<b>Gold Price</b> Not Overbought But Reverting To Its Mean | Gold Silver <b>...</b> |
- <b>Gold Price</b> Not Overbought But Reverting To Its Mean | Gold Silver <b>...</b>
- Why The <b>Gold Price</b> Rose $50 On Thursday June 19th | Gold Silver <b>...</b>
- The <b>Gold Price</b> Smashed Three Resistance Levels to Close Higher
| <b>Gold Price</b> Not Overbought But Reverting To Its Mean | Gold Silver <b>...</b> Posted: 22 Jun 2014 08:58 AM PDT In this article, author and fund manager Frank Holmes from USFunds.com looks at the recent gold price action and puts it into perspective. The gold price was at record lows, in extremely oversold territory, only six months ago. Sentiment was extremely negative, so it's no surprise that price spike of this week consider gold in an overbought status right now. The key question which this article focuses on: "Is gold overbought?" Based on historical observations and the math of the markets, gold seems NOT overbought; it is simply reverting to its mean. This mean reversion has shown that eventually, both gold stocks and gold bullion will move back to their historical averages. From USFunds.com: Right now, as you can see from the chart below, gold stocks have seen a reversal to the long-term mean, but we are still waiting for gold bullion to do so as shown in the second chart.  gold stocks price oscillator between 2004 and June 2014  gold price oscillator between 2004 and June 2014 Similarly, for gold bullion to reach overbought territory it would need another 20 percent move, and for gold stocks to be overbought they would need another 30 percent move. There is always an emotional bias against gold, whether it is soaring high or dipping low, and that is why it's important to manage these emotions when positioning a portfolio. At U.S. Global Investors we look objectively at the action of both gold stocks and gold bullion by monitoring these long-term data points and paying attention to buy and sell signals based on the trend of mean reversion. Additionally, I remind investors that moderation is key when it comes to gold. Your exposure should be 5 percent to gold stocks, 5 percent to gold bullion, while rebalancing annually. Another reason that gold is moving is it's beginning its seasonal cycle, driven by cultural gold buying. The demand of gold reflected over the next several months and characterized by the purchase of the metal for cultural celebrations and religious holidays, I refer to as the Love Trade. If you look at the chart below, you will see that July marks the beginning of the Love Trade with the celebration of Ramadan.  gold price chart with historical patterns The Indian Festival of Lights comes after, followed by wedding season and, of course, Christmas. This seasonal pattern is one of the most powerful drivers for gold demand. Monitoring this pattern, while remaining aware of other fundamentals to gold, such as mean reversion and a prudent 10-percent portfolio weighting (5 percent in gold stocks and 5 percent in gold bullion, while rebalancing annually), are imperative to understand when investing in gold. These trends allow us to manage short-term swings, small or large, that usually cause more concern than they are truly worth in the long term.  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Why The <b>Gold Price</b> Rose $50 On Thursday June 19th | Gold Silver <b>...</b> Posted: 22 Jun 2014 11:07 AM PDT This article was submitted by Michael Lombardi, MBA, from Profit Confidential. Gold bullion rallied just under $50.00 an ounce yesterday…and nobody expected it. (Okay, maybe just me. In a single day yesterday, my portfolio went up by twice the amount the stock market has risen in all of 2014.) Going through all the major financial web sites, I read story after story yesterday on why gold was rising so fast. They were all wrong; just reporters grabbing at straws, trying to explain something they know very little about. As I started writing in these pages in 2014, inflation is becoming a real problem in America. Years ago, I started writing about how all this money the Federal Reserve is creating out of thin air would become inflationary. That's exactly what is starting to happen now. Why is the Fed starting to pull back on its money printing operation with the goal of being out of the money printing business by the end of this year? Why is the Fed telling us that after keeping interest rates near zero for years, by the end of next year, the federal funds rate will move up to 1.13% and by the end of the following year, it will move to 2.5%? In my opinion, we are being told this because the powers that be see inflation in the cards, and they are working on trying to curb rapid inflation before it happens. And if there is something gold thrives on, it is inflation. Even the manipulated government statistics are now pointing to inflation. The Bureau of Labor Statistics reports prices in the U.S. economy increased by 0.4% in May after increasing 0.3% in April. (Source: Bureau of Labor Statistics, June 17, 2014.) This increase in the Consumer Price Index (CPI) was the biggest since February of 2013. With this rise in prices, inflation in the past 12 months was 2.1%. If we assume that going forward, the new monthly norm for inflation will be 0.3%–0.4%, then in the next 12 months, we are looking at inflation of 3.6%–4.8%. Gold loves inflation, plain and simple! The more there is of a currency in a financial system, the higher the chances of inflation; and the velocity of money is a big part of that. Without getting too technical, the velocity of money is simply how many times one dollar is used in an economy. And the more that dollar is used, the greater the chance of inflation. As it stands, we see the velocity of money is sitting at its lowest level ever recorded. In the first quarter of 2014, velocity of money in the U.S. economy was 1.4. This means one dollar was used only 1.4 times. Back in the 1980s, the velocity of money was 3.0. (Source: Federal Reserve Bank of St. Louis web site, last accessed June 17, 2014.) Why has the velocity of money been so low? When the Federal Reserve started printing money in 2009 and giving it to the big banks in hopes they would lend it out to customers, the banks (being too worried about the U.S. economy) didn't lend the money out. Instead, they took the money and bought safe government bonds (as has been well documented in these pages). But finally, after five years, banks are loosening up and lending again. Last month, commercial and industrial loans at all commercial banks in the U.S. economy stood at $1.69 trillion. This was the highest amount in years. (Source: Federal Reserve Bank of St. Louis web site, last accessed June 17, 2014.) As the banks start lending, the velocity of money increases and that just brings more inflation. I have said it many times before: inflation in the U.S. economy is going to be a major problem. And after roughly five years, inflation is picking up. The perfect inflation storm is brewing as even the velocity of money picks up. Gold is the best hedge against inflation. That's why it's an important part of any investment portfolio. And those gold mining stocks…they are still looking very cheap. This article Why Gold Went Up $50 Yesterday was originally posted at Profit Confidential. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The <b>Gold Price</b> Smashed Three Resistance Levels to Close Higher Posted: 19 Jun 2014 04:03 PM PDT
