2013 Forecast – Tis The Season To Drink & Own Coffee

It's always time for coffee, but today Chris Vermeulen shares his coffee trade with us.....


Coffee prices have fallen more than 50% since 2010 which can be seen through the coffee exchange traded fund symbol: JO. This investment seeks to replicate the returns that are potentially available through an unleveraged investment in coffee futures contracts as well as the rate of interest that could be earned on cash collateral invested in specified Treasury Bills.



Weekly, Hourly and Seasonal chart of JO Coffee Exchange Traded Fund

The top weekly chart shows my price targets for 2013 while the lower hourly chart shows strong on balance volume meaning big money is slowly building a long position in coffee. The small white chart is the seasonal chart of coffee futures showing prices historically rise from January–March, then a correction followed by another rally in to May.

Coffee prices are still in a down trend but it looks as though the end is near and if played properly it could provide up to 100% return on your capital in 2013.



Coffee Futures Monthly Long Term Chart

This chart gives you a bird’s eye view on where coffee prices are trading in the big picture scheme of things.



JO Coffee ETF VS. SBUX Starbucks Share Price:

Lower coffee bean prices has helped lift share prices of coffee companies like Starbucks: SBUX, Coffee Holdings Co.: JVA, Coffee Roasters Inc.: GMCR, and PEET’s Coffee: PEET. But cheap coffee may not be around that much longer and the lower earnings for coffee brewers may be closer than most may think.



2013 Caffeine Conclusion:

In short, I have been watching coffee prices for a bottoming pattern for months and I now feel it is getting really close to a bottom and it could be a great trade and investment in the new year. As for companies like Starbucks it will likely not have much of an affect on the bottom line until the second half of the year though it is something to keep an eye on during earning seasons.

If you want my trading and investing ideas each week along with trade alerts for ideas like this then join my newsletter today at The Gold & Oil Guy.com

Chris Vermeulen

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Mid week trades to focus on .... Gold, SPX, U.S. Dollar and Natural Gas

Yesterday’s price action was very bearish yet again and we are patiently waiting for a counter trend pullback to happen. While three are some good looking plays out there I really do not want to get long until the market clears the air with a bout or three of strong selling. Remember 3:4 stocks follow the market and the odds of picking a commodity or ETF that bucks the trend is unlikely.

SP500 / Broad Stock Market

We have seen a bug run up in stocks this month and things are looking a little long in the teeth. A large number of stocks are trading above their upper Bollinger band and the broad market is testing that key resistance level also. Typically when a Bollinger band is reached we see price reverse for a couple days at minimum.

While the equities market is in a new uptrend as seen by the moving averages I pullback seems imminient. The last two days has formed reversal candles and are pointing to lower prices.



Dollar Index Hourly Chart

This chart shows a possible bottom forming in the dollar pointing to a 3-8 day pullback in stocks.



Gold Futures Hourly Chart



Natural Gas Hourly Chart



Morning Trading Conclusion

Looking at the charts on several different time frames, not all shown here, technical analysis shows a pullback in stocks is highly likely. This is what we are currently positioned for.

The US dollars downward momentum is slowing and if it can find a bid today it should trigger strong selling in both stocks and commodities. Gold and silver are down sharply along with miners.

We have been watching natural gas for a few months and know that it has been trading inverse to what stocks do. This bodes well for a bounce in natural gas if stocks start a sell off. That being said, natural gas is trading at a key tipping point that could spark a very fast and hard drop. This knife can fall at a speed that will take a slice out of your trading account if not traded and managed properly (tiny position and use of a stop). I actually like natural gas the more it moves down and could issue a buy alert on it today or this week. I would like to see volume decline at this level showing the momentum is slowing......

Chris Vermeulen

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Is this "an emerging low" in gold stocks?

Gold stocks have been in another recent downtrend, which makes sense during a “wave 2″ correction in GOLD.

If we review the GDX ETF for Gold Stocks we can see a possible triple bottom formation. This one though looks bullish for a reversal trade to the upside near term as GOLD forms a C wave bottom.

This triple bottom looks like a series of higher lows should the 43-44 GDX ranges hold near term. The MACD line is still trending down, but in very oversold territory as in the prior two lows that had massive rallies.

Ways to play a reversal for the aggressive stock investor is NUGT ETF, which is a 300% long leveraged ETF based loosely on the GDX ETF (1x).

The specific timing of entering NUGT is of course tricky and best saved for our ATP trading service. That said, assuming GOLD does bottom at 1681 or 1631 near term, the GOLD stocks tend to lead the metal higher.… so they will bottom BEFORE the metal.

Here is the GDX long term chart showing what looks like an emerging Tradeable low...




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What the VIX Term Structure is Saying About the Fiscal Cliff

The past few weeks have been full of a constant barrage of press conferences and public statements from the charlatans in Washington D.C. Politicians cannot pass up a chance to get in front of the cameras and the media has used the “fiscal cliff” as a mechanism to scare average Americans further about their future.

Interestingly enough, amid all of the nonsense that has been going on stocks have remained resilient. I think sometimes its important to just step back away from the media’s noise and just look at some price charts for more clarity. The S&P 500 Index has been trading in a relatively tight range now for over 6 trading sessions as shown here by the great staff at The Technical Traders.com......

Read "What the VIX Term Structure is Saying About the Fiscal Cliff"



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Gold Should Be Nearing A Major Bottom

The recent rally in Gold took the metal from the 1620’s to roughly 1800 per ounce before the ensuing corrective action began. Back around October 20th we warned our readers about a likely “ wave 2” correction in Gold and we had several reasons for that warnings. One of the biggest concerns we had was that the sentiment surveys were running very hot at the time. The percentage of professional advisors polled that were bullish on GOLD was 88%, with 7% neutral and only 7% bearish. Elliott Wave Theory is the foundation of our work, though we are sure to mix in other clues and elements to “fact check” our reads. When you see sentiment readings that high, coupled with a $180 rally leading up to those readings, you can begin to look for clues of a top.

The other warning signal we noted was the MACD signal which had crossed south and was a topping warning signal to get out of GOLD for intermediate traders. At the time, we surmised that a “wave 2” correction in sentiment, and therefore price was required to work off the overbought conditions. The first level attacked the 1681 areas roughly and then a “B” wave rally to 1751 roughly ensued. Wave 2’s are made up of a 3 wave pattern, A down- B up- and C down to finish. It appears that GOLD is now in the final C wave down in sentiment to complete the correction pattern.

Clues for the “C” wave include the Goldman Sachs quasi-bearish 2013 GOLD forecast that came out today. In addition, the media attempting to explain the drop in GOLD as being related to stronger than expected economic indicators or fiscal cliff negotiations, neither of which make any sense at all.

We expect GOLD therefore to complete the C wave correction at 1631 or 1681 specifically. There are Fibonacci fractal relationships to the first leg down (The A wave) at those levels, and they tend to repeat themselves in terms of crowd behavior. At the 1681 level we have the C wave equal to 61.8% of the A wave amplitude. At 1631 we have a more traditional C wave equal to the A wave. In either event, look for a washout low in GOLD occurring at anytime near term, and for traders to start scaling in long.

