Summary
Gold stocks regained support and are Neutral since August 24,07 while Gold failed to breakout and is Neutral since May 10,07
The 2006 high in Gold did not see the level of optimism in Gold stocks seen at previous 6 year cycle highs, and should do so by
the next one in 2008. This is further confirmed by the COT's which never really showed extreme interest in Gold like we are seeing
in Palladium and Platinum now. A 6 year rhythm is visible in the price of Gold in other currencies, suggesting further gains and a
major high in early 2008. The US dollar also appears headed for an early 2008 cycle low, adding weight to the end of 2007 as a high
for Gold and Gold stocks.
Cycle lows favorable for Gold and Silver stocks
The Gold and Silver indexes turned up sharply from their cycle lows suggesting we are to see higher prices ahead. Since cycles
of 1.1, 2.5 and even 6 years are cresting in early 2008, the next 6 to 18 months could move up rather sharply.
Charts courtesy of StockCharts.com
Charts courtesy of StockCharts.com
Metals have yet to breakout and confirm
While Gold and Silver have yet to break resistance levels, the cycles holding them down are coming to an end soon and could result
in a powerful breakout confirming the recent move in Gold stocks. More evidence on the probability of higher Gold prices is
discussed below.
Charts courtesy of StockCharts.com
Charts courtesy of StockCharts.com
Commitment of Traders could support higher prices
The Gold (below) and Silver COT's are both near levels more suggestive of a low than a major top unlike the Palladium (below) and Platinum COT's which are very extended suggesting a major top is forming in these Metals. However the COT's can turn before the price does and much higher prices can be seen especially in parabolic moves often seen in Palladium and Platinum.Charts courtesy of Floyd Upperman Associates
Gold COT
Palladium COT
Charts courtesy of Floyd Upperman Associates
The XAU to Gold ratio suggests higher prices
The XAU to Gold ratio is a well known sentiment indicator for mining stocks, and despite the sharp run in Gold and mining stocks
it failed to reach previous levels of optimism in 2002 normally seen near 6 year cycle highs. It is likely to do so before the next
cycle high in 2008 and that could mean large gains ahead in Gold and Silver stocks. The HUI to XAU ratio has already turned up from
the zero line in 2007, suggesting this is the case. The similar HUI to Gold ratio is struggling with the pull of its shorter cycle
while being held up by the 6 year cycle of the XAU to Gold ratio. It is only a matter of time before the uptrend resumes, and the
obvious Elliott Wave count for the move tends to confirm.
Charts courtesy of StockCharts.com
Charts courtesy of StockCharts.com
Cycles are favorable for Gold in the rest of the world
Looking at the price of Gold in major currencies, we can see that they are all headed for a 6 year cycle high in early 2008,
suggesting a major US Gold high in early 2008. Future gains in other currencies may be limited, since any further decline in the
US Dollar will keep the Price of Gold in other currencies lower.
Charts courtesy of StockCharts.com
Charts courtesy of StockCharts.com
A breakdown of the US Dollar could push Gold higher
Currencies usually make significant turns near the New year or mid-year, like in 1985, 88, mid 89, 91, mid 92, 94, mid 95, 2002, and
2006 as seen in the US dollar chart below. Since the mid-year appears to have been a high in the daily chart below, the US dollar
is likely to repeat the pattern last seen in the late 80's and continue lower into the next January 2008 window for a low. It remains
to be seen how much the USD will decline, but with the 1992 low just a few percent below the decline is likely to be slow at first
and its effect on Gold limited at first.
Charts courtesy of StockCharts.com
Charts courtesy of StockCharts.com