A few weeks ago on February 4th, I penned an article for Kitco forecasting the gold correction trends and the likely outcomes. My opinion was that gold was pulling back to work off excessive optimism from the early December 09 highs. This type of pullback was orderly and there was a gap at 102.50 on the GLD ETF that I believed would fill. The following day, that gap filled and gold hit a bottom at 1042 and has rallied much higher since. I opined that the rally in the US dollar was merely cosmetic against other world currencies, and that Gold was still the preferred asset to accumulate and would begin to move regardless of the dollar moves.

The recent technical move up in Gold only confirms that we are in the final five year window in my opinion where the investing public becomes “aware” that gold is real money.  In my August article last year, I discussed my thirteen year bull theory for the Gold market. The first five years from 2001-2006 was the “stealth bull” in Gold and Gold stocks.  The average Gold Fund ran up 30% a year for five years compounded.  By the time investors figure this out, they all pile in right near a five year peak.  The market then chops for three years sideways in an up and down fashion, getting nowhere.  Investors get bored, and then we move into the final five year stage where awareness takes hold and the bull cycle really takes off.

It is maybe the second inning of this five year stage, so the recent pullback in Gold to 1040 is normal, and the next advance is likely to be larger than the August to December advance. As this awareness grows, the bears get upset and try to explain how gold bulls are foolish. The investing public sometimes does not get enough credit for being correct, and in this case, those investing in Gold have been proven correct over and over again for the past nine years. They will be proven correct for the next few years as well as Gold continues to climb and  befuddle the gold bears of the world. You will know that Gold’s bull market has topped when all of the bears are completely silent and every Gold bull is running around screaming buy at the top of their lungs. Every time I have seen Gold pull back in the past nine years I have chuckled at how fast the erstwhile Gold bulls start getting nervous and the Gold bears pile on hard.  As long as I continue to see these behavioral patterns, and the technical and Elliott Wave patterns stay bullish, I will remain a Gold bull while trading around the important pivot highs and lows. As long as the pundits keep trying to talk Gold down, it will keep on rallying and fooling them until they are all believers. This is how the 13 year Tech Stock Bull unfolded from 1986-1999, and it’s how this Gold Bull is unfolding before your eyes.

It is interesting that Gold bottomed a few times and bounced off the 1070 areas, and then made what appears to be a final bottom around 1042 on February 5th and has rallied hard since then. In my opinion, Gold rallying past the 1040 and 1070 fibonacci pullback windows and now over 1,100 is indicative of a new wave of bullish advance taking us to $1325-$1350 at the next pivot top in Gold. It is as if Gold just cleared two important psychological hurdles at 1040 and 1070, and yet we see articles talking Gold down.

What many market pundits do not understand about Gold and it’s ascent since 2001 is that Gold is real money. Since most world currencies are nothing more than “burning matches” in a debt ridden world, Gold rises to the top of the asset class charts.  If you look at the Dow Jones average relative to Gold prices in the past ten years, you can see what real money is doing. The Dow is flat over ten years now while gold is up nearly 400% in the same period of time. Measure the Dow or the SP 500 index against Gold as your money indicator, and we are still in a major 10 year plus bear market. Folks, the Kondratiev winter is still here and the weather is about to get a lot colder.  In the winter cycle, all debt gets washed out of the system and this creates all kinds of carnage. Gold becomes favored “money” in this type of cycle.  Once this cycle completes, the “spring” comes and we start anew.  In the interim, look for Gold to continue ever higher and look for continuing trash talk by the pundits who don’t  get it.

I will be launching a new Market Trend Forecast service in early March of this year which will forecast the short, intermediate, and long term views of the markets, indices, ETF’s, and precious metals.  This will be in addition to my Active Trading Partners service. You can learn more at www.activetradingpartners.com , read our subscriber testimonials we have  compiled in 6 months since our July 2009 launch, and also review our past forecasts at www.activetradingpartner.com/articles.

David Banister

Jeff Clark, Senior Editor, Casey’s Gold & Resource Report

As a self-professed gold bug, why would I possibly want my favorite investment to fall in value? Have the long hours finally caught up with me?

Au contraire; my near-constant devotion to all things gold has only served to crystallize one of the things I really want out of this. Here’s a hint.

I had lunch with a reader at a recent conference, and while talking about one of my favorite subjects – gold stocks – I asked why he was invested so heavily in them. “Greed,” he said bluntly and with little hesitation. I appreciated the honesty.

Let’s be frank: I’m here to make money, and so are you. And that’s why I hope gold falls to $1,000 again.

