Scandle34
12 years ago
Gold's multi-year march forward stopped when it went parabolic right around current resistance around 1640. Typically this happens when the market drivers are all in and start promoting it to the masses.
For a year it has gone sideways with support at 1550 - bottom of its old upchannel. It is now well under the multi-year uptrend and has the highest volume by price since it was under 1200.
I could see it taking another crack at $1900, where I extrapolate the bottom of the old up-channel.
Catalysts: Euro maintenance, US Quantitative Easement "x", or China having slower growth rates. Note that Gold was down when BRICs and China were down, so I am not sure there really is any further flight of foreign capaital from China to gold, but there might be extradition of wealth from RMB to gold.
Doubts: Instead of banging repeatedly into resistance, it has skimmed repeatedly along thin ice. It acts like the supposed market manipulators have a price (1550) they are willing to sell at and that when they are done we'll here what a bad investment (tech stocks, real estate, oil...) gold was at these prices and that it was just another "tulip craze".
frenchee
16 years ago
Grim Economy Creates a Golden Opportunity
By MICHAEL KAHN
http://online.barrons.com/article/SB123488598249200269.html
The rally in gold, despite a stronger U.S. dollar, tells us that people are worried about the economic outlook.
GOLD BUGS TOOK A LOT OF HEAT during the second half of 2008 as the yellow metal performed poorly, along with stocks and other commodities. But a funny thing happened on the way to deflation: Gold bottomed in October and has been rallying ever since.
Last week's action was technically important as prices moved above a loosely defined trendline drawn from the March 2008 all-time high (see Chart 1). I say loosely defined because the trendline really did not describe the action well in the final months of the year. Prices dipped more than 20% below that line and that is a bit much for a technical theorist to accept.
Chart 1
But charting and trendline drawing allow for a bit of wiggle room. We can all agree that the trend for much of last year was down and now it has changed to up. Strip away the patterns and the indicators and that is technical analysis at its core. The market is giving us its most important message that the bulls are back in control.
Indeed, from the big picture point of view, the bulls never really lost it. They were merely taking a breather following a successful foray into four-digit territory – a price over $1000. A monthly chart shows this quite clearly (see Chart 2).
Chart 2
The long-term bull market trendline drawn from 2001 has remained intact. Last year's decline provided a needed correction after an accelerated or even a bubbly rally and that is what has kept me quietly bullish throughout (see Getting Technical, "Gold Stocks Regaining Their Shine", November 24, 2008).
The question investors are asking now is, "How gold can be rallying when the U.S. dollar is so strong relative to other major currencies?"
Since gold is priced in dollars, a strong greenback typically results in a lower price for the metal. But not always.
If the supply and demand condition is stable, then gold and the dollar have an inverse relationship. But if demand for gold starts to build, then it can move higher no matter what the dollar does.
One look at gold priced in Euros bears that out (see Chart 3). From the European point of view, gold is in record high territory and significantly above both its previous high-water marks set in March and October 2008.
Chart 3
Gold is now rallying without regard to currency.
Gold stocks have also been moving higher despite a bleak overall stock market. The Market Vectors gold miners ETF (GDX) had a strong run from its October lows, moving from roughly 16 to its current 37 and change (see Chart 4).
Chart 4
Although the price of the ETF has more than doubled since the lows, the charts show no reason why the trend will end anytime soon. Specifically, it sports good momentum, a rising 50-day moving average and good volume. While many other sectors can boast similar conditions, the gold ETF is one of a very elite group that has also moved above its respective 200-day moving average.
Not only has the short-term trend changed to bullish but the long-term trend has a tentative change for the better, as well.
To be sure, the ETF and gold stocks in general have not recovered as well as gold itself. Gold has retraced roughly 75% of its 2008 decline while the gold ETF has only retraced about half of its loss. Further, there is rather stiff resistance for the ETF overhead in the 42.50 area from a trading range that was in effect about one year ago.
But as a colleague of mine tells his clients, there is always a bull market somewhere. Right now, gold is it.
frenchee
16 years ago
Are ETNs in Trouble?
January 27, 2009 at 2:00 pm by Tom Lydon
Speculation has arisen the Barclays could be nationalized, which raises a big question for holders of its line of iPath exchange traded notes (ETNs).
The New York Times recently reported that Barclays would be cutting 2,100 jobs within their investment banking and wealth management division. This news comes at a sour time. Many banks have lost money in the last year, some have collapsed altogether. As debt instruments backed by the creditworthiness of their issuer, this has some wondering about the safety of these ETNs. It was illustrated earlier this year after Lehman Brothers went bankrupt, creating anxiety amid the ETN industry, reports Joe Morris for Ignites.
Holders of the notes could face dire losses if the issuing bank defaults, reports Ian Salisbury for The Wall Street Journal. One advisor noted that the odds of Barclays getting nationalized are low, and for its part, the bank says investors shouldn’t have cause for concern.
One strategist notes in an ETF Update from Janney Montgomery Scott that nationalization does not create an event for the default of debt, and that governments would provide support for any “systematically important” financial institution, instead of allowing it to default on senior debt.
The bank issued a statement regarding the fact that the iPath ETNs continue to pull in assets and that issuance is at all-time highs. The bank says this is because ETNs are easier to trade and have more predictable risks than swaps contracts. Barclays also nots that on Feb. 17, it expects to report a profit before tax and beat analyst estimates.
As with every investment product, investors need to do their research and understand what they’re getting into. It’s important to determine if you are comfortable with the risks. Some investors are, some aren’t.
FinancialAdvisor
16 years ago
This is starting to look intriguing giving the growing socialism ways and printing money out of thin air going on in our country.
The only thing I'm concerned about is the P&F downside target of 12.50... I might analyze this a bit more, maybe run a fib, or if you have a minute this evening, see if you can throw a fibonacci on the chart, be interested to know if the most recent pullback hit some support today or if it's near-bye.
TIA, nice charting as always in the ibox, no one has any excuses not to see the technical indicators on those, sometimes I have to move my chair back a few feet just so I can see 'em ;)