May 30, 2008

A couple of years, ago, a poster started coming to the GE Forum late at night. His arrival was marked with upbeat posts that were usually posted in all “caps.” Shortly thereafter, this gentleman contacted me at my e-mail contact at the bottom of my editorial. “Humanoid” was a retired healthcare professional who was dedicated to taking care of a loved one in need. David also had some serious problems of his own- only to discover recently that his problems were more serious than he knew. You really had to know David, but even in the face of a battle for his life his attitude never changed one iota. He showed a positive attitude at all times, and he constantly worried about others rather than about himself. This editorial is dedicated to David in this Memorial time period. Hopefully, all of us will find some of David’s courage as these troubled times continue into the future. David, our thoughts and prayers are with you, and if I ever get down to that warm sandy beach for a “cold one”- I’ll be looking for you.

Dixie Chicks - Travelin' Soldier

Led Zeppelin Stairway to Heaven

“PM Sector- Late 2005 Déjà vu?”

In our April 30th editorial “Buy of a Lifetime”, we were looking for the PM stocks to bottom and to start a big run much higher. We have been comparing this environment to the late 2005 period when Gold and Silver ran to new highs while the PM stocks stuttered around highs, then fell back to support while Gold and Silver corrected sharply. When the bottom was in the PM stocks took the lead on the upside in a momentum run that lasted for months. In the present environment the same set-up appears likely. We have cited our expectations for the US Dollar to have trouble getting above 75 even though the word on the street is that the USD will have a big rally. We also showed the similar correction in GG as in late 2005, with expectations that GG would bottom around $33.5 to $34.5, and then lead aggressively on the upside. Another PM stock chart that we have focused on is that of AEM- showing a re-test of angled support that we called a “back-up the truck” buying opportunity. With the expiration in the metals this week we have seen the usual short-term correction in Gold and Silver while GG moved lower to close the gap in the chart. We still expect the price movement of GG to be pretty vertical over the coming month, or two, expecting GG to run up to around 54 to 58 in June, then to around 62 in early to mid July. We are still expecting to see GG run to $80+ in this momentum run with AEM probably running up to around $130. Finding a couple of these charts of large cap PM stocks as reference points as leaders can be very helpful in gauging where the PM stocks sector might be heading in this environment.

As far as Gold and Silver go, our expectations have not changed. We still expect to see Gold rally to new highs to around $1,130, then to around $1,250, with the possibility of a spike up to around $1,437. Our targets for Silver are up to $26/27, then to $32, with the possibility of a spike on this run up to about $38. We like the poor sentiment toward the PM sector at this time with very few seemingly expecting the PM sector to make a big momentum run at this time. We could make the case for this momentum run to last into the October/ November time-frame, or into early 09, but we will just give it some time to get a better read on how it plays out in “time.” Let’s take a look at some charts.

The US Dollar

I see people all over the place suggesting that the US Dollar will have a large rally in this time period, but I don’t see that happening. In this weekly chart we can see that the USD failed at the 20 week EMA and a couple of resistance lines. It looks to me like the Dollar will fall into the 60’s in the near future. We expect the Dollar may stay in the blue channel as it falls, or it may move more aggressively through the bottom blue rail toward the red circle. With the Dollar inflation as the main driver of the PM complex in this PM Bull, such a move would be very supportive of higher PM sector pricing.


Around the time that the PM complex started to correct back in March, we had suggested that we might see some close similarities between how the PM complex traded in late 2005 and the current period. In late 2005 Gold and Silver ran to new highs while the HUI and the PM stocks languished around old highs, then corrected along with Gold and Silver. At the time many PM investors thought the rally for the PM complex was over, but our “fractal model” had suggested much higher pricing to come. And that is exactly what we saw as Gold, Silver, and the PM stocks moved much higher over the ensuing months. Below, is the chart of Gold with the correction in late 2005 highlighted in green. The rally off the bottom is highlighted in red. In this daily chart of Gold for the late 2005 bottom we can see that Gold fell through the 20 day EMA down to touch the 50 day EMA. It then bottomed by running back up above the 20 day EMA, then fell back to the 20 day EMA before moving higher. As Gold moved up in the first move, the RSI moved up while the MACD histogram bottomed. The current chart of Gold is very much the same as we will soon see.