Let’s say Bob has taken our advice and has been storing cash. I’ll use $1,000 as an example. If Bob buys Yamana Gold now, he’d get about 93 shares as I write (at $10.73 per share).

Now, let’s say gold drops to $1,000, about a 10% fall from here, and due to its leverage, AUY sells off by a 2-to-1 margin, meaning 20%. So with that same $1,000, Frank, who’s waited for the downturn, buys 116 shares at around $8.58. Thus, instead of owning 93 shares at $10.73, he owns 116 shares at $8.58.

When Frank sells, he doesn’t just make the difference between $8.58 and $10.73 (an extra 25%), he also makes 125% on the extra 23 shares he owns if Yamana doubles in a couple years, which I expect it to. So two years from now, Bob would have $2,000, but Frank would have $2,500 because he bought more shares and at a lower price. Frank makes 25% more than Bob on the same dollar investment simply by buying when gold and gold stocks fall in price.

Got $5,000 saved up? Multiply the profit by 5. And with larger amounts, you can see we’re talking serious money.

I don’t know if we’ll see $1,000 again or not, or if Yamana will fall that low, but I would point out that corrections in the gold price can range as high as 20% (2008 notwithstanding), so a further sell-off in price would not be out of the ordinary. A 20% correction from gold’s peak at $1,212.50 on December 2 would equal $970. That’s not necessarily a prediction, but it shows you that price is certainly possible.

Don’t like my wish? Remember, it’s called a bull market for a reason; it’s not a cow market or a puppy market. It’s going to try and buck you off. But a correction to $1,000 or even lower can give you the chance to buy more, cheaper. Don’t view sell-offs as a bad thing but rather as an opportunity.

Bring on $1,000!

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Gold Stocks and the Dollar

The HUI (Gold Stock Index) has been on fire the past 10 months. Both gold and gold stocks have been leading the market higher. But the past month we have seen gold stocks under perform the SP500 and as of today are testing a key support level. Only time will tell if it bounces or breaks, so keep a close eye on your positions.

I use the UUP etf of the US Dollar to show the price action of today’s price move. The US Dollar is now above a key resistance level and has started to move higher. If the Dollar continues higher commodities across the board will have downward pressure. This could trigger a large sell off in the gold and gold stocks which I think are still over bought using a short term time frame.

Gold & Oil Futures Trends

The trend of gold and oil has been down the past few days. Gold broke down in the past 24 hours in overnight trading which triggered a wave of selling when the US market opened.

Gold and oil are currently trading between key support and resistance levels. I am looking for gold to drift back up to the $1130 level where I will look for a short setup as the current price action is not bearish on the intraday charts.

Oil is still bullish so I am not really looking to short it at this time. I will wait for another low risk buy signal.

Commodity Trading Conclusion:

I feel the broad market could be ready for a large correction ranging from 5-10%. I am calling it a correction as I want to stay positive thinking. But it could be the start of a major market top. Market tops tend to be a process and take several months to roll over. So let’s focus on protecting our money and wait for a pullback that will allow us to load up with some great positions in the coming weeks.

Patience is how money is made in the market. Waiting for the market to come to you is vital for success. Also having the patience to let winners run by scaling out (selling a portion) of a position when the price reaches a support or resistance level makes it easier to let them run. Each time you sell some of a position you are locking in a profit and lowering your risk for the balance of that trade.

If you would like to receive my Free Weekly Gold Reports please visit my website:

Chris Vermeulen
www.GoldAndOilGuy.com

Gold is in a strong bull market but the short term charts have provided over 13 short trades in the past 2 weeks for futures traders playing the bounces to resistance levels. The triangle on the 60 minute chart with declining volume is a continuation pattern of the short term trend which is down.

Because gold is trading near a support level on the daily chart, I am waiting patiently for a perfect setup to go short, or long depending on what happens in the coming hours. I predict lower prices with $102 area for the next support level.

Let’s continue to focus on these short term charts to take advantage of any low risk setups which come our way.

Get my Free Trend Trading Charts Free

Chris Vermeulen

www.TheTechnicalTraders.com

Donald W. Pendergast Jr. – Market Analyst – www.ETFTradingPartner.com
Wow – what a week it was in the world of Gold! After charging above $1,200 on the front-month futures contract earlier in the week, Gold finally finished the week on a very weak note, closing below $1,150, which was right above the low established a week earlier in the wake of the Dubai debt debacle. Clearly, Gold is beginning a trend reversal on a daily-based time frame, but the technical picture is less clear over the long-term. Let’s examine a weekly chart for GLD (one of the financial instruments that holds actual Gold) to get a better fix on what might be expected in this volatile market over the next month or so.

