In this essay we will look for these bells, and check to find out if they are loud enough to excite those investors who like to ‘buy low and sell high.’ After all before we can sell high, we must first buy low!
First, let's go over some fundamentals:
The money needed for gold to rise is already in the system. According to a recent report in the Economist, the money supply in the following countries is rising at a rate in excess of 8% per year: Australia, Britain, Canada, China (19%), Denmark, Euro-land, Sweden and the United States. According to sources who track the US M3, that measure is currently rising by 15% per annum. We live in a period that is unparalleled in history. Every major country is involved in monetary inflation, and all at the same time! Not that Zimbabwe is a ‘major,’ but inflation there is over 1,000%. The supply of gold is drying up. Global gold production is down by 8%. Even South Africa and Australia are producing less gold, and in most industrialized countries, the regulations for starting a new gold mine, even after gold has been discovered, require many millions of dollars, and up to ten years, before production can even start. The mining industry is running out of qualified people. There are very few WW2 generation miners left in the workforce, and the baby boomers are getting ready to retire. Due to the bear market in resources that occurred from 1981 to 2000, not enough people chose a mining profession as a career. It is estimated that the labor shortage will last until at least 2014. The central banks are rapidly approaching the point where they simply will not sell any more gold, because history has taught us that when fiat money collapses, (and fiat money always eventually collapses), the only way back to normalcy is to introduce new money, backed by gold. The central banks in developing countries are contemplating converting foreign cash and bonds into gold. According to figures compiled by the World Gold Council and reported 02/2007 AD, some of the following central banks would like to improve the ratio between paper and gold. (Foreign central banks hold five trillion dollars worth of non-gold (paper) reserves).
I read an interesting statistic about China. If you were to stand on a street corner in Beijing, watching a Chinese parade, consisting of every citizen in China, marching 6 abreast, the parade would never end. One of the sad aspects of Chinese life, is the intolerance of the communist government towards any kind of religious activity. There are currently 20 million people in prison for ‘religious crimes.’ (Source: Voice of the Martyrs).
US gold reserves are somewhat ‘suspect.’ According to the World Gold Council, current US official gold holdings are reported as 8,133 tonnes. The last time this gold was audited was in 1953! At that time the gold was referred to as ‘gold bullion reserves.’ In 2001 the description was changed to ‘custodial gold bullion.’ Six months later the description was changed again, to ‘deep storage gold.’ Could it be that the gold has been sold and or leased, and has been replaced by gold that is still in the ground, yet to be mined, possibly committed to the government by one or more mines? In the U.S. there are close to 10,000 mutual funds that, because of regulations, cannot sell stocks ‘short.’ If and when the Dow and NASDAQ turn down, and the mutual fund managers no longer wish to invest in generic stocks because of a ‘down-trend,’ they will pile into the resource sector. The U.S. debt is ballooning. Federal debt is 8 trillion dollars. Social Security liability is 20 trillion dollars, and Medicare liabilities total 32 trillion dollars. Total indebtedness is 60,000 billion dollars. A billion seconds ago was 1959. A billion minutes ago was the life of Jesus. A billion dollars ago, in the spending cycle of the U.S. government, was 8 hours ago.
Let’s look and see if we can find a few ‘bells that are being rung’ to let us know that the trend in gold is continuing its rise. The charts are courtesy of StockCharts.com.
Well what do you know! The bells are ringing again! Every green vertical line symbolizes a bell that was rung. Three of the past four were ‘right on,’ while one (September), was 10 days early. According to successful traders, “in a bull market, every dip near the 200 DMA (daily moving average – the red line on this chart), is an opportunity to buy. Even those who listened to the ‘bell that rang’ in September, made out okay, providing they hung in there, aided by the fact that the 200 DMA kept rising.
Featured is the HUI index of un-hedged mining stocks and the chart pattern is positive. The price has bounced up off the advancing trend line, the RSI is rising up from oversold territory (blue arrow), and the MACD is getting ready to bottom out in the seven month old support area (green arrow). The 50 DMA and 200 DMA (blue and red lines), are in positive alignment to each other. Things are "looking good!”
One look at this chart should convince even a skeptic that the bull market in gold is ‘alive and well,’ and that the current upturn, away from the rising trend line is one more ‘bell that is being rung!’
