Gold Stocks Bottom While SP500 Tops Out!

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US Dollar Chart

Dollar Commentary

• In the short term, the dollar is rallying against other paper currencies like the Euro. In the long term, the Euro is a junk bond currency, just like the dollar.

• Money in the bank is a big part of the American Dream. The problem is that when nations keep interest rates artificially low, to continue issuing debt (and paying a bit of it back), the value of the nation’s currency melts away.

• Rather than compare the two largest currencies to each other, I prefer to see you compare them to gold.

US Dollar vs. Gold Chart

• The US economy has serious structural problems. In ten years, the dollar is down 88% against gold. The US keeps rates low, even though real inflation is on the move. Modern surveys about inflation, exempt food and energy, which are very important products used by all consumers.

• The debt is so large the Fed’s hands may be tied, but what would happen if they did raise rates? Consider the mortgages that the government owns through Fannie Mae and Freddie Mac. If rates go up, individuals’ payments go up, more houses go into foreclosure and the house pricing problem just gets bigger.

• On the other hand, if rates stay low, the currency melts and more and more inflation hits the economy, breaking down the standard of living.

Euro vs. Gold Chart

• The Euro has also declined substantially compared to gold, down 70% over ten years. Typically, if the dollar is up, then the euro is down, yet both of these currencies are down substantially in comparison to gold.

• There really is no easy solution to the debt problem, but there is protection. A look at these charts demonstrates how much better off you are in gold than in fiat currency. Debt accumulation is rising at a record pace right now. A look at the charts makes it clear gold is more than a currency; it is the ultimate asset in a debt crisis.

SGOL (Gold Bullion Proxy) 14 Month Chart

• I remain a long term bull with buy signals in play on the entire precious metals sector. I continue to call for a breakout in the sector in the late June to early July timeframe, with new highs projected at around $1650 for gold bullion. Timing is the trickiest part of analysis. My internal indicators are pointing to new highs in the August timeframe for gold. Use market volatility to lower the cost of your core positions.

Gold 3 Year Major Trend Chart

• There are many technicians now saying the seasonal analysis is wrong and gold must go down. My technical work suggests opposite. Selling gold this year based on seasonal analysis could be your greatest mistake of the year.

• Why sell gold in a debt crisis? Use rallies in the dollar to exit the dollar, not to buy more dollars. Buy the metal and hold the metal. Only very small positions should be used for trading. The vast majority of the portfolio should be held for much higher prices.

GDXJ Bull Set-Up Chart

• The gift of gold stocks! There is no doubt that the recent moves in gold stocks are tough to watch, but you may want to refocus the frustration into a fresh perspective.

• I have advised people with bank CDs to transfer some money out of the banking system, and to buy physical gold with it because the income from CDs is now paltry. Those who have done so even a year ago are up 25%. Gold is up over 70% and Silver is up over 100% in the last three years.

• “The US is the largest debtor nation in the history of the world”. – Jim Rogers. Gold will be the tool to revalue debt. That revaluation brings me to compare gold stocks to gold.

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