The good news is that the bells for silver and gold are starting to ring again! Initially only a few people can hear them. In this essay we will look for these bells, and check to find out if they are loud enough to excite those investors who like to 'buy low and sell high'. After all before we can sell high, we must first buy low!
First some fundamentals:
I read an interesting statistic about China. If you were to stand on a street corner in Beijing, and you watched a parade of Chinese, consisting of every citizen in China, marching 6 abreast, the parade would never end. One of the sad aspects of Chinese life, is the intolerance of the communist government towards any kind of religious activity. There are currently 20 million people in prison for 'religious crimes'. (Source: Voice of the Martyrs).
Let's look and see if we can find a few 'bells being rung' to let us know that the trend in gold is continuing its rise.
Well what do you know! The bells are ringing again! Every green vertical line is a bell that was rung. Three of the past four were 'right on', while one (September), was 10 days early. According to successful traders, "in a bull market, every dip near the 200 DMA (daily moving average - red line on this chart), is an opportunity to buy. Even those who listened to the 'bell that rung' in September, made out OK, providing they hung in there, aided by the fact that the 200 DMA kept rising.
Featured is the HUI index of unhedged mining stocks. The chart pattern is positive. Price has bounced up off the advancing trendline, the RSI is rising up from oversold territory, (blue arrow), the MACD is getting ready to bottom out in the seven month old support area (green arrow). The 50 DMA and 200 DMA (blue and red lines), are in positive alignment to each other. "Looking good!"
One look at this chart should convince even a skeptic that the bull market in gold is 'alive and well', and that the current upturn, away from the rising trendline is one more 'bell being rung!'
Silver is just waiting for a 'bell to be rung'. As soon as we see a solid close above the green resistance line (green arrow), the 'bell will be ringing'. The blue dashed lines indicate support, and as the pro's say: "In a bull market every dip near the 200 DMA is a buying opportunity"
Featured is the US dollar index. The green 'speed-lines' show the five month down-trend. The green arrow is the immediate target which has now been reached. A drop below 81.50 will indicate that the green target was 'it'. Two closes above the green arrow, establishes a target at the 200DMA (blue arrow), something that has happened twice before. The latter event would likely be a temporary 'drag' on the metals.
Featured is the TGLDX gold fund. This is a very well managed fund. Everything about this chart spells: UP AND AWAY! The latest downswing in the gold bullion price, (which lasted about a month), barely made a dent in this chart. Price never even came near the 200DMA!
The COT report for gold positions dropped last week, from 173,000 147,000 which is positive, and the total could be even lower this week, as price was down for a day or so after the report was issued.
According to Julian Philips, every day 90,000 new bank accounts are opened in China. The Chinese have loved gold for millennia, and the only way they can legally obtain it is through a bank. One of the 'hottest' jewelry fashions in China is a 'hollow gold ball'. It consists of a gram of gold, shaped like a ball, and worn on a chain.
The precious metals look great. After a month in down-trend, the first few bells are ringing, and more bells can be expected to ring as these markets turn up.
Freebee! Every investor should read a classic book titled: 'Fiat money, Inflation in France', by Andrew Dickson White. It can be downloaded for free! www.gutenberg.org/etext/6949
May 23, 2007
Please do your own diligence, I am not responsible for your trading decisions.
Peter Degraaf is an online stock trader. He issues a weekly Email update to his many clients. For a 60-day free trial, contact him at ITISWELL@COGECO.CA