Silver is just waiting for a ‘bell to be rung.’ As soon as we see a solid close above the green resistance line (green arrow), the ’bell will be ringing.’ The blue dashed lines indicate support, and as the pro’s say: “In a bull market every dip near the 200 DMA is a buying opportunity.”
This chart features the US dollar index. The green ‘speed-lines’ show the five month down-trend. The green arrow is the immediate target which has now been reached. A drop below 81.50 will indicate that the green target was ‘it.’ Two closes above the green arrow, establishes a target at the 200DMA (blue arrow), something that has happened twice before. The latter event would likely be a temporary ‘drag’ on the metals.
This chart features the Tocqueville Gold Fund [TGLDX]. This is a very well managed fund, and everything about this chart spells: UP AND AWAY! The latest downswing in the gold bullion price, (which lasted about a month), barely made a dent in this chart. The price never even came near the 200DMA!
Summary:
The [COT] report for gold positions dropped last week, from 173,000 147,000 which is positive, and the total could be even lower this week, as price was down for a day or so after the report was issued.
According to Julian Philips, every day 90,000 new bank accounts are opened in China. The Chinese have loved gold for millennia, and the only way they can legally obtain it is through a bank. One of the ‘hottest’ jewelry fashions in China is a ‘hollow gold ball.’ It consists of a gram of gold, shaped like a ball, and worn on a chain.
The precious metals look great. After a month in down-trend, the first few bells are ringing, and more bells can be expected to ring as these markets turn up.
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This article has 18 comments:
- anon anon
- 9 Comments
May 24 01:58 PMAnd will this be like the previous note "Our 2007 Gold Stock Picks: How Are We Doing?" where you claimed success for picking NTO at $3.75 in February when in fact you called it a "hold" on that day?
Having your cake and eating it?
- omooc
- 210 Comments
My Website
May 24 10:50 PM- Jason Hamlin
- 32 Comments
My Website
May 24 11:42 PMPerhaps Anon woke up on the wrong side of the bed this morning. The point of the article is crystal clear - Peter is pointing out that gold and gold stocks are touching and/or have bounced off their 200-day moving average, the bottom of a trend channel or advancing right triangle pattern. Similarly, he sees the dollar as overbought, as it is touching on the top line of the channel, which has proved a tough ceiling in the past.
He summarized that: "After a month in down-trend, the first few bells are ringing, and more bells can be expected to ring as these markets turn up." The gold markets turned down today and might need further correction before the bells are actually rung. But still, how did you miss his point Anon?
Lastly, I only profile companies that I believe to have significant upside potential. While our previous NTO article was not a screaming buy signal and we did state neutral sentiment, we also communicated the following:
"This pattern often forecasts a breakout and should be seen as bullish with clear support around $3.75. This support line has been tested three times over the past year and has held every time. Although it is still early to confirm, technical indicators are turning North for both the RSI and MACD, confirming the bullish sentiment."
$3.75 did prove to be the bottom, so we called it right and took credit, even though we didn't take a position. Gold Stock Bull consistently profiles companies that significantly outperform their peers and the broader gold market. I am proud of our track record and many of our readers have enjoyed the fruits of our labor and have written in to say thank you. And although we don't charge for access or a newsletter, many users have donated to show their appreciation. So yes, I am having my cake and eating it too. Feels good.
In response to David Li, feel free to contact the writer at ITISWELL@COGECO.CA if you want to question his sources. I agree that the comment is irrelevant in the context of the article. On the other hand, that one line really doesn't diminish the value of the article from an investment standpoint.
In terms of disclosure, I typically state if I have position when writing about a particular stock. Where I have neglected to do so, if was honest oversight and I am happy to provide my positions on any stocks that have been covered on Gold Stock Bull. I don't see reason for Peter to disclose his positions since he wrote about the overall gold market and talked about indices and not individual stocks.
Cake anyone?
- anon anon
- 9 Comments
May 25 12:26 PM"....we remain neutral toward NTO and will wait for some encouraging news before taking a position...."
However on May 8th you wrote:
".....Both of our stock picks (FRG and NTO) for 2007 have generated the exact same annualized return… 143%. It must be a magic number.........."