Below is the GLD ETF chart showing the two most likely bottoms for the precious metal, one of which already qualifies as of today’s trading:

Click here to sign up for our free weekly report or take advantage by signing up today for SP 500 and GOLD forecasts updated on a daily basis.

Gold, Silver and Miners in Stage 1 Accumulation Mode

We don’t hear much about gold and silver anymore on the news. This time last year you could not go 5 minutes without a TV or radio station talking about them. Why is this? Simple really, precious metals have been building a Stage 1 Basing Pattern for the last 12 months. This boring sideways trading range is how the market gets most of those long holders out of an investment before it starts another move up. The saying is “If the market doesn’t shake you out, it will wait you out”.

We all know time in money so the above statement makes a lot of sense doesn’t it? Instead of having your money sitting in an investment that has clearly displayed a large sideways range with month and possibly years before any significant breakout will occur, why would you want their money in it doing nothing? There are other opportunities which you could be putting your money into that could generate more gains until the precious metals sector sets up with a high probability trading pattern.

The good news is that gold, silver and precious metal miner stocks are forming a very large Stage 1 Accumulation pattern on the weekly chart. This points to a multi month rally in prices if they breakout above our resistance levels.

Gold & Gold Miner Stocks Weekly Analysis

The chart below shows a lot of analysis and to the untrained eye this may look messy and confusing, so take your time to review it. In short, what we are showing are sideways price patterns using the previous highs and lows for support and resistance levels. The analysis shows the shift in prices from bearish (down), to Neutral (sideways). The exciting part about this pattern is that a new bull market should emerge if our analysis is correct. Now, we are not talking about 5 -10% move here, we are talking about a multi month and possibly a year long rally in precious metals that could allow some individuals to retire early if played properly.

A break above our red dotted resistance lines should trigger aggressive buying in gold miners along with physical gold bullion.

In the past month we have been giving out some of my Stage 1 trading ideas which have generated some decent gains for those who follow along. All but one have generated gains with FSLR 12.5%, FB 12%, RIMM 54%, AAPL 5%, TLT 2.5%, XLU 1.5%, and KOL down -5.2%.

Silver & Silver Miner Stocks Weekly Analysis

This chart of silver and silver miner stocks (SIL), shows a very similar pattern to that of its big shiny sister (Yellow Gold). Silver carries a lot more risk because of its industrial usage. Also this commodity is thinly traded and can move very quickly on a daily basis compared to gold. Because of these quick price movements it has attracted a lot of speculative money which also has increased the volatility. More often than not silver will move 2-3 times more on a percentage bases than that of yellow gold.

Battle of the Miner ETFs Weekly Performance

This chart compares three precious metals miner ETFS (GDX – Gold Miners, SIL – Silver Miners, NUGT 3x Leveraged Gold Miners).

Silver miners have held up the best because the herd saw how big the move was a year ago and are front running the next potential rally. But, depending on how you read the charts and sentiment it may be pointing to the dormant gold miners for a bigger than expected rally. But debating which one will breakout and run the most is a conversation/debate of its own and even I can argue both sides. The safe play is that even if gold miners (GDX & GDXJ) underperform the silver miners (SIL), the NUGT which is 3x leveraged gold miners should be the same if not outperform silver miners.

Precious Metals & Miners Trading Conclusion

In short, we favor trading the miners over physical bullion simply because the charts show much more profit potential than if one was to buy the bullion exchange traded funds GLD and SLV.

The market seems to be setting up for some very large moves in 2013 and members of our trading newsletter should do very well. Be sure to join and follow along at The Gold & Oil Guy.com



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Why the S&P 500 & Gold Rallied in the Face of Negative News

The amount of negative news that we have seen recently has been mind blowing. Europe is going into recession, Greece and several other countries are on the verge of bankruptcy, the Middle East is a powder keg, and the U.S. is facing a fiscal cliff. Shockingly for most retail traders, the past week has produced a very strong return for U.S. equity indexes as well as risk assets in general.

Retail investors often times consistently lose money because they focus on the financial media and all of the negative news that is out there. Trust me, as a longer term trader and investor, there is never an absence of negative news or potentially poor economic possibilities. This is not to say that markets cannot decline, investors just need to understand that markets are cyclical in nature and do not ever move in a straight line.

Based on what I was reading from most of the financial blogosphere recently, you would think that the entire world was about to end. A few blogs were calling for an all out collapse late last week or a possible crash this past Monday, November 19th. As is typically the case, the market prognosticators were wrong with the calls for a crash or an absolute collapse in financial markets.

Unlike those blogs, members of my service at the Traders Video Playbook were getting information indicating that we were expecting higher prices. At our service, we lay out regular videos covering a variety of underlying assets from the S&P 500 Index and oil futures, to gold and treasury futures. The focus is purely on analysis of various underlying assets across multiple time frames. We cover intraday time frames as well as daily and weekly swing time frames throughout the week with videos and written updates.

To put into perspective what we were seeing in the marketplace on Monday November 19th, the following charts were sent out to our members during intraday trading that day....Click here for "Why the S&P 500 & Gold Rallied in the Face of Negative News"

See you in the markets,

J.W. Jones

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Markets are Cyclical in Nature....Make sure you know these "Four Stages of Stocks"

Our good friend and trading partner Chris Vermeulen has put together an article detailing his classic economic theory that dissects the economic cycle into four distinct stages..... expansion, trough, decline and recovery. And he explains in detail why a stock is no different, and proceeds through these cycles.

Knowing this information is crucial to survival as this cycle happens on all time frames (1 minute chart all the way up to yearly charts). Harnessing this information for trade selection and timing greatly reduces the amount of trades you take, while focusing only on new leaders which have massive upside potential.

So take a few minutes and click here to read Markets are Cyclical in Nature....Make sure you know these "Four Stages of Stocks"

HUI-Gold Ratio..... 3 Views, 1 Conclusion

Here is a little snippet from NFTRH 213 that showed the important indicator of gold sector health, the HUI-Gold Ratio (HGR) from three different views; daily, weekly and monthly. As you can see, daily must hold to keep the weekly intact, which in turn must hold to keep the monthly big picture of the secular bull (for the HUI, not this sad looking ratio) intact.

This is a difficult sector to own and indeed these charts say it is best to trade the stocks regardless of what one does or does not do with the bullion. But the conclusion is that until the HGR breaks down to a lower low, the current situation is viewed as a buying opportunity. On the other hand, HGR will serve as a handy risk management indicator if it should unexpectedly collapse.

Daily HUI-Gold Ratio (HGR) needs to hold a higher low to both the May and July lows here or else the story is bearish. That is because a new low here would threaten the higher low from Armageddon ’08, highlighted in yellow....Let's go to the charts [click here].

Keep Your Eye On Trends & Reversals.....SPY, RIMM, KOL

Today our trading partner Chris Vermeulen gives us some trades to keep an eye on......

The equities market technically still has another day of positive momentum behind it and with a short holiday week higher prices are favored.

