Thursday, June 15, 2006

Gold Bottom

Gold is in a channel that slopes downward a bit more than its primary down trend line and looks to have bottomed.

[click on graphics to enlarge]

End of downward trend points:

By Wednesday gold was down 7 days in a row, and had gapped down on Tuesday. Tuesday was a big volume day in the gold markets. Volume is a sentiment indicator. Lots of fear showed up on Tuesday which is indicative of important bottoms. Gold hit the bottom of its channel. It's a good bet that gold has bottomed. Right below gold is its 200 day moving average line. A little further below that is its upward trend line of about 10 months in length. There is also support right here from the double bottom base that gold made several months ago. IBD's (Investor's Business Daily) proprietary momentum indicator shows gold deeply oversold right now.

Probably for the first time there is now fear of inflation in the financial media which is not good for the US dollar which is one of gold's main prices:

DJ WORLD FOREX: Dollar Down As Inflation Concerns Grow
Wed Jun 14 16:30:06 2006 EDT
By Isabelle Lindenmayer

NEW YORK (Dow Jones)--The dollar is lower late Wednesday after a choppy North American session kicked off by stronger-than-expected U.S. inflation data.

Silver is in a similar situation except that it did not generate standout end of downward trend signals, but is providing a great second chance.

Gold is at a great buy price right now and is providing a great second chance.
Those buying right now are going to be happy campers by the end of this year.

Saturday, June 10, 2006

Interest Rates Rise With Gold

Yields on USD denominated financial instruments rose during the last bull market in gold because the US dollar was loosing value. Despite what the financial media, mass media, hedge funds, mutual fund managers think or are telling you, rising interest rates/yields are a negative for the US dollar and a positive for gold and silver.

[Open the below charts in another browser window so that you can increase their size to see them better.]

Never mind gold and silver, the US dollar during the last gold and silver bull markets lost a lot of value against other government fiat tokens.

What did gold and silver do during the rising interest rates and yields during the decade of the '70s?

As interest rates rise the US stock market will crash, as well as the price of US government notes and bonds (the "safe" stuff), as well as the price of houses in the US. The US was not a net debtor nation at the beginning of the '70s. This time around it is not only a net debtor nation, but a huge record breaking net debtor nation with , so far, no intentions of changing. The US has so much debt now a days, not only is it going down the tubes, but it should stay down for a number of decades. Many many decades.

When most everything around you is crashing down, real non-leveraged stuff (most real estate is highly leveraged and illiquid) becomes a safe store of value. Not only are gold and silver the best safe stores of value, they happen to be the historically best medium of exchange (real, actual money). At some point poeple will be happy to accept these metals instead of lousy government fiat tokens.