GLD Archive

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Record High in Gold Adds Allure To Yamana Gold Shares

By
king1
– May 14, 2010
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By Relmor Demitrius

Yamana Gold Inc.(NYSE:AUY) and other miners are feeling the effects of record gold prices.  Due to extreme market conditions in 2008, Yamana Gold has fallen short of its own high, trading near $11.25 today, but had traded as high as $14 in December of 2009.  Will Yamana Gold and other miners see another explosion back to extremely bullish prices?

Strong gold prices have been providing an excellent over $10 base on shares of AUY.  I am bullish on this equity anytime its trading strong over the $10 line.  Checking the charts we can see strong support in this area and a recent gap up and hold has given reason for investors in AMEX:HUI and NYSE:GDX companies to have hope of an early summer breakout.  The higher AUY trades, the more attune to market sentiment it will trade.  Is the NYSE:GLD a better play here?  When is spot gold due for a pull back?  All equities can be sold regardless of strength of sector in market pullbacks and gold miner shares are certainly no exception.  With price ranges from $18 to $4 during the 2008 blow off top to the sinking lows of the dreaded March of 2009 area, fear buying into shares of gold miners hasn’t always been the driving force in this equities accumulation pattern.  As gold prices rise, because of a base of support due to somewhat static costs versus increase in the product selling price, so does Yamana Gold’s abilities to generate profits.  The costs to mine gold do increase as oil prices increase and labor costs due to foreign exchange rates vary, but if the underlying product increases at a higher percentage than the increase in costs, additional profits are available.

With gold prices reaching record highs of over 1200 dollars an ounce, expanded revenue for unhedged miners are sure to follow.  I expect Q2 numbers in revenue in Yamana to have an increase due to this gold surge.  The percentage increase from $800 to $1000 isn’t as great as from $1000 to $1200, but most of this added value comes with less and less costs attached to the higher price.  Why do costs increase as gold increases?  Well it doesn’t necessarily, but when gold increases certain economic conditions are usually in play that increase gold miners costs of production of the metal.  These include mining countries with a strong local currency or having the falling dollar cause a rise in oil prices.  These are a few conditions that high gold prices can affect the cost side of business.

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Gold Breakout Comes Early (NYSE:GLD, NYSE:AUY, NYSE:GDX, NYSE:ABX)

By
king1
– May 10, 2010
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By Relmor Demitrius

SPDR Gold Shares (NYSE:GLD) in the last two trading days had climbed almost 3%, to $118.27 (this reflects a spot price equivalent of around $1,182.70 an ounce) at close on Friday.  Fears of a European financial meltdown brought on by weakness with their smaller members such as Greece, Spain, and Portugal combined with a falling stock market, drove buyers into gold last week.  Even after the GLD closed trading, a late day surge saw spot gold go from around 1,180 dollars an ounce to a near record high of 1,208 dollars an ounce, at the time New York COMEX ceased trading on Friday.

Last month I wrote an article predicting a sizeable breakout in gold to happen around the 20th of May.  It seems the gold breakout came early on Greece news, creating fear buying.  On my Chart 1, I showed the coming together of two long term trend lines around the 20th of May.  As you can see from the circled breakout from early September on Chart 1, that move also had an early breakout, so this should not be surprising, as May 20th was more of a deadline for this move, rather than a prediction on the exact day of its occurrence.  A strong qualification of a valid resistance break is that it occurs on high volume.  As indicated on Chart 2 this break does indeed have higher than usual volume.

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Technical Alert on Spot Gold and the GLD

By
king1
– April 23, 2010
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By Relmor Demitrius

SPDR Gold Shares (NYSE:GLD) and Spot Gold has been trading sideways for a few months now.   After achieving new record highs and a period of prolonged consolidation over the $1000 dollar mark, the GLD has been setting up a nice floor for possibly another breakout coming soon.  These breaks can be up or down on this pattern, but they usually break in the dominant trend, in this case, up.  Let’s take a look at some points of interest.

As per my chart 1 below, the GLD is in a symmetrical triangle pattern that will resolve on the 20th of May.  We have converging trendlines that demand a resolution on that day or before.  The break should occur in the direction of the trend, which has been up, and is usually a break of significance, meaning not just a few dollars.  I expect a break back into the higher channel, now between 115 and 125, at this time.  A break on this consolidation is possible back into the extremely bullish top channel of 125 to 137 as well.  I expect sideways until then, between 109 and 112 until this break occurs.

