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Posts Tagged ‘xau gold silver index’

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Silver Ascending Triangle Breakout. Major Move Expected

In Market Analysis on August 25, 2010 at 6:14 pm

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Silver had very powerful break out today as investors are seeking assets that are safe and will retain value during a debt crisis.  Silver is  seeing demand at these price levels as it is historically cheap relative to gold.  If the ratio came down to the levels it was in 2006 it would be close to $27 an ounce.  Silver is soaring because investors are realizing this is a hard asset, it is money and it is historically cheap compared to gold.

Gold has reached overbought conditions from my July 28th buy signal.  Right now gold is a bit overbought while silver is at an interesting buy point, having found support for the fourth time at its long term 200 day moving average.  Today’s breakout of the symmetrical triangle, a very bullish chart pattern, is a sign that silver has built up a lot of internal strength and could break out into new three year highs. Remember, silver is significantly below all time highs while gold has already broken into new highs.

While I am bullish on gold, I believe investors could see a higher percentage move in silver.  I have also alerted my readers to a specific  mining company which has recently found a major discovery in Mexico.  Pure silver discoveries are very rare.  Silver supply is mostly produced as a byproduct which makes supply very inelastic.  A new pure silver discovery in a silver bull market could receive a nice premium.

I believe silver will make a major move on this break out. Investors are looking for a safe haven, protection and value in silver.  Gold has already made a significant move and is quite overbought, while silver has not participated to the same extent.  The gold silver ratio should move to historical norms which could mean a major move for silver.

If you do a study of the point and figure chart of the relative strength of silver versus the S&P500 since 2001, its strong uptrend is apparent. Each time silver falls back into support, it breaks out and makes significant rallies.

The break above the red bearish resistance line and a double top breakout coupled with the daily chart symmetrical wedge pattern demonstrates that silver has reached a critical juncture and could make a nice move.

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Is Gold In A Bubble? No Way! Classic Cup and Handle Pattern

In Market Analysis on June 11, 2010 at 1:13 pm

On the front page of all the media outlets is the question if gold is in a bubble.  I ride bubbles and look for beginning signs of bubbles.  Bubbles are irrational, but there is an old saying that markets are irrational a lot longer than one can stay solvent.

I believe gold is nowhere near a bubble top and believe now is the time to profit on the next major asset class ready to run through finding the strongest mining stocks in the sector.  I use relative strength to find those companies.

Gold is in a classic cup and handle pattern.  The cup and handle pattern has historically led to major market moves.

You can see by the graph the major breakout from the six month saucer on excellent volume.  Notice how the volume dries up on the handle.  Now I expect a major breakout and a run to $136 on GLD or $1375 an ounce.

Compared to other bubbles gold appears flat.

This a chart of the oil index verse the gold and silver index.  Notice the run in oil before the credit collapse.  This run lasted almost 5 years before it topped.  Meanwhile for the past 15 years the XAU has been relatively flat and yet it has had a nice run we have not seen the run up like other asset class bubbles.

I believe there are signs that we may be moving into a peak gold area and would not be surprised if there is a global rush to gold as investors lose faith in fiat currencies.

The recent collapse of the euro only preludes what will eventually happen with the dollar and treasuries.  Now many people have run from the Euro to dollars, but I believe that is temporary.   Now is the time, before the masses rush in, to buy gold and specifically the strongest mining shares which I highlight here.  This is not the time to be bottom fishing other markets.  I believe to stick to strength.   This chart above gives me the confidence to know that we have not entered bubble territory yet.