Gold Price - Where is it heading?

[So_Cynical]

South African production has been falling since the 70s
world production has been falling since 2001.

 

[bean]

High on the 19th July
The Gold Indices usex,hui,xau
16.7 158.11 371.11

Yesterdays Close
16.24 155.47 366.98

Todays close
16.15 155.75 366.18

I currently on one index have a run pattern (which I have been looking for )
One down four up ( 70% probability of preceding a decline other % wise it could just flop around for a few, or could be bullish! )

“one Index in that system I refer to went from negative to positive (which can mark a top or within a day of top)”.
Which it did but it may be showing me something else. I will know soon enough.

THEY DROPPED O/K not by much but they dropped that is all that was require by the signals.

I entered the various date and prices of the Indices yesterday and today as they now come into play

Yesterdays closing prices and the highs on the 19th July is now the resistence range.

So the action of the next few days will be interesting.
With resistence you can break through but you have to hold.
The ideal bearish scenario will be up for the next day or two then failure,
But will look at each day as it comes

I also mentioned at the weekend POG ‘may’ get to US 720 – 725 range

Also Still in play

“The Daily and 60 Minute Charts show the Dow continues to build out within the boundaries of the large triangle range, which continues to be the major long term pattern to watch in the charts. The index is approaching the top of the pattern at 13,450, but more development within this range is likely before a breakout occurs. As we mentioned before, a breakout in either direction from this pattern could yield a move of about 1,200 points, so continue to watch it closely.”

The bottom of that triangle is 13050.

I seem to be having everything thing in place, However I may be wrong about the direction

I have the possibility of getting my 20-30% decline in the gold Indices to the final bottom
And we have the Dow falling a least 10%
POG (I do not have a price on the bottom!!!)

In a matter of days we will know if I am right

 

[Sean K]

In a matter of days we will know if I am right

Bean, can you please recap exactly what you will be right about. Thanks.

Exactly.

 

[barrett]

On gold sector timing – the indicator I pay most attention to when deciding when to buy gold stocks is the XAU:spot ratio, the XAU Philadelphia gold stock index divided by the spot gold price. At the end of every major correction in the gold sector for the past 25 years, this ratio has fallen below 0.2. The most recent breach of this level was mid August ‘07. Typing $XAU:$GOLD into www.stockcharts.com gives a graph of the ratio.

In early ‘05 John Doody from the Gold Stock Analyst newsletter did a retrospective study of the XAU:gold ratio as a buy signal. The trading rule was that a buy signal would be generated if the XAU:gold ratio fell below 0.2; the holding period would be six months, and if during this time the ratio again dropped below 0.2, the holding period would be extended by six months from that date. From 1982-2004 there were 8 buy signals, and the average annualised gain in the XAU over the subsequent holding period was 63.1% (range 11.7% - 85.1%). The holding periods ranged from 184 days to 804 days but were usually less than 400 days.

In the period since 2001, each of the three major uplegs in gold stocks has begun with the XAU:spot ratio falling below 0.19 twice within a two-month period (ratio is graphed in the middle data series of the chart below). Using this indicator you would have been buying the gold stock index at the exact bottoms in November 2001, March 2003 and May 2005, and making gains of 80-100% each time in the following 6-12 months. Notice on the chart, there have been two false bottoms where the ratio fell below 0.19 only once before heading up. This suggests that while <0.19 or even <0.2 is a safe time to buy gold stocks, the most aggressive gold stock buying during this bull market should be reserved for when the indicator breaches 0.19 twice consecutively.

So far this year, the ratio has fallen below 0.19 once – in mid August. 50% of my portfolio is long term holdings of gold mining stocks and I am waiting until the ratio falls below 0.19 once again before deploying my remaining cash in gold stocks.

 

[barrett]

The above chart is from www.theglobalspeculator.com.au, an Australian gold investment website with free newsletter, worth a look. They are associated with goldnerds.com.au, who run a subscription data service on Australian gold stocks.

Another take on the XAU:gold ratio: http://www.resourceinvestor.com/pebble.asp?relid=16024

 

[barrett]

In addition to the XAU:gold ratio, various other technical and fundamental indicators suggest to me that gold stocks are yet to make their final bottom for 2007:

1. The commitment of traders in the US dollar (see http://www.cftc.gov/) shows that the commercials are very heavily net long the US dollar: long 16,918 contracts and short only 2400 contracts, about a 7:1 ratio. This setup usually precedes a sharp rally in the US dollar, which would be expected since the US dollar has rallied strongly at the beginning of every global economic slowdown since the early 1970s - and since as Marcus Padley acknowledged on Lateline Tuesday night, there is nearly a total bearish consensus among analysts on the US dollar.

2. The latest commitment of traders in gold shows the commercials net short 124,000 contracts, which means that industry insiders are too bearish in the short term. At the 2001, 2003 and 2005 major bottoms the commercials were always short less than 50,000 contracts (and at major bottoms in prior years the commercials were typically substantially net long). So the gold COT strongly suggests that the major bottom for 2007 gold is not yet in.

