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New Era For Gold And Silver Has Begun
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“Interrelationships among the currencies relative to gold are changing. Gold and silver are rallying with power despite the U.S. Dollar supporting in a new ABC correction pattern on the weekly most active chart this morning at 76.235. The dollar today could begin a new rally move, go sideways for awhile or, sell back to 75.00 support. We expect a sideways to mildly higher gradual trend as other currencies are softer with the exception of the Swiss entering a new and powerful rally trend. The British Pound is moving to the sell side along with the Yen. Theoretically, the Yen should rise as large funds unwind the carry trades and buy back Yen to make an exit. Traders need to be especially careful trading currencies in the middle of this transition and understand their relationships with gold.” - Traderrog
Precious metals are buying rapidly toward the achievement of our January-February trading goals. Not only did the 2008 rallies start early on December 26, 2007 instead of January 7-10, 2008, but they are rising swiftly with power, and advancing faster than expected.
Normally, we enjoy two first quarter precious metals cycles from bottom to top and back to bottom again by March-April. Since the current rally began early and is moving so fast we might receive three, entire spring rallies instead of two. In the alternative, we could receive the normal two but with a more prolonged or, extensive move to the upside.
Most of the G-8 currencies are being diluted with over-printing in an effort to keep them aligned with the U.S. Dollar. America’s dollar is now so cheap this country is essentially for sale. Non-USA nations’ investors, overloaded with dollars are recycling them back into the states by buying companies, commercial facilities and certain shares to off-load decaying dollars. Those dollars are being replaced with real value in form of hard goods, beaten down real estate or, mining-material companies, shares and comparative assets. One USA positive is an increase in exports.
The U.S. stock market and economy is sick with credit crunch problems and lower earnings and a particularly bad start in 2008. The Plunge Protection Team had an emergency meeting with the President last Friday to review a revival plan to escape this mess amid selling stock markets. We had forecast a stocks’ supporting PPT program on Monday the 7th, but so far we cannot detect any moves in that direction.
Tools available to the PPT at this time are more rate cuts at this month’s FOMC meeting, lots of newsy-happy talk and direct market intervention. We now think intervention will not appear until the next technical selling top for gold and silver. By hinting at later month rate cuts and making fictional speeches, the PPT could be trying to hang-on with no major moves until the end of this month.
A simultaneous action of rate cutting, more speeches and news coupled with selling gold hard at its peak could drive precious metals down faster than trying to hold them back in the middle of a rally. Next, the PPT can buy Dow and S&P futures in the night or, on a weekend at a propitious time giving stock markets a strong boost instigating a rally. If thousands of gold futures contracts are sold on or, near gold’s technical high this can reinforce the gold and silver selling driving these prices down faster scaring the hell out of gold bugs.
We have mentioned numerous times in recent reports volatility and trading prices would scramble around with wider daily ranges and some large, very hairy moves. Smaller traders can be easily run-over and knocked-out of positions during these events if they have not protected themselves with stops and judicious trading positions.
Junior precious metals shares are vulnerable since entry and exit is not as easy as in trading senior shares on major exchanges or, by using futures in metals and their associated trading tools. This does not mean you should eliminate junior trading but, you must be particularly vigilant with trade management and control. As trading becomes more intense, junior positions must be sold into strength for an exit. After a top or, near the beginning of selling, escape will not be an easy proposition.
We feel it is very important to note that gold versus several currencies is now in the early stages of running away from them in rallies. There was a prolonged period when gold versus the U.S. Dollar showed us more gold power with dollar selling power. This event is widening with the dollar, for now stabilized at a much lower index value. The dollar is weak and getting weaker. Currently, it is stabilized but should resume its nasty fall as this year wears on. Previously, the Euro, being perceived as a more valued and powerful currency rallied along with gold. For now, the Euro is peaking and resisting under 150. Could it go higher? Yes, it can, but gold is rallying to not only equate itself with Euro values but surpass them.
We are entering a new era when gold is rallying away from other so-called currencies thought to be of more value than the dollar. This process has been gradual but is moving faster during this new, more powerful gold movement. Keep in mind all paper currencies are fiat money and must eventually succumb to the true value of gold. If a nation’s currency were backed 100% by gold and it could be proven, that paper money would no doubt hold its true value. This is not the case, and currencies throughout the world are declining in value compared to gold at different rates of transition.
For now, the Swiss Franc is perceived to be the El Supremo currency and consequently is rising in value relative to most others. We saw a report earlier this week from a credible analyst telling us the value of the Swiss could double. This would be truly frightening to Swiss central bankers as a McDonald’s Big Mac sandwich could be priced at $20; a really scary and expensive proposition.
One of the key price elements traders should watch carefully are comparative values of the Euro with the Swiss Franc. Previously, those currency charts looked like twins. You could overlay one on the other and they would match. Next, we are forecasting the Swiss central bank will be in a struggle to maintain this parity with their Franc as it departs from the Euro with higher values. Somewhere off in the future we expect the Euro to sink in value as Euro-land experiences more credit and economic struggles, especially this fall.
U.S. Dollar March 2008 Weekly Futures 1-9-08 8AM in Consolidation.
The dollar sold-off and supported at 75.00. It is trying to rally from an oversold position but lower box stochastics show more weakness. We expect sideways trading for a fewdays or, mild selling again taking price to 75.00 support. The major trend remains down.
Gold February, 2008 Most Active Weekly Futures Rallies From Triangle.
Gold sprung from a continuation triangle into a new fast rally. The rally wave set is not complete and we expect price to seek 930-960 before a selling, profit-taking correction. Note the slow stochastics in lower box has room to expand to the high side before a momentum correction. We forecast a peak near March 1, just like last year followed by a second spring rally peaking in mid to late April. Gold relative to several other market sectors is decoupling and moving ahead without other markets holding it back.
Silver March, 2008 Weekly Futures Rallies in a New Wave Set.
After a full five wave correction beginning in early November, 2007, silver sold down to 14.00 support and began a new rally the day after Christmas. This is an early cycle start and buying has been strong. Momentum in the lower box has plenty of running-room to the upside for a rally completion. Note sharp silver selling drop on March 1 last year. Considering our current rally began early it could also end earlier. Traders need to be particularly vigilant during this silver run to manage trades and hold stronger gains.
This is an election year and the politicos will do anything to be re-elected. The most important thing they will do is make the economy appear strong and safe and keep stock markets levitated. We all know by now how this is accomplished. They buy Dow and S&P Futures and sell gold along with lots of happy phony speeches. Cutting rates is part of this game as well, but this has had little or, no effect so far. Do not be fooled. This game is in play once again.
From our perspective the two most dangerous times for gold and silver will be late April to early May and the 60-90 day period leading-up to the fall presidential election this November. Plan accordingly and do not get run over in these markets. Understanding fundamentals and technicals can go a long way toward protecting your trades and investments. This year will be anything but dull. - Traderrog
Roger Wiegand
Editor Trader Tracks Newsletter
& The Rog Blog at webeatthestreet.com
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Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional stock shares and futures- commodities trading with specifics for individual trades. See www.webeatthestreet.com for more information.
Contact Claudio Bassi, at Trader Tracks New York City publishing offices for a modestly priced trial subscription 718-457-1426 Monday through Friday, 9:30am to 5pm or, e-mail Claudio at cbassi@miningstocks.com
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