In the next chart we can see the recent bottom in Gold that looks very similar to the 2005 bottom in the above chart. We need to show the weekly chart to compare at proper “Elliot Wave Degree” as we explained in the past with our fractal work. We can see that Gold dropped below the 20 week EMA, but did not make it all the way down to the 100 week EMA as above. Gold then moved up above the 20 week EMA, where it is now correcting down to re-test the 20 week EMA- probably a bit below $900. The RSI has moved up similarly to the chart above as has the MACD histogram. We expect Gold to soon start moving higher, again, with targets to $1130, $1250, and possibly as high as $1437. The $1250 target for this time period was originally presented back in 2005.

The PM Stocks

As a proxy for the PM stocks we have been following the charts of AEM and GG. The last time we showed the chart of AEM was back right at the bottom where we suggested it might be a “back-up the truck buying moment.” So far, from that point AEM has completed the back-test of the angled cup formation and has risen to the first resistance point while the RSI has risen off the bottom along with the MACD histogram. We are currently correcting that move, but expect this correction to be rather short in time. By the end of this run we have potential targets for AEM up in the $132 area on the chart.

In our other “barometer” chart for the PM stocks, GG, we see what I call a “working chart.” A working chart is a bit messy since it contains several reference points that I keep to be able to view from time to time, but there is something that I wanted to show you in this chart. We can see that in the series of blue angled support and resistance lines that there are 3 areas circled in pink. I have been calling these corrections circled in pink “running corrections”, but they also are called “diagonals.” Look how all 3 fall in the same area between the same two angled lines. Also, note that all three fall after 1st wave up-moves of some degree. This kind of symmetry with these kinds of consistent relationships can be very supportive to our expectations of future price movement. They also can be supportive of our expectations for the HUI Index since its chart shows the same characteristics in the same time-frame. Notice that the formation in the middle pink circle occurred right at the end of 2005. We have expectations of GG potentially running to 80+ on this move. Price dropped today to close a gap left at a lower level. We expect GG to trade up similarly to the late 2005 period by running to around $54 to $58 in June, and possibly to around $62 in early to mid-July.

In this daily chart of GG on “Bigcharts” we can see the two similar corrective periods circled in blue with blue arrows pointing to what we suspect are the current very short-term corrections in this current time (on the right.) We can see that the gap in the GG chart was filled, today, and we do not expect the correction for GG to be a lot deeper.

In our eyes the charts of the PM Sector look very constructive at this time, suggesting a continuance of the momentum run in the large cap stocks that we expect will soon be joined by the small cap PM stocks. Currently Gold, Silver, and the large cap PM stocks are chopping higher through the bands of resistance that were created on the way down into the bottom. Most of Silver’s resistance on the chart lies more toward the bottom of the move so we’d expect Silver to move more aggressively as soon as the recent highs are taken out. I’ll never forget the quote from Kenny Adams that was passed on by Jim Sinclair a few years, ago……. “A break-out from a low chop in a Bull Market usually gives way to a very large move.” I think Kenny’s words will soon be quite prophetic for the PM complex.

I hope to find time later this week to return to discuss the Silver chart along with some Silver stock charts and my expectations for the small caps and explorers. It all should get much better from here, in my opinion.

As we have noted we will be moving our work to a subscription site, though there has been a delay with the site, itself. I apologize for the delay, but do not have control over creating the site. I would again like to thank readers for the many kind comments that I have received. We are compiling an e-mail list to contact those who wish to be notified when our new site is up. [email protected]

For the moment…………..Goldrunner.

Below, is a link to the Goldrunner Index which includes links to the recent series of editorials we have posted.

Again, I’d like to thank all of the posters at the Gold-Eagle Forum for their daily input.  This thank you is especially extended to TQ and to Grininbarrett who have positively affected my growth over the years, along with posters  Pittrader, Trader_Vic, and Mr. Aholbroke.  Special thanks go to Dr. Vronsky and Westerman for creating the Gold-Eagle site and for editing my work.  A very special “Congratulations” go out to Dr. Vronsky and Westerman after Gold-Eagle saw its hit counter ring up to 288  million this last week. 

Here is the link to a site I use to research the warrants of Precious Metals stocks.  I will be discussing some aspects of the leveraged use of warrants later in this editorial series.

Another very good site that is dedicated to investments in Silver belongs to David Morgan, and his site can be found here…………….

India and the U.S. trump Italy as top gold jewelry exporters.

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