This morning in the video I mentioned how oil continues to look untradible because of the sharp news related swings and lack of clear chart patterns. Yesterday it rallied over 2% and today is back down 2%.… Steer clear of this beast…

SP500 (broad market) continues to grind sideways/higher today. Volume is very light which bodes well for lower prices in the coming days. I would love to see a Pop-N-Drop tomorrow which is when the index gaps higher at the open into a resistance zone at which point we would be looking to get short (buy the SDS).

Research In Motion shares hit our first resistance level after being upgraded this morning…. Buy the rumor sell the news…? If you are long taking some money off the table here is smart play and to move your stop to break even or better.

Coal sector is looking tasty today and we may take a long position in KOL, but I will update if I do so.

Chris Vermeulen

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Free Workshop Video: Advanced Trading Applications of Candlestick Charting

Candlesticks, used by many....truly understood by few. As a special treat to Gold ETF Trader readers, Gary Wagner is offering you an in depth look into candlestick charting. Join co-founder of Wagner Financial Group. and acclaimed author as he walks you through set ups in ways you can take your candlestick charting to a new level.

In this video workshop you'll discover the crucial chart patterns that candlesticks reveal - how to interpret them and how to use them to pinpoint market turns. You'll also learn how to use candlesticks in combination with familiar technical indicators like Stochastics, %R, Relative Strength Index and Moving Averages to create a dynamic, synergistic and extremely successful trading system.

Click here to watch Advanced Trading Applications of Candlestick Charting

How do Hedge Funds Trade the First 30 Minutes the Markets are Open?

We have been day trading for years, back to the days when we got excited that we could now use this new technology and fax our orders in. And so much has changed over the years on the technology side. But a lot of things still have not changed one bit. Most importantly is the ability to use market psychology when getting the upper hand on traders and investors on the other side of your trades.

Yes, it's true.....we all can't be winners. There is a losing trade on the other side of every one of your winning trades. And I still, after all these years, believe that most of those losing trades are being placed by retail and professional traders that insist on breaking the rules of Trading 101. The pros know them better then anybody and they still continue to allow their emotions to dictate their trades.

That's why I have partnered with my friend Todd Mitchell in promoting his New 30 Minute E-Mini Breakout Strategy. This is a time tested system that takes your emotion out of the equation and allows you to make your trades in the first 30 minutes that the market is open, then go on with your life. Regardless of news cycles and market reactions. I am buying this for myself, we have traders in our family and our shop that will benefit from the immensely. So should you.

It's free to sign up, watch Todd's video and ask him questions about the program and the way the system works. This is the guy that hedge fund managers are sending their new employees to so they can use the system in their shops. Why wouldn't you take a minute to sign up, read the comments traders are leaving about the program and ask Todd your own questions.

OK, enough of me....I need to get ready for the first 30 minutes of trading on Monday.

See you in the markets,
Ray C. Parrish
President/CEO at The Gold ETF Trader

Just Click Here for "The New 30 Minute E-Mini Breakout Strategy"

Did the SP500 Finally Bottom?

From our trading partner David A. Banister at Market Trends Forecast.com......

The SP 500 finally caved to match or go a bit lower than the SP 500 futures lows of about 11 days ago in yesterday’s action. The drop to the 1390 area is within our 1386-1400 pivot points for a major wave low pattern that we outlined as far back as September 25th for our subscribers.

Our work centers around sentiment and crowd behavior, the headlines are of interest but only tell you the psychology of the publishing arms or talking heads at the time. Often headlines can be negative and the market climbs, or positive and the market is dropping. So the key for our work is figuring out where we are in the sentiment patterns of the crowd, and then to anticipate the pivots ahead of time and invest accordingly.

In fact, in just 24 hours or so we had a 43 point SP 500 drop… this is interesting because the same thing happened at the June 2012 lows as well. Back then we had outlined pivots in the 1250-1270 areas as likely lows, and the market ended up bottoming at 1267. This bottom area yesterday fits within pivots we were able to anticipate 7 weeks ago, without any knowledge of the election or other headlines around the world.

Often, major washout days like yesterday centering around major news (Election) can create the final panic sell-off to complete a wave pattern of negative sentiment to the downside and then reverse the markets higher in new bullish pattern. To be sure, there are many sentiment headwinds like the Fiscal Cliff and more in the coming weeks…but markets tend to price all that in ahead of time right?

At yesterdays lows the market seems to have completed all requirements for a C wave of an ABC complicated decline from the 1474 SP 500 highs and so far an 8 Fibonacci week correction period.

What we expect is a rally now and again, we need to get back up and over 1423-1427 pivots this time and hold more than 24 hours, but the odds of a rally are now at 75% from here. IF we fail to hold the 1388 pivots, then the next levels are 1372 and 1363 to watch.

Bottom Line? Most metrics have been met for a wave pattern low, (Whether this be wave 4 or wave 2 doesnt much matter just yet) and the market now has a chance to start a wave 5 or wave 3 rally to the upside. Lets watch 1388 areas to hold first, then we will watch 1403, then 1423-1427 pivots to clear. We are neutral to bullish now after this washout

Back on Sept 25th we did a chart forecasting a drop to 1395-1400 as likely before the downtrend would end, now let’s see if the market can get some legs here. We have included that old chart here to show you how crowds are fairly predictable in their behavioral patterns in advance.



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It Doesn't Have to Be Hard....Post Election Trading Made Simple

Our trading partner Chris Vermeulen gives us his take on trading the post election markets.......

Over the past two months shares of gold (GLD) and Apple (AAPL) have had a sizable bite taken out of their share price. Active traders along with the longer term investors have had a wild ride this fall watching these investments slide to multi month lows. The big question is when will gold and apple shares bounce?

Here we are again with another election behind us and Barack Obama in the White House again. Many think this means four years of the same thing… Printing, Inflation and higher stock prices.

Is this good or bad for Americans or the world for that matter? I doubt it, but who really knows and who cares because there is nothing anyone can do about it now. So buckle up your seat belt and focus on trading and investing with major trend both within the United States and abroad using exchange traded funds.

Currently the broad stock market and commodities are in a full blown bull market so the focus should be to buy the dips until proven wrong. Here are some charts showing the important breakout levels for Apple, metals, oil and key indexes like the Russell 2000.....Check out "Post-Election Trading Made Simple"

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Why E-Minis Are One of Our Favorite Markets

We here at the Gold ETF Trader don't talk about E-Mini trading a lot, but there's a reason why the E-Mini futures are one of our favorite markets to trade.....

They're just so darn consistent, the opportunities are easy to spot, and the potential for making daily income is unlike any market we've ever seen!

The problem is most people approach the E-Minis all wrong....

Well, that's about to change....

You'll see what we mean inside of the free video presentation our trading partner Todd Mitchell created for you here.

Not only will you discover the real reason why so many traders use the E-Minis to make money, but he shows you how you can start taking advantage of these opportunities regardless of how large or small your trading account is.

Access is limited [really, no kidding] and that's why we don't intend to leave this video up for long, so please be sure to watch it today!

