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What's Up!
This reality is now setting in and it is obvious that the Fed's only recourse is to print obscene amounts of worthless currency. This has in fact been the policy for months, but none of it reaches the consumer and that was never the intent anyway. Gold is now signaling that there will be serious repercussions from all of this and the wheels may be about to come off. I am looking for a test of the old historical high at 850.00 in the spot price, about 858.70 in the February contract, sometime before Christmas. Once gold closes above that, it should really take off. There will be points of resistance along the way and the next crucial level is at 824.00 in the February contract. Below I have posted all of the important Fibonacci support/resistance numbers so you can follow along:
Like gold I also see a good future for silver, but the sleeper just might be the gold stocks. That's right, I said gold stocks. They took a real beating from the decline in the Dow as well as the reaction in gold, and I think they are a careful buy right now. Take a good look at the daily chart for the HUI below and I will explain:
Today the HUI will have made a higher high and is actually looking better than the physical gold. For confirmation I want to see a close above the 261 area, which was an old low and I think we'll get it soon. Now take a look at the P&F chart for the HUI below:  That is not a misprint; it has a bullish price target of 386 and that is a long ways from where we are at today. My best advice is to start out slow and with blue chip stocks like Buenaventura, Goldcorp, Silver Wheaton, and Royal Gold and if you want to speculate a little bit you can buy Golden Star. Do this with 25% of your available funds and then wait until you have confirmation with a close above 279.00 and then add on. Finally, I would like to close with a look at the US dollar. I think the greenback is at a critical juncture and a break to the downside here would take a lot with it, including stocks:  Today the cash US Dollar Index is trading down .30 at 85.33 (not posted) and has broken down. The technicals look bad and the real problem is just too many dollars. By his own admission today, Bernanke said that 15 to 20% of all mortgages are underwater and that tells you the dollars are flowing to the people who need them least. That means consumption will continue to decline while unemployment rises. Bernanke will now print more and more to pay debt and that will drive the dollar lower, a lot lower. I have posted the important Fibonacci support/resistance numbers below so you can follow along:  The next key level of support will be at 85.32 in the March contract and I would not be surprised to see it as early as Friday. ebo@dtanalysis.com |
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We seem to be seeing a change in perception at least as far as gold is concerned. As I type, the February gold futures contract is trading up a large 35.90 at 810.10 and well above what was significant resistance at 777.20. What is the significance of such a move? I think it is two-fold:
