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Gold and Silver
There’s bad news and good news!
by Peter Degraaf
“The future ain’t what it used to be”.
Judging by several E-mails I’ve received from
anxious readers of my articles during the past few days, some of you are
wondering if you should have ‘sold in May and gone away.’
Let’s look at a chart from last year and see if that
strategy would have worked in 2009.
(Charts in this report are courtesy Stockcharts.com unless indicated).
Here is the daily bar chart for gold from last year.
Selling in May (green rectangle) and going away would not have been a good idea
in 2009. The good news is that the best buying opportunities for buying gold and
silver usually come in May – June – July.
“There can be no other criterion, no other
standard than gold.
Yes, gold which never changes, which can be turned into ingots
bars, coins, which has no nationality and which is eternally and
universally accepted as the unalterable fiduciary value par excellence”
What if 2009 was an exception? Might ‘selling in May
and going away’ have worked in some other year?
This chart is courtesy Dimitri Speck at
Seasonalcharts.com. He last updated this chart in 2007, but it covers gold data
from 1971 to 2007. Here we see that almost every year the months of May – June –
July offer some great buying opportunities. Good News!
Featured next is the weekly gold chart. The blue
arrows point to bottoms in the 7 – 8 week gold cycle. My subscribers and I watch
this cycle continually in order to buy as close to the cycle bottom as possible
and then take some profits near the top of the cycle. The cycle can bottom a
week early or put in a bottom up to two weeks late. We are presently in week # 7
in the cycle and there is a good possibility that the low point reached on
Tuesday July 6th and early Wednesday July 7th will turn out to be the bottom in
this latest cycle right on schedule during week #7. In the event that these lows
hold and we see gold and silver rising from here, then the next cycle advance
will be underway. All we need now is confirmation that the cycle bottom is in
place. That will come as the gold price rises and supporting indicators begin to
provide confirmation. Cycle bottoms are Good News.
This drawing by Chad Crowe, courtesy
Goldstocksdaily.com shows Mr. Bernanke is getting ready to make good on his
promise to drop money from helicopters. This counterfeiting activity is bad news
for people on fixed incomes, but good news for people who buy physical gold and
silver to protect themselves from Mr. Bernanke and his Keynesian friends.
In the history of civilization, there is not one
country that escaped the destruction of its fiat currency, once monetary
inflation became part of the process …..Not one!
This chart courtesy Bloomberg and Erste Group
Research shows the depreciation of seven currencies measured against the price
of gold. ‘A trend in motion remains in motion until it is stopped.’ Until these
currencies cease to be surreptitiously destroyed via monetary inflation, this
downtrend (uptrend for gold), will continue. This is bad news for people who
have bank accounts and good news for people who buy gold and silver, regardless
of what month it happens to be. As Marc Faber likes to say: “The important thing
is that you’re buying ounces.”
This chart courtesy Businessinsider.com and Erste
Group Research shows the percentage that gold and gold shares take up within the
total global assets at the moment, compared to four different eras.
The assumption is that some of these ‘other assets’
(99% in 2009) will be transferred into gold assets. A rise from 0.8% to 20% of
the total is a minimum to be expected, as this will bring the percentage up to
the 1932 equivelant. This should convince the reader that the current gold bull
market is still in its infancy and that is good news!
Capitalism is the financial system that puts capital
to work. The true definition of a capitalist is someone whose capital is working
for him or her.
This chart courtesy Wirtschaftswoche, Bloomberg,
Wikipedia and Erste Group Research shows in chart form the remarkable trend
reversal from gold sales to gold purchases in 2009, on the part of the Central
Banks of the world. This is bad news for the gold bears (including the bullion
banks that hold massive short positions), but good news for people who buy and
hold physical gold (as opposed to ‘paper gold’ which is after all just a
It is in the interest of central banks along with
the bullion banks that are co-operating, to keep the price of gold as low as
possible, to hide the effects of monetary inflation from the public.
This chart, courtesy Businessinsider.com shows us
that monetary inflation (watering down of currency values), is nothing new. The
silver content reduction from nearly 100% down to 8%, was done gradually over a
period of hundreds of years. A lot of people never noticed the trend! “It’s
déjà vu all over again.” …Yogi Berra.
This trend is bad news for people on fixed incomes
and those holding fixed rate investments. It is good news for people who own
pure gold and pure silver.
“A black market is a free market operating
against the wishes of the state.”
This chart courtesy Federal Reserve Bank of St.
Louis, muzzles the members of the deflation crowd who say there is no monetary
inflation. ‘Liars can figure, but figures don’t lie’ (to paraphrase an old
saying), and this chart is quite convincing.
“Nations are not ruined by one act of violence,
but gradually and in an almost imperceptible manner, by the depreciation of
their circulating currency, through excessive quantity. …..Nicolaus
Copernicus (Uttered in 1525).
Featured is the daily silver chart. Price is carving
out a bullish inverted ‘head and shoulders pattern. A breakout at the blue arrow
sets up a target at 30.00
The green arrow points to the positive alignment
between the 50DMA and 200DMA while both are rising. That is good news!
Gold's huge drop on Thursday July 1st is not the
beginning of a new major leg down for the yellow metal. That at least is the
conclusion reached by a contrarian analysis of gold market sentiment. There does
not currently exist the kind of stubborn optimism among gold timers that is the
hallmark of major market tops...The bottom line? The sentiment winds will be
blowing strongly in the gold market's sails in coming sessions”
(And that is good news for those who own gold and silver).
Peter Degraaf is an online stock trader with over 50
years of investing experience. He provides his subscribers with a Weekend Report
and a Monday Morning Update. For active traders he provides a daily message
Tuesday through Friday. For a sample copy just send an E-mail to
email@example.com or visit his website
www.pdegraaf.com A 60 day
trial to the weekend report and Monday Morning Update is available for just $10.
Quotes used in this article are from a collection of
quotes found on our website and titled: “Worthwhile Quotes”
Please do your own due diligence. Investing involves taking risks. I am NOT
responsible for your trading decisions.