Graphic credit: Metastock v.11

Before going any further, I must admit to being a Gold Bug, having been afflicted with this wonderful malady for many years – including the time period prior to the recent bull run in Gold from 2001-present. Long-term, and given the abysmal long-term outlook for the US Dollar (and all fiat currencies for that matter), declining mine production (most of the high-quality, easier to mine deposits are used up already) and greater awareness among investors regarding the inclusion of Gold in their portfolios, I believe that Gold will easily make it to $2,500 to $3,000 at some point in the next five years, despite several massive sell-offs along the way to the eventual summit. However, in the here and now, we need to also rely on our charts, technical indicators and COT futures market data (Commitment of Traders report, published weekly by the CFTC) in order to minimize losses and maximize gains by waiting for more opportune times to add to long-term holdings of Gold and/or to capitalize on high probability, short-term moves (up and down) that will likely commence from solid support/resistance (S/R) levels in the weeks ahead.
OK, now on to what the weekly chart of GLD is telegraphing to astute traders and investors here:

1. $1,200 was a key Fibonacci extension/Keltner Band resistance area on both a weekly and monthly time frame; major turbulence was expected well in advance – thus the recent tumble came as no surprise to experienced technical traders.

2. Note this week’s wide-range weekly reversal candle, one that printed on extremely heavy volume (see circle at bottom of chart); this is a major reversal signal, especially for daily-based traders, coming in the wake of such a high profile resistance barrier($1,200).

3. Look now at the short-term and long-term money flows (lower portion of the chart); both of the Chaikin money flow indicators (CMF)(34) and (CMF)(144) are revealing pronounced negative divergences with the actual price trends of GLD, which means that the raw fuel (money flowing into GLD and Gold) needed to drive Gold higher is beginning to dry up – for the time being.

OK, so what? What’s a trader and/or investor to do now, given this information? Well, if you’re a long-term Gold Bug, simply hold your core investment positions for the long-haul; that $100+ trillion US national debt/unfunded liability problem ain’t paid off just yet (and likely will never be), so the future for Gold has never looked better, especially for those wishing to diversify out of the Greenback. Let this corrective move play out and trhen consider adding more at lower price levels – $1,050 might be one such a price zone, which happens to be the current 21-week exponential moving average (EMA) price for cash Gold. For those investing via shares in GLD, the area near $104 also coincides with its own 21-week EMA. More cautious investors might wait for a move lower toward the 50-week EMA, which comes in at about $96 for GLD and $975 for cash Gold. The 21- and 50-week EMA’s acts as strong S/R barriers in nearly every kind of market, and Gold is no exception, so you may wish to do further analysis to see if adding on at those particular price areas makes sense for your financial situation.

Traders can be a bit more aggressive; expect to see some sort of a reaction move higher once GLD/Gold hit their 21-week EMA (green box on the chart shows the likely time/price zone in which to anticipate a reversal higher)– this will most likely be a high-probability swing trade play, one that also needs to have a logical stop loss and profit target as well. Daily-based traders can do the same thing – plan on on the 21-day EMA offering some sort of a floor from which a short-term tradable bounce will commence. But be very nimble, with firm stop-loss and profit targets in place before you enter the trade.

Yes, this is a real correction in Gold, but no one really knows how far the price might fall. Even the strongest bull markets need to pause and correct before moving higher, and perhaps this is the case with the Gold market right now. We should know more as the weeks ahead play out; as always, use common sense, be patient and learn to focus on what the charts and long-term fundamental factors are saying, rather than giving in to fear, doubt or the opinions of those who may not have your best interests in mind.

Mad Hedge Fund Trader

Featured Trades: (GOLD), (GLD)
(HARD ASSETS INVESTMENT CONFERENCE)

1)Welcome to the new gold standard! There was a time that to own gold you had to be a “gold bug” and believe in the myriad urban legends that percolated in the underground. Fort Knox is either empty, or full of gold plated steel bars. The Treasury cut back on the minting of new gold coins because it had to ship the bulk of our reserves to China to cover the trade deficit. The US government is going to ban private gold ownership again. The Feds have unwittingly fanned the flames of paranoia, with the Patriot Act forcing all American gold and jewelry dealers to register with the Treasury Dept. But adherents to the yellow metal are considered raving nut cases and conspiracy theorists no more. Emerging market central banks, pension funds, hedge funds, mutual funds, and millions of individuals around the world have all simultaneously decided to keep a certain percentage of their assets in the barbaric relic. They are either making a bet on an extended super cycle in favor of all hard assets, or looking for insurance against a wave of hyperinflation that Washington’s policies threaten. Enthusiasts are no longer burying pillow cases of coins in the back yard, but instead are pouring into an ever expanding legion of ETF’s, mining shares, bullion, and futures contracts. The SPDR Gold Shares (GLD), with $37 billion of the yellow metal, is now the world’s sixth largest owner of gold. Some economists are now arguing that if you take world GDP and divide it by the value of the gold above ground today, an historic mean ratio would put the yellow metal at $11,000 an ounce. That makes the current spot price look like the deal of the century, and my target of the old inflation adjusted high of $2,300 positively conservative. To sign up for an excellent free weekly research product on precious metals, please click here for the Millennium Metals website

