As we can see from the above chart the US Dollar is doing an impression of a Walt Disney Cat sliding down a smooth wall into the great unknown. The two mice, gold and silver look on in anticipation of a bigger fall. We are at a critical juncture whereby gold needs to punch its weight and go through $1033 level demonstrating that it is really going places.
Silver appears to be anticipating golds upward move and is performing very well indeed as seen by the ever reducing ratio of gold to silver, which currently stands at 59 down from around 85.
The HUI is also on the move and now stands at 418.86 up from 310 just a couple months ago. The gold and silver producers have been lagging behind the metals for some time but now appear to have seen the light as demonstrated by the sudden spike upwards in stock prices and the dramatic increase in the volumes of shares traded, which bodes well for the future.
Back to the US Dollar, we can see that the RSI is at 33.68 so there is still room for it to fall further. A further devaluation of the dollar is golds cue to make a record breaking move firstly to $1007 and then $1033 and above.
Once the new high has been made the Internet will propel the news to all corners of the planet. The speed of communication is one of the key differences between this bull market and the one of the early eighties. In 1980 it could take three days for The Wall Street Journal to get to our office in Den Haag, the capital city of The Netherlands. Today you can sit on a beach with a laptop and know what is going in New York, London, Sydney and Stockton-on-Tees. We can also trade at the press of a button, these two factors will add to the increase in volatility as trigger happy traders do their best to maximize profits.
The day will soon be upon us when gold moves $100/oz in a single trading session, so you have been warned. If you are in deep and of a nervous disposition try decaf.
Taking a quick look at the silver prices chart we can see just how well silver has performed recently. The 50dma and the 200dma are moving in parallel in a northerly direction adding support to silvers progress. A spanner in the works could be the RSI which is nudging ‘80 and suggests that silver is now overbought. However both gold and silver are now a ‘dollar’ play and should the dollar fall then the charts will be sidelined by the fundamental issues, albeit for a short time period.
The chart for gold prices is similar to that of silver as we can see, so we now wait in great expectancy of a major move north.
Have a sparkling day.
Your thoughts are of course most welcome.
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12 September 2009
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