Editor's Note: HSL is written by the world's highest-paid investment consultant, Chevalier Harry Schultz (Guinness Book of Records- International Editions: 1981-2002). The HSL was the leading gold advocate in the early 1970s, when it called the Great Gold Bull market.
Gold Charts R Us
+ WWW (While We Wait)
Welcome to GCRU #185 on Nov 16, 2005. The good news is that gold shares broke upside from the symmetrical triangles seen in all 3 gold stk indices last week. Also, none of the 3 are overbought. The neutral news is that our Advance/Decline Line went only sideways, & bullion itself is still in its downchannel, despite a $7 rise since last Wed. That may change by the time we get to the bottom of this page, as I write, or by Wednesday morning when I add the PS (which often is the key). Until gold breaks upside to 472 (preferably 474 close), we can't rest on our oars. Thus the password, breatholding; we await.
Meantime, the breakout target of the 3 gold indices is back to their highs of end Sept. But the "average" gold share is doing nothing much; weak ones stay weak, strong ones stay strong. This is where chart-wise selection comes into its own.
I have again been buying a few golds, while staying short bullion until it breaks out convincingly. Such insurance is cheap-to protect sizeable long positions in shares.
Bellwether AgnicoEagle has broken up from its down channel, but ex-bellwether Newmont has not. Those 2 stks rather sum up the gold stks sitch.
Volume has been low in both bullion & gold stks, so a lot of people are waiting. Waiting for what? Either an upside B/O in bullion's down channel or a final correction leg.
I asked my clone/shadow/Aide de-Kamp, Paul, to give me his take on the gold mkt. We agree but he expands on my take. He replied: "Gold bullion has risen to test pivotal resistance of its Oct downtrend. A failure here may open way for a 3rd down-leg (from the Oct peak) towards the 442-450 support area, whereas a forceful push above 472 could put price on track for a run at the $500 psychological resistance. Positive hook in Spinners blue confirming line is hopeful, but not yet compelling. - Schultz Gold Index (SGI) broke upside from the mini-symmetrical triangle mentioned last week & now needs a new higher low &/or continued strength above 15.00 to put it on firmer ground. Encouraging action in SGI is backed-up by rises above Oct downtrend resistance lines in HUI & XAU gold indexes. Spinner lines on the 3 gold indexes are perking up with blue confirming lines poised to rise above zero. -- SGS A/D line is expanding a potential July-Nov H&S top with down-slanting neckline. All will be ok as long as the neckline holds. If index moves up over 4880, we have an important buy signal for the group. Spinner lines portray a more positive stance than price. --Action has improved in the general gold shs mkt with rises to new highs in some golds, questioning the credibility of potential H&S top developments in YRI-T & AEM, while NEM & MDG remain vulnerable to breakdowns/lower lows. Strength &/or rises above important resistance seen in FCX, RTP, TEK-T, AAUK & VYE-T. GG holding tentative base. -- Bottom Line: improvements apparent, but gold share mkt remains a very mixed bag & pack leaders are unlikely to make significant headway while the general mkt remains in the doldrums. With the gold shs mkt striving to find direction, action in gold bullion is likely to be the dominant influence this week; ie, if bullion stops at 472 resistance, the negative draft of any pullback is likely to throw cold water on nascent gold shs strength, whereas a determined push above 472 could kindle a sustained rally leg. Continue to dabble in the strongest shs only, taking regular profits &/or locking in profits via trailing stops." End Paul quote. Good clone, eh? All my own work.
The US$ seems sufficiently disconnected from gold now that it's not a major factor. But on big moves, it should still have a psych effect. As I said lastime, the US$ is moving for interest rate reasons, only. That's the new game in town.
US$ continues strong. I bought more. The euro continues weak. I shorted more; my target for euro is 1.10, at which point the US$ will "probably" have completed its upward thrusting & revert to the downside. If so, it could take 1-2months. Don't fight this or any trend, & get off the trend when it begins to falter.
The Swiss Franc broke support, will move lower.
The £ is neutral to bearish; I've reduced exposure.
C$ needs to hold 83.50 area to avoid further correction. Wud like to see rise over 85.50.
A$ due for rally.