In this video Todd will also teach you the 3 times of day that offer the most profitable trading opportunities (and when you want to stay out of the market!), how to pull in profits without struggle, a 4 - step sequence to boost your trading profits immediately, and a lot more.

This could be the game changer you are looking for...Click here to watch the video.

Happy trading and we'll see you in the markets!

Ray C. Parrish
President/CEO at The Gold ETF Trader

Election Cycle – What to Expect in Stocks & Bond Prices

By: Chris Vermeulen of The Gold & Oil Guy.com.......

It is that time in the presidential cycle that gets everyone emotional and concerned with the future outlook of the United States. While everyone has their opinion on whom they think is best for America, I promised myself a long time ago to keep my thoughts to myself for two key reasons. ONE: only 50% of Americans will agree with me J, and TWO: I am Canadian so I do not experience what Americans go through on a daily basis.

My thinking is if Obama wins then we will see Quantitative Easing continue. And with the recent positive economic numbers on Friday it should give some confidence to investors that things are SLOWLY stabilizing (Bullish for Stocks). But, if Romney wins then we could see Quantitative Easing be cut or eliminated which is obviously bad for equities.

So, let’s just jump into the charts of what I feel will unfold in the next few days and months.

Using the season chart of the four year election cycle we can see what the Dow Jones Index has done in past election periods. Obviously every market environment is drastically different in each situation but overall we see stronger stock price. This is naturally a very emotional time for investors but once the election is finished most individuals become more confident simply because there is a leader that has four years to make things better and there is nothing they can do about it now and the campaigning and debating is over.



DIA – Dow Jones Industrial Average – Daily Chart:

Looking at the chart of Dow DIA Index fund you can see a 5-6 month cycle in the market which has a positive skew. Just so you understand what a positive skew is I will explain.

Positive Skew is when the market is trending up making a series of higher highs and higher lows. Because there are naturally more buyers during a bull market each cycle upswing lasts longer then when the cycle down downswing. So you get longer rallies which sends your secondary indicators (stochastics, volatility, put/call ratios, advance decline line etc…) in the overbought levels for extended periods of time. Those trying to pick a top continually get their head handed to them. The focus must be on buying the pullbacks. Keep in mind volatility is higher which meaning risk per trade is higher. Overall in the long run you stand a much higher chance of making money trading with the trend than trying counter trend trades (picking a top).

So as you can see below it looks like the stock market will be trying to put in the bottom over the next week or two which falls in line with our election cycle. It is very important to know that during intermediate cycle lows is where some of the biggest drops take place. These sharp drops are what is needed to cleanse the market one last time to shake as many traders with tight stops out of the market before it reverses and starts the next rally. I would like to see a 1-3 day market sell off as that would be the signature bottoming pattern I like to buy.



Bond Prices – Moving Against the Norm…..

Bond investors are some of the most conservative people in the market. They do not like to take risks so they dump their money into bonds to make a tiny profit in exchange for low risk (volatility). The nature of these investors put more money into bonds as we enter the election because they are nervous about not knowing who will be in control of the country.

After the election finished some money flows out of bonds and into stocks because there is now a president and direction for the country. Generally come the new year investors move to bonds as the safe haven as they try to figure out what their game plan is for new year.

So looking forward to this week and the next 2 months I would not be surprised to see bond prices rise or trade sideways while stocks move higher. This analysis is based on Obama winning. If Romney wins then I feel bonds will rally much more and stocks could sell off.



TLT Bond Exchange Traded Fund – Daily Chart:

Here is a chart of 20+ year bonds showing a possible reversal to the upside that could trigger as soon as next week. This chart is forward looking 1 – 2 weeks. Overall the trend remains down but if Romney wins I feel bonds breakout above the red resistance levels and trigger a new uptrend.



Election Year Trading Cycle Conclusion:

Next week is going to be very interesting to watch unfold. I generally do not like to trade or invest before news of this magnitude so trade smaller sizes if you do as price action could be wild.

Get my Daily Trading Analysis & Trade Setups at The Gold & Oil Guy.com

Chris Vermeulen

Is Santa Coming Early for Gold & Gold Mining Stocks?

By: Chris Vermeulen at The Gold & Oil Guy.com

If you own physical gold, gold mining stocks or plan on buying anything related to precious metals before year end, you are likely going to get excited because of what my analysis and outlook shows.

Since gold topped abruptly a year ago (Sept 2011) with a massive wave of selling which sent the price of gold from $1920 down to $1535, technical analysts knew that type of damage which had be done to the chart pattern could take a year or more to stabilize before gold would be able to continue higher.

Fast forwarding twelve months to today (Oct 2012). You can see that gold looks to have stabilized and is building a basing pattern (launch pad) for another major rally. The charts illustrated below show my big picture analysis, thoughts and investment idea.

Weekly Spot Gold Chart:
The weekly chart can be a very powerful tool for understanding the overall trend. This chart clearly shows the last major correction and basing pattern in gold back in 2008 – 2009. Right now gold looks to be forming a very similar pattern.

Keep in mind this is a weekly chart and if you compare the 2009 basing pattern to where we are today I still feel it could take 3 – 6 months before gold truly breaks out to the upside and kicks into high gear. The point of this chart is to provide a rough guide for what to expect in the coming weeks and months.




Weekly Chart of Junior Gold Miner Stocks:
If you follow gold closely then you likely already know junior gold mining stocks can lead the price of gold up to two weeks. Meaning gold mining stocks which you can track by looking at GDX and GDXJ exchange traded funds will form strong bullish chart patterns and generally start moving up in price before physical gold.

The chart below shows the junior gold miner ETF with a VERY BULLISH chart and volume pattern. Remember that gold stocks are a leveraged play on gold in most cases. For example, if gold moves up 1% we typically see GDX and GDXJ move 2-4%. Because they act as a leveraged play on physical gold smart money and big institutions start accumulating these investments in anticipation of gold rising.

GDXJ has formed a tight bull flag and the volume levels confirm there is big money moving into these investments. The first price target on GDXJ using technical analysis for a measured move points to the $32 area. Looking forward twelve months with gold trading above $2000 we could see this fund more than double in value.

Bonus: while most traders focus on GDX gold miner fund, I prefer the GDXJ fund because its almost identical in price performance BUT it pays you a 5% dividend....




Gold’s Seasonality: 
It’s that time of year again where gold tends to move higher. Below you can see where we are and what the price of gold typically does in November.




Gold Investing & Trading Conclusion:
Looking forward one month (November) and factoring in the recent pullback in gold to known support levels along with strong buying of junior gold mining stocks, I feel gold will take another run at the $1800 level and for GDXJ to test its previous higher of $25.50 at minimum. If both those levels get taken out then a massive bull market for precious metals could be triggered. Only time will tell.

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Chris Vermeulen

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Is the Link between Gold and the U.S. Dollar in Question? Here's our Technical Setup

The $1800 per ounce level continues to be a major technical resistance area for gold. After hovering near $1800 recently, gold moved sharply away from that level last week to close at $1735 an ounce.