2) I thought I’d visit the front trenches of the gold boom by dropping in on the Hard Assets Investment Conference in San Francisco. I planned on spending one hour, but stayed eight. It proved incredibly fertile ground, not just for gold bugs, but also of enthusiasts for silver, platinum, uranium, rare earths, and base metals. A nearly football field sized conference hall was filled with booths from over 100 participating companies. Of course the coin dealers were out in force, flogging maple leaves, silver eagles, and krugerands. The gold miners alone had reps from Africa, Canada, Peru, Brazil, Argentina, Guyana, Mongolia, the Congo, and Burkino Faso. I gravitated to the tables manned by grizzled old mining engineers with dirt under their fingernails who gave me the hard data on yields, processes, and costs that I was looking for. I pawed ore samples and core drillings of every possible description. The newsletter publishers also had a large presence. It turns out that there is no environmental movement without rare earths, and we are entering the golden age of nuclear power. One guy even offered to drink the runoff from pure yellow cake to make his point. The financial leverage of the junior miners is spectacular if the price of the barbaric relic keeps going up. I even learned about the fascinating world of collectable gold nuggets. By the end of the day my back finally gave out, and I went cross-eyed poring over a topographic map of lithium deposits in Chile’s Atacama Desert. I’ll delve into each of these areas in detail in the coming weeks, once I have had a chance to sort through the wheat from the chaff. The early preview: the price of everything is going up. The next conference on May 10-11 at New York Marriot should be a real whopper.

QUOTE OF THE DAY

“Central Banks are sewing gold into their lapels,” said Philip Gotthelf, president of Equidex, a foreign exchange dealer

I didn’t believe it either until I saw the proof with my own eyes… Click here for the full report Genius chess player with a certified I.Q. of 157 unveils his ’sneaky’ (and 100% legal) trading system which can… … secure net profits up to $1250 … not in days or weeks … but just 59 minutes or less Click here for the full report

Vincent Fernando of Money Game

RBC has calculated that gold-related shares are currently pricing in a long-term gold price of $940, according to a chart highlighted by FTAlphaville.

While such excel-model calculations always need to be taken with a grain of salt, by RBC’s numbers Barrick Gold (ABX) appears as relatively under-valued. It would be interesting to see by what model RBC arrives at these valuations. Barrick, for example, doesn’t only produce gold.

I didn’t believe it either until I saw the proof with my own eyes… Click here for the full report Genius chess player with a certified I.Q. of 157 unveils his ’sneaky’ (and 100% legal) trading system which can… … secure net profits up to $1250 … not in days or weeks … but just 59 minutes or less Click here for the full report

Infamous wave theorist Martin Armstrong (see this New Yorker profile for background) sees gold going to $5,000 plus.

His first line is a doozy, and it sets his tone: Gold has been among the most hated subjects by the socialists, because with each dollar that it advances, it reveals the delusion that they seek to live within.

Armstrong, of course, sees the number π, in everything, which is why you get parts like this (in which he discusses the history of gold speculation). Notice the duration of the scam in the last line.

GOLD $5000+ 11/11/09

By Jeff Clark, Casey’s Gold & Resource Report

A couple weeks ago, I had my TV tuned to a business show that loves to give predictions on the markets and the economy. On that day, one of the program’s regular guests declared it was time to “short” gold, that it had reached its top, and that the precious metals bull market was over. I’ll try to be nice in my rebuttal.

So, what was his reasoning: technical analysis of wave counts? falling demand? a telling ratio? sun spots? No, he noted that upscale department store Harrods in London began selling gold bullion and coins “over the counter,” ergo, the top was in. Nice try, “Bert,” but this is amateurish. You really shouldn’t be playing with the big boys if that’s the basis of your call.

Yes, gold will someday put in a top, and since the gold price is largely determined by psychology, the end of the bull run will be marked by behavioral types of signals. But calling a top in gold now is like declaring that WWII was over because the Allies won a small skirmish in early 1942. To have made such a statement, based on a small, isolated event, ignored the greater forces that had yet to play out and would have made any journalist or military strategist look foolish indeed.