NZ$ stronger than A$, is holding 68 vs US$. Yield still tops the field.
US$ Index overbought & vol weak, so correction due. If so, a chance to rebuy. As I write I note US$ overbought condition is extreme so I'll sell here & plan to buy back on pullback. If we get a pullback, say to 90.50, would be good chance to adjust your positions in other currencies.
Note this: currencies are the area MOST sensitive to charts! Why? Because all other areas have some fundamentals. Wheat has wheat. Stocks have earnings. Since the end of the Gold Standard there are no fundamentals for currencies. They float free & their charts influence their direction & their trends last longer than trends in many other areas. Interest rates are a sometime fundamental. Sometimes not.
US bonds should have a mini-rally here, a chance to sell at 110.30, IMO.
Aug Forbes magazine implies Greenspan doesn't seem to understand which tools cause & cure inflation or deflation. Says it's time to ask the question: is raising the cost of money the best way to fight inflation? Says the Fed may be on the wrong track again. Here's a wise paragraph in the Forbes article: "There's a simpler, better way for the Fed to conduct its monetary operations. Commodity prices as a whole--gold, in particular--will tell U instantly if the central bank is doing its job right. For a variety of reasons, gold is to monetary policy what the North Star is to determining location. Gold's intrinsic value hardly changes. Its price fluctuation in dollars reflects not a change in the value of gold but a change in the real worth of the greenback. This is absolutely basic." Well said.
Enough of well said-ing from the team. See U in the PS, dear readers,
Uncle Harry
PS: Gold's feminine nature showed through as she changed her mind several times in last few days, with half day reversals. On Tuesday she decided not to proceed with the rally toward breaking through the downtrend line from the Oct peak, & instead eased back a bit at the close. As of last night, Tuesday, we were back to WILLSHE or won't she? And Breatholding. But this morning, in Europe, she changed her mind again! Despite a strong US$ this early morning, in Europe, gold shot up $4.20 to 473.20. So, gold has (intra-day) broken through its Oct downtrend channel. 3-cheers, can hardly believe such good fortune. But unless there is a 180 degree reversal during the course of today & a failure to hold the breakout, this is or will be what we've been waiting (& hoping) for.
Yet, a small note of caution: I said on page above, that I really wanted 474 for a validated close. Also, as I write, gold has slipped to 471.60. In any case, by the time NY opens, U'll be able to see if NY is supporting this apparent breakout (I'm writing this at 4AM NY time, 10AM Eu time).
Stepping back a bit, Tuesday's gold mkt was not kind. All 3 gold indexes closed at their low of the day, though none broke their uptrends lines. Ditto for bellwether AgnicoEagle. Gold 's Spinner was positive, but the 3 gold indexes had a negative hook. Volume was low, which was good sign on a weak day.
Best behaving stks Tuesday were AAUK, LIHRY, RTP, YRI, CEDC & WWW stocks GMRK & MDR.
Bullish Consensus Svc show gold at 80% & overbought. Show US$ at 59%. Says gold is neutral both short & intermediate term.
There is thick resistance at 474-475, so it may be slow going for bullion for a few days, but with this "apparent" breakout, the gold shares can now feel free to move up en-masse, knowing they have bullion support!
Currencies Tues: Euro down; ditto its Spinner. Ditto £. C$ held price but Spinner down. A$ rose. NZ$ closed at high of day. US$ held at high of week area & same this Wednesday morning. But with gold up sharply this Wed AM, maybe we'll get the $-pullback I hoped for as the day/week wears on for rebuying.
This is shaping up to be a big day in metals & currencies, so stay in touch with your broker or screen. Be a bit daring. My pre-breakout buying is paying off; the wind seems to be with us. Our under-chart guidelines will be hyper-critical this week. Good luck to us all. Fond wishes from your private alchemist, who is turning lead into gold for U. Uncle Harry
Harry Schultz
Contact: E-mail: HSLmentor@racsa.co.cr
Fax: Monaco (377) 97 70 31 48
Mail: POBox 622, CH-1001-Lausanne, Switzerland
HSL Subscription information:
www.hsletter.com/GCRUPromo_GoldEagleSpecial.html
19 November 2005
Email this Article to a Friend 
Printer Friendly Version