The 2nd chart is a look at the rounding top action versus sharp hits and retraces.  You will notice that the rounding off pattern (attacking the resistance line more than just once, for instance) has resulted in better overall reactions to the price.

The third chart shows a similar pattern break in the past, with the underlying volume information.  You can see the first pattern broke on high volume, and the same it true when the pattern broke down at the top as well.  Notice the sharp hit off resistance and the subsequent harsh reversal.  I see rounded tops here, consolidating into that wedge, and a breakout coming.  I show expected direction on this chart as well.

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The Two Sides To Gold

By
king1
– April 20, 2010
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By Relmor Demitrius

Gold made front page news in 2009 when it soared past the $1000 barrier and reached new all time highs.  People rushed into gold tracking stocks like NYSE:GLD , NYSE:IAU,  and NYSE:GDX.  Many economists offered explanations for why this happened or found a causal relationship in the economy to justify this event.  Whatever the reason, understanding how currency and gold values are affected can reveal the answer and maybe even how, where or even when to invest in the future.  Can gold go higher?  If so how high?  To say gold is high due to inflation is immature and shows a lack of knowledge about the subject.  Sorry main stream media gold fly by night journalists, your two bit answers don’t explain even a portion of the story, nor why that statement isn’t accurate right now.  To understand this move in gold we must first understand currency and its relationships with hard assets.

Like anything, the value of the dollar is based on supply and demand.  First let us focus on the demand side.

If demand of the U.S. dollar increases, and the current supply of dollars remains the same, the value of the dollar will increase.  This means that the dollar index, a basket of currencies used to track the value of the dollar, ironically against things measured against simply other currencies themselves, and why they call it a floating currency, will go up.  As the dollar index goes up, it signifies that fewer dollars are necessary to purchase the same amount of goods.  It also means the price of gold will drop in dollars.

If demand of the dollar decreases , and there is the same amount of supply available, the value of the dollar will drop, and the price of gold will go up in dollars.  So as the dollar index goes down, the price of gold should rise, all other factors, of course being neutral. 

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Understanding the Market Boom/Bust Cycle (NYSE:IBM, NYSE:BAC, NYSE:C)

By
king1
– February 13, 2010
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By Relmor Demitrius -

The year 2008 proved to be a very educational one for the average investor.  Due to the stock market downtrend, bank failures, and emergency FED meetings galore, we learned some interesting diction during this economic downturn.  Stagflation, inflation, deflation, recession, depression, V shaped corrections, W shaped corrections, FED rates, LIBOR rates, and what the hell is a CDO?  What is the boom/bust cycle?  What are cyclical stocks?  Value stocks?  All these concepts and words were being thrown around by so called “experts” on every news TV show to every financial bog and newspaper in the country.  The amount of half truths, misinformation, and just plain fear mongering was staggering.  I think as time has passed, and a clear mind can now be used to refocus on some of these past events, terms, and concepts.  We can use this to better understand where to put your money a year from now, or even tomorrow.  But first, you have to understand the animal.

At the core of all of this is having a basic understanding of the economic and monetary rules that are applicable to today’s world.  At the very core, the first concept that must be understood is what is fiat currency, the current monetary system we are using today.

Fiat currency is a currency that is backed by nothing, and measurable only to other currencies.  This is where the term “floating currency” comes from, which means it is only “floating” in apparent value up or down in comparison to other currencies currently backed by nothing.  The Euro, Yuan, Ruble, and most major foreign currencies are indeed backed by nothing but a promise.  In effect they are not assets, they are simply a way to pay debt.  Since we live in a world of debt, they should always have a use, however.  In 1941, with the creation of the Taft-Hartley Act, which Nixon revoked, we were on a limited gold standard.  When the U.S. dollar was implemented as the worlds reserve currency, we promised that an exchange for gold would always be possible.  Well in August of 1971, Nixon said, No more.  The dollar can no longer be redeemed for gold.  Costly war expenses, innovations in modern banking, and other factors lead to a huge influx in the money supply.  There soon simply wasn’t going to be enough gold to give out, if so demanded.

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