Despite that, more fund managers and analysts continue to point to a bright long term future for gold prices. John Hathaway of the Tocqueville Gold Fund says gold will reach new highs within a year. He based his forecast, like many others, on the fact that negative real interest rates look likely to persist as Ben Bernanke and the Federal Reserve continue to print money.

Believe it or not, some mainstream analysts are also touting gold’s potential. Merrill Lynch analysts point to the correlation (discussed in a previous article) between the price of gold and the expansion of the Federal Reserve’s balance sheet since the start of QE1 in early 2009.

Based on the current path of the Fed’s balance sheet expansion, Merrill Lynch came up with two longer term targets for the price of gold. They project gold to hit $2,000 an ounce next summer and to hit $2,400 an ounce by the end of 2014.

Another way to look at gold and the Fed is the so called gold coverage ratio. That is the amount of gold on deposit at the Federal Reserve versus the total money supply. According to Guggenheim Partners, the gold coverage ratio is at an all time low of 17%. The historical average is about 40%, meaning that gold would to more than double to reach the average.

Looking at the Fed’s balance sheet is a new and interesting way to look at and forecast gold prices. In the past, the conventional wisdom was that gold was merely an anti-dollar play: U.S. dollar down, gold up and vice versa. But that seems to be changing....

Reuters had some interesting data. The value of the U.S. dollar net short position fell to $6.43 billion for the week ended October 9. This is substantially down from the previous week’s net short position of $16.3 billion. At the same time, the “managed money” net long gold position in gold futures rose to its highest level since August 2011. That was the time when gold hit its record high of $1,920 an ounce.

So much for conventional wisdom. Both currency and gold traders are seeing this long-term relationship between gold and the U.S. dollar breaking down into a “new normal” of direct central bank intervention into financial markets. Gold seems increasingly to be turning into more of a safe haven play than an anti dollar one. It seems that more investors are worried about all fiat currencies that are burdened by huge debt loads.


The Technical Take.....

Below is a daily chart of gold futures. Looking at the price levels and analysis you can see that a bounce or bottom could form at any time now. Price of gold has pulled back in a mini five wave correction touching both our first Fibonacci retracement level of 38% and the 50 day simple moving average. This is the type of pullback that longer term investors like to add to their long gold position. While gold does have the potential to fall all the way down to $1625, in the long run it should continue to rise for the long term investor.

From a trader point of view, it may be worth a stab to get long gold with a very tight stop, but until we see a real panic selling day in gold where volume is high I don’t think the final bottom is in yet.




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Chris Vermeulen

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Gold Is Not Back In Favor Yet.....

Despite the decline this past week, gold seems to be regaining favor with global investors, as just a week earlier it had been flirting with the $1,800 an ounce mark. Quite a change from the sentiment in early summer when some investors were questioning whether the yellow metal’s decade long bull run was coming to a close.

The rebound in investor sentiment toward gold, of course, coincided with the launching of open ended QE3 (or QE infinity) by the Federal Reserve. Since then gold has “barely paused for breath. It has, as discussed previously, touched all time highs in terms of euros or Swiss francs.

QE3 certainly seemed to worry some investors. These people moving into gold are concerned about things such as competitive devaluations and the debasement of currencies in an attempt to pay back enormous debt loads with a cheaper currency. This road – currency debasement – eventually leads to inflation most believe.

So it is really is not surprising that, according to UBS, investors in exchange traded funds raised their holdings by 158 tons since the beginning of August to a record 2,681 tons of bullion recently.

Many of the world’s best investors are in agreement with the average person putting his or her money into gold. The list of names is impressive: George Soros, John Paulson, Ray Dalio and Bill Gross.

Ray Dalio, founder and chief investment officer of Bridgewater Associates, the world’s largest macro hedge fund, told CNBC viewers recently: “Gold should be part of everybody’s portfolio. We have a situation now when you have too much debt. Too much debt leads to the printing of money to make it easier to service. All of those things mean that some portion [of a portfolio] should be in gold.”

Dalio’s conclusion? “Only gold and real assets would survive.”

All of this positive macro news about gold has managed to influence the gold chart too. According to asset manager Blackrock, “the gold chart has turned decidedly bullish.” Blackrock was speaking about the so called “golden cross”. That occurs when the 50 day moving average moves above the 200 day moving average.

Blackrock noted that the last time gold’s chart looked so good was shortly after the Federal Reserve announced QE1, the first round of money printing. It said that if gold does the same thing it did back then, the price of the precious metal will hit $2,400 an ounce by next summer. Of course, macro factors like Chinese and Indian demand for physical gold will play a major role in whether we reach those lofty levels.

While I am bullish on gold longer term the chart patterns, volume and sentiment for both gold and silver are overwhelmingly bearish looking for the next couple weeks. A sharp pullback is likely to unfold before they take another run at resistance and breakout to new highs.

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Chris Vermeulen

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Bill Gross Says Gold Will Thrive in ‘Ring of Fire’

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Bill Gross is one of the most recognizable names in the investment world. He is the founder and co chief investment officer at bond fund giant PIMCO. His long term track record regarding bonds is among the best and he still runs the world’s biggest bond fund, the PIMCO Total Return Fund.

Gross is also known for speaking quite bluntly about the United States’ growing debt problem. His latest monthly market commentary came with a warning for the U.S. and investors alike. Gross stated that a number of recent studies have concluded that “The U.S. balance sheet, its deficit and its ‘fiscal gap’ is in flames and that its fire department is apparently asleep at the station house.”

The recent studies Gross pointed to came from the Congressional Budget Office, the International Monetary Fund and the Bank of International Settlements. The studies calculated that the United States needs to cut spending or raise taxes by 11% of GDP over the next 5-10 years. This translates to $1.6 trillion per year. That compares to the country’s 8% of GDP deficit in 2011. Those numbers put the U.S. in the ‘ring of fire’ with other countries with similar fiscal gap sizes. These countries include Greece, Spain, Japan, France and the U.K.

Gross warned that the U.S. debt problems have put the country in this “ring of fire” that will burn most investors. The only investors who will not get “burned”? He says the lucky few will be those that are protected by gold and other real assets, protected from a severe U.S. dollar depreciation caused by the Federal Reserve’s money printing.

In a white paper titled “GOLD – The Simple Facts” posted on PIMCO’s website, PIMCO analysts Nicholas J. Johnson and Mihir P. Worah also said some interesting things. Here is an excerpt, “Our bottom line: given current valuations and central bank policies, we see gold as a compelling inflation hedge and store of value that is potentially superior to fiat currencies.” They pointed out the positive supply/demand characteristics of gold as a big plus in their scenario. The PIMCO analysts went on to say, “We believe investors should consider allocating gold and other precious metals to a diversified investment portfolio.”

That is quite a statement coming from a “mainstream” investment firm. Wall Street’s usual reaction to gold is that it is a barbarous relic whose only use is in jewelry and that no sane investor should put any money into it, even paper gold instruments such as gold ETFs like the SPDR Gold Shares (NYSE: GLD) and others.

After Bill Gross’ bullish words, gold prices were trading a 7 month high on Thursday before falling Friday to finish the week at about $1776.00 an ounce.