You "remain neutral" on a stock then conveniently claim it as a "stock pick" 143% later. As for "magic numbers, you sure have got them working for you!
Consider yourself well and truly exposed. You publish and you think you are unacountable for your publications? Wrong.
I suggest readers remember two things: Firstly that old saying "you get what you pay for" and secondly that goldguru does not charge access to his website.
- pater suspriorum
- 3 Comments
May 25 12:41 PM- pater suspriorum
- 3 Comments
May 25 12:42 PMthe dollar is very oversold and widely hated - and has only just begun to bounce off support that has held for decades. you bet it's a 'drag' on the metals - and will likely continue to be one. every tiny bounce in gold stocks has recently met with selling , which has of late grown more determined.
this is not to say that the secular bull market is over, but it could be in for a rest, and that rest could be very painful for holders of precious metals shares. the 1970's mid-cycle correction produced a 60% sell-off in gold stocks between 1974 and 1976, if something similar happens here, one would do best to sit it out. in short, one should now wait to see if the supports actually hold, and only adopt an outright bullish posture when they clearly do.
- Jason Hamlin
- 32 Comments
My Website
May 25 04:54 PMsince starting Gold Stock Bull, we have profiled 12 other gold/silver companies that we thought would outperform their peers and the broader market. we gave clear buy signals on these stocks and guess what? during the same time period in which the HUI and XAU declined 1% and 3%, respectively (july 25 - may 25) , our profiled companies were up an average of 21%. this return is despite the recent selloff and excluding NTO, which is bothering you so much.
i have added a detailed "performance"... page to our site so that readers can judge our results for themselves. you can access the page here: www.goldstockbull.com/.../
even excluding NTO, we are beating the gold miners indices by more than 20 percentage points. yes, we are "well and truly exposed" and quite happy to be "accountable for our publications." so, we will keep providing valuable investment information free of charge and beating the markets by considerable margins and you can keep slinging anonymous mud.
- anon anon
- 9 Comments
May 25 05:24 PMIt would seem the diligent investor would have to carefully check all your "claims" before taking any advice from you. Frankly, most have better things to do than hunt through all your supposed stock recommendations to check whether they were in fact buy recommended or simply mentioned in passing and jumped upon later.
- Jason Hamlin
- 32 Comments
My Website
May 25 06:18 PM- anon anon
- 9 Comments
May 25 07:04 PMYou accuse somebody of 'whining' who in fact pointed out in important factual error in your analysis. That is not "slinging mud", it is called "being correct".
It is not a public disservice, it is a public service.
The only person annoyed by the plain and undeniable fact that you massaged your own stock call to suit yourself is you.
You eventually and grudgingly 'concede the point' when in fact you should be apologizing to the readership for YOUR deliberate misrepresentation. Not to me. I don't want or need your apologies. You owe an apology to the (presumably) hundreds of people who read this part of the website.
Instead of cake, try some humble pie next time.
I hope you have learned not to defend the indefensible.
- Jason Hamlin
- 32 Comments
My Website
May 25 08:53 PMYou know, for someone who has "better things to do than hunt through all your supposed stock recommendations," you sure have spent a good deal of time in this comments section. Get out and enjoy the weekend whiner.
- anon anon
- 9 Comments
May 25 09:59 PM2) too arrogant to admit it
3) rude and obnoxious
i wonder why you're playing around on a free website instead of getting paid for analysis? tough one, eh?
- anon anon
- 9 Comments
May 25 10:20 PMYour record is getting worse by the post.
Why not throw another gratuitous insult? It seems to suit your character. I am quite sure that this little exchange has enlightened a few people to your personal moral standards. Hopefully they will never take your analysis seriously again.
- Jason Hamlin
- 32 Comments
My Website
May 25 11:38 PMhere are the facts:
we have provided free analysis highlighting stocks which have beat the market by over 20 points. over 30 points including NTO. but you keep conveniently ignoring these facts and cherry picking the one time we gave neutral sentiment on a profiled stock. all of our picks are clearly posted on the site to back up our claims.
www.goldstockbull.com/.../
both FRG and NTO were up 143% when we wrote the article. and we did call the bottom of NTO around $3.75 and stated that the technicals had turned bullish. here were our exact words:
..."forming a descending triangle pattern. This pattern often forecasts a breakout and should be seen as bullish with clear support around $3.75. This support line has been tested three times over the past year and has held every time. Although it is still early to confirm, technical indicators are turning North for both the RSI and MACD, confirming the bullish sentiment."
so regardless of whether we took a position at that time, investors who saw the bottom and bullish signal that we pointed out and decided to buy NTO, made out very well. but i suppose we should not take credit for any of that. and NTO aside, every other company we profiled had a clear bullish signal from us and contributed to our success at beating the market by over 20 points. but i suppose we don't get credit for any of those other 15 picks either and readers shouldn't take our analysis seriously. whatever.
now please, walk away from the computer, get some fresh air, spend some time with your kids, make love to your wife and quit nit picking, making false claims and blowing things out of proportion. anon the internet vigilante.
- anon anon
- 9 Comments
May 26 12:33 AMon Feb 15th "....we remain neutral toward NTO and will wait for some encouraging news before taking a position...."
on May 8th ".....Both of our stock picks (FRG and NTO) for 2007 have generated the exact same annualized return… 143%. It must be a magic number.........."
You did NOT pick NTO on the 15th February, yet you claim it as a pick on the 8th May.
The evidence is as clear as it could possibly be; one example or not, it is clearly false information. You cannot admit your error like a man, all you can do is hide behind a wall of sarcastic comment and dare to give me advice on how i should spend my weekend. It is clear that your advice is something built on shaky ground.
Did you or did you not say "neutral NTO" and then say "NTO is our stock pick" 143% points later? A simple question.
- LR European
- 6 Comments
May 26 12:23 PMI have never looked at gold guru's website before, but intend to do so regularly in future as this is someone capable of retaining perspective in the face of a true neurotic. Weekend advice was spot on. Hope the stock advice will be as sensible.
- anon anon
- 9 Comments
May 26 03:22 PMSorry lorenzo, he was caught with his schoolboy pants down and is too full of himself to admit his error. He has most certainly not answered and addressed the issue. A self-proclaimed analyst who massages his own stock pick predictions cannot be trusted for one minute. You choose to follow his advice in the future at your own peril.
- LR European
- 6 Comments
May 27 05:47 AMUntil not so long ago the dominant influence in financial market relationships was the concept of caveat emptor - buyer beware. Although in the current environment of compliance and regulation this might seem a dangerous world, what this meant in practice was that advisors who did not act with integrity held brief tenure and were quickly displaced: a free market at its best. Today, with the box ticking compliance culture deception and fraud is just as easy to perpetrate but it is usually more covert. The main casualty is excellence and the impulse from advisers to actually protect and help their clients/ readers (to win trust and benefit from loyalty and business).
It seems to me that the less rule-bound forum of internet advice offers the hope of a return to the sort of excellence and flair of the old caveat emptor culture. People will only follow advice from an unknown contributor if they display consistency and flair.
So, what do we have here? It seems to me that the advice provided by Gold Guru on NTO would have provided any reader with a modicum of independence of thought with sufficient evidence to buy the stock even in the absence of a full on buy recommendation. It is therefore understandable (and forgivable) that performance statistics were included as evidence of the quality of information being analysed. It is equally understandable that you point out that this is not strictly correct and suggest that the data is excluded. The prompt modification of the stats by gold guru and clear explanation of what happened is commendable - but you seem unwilling to let this go.
In a compliance driven market, gold guru would be fined or face some other regulatory control. In an internet / caveat emptor market, gold guru recognises that persistent misrepresentation will put an end to his enterprise because the trust and loyalty of readers will be undermined. In the first case there is no forgiveness, only punishment. In the second we have the potential for redemption through self-correction, with the alternative of total destruction.
Gold Guru has acknowledged the potential problem, corrected the web site and therefore renewed the unspoken contract with his followers. Obviously if there was a pattern of deception it would be a different matter, but for now this is a mistake which we can move on from without seeking punishment. For God's sake let's not impose the mediocrity that now afflicts institutional analysis on the free-market internet model. Let's continue to be wary of course, but not get tied up in knots every time there is an understanable human mistake.
Over and out! ;-)