3. Insider share purchases in the gold sector, a typical feature of major bottoms, have been very sparse even around the middle of August, and in fact last week there were a number of insider sales including at Royal Gold (RGLD) and US Gold (UXG).

4. Many segments of the corporate debt market are still frozen. If crunch time comes it will be no different to any previous time - money will first flow into US dollars, due to the need to get liquid - not into gold, at first.

5. The US bond market is forecasting a serious economic slowdown, with the two-year treasury yield continuing to fall sharply – so far 220 basis points in 3 months.

6. Silver is not confirming gold: silver technicals are weak.

7. Gold is short-term overbought on just about every technical indicator there is, having rallied from $642 to $712 in less than a month. From a technical standpoint a sharp correction and even sharper sell-off in the gold stocks would not be surprising, causing the XAU:gold ratio to again retest 0.19 (it is currently 0.217).


To re-iterate - 50% of my portfolio is currently in gold stocks. The XAU:gold ratio suggests that substantial gains are ahead in the coming year or so for gold stocks - I don’t want to discourage anyone from buying. But to my mind the above is enough evidence that a better buying opportunity will soon be available to wait before buying more. If the XAU:gold ratio retests the 0.19 level in the coming month I will deploy my remaining cash in gold stocks.


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Disclosure:
I hold LGL, RSG, OGD, SGX on the ASX
And AUY, GG, SSRI on the US exchange

And looking to buy:
ASX: more of the above + NEM, SBM, NCM
NYSE: SLW, MFN, RGLD, SIL
TSX: DMM.TO, NGG.V (the McNeils' other company - New Guinea Gold)
and others

 

[bean]

Bean, can you please recap exactly what you will be right about. Thanks.

Exactly.

The resistence the gold indices are at.

To confuse you even more

High on the 19th July
The Gold Indices usex,hui,xau
16.7 158.11 371.11

Yesterdays Close
16.24 155.47 366.98

Todays close
16.15 155.75 366.18

The top of support range for those indices over the next three days.
Remember does not use moving averages but it does use numbers and cycles
so can be quicker moving.

16.12 158.11 371.11

As you can see they are in resistence.
This occurence does not happen often but its winding up for a large move.

HUI XAU both issued a signal last night could be top or within day of top???
There is definetly something big ready to happen.
I will know in next couple of days depending on the action

 

[bean]

Note because the hui and xau issued a signal last night there support moved to a different cycle to the userx.

 

[explod]

I am not convinced by the evaluations of Bean or Barrett. The US dollar continues to weaken and the gold price is in a typical consolidation phase. There is established support now at US$700 per ounce, which goes back to 1980. As well the fundamental demand now kicking in supports my feeling to hold long at this time.

Not saying I am right, just my take

 

[Nicks]

I will know in next couple of days depending on the action

We all will by then Bean.

 

[robandcoll]

The year 2007 is the slowest production of gold since the year 1922.

 

[Kauri]

Is it on a stairway to heaven... or going to drop like a Led Balloon??
Cheers
..................Kauri

 

[barrett]

It will go up like a rocket - but the rocket has to refuel first imo

 

[explod]

It will go up like a rocket - but the rocket has to refuel first imo

Yep, needs to hold above long term support at US$700 (which actually goes beack to 1980/81) with consilidation, and yes up like a rocket from there. But could be a further shake out yet as alluded to by Bean, but not that low however.

Fundamentally, US dollar is at an all time low and continuing to weaken. Interesting the press seem to be avoiding this event. Not lost on the gold bugs however.

 

[bean]

Last night the Indices moved a little XAU rose while the hui and userx fell.
At the moment they are stuck in resistance and support
These ranges are only the same for another day or so.
A couple of the indices issued another signal last night Could it be a short term bottom last night or tonight? I did say a small % wise could be bullish but if it is it may only last a few days (false breakout).

 

[Edwood]

potential bearish bat forming on gold, could be worth watching

 

[Sean K]

potential bearish bat forming on gold, could be worth watching

690 has to be considered support now doesn't it? I suppose it needs to be tested.....

 

[Edwood]

Hi Kennas - if that bearish pattern plays out it will be going a lot lower than 690 (but it will have to test 690 first of course if it is going lower.) could also continue on up from here & negate the pattern - just flagging it as something to be aware of but not to trade off - ie with these auto-generated harmonics I follow my normal entry signals but keep an eye on them. here's one from kiwi-sterling which played out nicely

 

[Edwood]

but if the credit squeeze really kicks in & we get a run on the banks you'd have to think gold is going to rocket

 

[wavepicker]

but if the credit squeeze really kicks in & we get a run on the banks you'd have to think gold is going to rocket

Interesting charts Edwood. Is the Pesavento type analysis you are using??


I am mulling over Gold at present. There has been so much hype and bullishness surrounding this advance that I can't help feeling that it may not rocket as much as most expect, as such I am gonna sit this one out. There is a major time cycle due at years end for the USD, most pairs and the precious metals.

This last leg of the USD still resembles an Ending Diagonal that is approaching completion(although is not there yet)

Cheers