From a technical analysis point of view gold, silver and gold miners have been holding value at key resistance levels. While we could see a 3-5% pullback before they breakout and start the next rally overall the outlook for precious metals remains very strong and I put a $2400 per ounce on gold for 2013.

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Chris Vermeulen

70 Second Market Outlook – Metals, Dollar, Bonds, Stocks, Energy

Over the past year we have had some really interesting things unfold in the market. Investing or even swing trading has been much more difficult because of all the wild economic data and daily headline news from all over the globe causing strong surges or sell offs almost every week.

For a while there you could not hold a position for more than a week without some type of news event moving the market enough to either push you deep in the money or get stopped out for a loss. This has unfortunately caused a lot of individuals to give up on trading which is not a good sign for the financial market as a whole.

The key to navigating stocks which everyone thinks are overbought is to trade small position sizes and focus on the shorter time frames like the 4 hour charts. This chart is my secret weapon and giving you both large price swings which daily chart traders focus on while also showing clear intraday patterns to spot reversals or continuation patterns with precise entry/exit points.

While I could ramble on about why the stock market is primed for major long term growth from this point forward I will keep things short and simple with some 4 hour and daily charts for you to see what I see and what I am thinking should unfold moving forward.

Keep in mind, the most accurate trading opportunities that happen week after week are the quick shifts in sentiment which only last 2-5 days at most which is what most of my charts below are focusing on…..

Dollar Index – 4 Hour Chart

This chart shows a mini Head & Shoulders reversal pattern and likely target over the next five sessions. The dollar index has been driving the market for the past couple years so a lower dollar means higher stock and commodity prices.

Bond Futures – 4 Hour Chart

Money has been flowing into bonds for the past couple weeks with most traders and investors expecting a strong correction in stocks. As you can see the price of bonds hit resistance this week and as of Thursday has now started selling off. Money flowing out of this “Risk Off” asset means money will move to the “Risk On” investments like stocks and commodities.

Gold Futures – Daily Chart

Gold is stuck in both categories in my opinion. It is a “Risk Off” safe haven when people are scared of falling stock prices, and it is also a “Risk On” speculative investment when people are feeling good about the market. Gold has been trading at key resistance for a couple weeks and looks as though it’s starting its next rally.

Silver Futures – Daily Chart

Silver is in the same boat as gold though it carries much more volatility than gold. Expect 2-4% swings regularly and sloppy chart patterns in this metal.

SP500 Futures – Daily Chart

As much as everyone hates to buy stocks up at these lofty prices I hate to say it but I think they are going to keep going up and they could do this for a long time yet. If the dollar index continues to break down then I expect the SP500 to rally another 3% from here (1500) in the next 1-2 weeks.

Crude Oil Futures – 4 Hour Chart

Crude oil has not had much attention from me in the past few months. While it has had big price action many of those big days took place on news causing an instant price movement making this extra dangerous to trade. I continue to watch rather than get attached to it.

Natural Gas Futures – Daily Chart

Natural gas has been a great performer for us in the past 6 months as all the short positions slowly get covered. I just closed out my natural gas ETF trade this week with a 31.9% gain and plan on getting back in once the chart provides another low risk setup.

Trading Conclusion:

In short, I feel the dollar index along with bonds will correct over the next few weeks. That will trigger buying in stocks and commodities. Keep in mind natural gas dances to its own drum beat. The dollar does not have much affect on its price and most times natural gas is doing the opposite of the broad market.

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Gold Hits Record High in Euros and it’s Setting Up for Another Rally

The price of gold hit a record high this past week.....in euro terms (at about 1380 euros). The record came after a number of actions by central banks around the world, trying to stimulate their respective economies. The actions, usually centered around money printing, once again had investors looking for refuge in gold.

Since the beginning of September, investors have bought about 75 tons of gold through exchange traded funds. Reuters says that gold ETFs, such as the largest gold ETF – the SPDR Gold Shares (NYSE: GLD), are on track for their biggest quarterly inflows in over a year, of 3.285 million ounces. Finally, according to UBS, investors have also raised their bullish bets on gold futures to the highest level in more than a year.

All the world’s major central banks took action recently including the Bank of Japan which launched a fresh round of monetary stimulus. The main action though was centered in Europe and the United States. The European Central Bank has promised to buy an unlimited quantity of eurobonds going forward. And the Federal Reserve announced its third round of monetary stimulus, QE3, that promises to buy $40 billion of mortgage backed securities monthly on top of its ongoing Operation Twist program of buying long dated Treasuries.

Speaking about the monetary easing, Barclays precious metals analyst Suki Cooper put it this way to the Financial Times, “Gold finally found the catalyst it had been waiting for all year after the Fed announced open ended quantitative easing.”

Another reason for gold’s rise in euro terms, it must be noted, is the continuing fiscal turmoil in Europe itself, particularly in Spain. Spain’s largest autonomous region, Catalonia, manages an economy as big as Portugal’s. The problem is that it has debts of 42 billion euros which it is struggling to service. Catalonia has requested a 5 billion euro temporary bailout from Spain’s central government, adding to its debt burden. In a real show of defiance, Catalonia is also refusing to implement austerity measures. Add to that, bank stress tests in Spain showed that the country’s 14 largest lenders will need 60 billion euros in new capital.

No surprise then that physical demand for gold bars and coins in Europe rose 15 percent in the second quarter, according to the World Gold Council!

Another positive fundamental reason in the corner of gold bulls is the recent currency appreciation in the Indian rupee. India is traditionally the world’s largest consumer of gold. Sales have been slow there this year due to the government trying to slow down gold sales there through rises in a gold import tax. However, the recent rise in the rupee has made gold purchases more palatable and gold sales to India have hit their highest level in two months.

So for now, many of the fundamentals look to favor a move higher for gold, although there is technical resistance at its 2012 high of $1791.

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Chris Verneulen

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Investor Gold Buying to Resume & Fed Doubling Their Balance Sheet AGAIN!

A leading precious metals consultancy, Thomson Reuters GFMS, has forecast that investors will buy record amounts of gold in the remainder of 2012. GFMS produces the benchmark supply and demand statistics for the gold market. GFMS forecasts that investors will purchase 973 tons of gold in the second half of 2012, more than during the wild gold market of the summer of 2011. This surge in demand for the yellow metal, GFMS says, will move gold above the $1850 an ounce level, not far from the record high of $1920 hit in September 2011.

GFMS may be right. This past week, gold hit its high for this year at $1790 an ounce on the back of the various global stimulus plans launched by a number of countries around the globe. Primary among the recently announced stimulus plans was the Federal Reserve’s QE3 or as some in the market have called it, QE infinity. Philip Klapwijk of GFMS said that, for the gold market, “QE3 has become talismanic”.

The Federal Reserve said it would purchase $40 billion a month in mortgage-backed securities indefinitely. In addition, the Fed will continue Operation Twist – the buying of longer dated U.S. treasury notes and bonds. When all is totaled, the market is looking at about $85 billion a month in government bond purchases for an unlimited period of time.

