Precious Metals Summary
The expected Spring pullback started from Gold 1000 and turned us to Neutral since Mar 18, 08 from our Buy the Dips since Jan. 24, 08. 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. The Commitment of Traders for most Precious Metals are bullish, except for Gold but that could just be a sign that it is the most popular trade and that Gold may underperform the others. 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 a late 2007 cycle low, adding weight to early 2008 as a high for Gold and Gold stocks.
Precious Metals are breaking out
Gold broke above the May 2006 highs bringing the all time highs within range, while Platinum is already making all time highs. Silver and Palladium are not far behind and all the cycles seem to be favorable well into 2008 suggesting a late 2007 Precious Metals rally.
Charts courtesy of StockCharts.com
Charts courtesy of StockCharts.com
All cycle lows are 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
Commitment of Traders can support higher prices
While the Gold COT's could be considered extended and suggesting caution, the Silver COT's are telling us that this rally could extend much further. Maybe the gains in Silver will be much bigger than in Gold. Palladium and Platinum COT's (not shown) are also suggesting much more to this rally, especially in the case of Palladium.
Gold COT
Charts courtesy of Floyd Upperman Associates
Silver 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 still lags and should turn up soon if the obvious Elliott Wave count of the HUI to Gold ratio is correct. So far the action of the HUI to Gold ratio is promising, but has yet to confirm the breakout.
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
Astrological cycles favor a parabolic move in Gold
Charts courtesy of StockCharts.com
Charts courtesy of StockCharts.com