I am going to enjoy typing this next sentence SO mightily. Today the SILVER PRICE rose 87 cents (4.4%) to close on Comex at 2063.7c. Treading right on silver's heels, gold leapt $41.30 (3.25%) to close at $1,313.70. The great oil man H.L. Hunt said, "Never get really elated in victory; when times are tough, never get down." Times like this, you have to grab yourself and imagine what might make it go the other way. After a fierce rally -- depending on how far it runs -- they might collapse back to a low, but a higher low than we have recently seen. What might cause that? It's not clear how much this rally is being driven by safe-haven demand spawned by events in Ukraine and Iraq. I would say, "Probably not much," because this rise came on the heels of the FOMC's announcement and the dollar's fall. Still, much of this rise could be air from those crises, and that sort of boost quickly deflates. Not that time for a silver and gold price turnaround is not ripe -- it is, and you're watching it now. Only question is how it plays out in the foreground. The GOLD PRICE reached it's first tough resistance level, May's $1,315.80 high. In the aftermarket it's trading right there. Tomorrow is Friday, so likely a lot of those New York traders headed home for martinis will sell tomorrow to realize the week's profits, taking it down a little. What happened? Apparently the market was full of uneasy shorts. Once their buy stop orders were hit around $1,285, gold just kept on rocketing, hitting the next levels of buy stops. Time it stopped, it was $41.30 higher. Silver progressed through the same rout. Think about the gold chart. Remember that in April and May it traced a long even-sided triangle, then broke out of that in late' may about $1,280. So it fell out of that triangle, bottomed at $1,240.20, rallied steadily through June, and today broke through old $1,285 resistance as well as the apex of that triangle (about $1,290). Next gold must overcome April's $1,331.40 high, and down the road March's $1,392.60. The big log in the road is last August's high at $1,434. Those are the milestones. Watch for them. That 2050/2060c level was a high hurdle for silver, support/resistance stretching back more than a year. Silver has oscillated over and under it, and today has vaulted over it, along with its 2049c 200 DMA. Resistance awaits at 2218c (February high), then 2309 (October high), and 2512c (August high). On the weekly chart today's close takes silver to the 50 week moving average (2065c) and above the 20 WMA (20.11). Silver is already above the major downtrend line from the April 2011 high, but still needs to cross above 2400c to break clean free of all taint of the long correction. Without discounting the possibility for one more, but higher, low in June, I have metals have screamed in your ear that they are rallying. Today was a breakout. You BUY the breakouts, in case y'all missed those lows where I was urging y'all to buy. Ain't that just like a nacheral born durn'd fool from Tennessee, to say "I told y'all so"? S&P500 made its second new high this week, but like the Dow, it's struggling for tiny gains. Dow rose 14.84 (0.09%) to 16,921.46 and the S&P500 inched up 2.5 (0.13%) to its new high at 1959.48. On the other hand, the Nasdaq and Nasdaq 100 dropped a bit. But all this says practically nothing -- it squeaks, it whispers -- next to what the Dow did against silver and gold. It TANKED. Dow in Gold plunged 2.68% to 12.88 oz (G$266.25 gold dollars, from G$273.49 yesterday). That took it from its 20 DMA to its 50 DMA (12.91 oz or G$266.87), and through support from a past triangle's top line. Assuming the DiG doesn't turn around and reverse skyward, this leaves behind a double top (Dec - June) which looks like the end to the three year rally of stocks against gold. O, yes, it does. Dow in silver DOVE 3.56% to 819.52 oz (S$1,059.58 silver dollars, from S$1,098.72) leaving its 50 DMA (853.93) far behind and puncturing its long term uptrend line. Awaiting at 787.45 oz (S$1,018.12) is the 200 DMA. I suppose it could look better than this, but I don't know how without violating natural law and good manners. US Dollar index sliced through its 200 DMA (80.41), but ended the day right on it at 80.42, down only 11 basis points. At one point it was down 27 bp to 80.24. Dollar index appears to have expended all its fuel and like a rocket, turned its nose down. As if to verify that, the euro jumped over its 20 DMA ($1.3598) and rose 0.11% to $1.3605. Looks set for a rally at least to $1.3725. European manufacturers must be screaming in pain. The yen reacted with more reserve, losing 0.2% to 98.1. No traction, no direction. I'm sending y'all a weekly report today because I have to travel to Rome, Georgia for a wedding tomorrow. God willing, I'll see y'all again on Monday. Y'all enjoy your weekend! Aurum et argentum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger © 2014, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 18 ounces of silver. or 18 ounces of silver. US $ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down. WARNING AND DISCLAIMER. Be advised and warned: Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures. NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps. NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced. NOR do I recommend buying gold and silver on margin or with debt. What DO I recommend? Physical gold and silver coins and bars in your own hands. One final warning: NEVER insert a 747 Jumbo Jet up your nose. |
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