Gold Investment Archive

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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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4

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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7

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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4

Bottom in for Gold

By
Hardeek Patni
– January 20, 2010
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Spot Gold has climbed steadily since 22 December 2009 low of $1075/oz. Gold had declined about $150 since the early December peak at $1225/oz. The decline was due to fear of Dubai debt and profit taking as a correction was due. As mentioned in my previous article, Abu Dhabi stepped into rescue and provided Dubai with a huge $10 bln bailout.

Now moving over to Gold’s technical outlook, little has changed since my last update. My buy zone of 1100-1125 was very decent considering the bottom being $25 away. So now what is the big questionon everyones mind? It is obviously confusing if we look at technical patterns and compare it with seasonal patterns. Technically the current pattern is supposed to be bearish – A sharp dip followed by a fake rally with another down move.

However, seasonal patterns show us the complete opposite. Historically the month of January has been a very sideways month for Gold with February and March being extremely bullish. Considering this pattern to occur again Gold could easily surpass $1200 and challenge $1300 by March.

The seasonal pattern has the bias over technical pattern because fundamentals are more stronger than technicals. Also, after the great performance of Gold last year and gaining popularity as the next bull market, there would be many huge portfolios being adjusted with more weight given to Gold.

Looking at the Chart now, Wave IV met its end at $1075 on 22 December last year. We are now in the early stages of wave V and the rally should be accelerating next week or early February. Those who are in buy from my suggested buy zone should move their stops to 1100 since any move below 1100 could open up the way to the previous all time high of 1030. Another interesting fact here is that the length of wave A) is equal to wave C) which increases the confidence in this count.

Summing up, Gold is bullish above 1100 and we are in the early stages of a massive Wave V. Moving above 1180 would certainly bring momentum back in this market and Gold will shine yet again.

19-1-10 GOLD

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2

Is the Gold Bull over?

By
Hardeek Patni
– December 21, 2009
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By Hardeek Patni -

Spot Gold jumped off the cliff on December 4, 2009 with a $65 single day fall yet again. It gave up about two weeks’ gain in a matter of 3 days leading to confusion and chaos in the market. Many traders must be questioning themselves – Is this IT? Has the bubble burst? Do I sell now? I say NO we are not there yet. The bubble has not burst and its time to buy not sell. There is a lot of fear in the market at this point since the Dubai World news.

One thing most of us need to know is that the Abu Dhabi (capital of U.A.E) government is ready to support most of the Dubai debt. Investors need to calm down because over the span of 6 months the situation will be better in Dubai. The sell off in Gold due to the Dubai crisis shows the panic in markets. There is an old saying: the best time to invest in a market is when panic and fear are at a high.

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