
Disclaimer & Limitation of Liability: The above represents the opinion and analysis of Mr Florian Grummes, based on data available to him, at the time of writing. Mr. Grummes's opinions are his own and are not a recommendation or an offer to buy or sell securities. Mr. Grummes is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in the Midas Touch. As trading and investing in any financial markets may involve serious risk of loss, Mr. Grummes recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Florian Grummes is not a Registered Securities Advisor. Therefore Mr. Grummes's opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction. The passing on and reproduction of this report is only legal with a written permission of the author. This report is free of charge. You can sign up here: http://eepurl.com/pOKDb
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