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Peter Degraaf

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Gold, Silver - Important Alert!

By Peter Degraaf      Printer Friendly Version Bookmark and Share
Apr 23 2009 2:38PM

The Gold Direction Indicator is flashing another buy signal. This indicates that the pull-back that started late February is probably finished. A new rally is about to start.

Some of the monetary inflation that the Obama team is injecting into the system is starting to turn into price inflation.

The stock market rally which had drawn attention and money away from the gold market is running out of steam.

The situation in Pakistan which has been smoldering for months is moving to the front pages, and is causing anxiety in India, where people buy gold bullion when fear mounts.

The loss of trust in the banking system along with the corruption on Wall Street, and the sheer incompetence of the Obama administration (headed by a man who has been put in charge of the largest ‘corporation’ in the world without any experience to run a business), virtually guarantees that the record amount of monetary inflation that is currently being generated will turn into price inflation which will make the problems we saw in the late 1970’s appear to have been a picnic by comparison.

Featured is the 30 year bond chart.  The trend since the beginning of the year is downward, indicating that long-term interest rates are beginning to reflect the ‘watering down’ of the dollar through monetary inflation.  The supporting indicators (RSI and MACD) are negative.  While some resistance to lower bond prices is to be expected here at the 200DMA, once price breaks down below the purple arrow it will become obvious to a lot more people that the bond market is continuing to worry about price inflation.

Featured is another chart that points to price inflation. This is the index that compares gold to long-bonds. It is an important component of my unique ‘Gold Direction Indicator’. When this index turns up, it signals a ‘buy’ for gold and a ‘sell’ for bonds. It did so reliably in December. When this index turns down it signals a ‘sell’ for gold and a ‘buy’ for bonds, and it did so reliably for a short-term trade in February.

At the moment the index is flashing a ‘buy’ for gold, and a ‘sell’ for bonds (blue arrow).

The supporting indicators are positive.

Featured is another component of my unique ‘Gold Direction Indicator’. It is the index that compares the gold and silver stocks of the HUI to the price of gold. The trend has been bullish since November, and every now and then it produces an upside reversal (blue arrows). The index is working on the fourth such reversal right now, and once the index closes above the green arrow it will become obvious to everyone.

The supporting indicators are at support levels, ready to turn positive. The 50DMA is on track for a bullish crossover with the 200DMA.

Featured is the CCI index of commodities. After completing an ABC bottom, CCI is now carving out a bullish ARAT. A breakout at the blue arrow spells more price inflation.

The supporting indicators are positive.

Featured is another component of my unique ‘Gold Direction Indicator’. It is the chart that features the performance of gold compared to the S&P 500 index. When this component turns up it is time to buy gold and sell stocks. When it turns down, short-term traders do the opposite. The supporting indicators are turning positive indicating the trend is about to move in the direction of the blue arrow (gold outperforming generic stocks).

Summary: I know I’m going to receive some angry letters from Obama followers. So before you get too excited, consider this: Despite the fact that weather in North America is getting progressively colder (as part of normal weather cycles), and although there is no hard evidence for Global Warming, the Obama administration is on track to waste hundreds of millions of taxpayer dollars to ‘fight’ Global Warming.

The President is willing to disturb entire industries with his Carbon Caps.

When Mr. Obama took office, the first few pieces of legislation he signed, involved the advancing of the agenda in aid of the abortion industry - even committing tax payer dollars to foreign countries, to pay for abortions over there. He did this while he told the nation that ‘the economy was bad and likely to get worse’.

This shows the man’s priorities are ‘out of kilter’.

Instead he should have signed legislation to protect the unborn. Who else is going to pay for the reckless expenses that are being planned? By promoting abortion you destroy the very future generation of children that are going to be needed to ‘pay the bills’. Instead of lamenting that the economy was bad, he should have told the American people that he had confidence in the American ‘spirit’, to work through the economic problems.

Instead of relying on Keynesian educated people without business experience, he should have taken a page from former President Reagan who, during his first few days in office appointed a committee of well-known business leaders to plan economic progress.

Where is Lee Iacocca when we need him?

The result of Mr. Obama’s actions will be wasted resources resulting in tax increases, and a large dose of ‘stagflation’ (reduced business activity, reduced government revenue along with rising prices).

Explanations for the terminology used in this article can be found in “Explanation of the Terminology’.  It is found at the bottom of the archived articles on my website.

Happy trading!

Peter Degraaf



DISCLAIMER: Please do your own due diligence. I am NOT responsible for your trading decisions.

Peter Degraaf is an on-line stock trader with over 50 years of investing experience.  He issues a Weekend Report for his many subscribers.  For a sample copy, send him an E-mail, or visit his website A popular feature on his website are the long-term charts which are updated frequently.