And here’s why Bert looks equally silly today…

If the top were in, we’d be in the midst of an all-out Mania. Are we? Do you get the impression there’s a rush into gold by the greater public right now? Are headlines blazing the covers of major magazines pronouncing gold as the new investment king? Has Wall Street gone gaga over gold and silver? I ask because these are the true signs that a trend has entered its final blow-off top and would signal it’s time to get out.

I decided to put Bert’s prognostication to the test, and I invite you to play along.

First, I struck up casual conversations with my friends, neighbors, relatives, acquaintances, my wife’s co-workers – heck, even my seatmates on airplanes – angling to learn how much gold they were hoarding, about the killing they were making in gold stocks, and how they were getting rich from all their precious metal investments. (In fairness, I had to exclude my dad, who is an award-winning gold panner, but he’s the only one.)

I found no one – not one person – who is actively investing in anything gold or silver, let alone rushing to buy or hoard the stuff. I had two people who confided that they did own gold, but in both cases it was inherited. A few were curious how they would go about doing such a thing, and fewer asked if I thought they should. Most everyone looked at me blankly when I asked; they didn’t seem to know what I was talking about. When I got a reaction like that, it was pointless to ask about gold stocks. Of the handful I did ask, most had never heard of Barrick Gold, the world’s largest gold producer.

Now ask yourself the same thing: how many of your family, friends, neighbors, and co-workers are buying gold and silver coins? Are any of them giving you hot stock tips about a fantastic gold producer, or telling you about the latest gold discovery made by a company in China? Have any fellow investors told you they’re dumping their brokers because they can select gold stocks better on their own? Anyone telling you they’re going to night school to learn the gold mining business?

Next, I surveyed a large sampling of print media looking for some of these signals that Bert surely had spotted. Over the past couple weeks, not one of the major business magazines I reviewed had anything on the cover about gold or silver. Further, there were no articles on precious metals, such as the best ways to buy or store all this gold everyone is buying.

One magazine ran an article about ways to prepare for inflation, and gold wasn’t even mentioned! I did see an ad from the U.S. Mint in another, along with a couple small ads in the back that said they had the best prices on bullion (right beside the teasers for buying a Russian wife), but that was it. Even the portfolio allocation models recommended in the articles I read made no specific mention of precious metals (one recommended a “resource” fund, but their discussion of it was centered around energy investments).

Other than the articles you seek out, how many mainstream magazines do you see extolling the virtues of gold and silver on their cover? How many bestsellers are prominently displayed at your nearest bookstore that scream at you to buy gold stocks? Are you getting fed up with all the junk mail you get about gold and silver?

Last, I went out of my way to look for stories on gold and silver on TV and radio. About all I could find were the same ads that popped up after last year’s Super Bowl commercial by Cash4Gold. A couple programs quote metals prices, and I was able to find another that actually used the word “gold” in a sentence. It might just be me, Bert, but I can’t find any news anchors talking about the latest gold discovery or that “must own” gold stock. No in-depth special reports from investigative journalists on the hot Canadian junior mining sector. Nothing on my radio about the best ways to store all the silver every smart investor has been buying.

How about you – are you feeling bombarded by TV and radio ads and segments on precious metals? Do you have the clear impression gold and silver are the hot new investing trend around the world? Are you Tivo-ing certain TV shows because of all the great info they provide about picking the next great gold stock?

If we were in a Mania, Bert, all of this would be happening. But it’s not. Those who buy gold coins in the U.S. are still largely viewed as members of a fringe group. There is no public discussion on gold, no insider tips on the latest hot gold stock, no special reports on how to store all the bullion you’ve collected. The psychology isn’t on our side yet. One signal does not a Mania make.

Last and perhaps most important, Bert, are you sure the dollar is done falling? You’re absolutely convinced we won’t see price inflation? Our current debt load won’t pose any future problems? No more worries about foreigners buying all that debt? Obama and Bernanke really have saved the day?

Bert, send me your shorted gold positions, I’ll buy them from you. And although the gold price could see a correction in the near term, and several more along its journey to “the top,” remember that battle in early1942 and all that had yet to occur before the war was over.

And one more thing: when you finally become breathless to buy gold stocks, I just might be ready to sell them to you.

Are you convinced you have the right gold and silver investments for what lies ahead? For just $39/year, you can be sure you have the best gold and silver stocks, along with specific recommendations on the best places to buy bullion. Check out Casey’s Gold & Resource Report.