Gold Bullion – On the verge of a major breakout? Wednesday, Sep 8 2010 

Historically, the argument against Gold was that it provided no yield to investors. Stocks, bonds, and cash all provide some sort of yield so Gold as an investment has no merit.

But that view appears to be changing, with volatility in the equity markets, bonds now providing little or no yield (witness the US treasury yield curve and IBM’s latest offering), and money markets and cd’s providing scant yields Gold is looking much more attractive as a place to park cash.

Seasonally, the fourth and first quarters of a year are the most bullish for Gold.

In countries such as China and India which are experiencing strong economic growth Gold is looked at as a store of value. In both countries imports of Gold are rising as citizens view Gold as lucky and a store of value.

Recent news out of Europe indicates market participants are increasingly worried about the stress tests performed on European banks as they are increasingly being viewed as not that stressful at all.

In the US the economy appears to be slowing into a 1-2% growth range, with a budget deficit of over a trillion dollars, new spending proposals, and the Federal Reserve instituting a Zero Interest Rate Policy (ZIRP).

So while we look over the world we see two major areas with slow growth, Europe and the US, and investors rushing to Gold as a safe haven to protect against problems in the banking sector and at the sovereign level.

In Asia strong economic growth is allowing investors to diversify their wealth by purchasing and giving Gold as gifts.

While we may be near a major resistance level, Gold has provided investors with a safe haven in times of trouble. Since its rally from the 2008 lows Gold has seen rising support levels as investors buy on any dip.

Technically, the weekly charts have six straight weeks of upward price movement and may make a slight pullback at this major resistance level. Silver is also outperforming Gold as well which is often a sign that a pullback in both markets is forthcoming.

Investors would be wise to buy Gold on any dips and be ready to allocate some capital before the next leg up starts.

Next week: Gold Equities – Where is the Bull?

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

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Technical Commentary (Asia Edition)– August 30th Monday, Aug 30 2010 

Nikkei – The Nikkei is in trouble across the board. The 9000 level did not hold and the short and long-term charts are all showing bearish signals.

The market is looking for the government to do something regarding the appreciation of the Yen to help exporters.

If something does not happen soon we may see a test of the 2003 lows around 7800 and if that level does not hold 7000. Should economic numbers come in weaker than expected do we see another round of quantitative easing by the government and the Bank of Japan?

South Korea (KOSPI) – The KOSPI has had a very volatile year with prices whipsawing between 1800 and 1525.

In early August the KOSPI broke through an ascending wedge and pulled back to the 1720 area where it appears as though a triple bottom is being formed. The question this week is will the 1720 level hold and if so is this a springboard to new highs on the year or does it become a trading range?

The weekly charts show strong support at the 50 and 200 week moving averages with an uptrending pattern.

If support holds and we see a strong rally then 1900 and 2100 are distinct possibilities.

Bombay Sensex (BSE) – The BSE just broke through an ascending wedge to the downside on Friday. The short-term charts indicate a pullback to the 17500 area which will make the Sensex flat for the year.

The longer-term charts are overbought but have a bullish slant to them. This coming pullback may just be a pause that refreshes the market.

On the weekly chart there is a clear W formation and this pullback may just be the springboard to set the stage for a rally back to the old high in the 21000 area.

India has been one of the better markets this year with strong economic growth and a proactive central bank already into a rate tightening cycle in an attempt to cool off the economy before inflation gets out of control.

US Comment: Friday’s rally was well overdue in this pullback. Since the sell off following the Federal Reserve meeting rallies have been weak and met with selling. This week we need to a follow through with respect to Friday’s move up and get in position to take out resistance at the 50 day moving average and 1100 on the S&P 500.

AAII sentiment numbers are extremely bearish which points to a possible contrarian rally, one that may just catch people off guard.

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.