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The main characteristic of QE3 that drives the gold market is the fact that the open ended purchases of all of these Treasuries will be financed by money that does not yet exist! And it’s not just about a fear of future inflation being ignited by all this money creation. It’s a very logical move higher by gold based on recent history of Fed actions and gold prices.

Even ignoring Operation Twist, the Fed will add $40 billion a month, or $480 billion a year, to its balance sheet. If one looks at the Fed’s own website, you will see that it shows current assets of $2.8 trillion. Add $480 billion annually to that and in about five years the Fed’s assets (the foundation of the money supply) will have nearly doubled.

That is exactly what happened in the last five years too…the Fed’s assets doubled. And in what should not be a surprise to gold investors, the price of gold also doubled! For the past decade or so, gold has tracked the increase in Federal Reserve’s assets. Do not be shocked if that pattern continues over the next five or ten years too.

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Chris Vermeulen

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Has the Arab Spring Effected Crude Oil Prices?

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Crude oil prices hit a four month high this week on the back of rising tensions in the Middle East and North Africa and the unfortunate murder of the U.S. ambassador to Libya. Added impetus on the upside was given to oil by the announcement of more money printing (QE3) by the Federal Reserve which said it would launch an open ended commitment to purchase $40 billion of mortgage backed securities monthly. The global benchmark for oil, Brent crude oil, jumped to about $117 a barrel.

It maintained its roughly $18 premium to U.S. based WTI crude oil which was trading at $100 a barrel on a couple days ago. Non futures investors can easily participate in the oil market through the use of exchange traded funds. The ETF which tracks Brent crude oil futures is the United States Brent Oil Fund (NYSE: BNO) and the ETF which tracks WTI crude oil futures is the United States Oil Fund (NYSE: USO). The real story behind the story in the oil market, however, is the ongoing Arab Spring which is sweeping throughout the Middle East and North Africa, pushing aside some regimes and threatening others.

The countries whose governments, such as Saudi Arabia and the other Gulf states, feel threatened by popular uprisings are where investors should put their focus. Saudi Arabia in particular is key because it accounts for more three quarters of the world’s spare oil production capacity. So it is very important to note that the kingdom is no longer a price ‘dove’ in OPEC as it has been for decades. It has joined Iran, Venezuela and others in being a price ‘hawk’. The reason behind the change in attitude is simple…Arab Spring. Like its neighbors in the Gulf region, Saudi Arabia has gone on a public spending spree to appease its restless citizens.

It has sharply increased outlays on subsidies for items like food, fuel and housing in an attempt to appease its citizens. In 2011, the kingdom raised its domestic spending by $129 billion – the equivalent of more than half its oil revenues. Much of this increased spending will go toward upgrading the country’s infrastructure. Take electricity, for example. Saudi Arabia has revealed plans to spend more than $100 billion dollars on power plants and distribution networks by 2020. The kingdom has also set a goal to electrify 500,000 new homes that are being built in an attempt to mollify political unrest among its population of 27 million people.

This spending spree led the International Monetary Fund and other analysts to estimate that the kingdom and other Gulf countries need oil to be selling between $80 and $85 a barrel in order for the governments to balance their budgets. This is up, in Saudi Arabia’s case, from a mere $25 a barrel a few short years ago! Unfortunately for oil consumers, this trend looks set to continue in years ahead.

According to the Institute of International Finance, by 2015 the Saudi government will only be able to balance its budget if oil prices are at $115 a barrel if current spending trends remain in place. So in effect, with the Arab Spring forcing governments to spend more on their citizens, it has put a floor under the price of oil. OPEC will do everything in its power to keep the price above the budget breakeven points for governments in the Gulf region.

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Chris Vermeulen

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Volatility is back, but on the upside...is it time to buy silver?

The price of silver reached a 5 month high this past week as investor interest seems to have been rekindled in both gold and silver as belief in financial markets increases that the latest round of monetary easing from the Federal Reserve, QE3 , will soon be on its way. Many investors had largely stayed away from silver in recent months after some had got caught up in its volatility. Silver had touched a 30 year high in April 2011 before plunging 35 percent in a few short weeks.

Now the volatility is back, but on the upside, as prices have climbed more than 20 percent in less than a month. The gains have outpaced that of gold which rose roughly 10 percent during the same time frame. Importantly for investors, the ratio between the two precious metals has moved about 10 percent in silver’s favor since mid August. This is the first time silver has outperformed gold since the start of 2012.

For non futures investors, the two precious metals can easily be tracked through the use of exchange traded funds (ETFs). The most liquid ETFs for the two precious metals are the iShares Silver Trust (SLV) and the SPDR Gold Shares (GLD) respectively.

You can take a look at my long term outlook analysis from last week here "Gold Standard to be Reinstated Through the Back Door"

Some may wonder why has silver outperformed gold in the past several weeks? The answer goes deeper than just confidence that QE3 is coming soon, but it is still rather a simple one. The sharp rally in silver was fueled largely by short covering. That is, some investors (hedge funds, etc.) had made rather large bets that silver would continue falling and were caught off guard by its recent rise. According to data from the Commodities Futures Trading Commission, the silver market during the week of August 27-31 saw the largest amount of short covering since May 2011. At the same time. Bloomberg reported that hedge funds were the least bullish on silver in almost four years.

It is unknown for how long silver will outperform gold. But even some long term fundamental investors such as legendary commodities investor Jim Rogers has said that he believes silver right now is a better investment than gold. He points to the fact that historically gold has been worth about 12 to 15 times what silver is worth, but that recently it has been worth roughly 50 times silver’s value. Silver is also the only major commodity not to have reached a new all time high in the decade long commodity bull market and is still cheaper than it was 32 years ago.

So it may be worth a look. But since silver is so volatile, wait for a downward spike before initiating or adding to a long position.

If you would like to get my weekly analysis on precious metals
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Chris Vermeulen


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Can it be true...is it even possible? Gold Standard To Be Reinstated Through The Back Door

With political season upon there is plenty of talk about the U.S. going back to the gold standard. Most people think it's just a play by the right to appease Ron Paul and his supporters. But really, is it even possible at this point to go back to the gold standard. One of my business partners Chris Vermeulen just sent over a great article he just wrote.......

For the first time in over 30 years, talk of a return to the gold standard has become part of mainstream politics in the United States. Part of the official Republican policy adopted it at the recent Republican Convention and called for the commission to look at reestablishing the link between gold and the U.S. dollar. No doubt that plank was added to soothe supporters of Texas Congressman Ron Paul.

However, gold bugs holding gold bullion or even those holding gold ETFs such as the SPDR Gold Shares (NYSE: GLD) shouldn’t hold their breath in anticipation of the gold standard returning. There was a similar commission – the Gold Commission – set up in 1981 by President Ronald Reagan. After a lot of ‘commissioning’, the decision was made to go with the status quo of using fiat Federal Reserve dollars.

Any commission set up under the current president would likely come to the same conclusion. There are simply too many practical obstacles to return to a full fledged gold standard. Even pro-gold advocates including the World Gold Council and the Gold Anti-Trust Action Committee (GATA) don’t see a gold standard returning.

The key problem would be at what price of gold would the United States peg its currency. Great Britain returned to the gold standard in 1925, after going off it in 1914, at the 1914 peg price. This was a mistake made by Winston Churchill (he called it the biggest he ever made) since it basically ignored the vast inflation in the British pound in those intervening years. The result was a vast overvaluation of the pound and deflation and high unemployment soon followed.

What price would a new Gold Commission set as the “correct” price of the U.S. dollar versus gold? $1,000? $2,000? $5,000? The answer is that there is no “correct” price. Whatever price is set will eventually be tested by the financial markets and fail much as the pegged currencies system failed. So there will be no return to the gold standard.

But that does not mean there will not be a ‘back-door’ gold standard. The move to such as a system is already underway as central banks all over the world are rebuilding their stockpiles of gold. After two decades of heavy selling, central banks became net buyers of gold in 2010 and the momentum has built since. Gold will likely end up being used as ‘good’ collateral by global central banks, as opposed to the shaky collateral sovereign bonds are turning into.

Central bank purchases, led by the emerging markets, are on track this year to hit a record high according to the World Gold Council. China alone in 2011 bought around 490 tons of gold. Other countries including Russia, Turkey and South Korea have added gold to their official holdings in recent months. This buying showed up as central bank purchases in the second quarter of 2012 were more than double the level reported a year earlier at 157.5 metric tons. If the buying continues at current levels, central banks gold purchases would total around 500 tons this year, easily surpassing last year’s 458 tons.

The bottom line for investors from the global central banks’ buying of gold? The gold standard is working its way back into the international monetary system through the back door. This should, in the long term, put a floor under gold and help maintain it on its steady upward path.

 Just last week we started to see gold bullion, silver bullion and gold miner share prices start to breakout to the upside of a 12 month consolidation pattern. This could be the start of the next major rally in precious metals as future uncertainty fears continue to rise. The large bullish technical pattern we see on the gold chart points to much higher prices over the coming 24 months. But keep in mind this is a monthly chart and it could still take months to truly breakout to new highs and start another rally.

Gold Bullion Trading

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Chris Vermeulen



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The Precious Metals MAJOR Breakout Part II

It has been a year since the price of gold bullion topped out and even longer for silver. Many traders and investors have been patiently waiting for this long term consolidation pattern to breakout and trigger the rally for precious metals and miner stocks. Most of gold bullion is used for investment purposes. As a result, it rises when there is economic weakness and investors lose confidence in the fiat currency of a country.

With continuing economic weakness in the United States it will almost certainly lead the Federal Reserve to act in way that is more powerful than Operation Twist which is the selling of short term securities to buy those with a longer term. Based on the most recent data, economic growth in the United States is falling as the unemployment rate rises. A recent statement by the Federal Reserve was unusually clear in calling for greater action in the future.  

Gold, Silver and Dollar Weekly Price Chart:

Take a look at the weekly charts below which compare gold and silver to the US Dollar index. You will notice how major resistance for metals lines up with major support for the dollar. As this time metals are still in consolidation mode (down trend) and the dollar is in an uptrend.

Gold Miners ETF Weekly Chart:

Gold miners have been under pressure for a long time and while they make
money they have refused to boost dividends. That being said I feel the time
is coming where gold miner companies breakout and rally then start to raise
dividends in shortly after to really get share prices higher.

On August 13th I talked about the characteristic’s and how to trade the next
precious metals breakout and where your money should be for the first half
of the rally and where it should rotate into for the second half. Doing this could
double you’re returns. Click here to read part one "Gold Mining Stocks 

Continue to Disappoint but not for Long"

Overall I feel a rally is nearing in metals that will lead to major gains. It may
start this week or it still could be a couple months down the road. But when
it happens there should be some solid profits to be had. I continue to keep
my eye on this sector for when they technically breakout and start an uptrend.

 If you would like to get my weekly analysis on precious metals and the 
board market be sure to join my free newsletter at The Gold & Oil Guy.com 

Chris Vermeulen

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Gold Price and Indian Demand Shifting Trends

From Chris Vermeulen at The Gold & Oil Guy.com.......

One of the top stories in the financial markets in 2012 has to be the stagnation in the price of gold at around $1600 an ounce, which is down approximately 17% from its peak at $1920.30. Those bullish on the yellow metal have been disappointed in gold’s performance while those bearish on the shiny metal have reveled in its stagnation, saying that gold’s status as a safe haven is over.

What is behind gold’s sluggish performance in 2012? There are several reasons, but one of the key fundamental reasons has been the lack of demand from traditionally the largest buyer of gold on the planet – India (although China will surpass it this year). India bought only 181.3 tons in the second quarter of 2012, a 2-year low, according to the London-based World Gold Council.

There are several factors at play as to why Indian demand for gold has fallen. One reason is the sharp drop in the value of its currency, the rupee, which is down by 25% versus the U.S. dollar this year. This decline has kept gold prices high in relative terms while the actual dollar value of gold was falling. Perhaps even more important has been the ‘war’ declared on gold by its central bank which has blamed all of the country’s economic ills on Indian citizens’ traditional buying of gold. In an attempt to slow down gold and silver imports, the Indian government has imposed new taxes on the purchase of these precious metals.

But even though demand for the precious metal is way down in India, the situation still offers hope for gold bulls. Why? Because we’ve been here before – in 2009 to be exact. In early 2009, the Indian economy and rupee tanked. Gold demand almost completely dried up. According to precious metals consultancy GFMS, Indian demand for gold in the first quarter of 2009 collapsed by 77%. For the full year GFMS said Indian consumption dropped by 19%.

Now with the Indian economy slowing to its weakest growth rate in nearly a decade and the rupee falling, we are seeing a replay of 2009. The monsoon season has been poor, hitting farmers – among the biggest buyers of gold – hard. Gold prices have hit a record high in rupee terms, and India is expected to purchase, as forecast by the World Gold Council, only 750 tons of gold, down 25% from 2011 levels. Meanwhile, the WGC forecasts that China will buy 850 tons of gold this year.

Investors should pay heed to the clues that recent history is giving us. The drop in Indian demand is simply a cyclical phenomenon due to the lousy state of the Indian economy. It will recover eventually. And when it does, look out for the fireworks from renewed Indian demand for gold added to the Chinese demand. In 2010, as pent-up demand for gold was unleashed, Indian gold consumption soared 74% to a record high of 1,006 tons according to GFMS.

Gold bulls surely hope we see something similar in 2013 and that is exactly what I talked about last week based around gold miner stocks and also what Dave Banister’s recent gold forecast was about at TheMarketTrendForecast.com sees in 2013.

Gold Chart Showing 2009 Collapse and Outcome and Current Gold Price Analysis:

Gold Forecast - India Gold demand

Gold Trading & Investing Conclusion:
In short, gold and gold stocks have a lot of work to do before they truly breakout into the next major leg higher. I feel we are nearing that point and they may have bottomed already. Starting a small long position to scale in I think is a safe play. But I would only add more once the trend actually turns up and shows strength in terms of price and volume action.

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Chris Vermeulen