- Signs of life emerge in the smaller, less liquid and more speculative junior miners and explorers, but in a tepid, tentative, post-tax-loss-selling relief bounce sort of way - so far. Similar to the bounce in early 2009 in many ways.
- Gold and silver turn in bounces more or less where expected.
- Commitments of futures traders continue to be bullish from a contrarian point of view.
- Our favorite soon-to-be-low-cost-gold-producer knocked on its too-cheap back foot by the delay of a necessary permit, a non-fatal disappointment, possibly setting up the last good buying op for it.
- Most, but not all, indicators are favorable for gold, silver and North American mining/resource-related companies as the world gets sick and tired of hearing about European debt, Greek default and fiscal restructuring pain. Traders/investors growing more and more numb to dire and menacing news.
HOUSTON - Since the last full Got Gold Report both gold and silver have seemingly found their 2012 footing, putting in bounces more or less in line with our expectations. Well, actually gold fetched up above our hoped-for reentry target, but we admit to having a buy-only-if-cheap attitude there. For the week gold logged a $22.37 (1.4%) advance for a last trade of $1,638.68 (USD Cash Market).
As Vultures (Got Gold Report subscribers) already know, we have adopted the notion that gold is currently inside a giant, months-long pennant formation - still digesting its fear-assisted parabolic interim pinnacle of $1,923 last September. Most technicians will agree that pennant formations are often continuation patterns that resolve in the direction of the prevailing trend more than not.
Silver added $1.01 or 3.5% this week to close at $29.71 in New York. We regard silver as also being in a huge consolidation, a giant "flag" formation that has been in play since its near $50 parabolic surge in April of 2011. As the very simple chart below depicts, our view is that silver has recently been contracting in a bullish falling wedge pattern inside that great flag formation. (A consolidation inside a larger consolidation as part of silver's digestion of the new higher plateau.) As everyone knows by now, silver bounced precisely in line with its September panic spike nadir (about $26.15), which happens to coincide with where it found support last January, 2011. (Brown dashed line.) Therefore $26 has once again proven it is an important support zone for the second most popular precious metal.
The support bounce is pretty interesting to us (Vultures know why), but perhaps just as interesting is that from our simple-Simon trading point of view, silver made a run at a breakout of that falling wedge on Thursday, Jan. 12, touching $30.62 briefly before running into a Euro-centric negative news loop and a profit taking, just ahead of a three-day-weekend - "Give Back Friday."
Like pennants, flags are contra-trend consolidations or digestion periods that often, but not always, resolve in the direction of the prevailing trend. Although flags are normally thought of as more short-term animals, we do indeed believe they are appropriate to consider in longer-term events inside great secular bull markets.
We use much larger, easier to read charts that we share with Vultures on the subscriber pages, and that is where we comment weekly in dialog boxes directly inside those big graphs. It is our preferred way to communicate and we plan to do more of that and less of "this" in 2012. It is just more efficient to do so. Just below is a much reduced example of one of those very large linked graphs - the three-year weekly gold graph. The graph normally fills a computer screen and then some, by the way.
Note that even in this greatly reduced format, the giant pennant formation idea we have championed is quite visible. Perhaps less visible is a budding breakout attempt of a declining wedge inside that giant pennant, which just got underway this past week.
We have to be somewhat impressed that gold and silver advanced despite continued Orwellian strength in the US dollar this past week. Note the comments in the graph.
The US dollar is imperfect; it is far from a satisfactory, stable and confidence inspiring, well-backed medium of exchange, but for the time being, at least, the greenback is where people gravitate to in a time of crisis. That is even if the dollar is merely a waypoint on the road to something else for scared European wealth. The US dollar is deep, liquid and accepted worldwide, for now. But gold is rapidly gaining acceptance and confidence as an alternate "currency" to fiat money.
Come to think of it, the "dollar-gold-exchange-rate" pretty much confirms that notion, does it not? As fiat currencies everywhere have been in an accelerated competitive debasement phase, since about, oh, say 2005, haven't we seen the major fiat currencies all losing purchasing power at a blistering pace? Isn't that the same thing as gold gaining in purchasing power relative to those debt-based paper promises?
Just below is a graph of the Euro Index in terms of gold metal for reference. When most people think of currency fluctuations they think in terms of one fiat currency versus another. This graph shows the "value" of Euros to "buy" the one "currency" that cannot be printed and abused by politicians and central banks. Quietly, but surely, gold is taking over the lead role as the ultimate reserve "currency" on Earth.
Decades of an experiment where the world's leaders were entrusted with the responsibility of maintaining their currencies without the burden of being tied to gold - without gold being the "currency policeman" proves at least one thing: That governments will not act responsibly in the monetary realm without an "enforcer" to govern them. In the 41 years since August, 1971, when President Nixon severed the last feeble ties of the world's reserve currency, the US dollar, to real gold metal, governments have gone hog-wild, making government-give-away promises to their voters, borrowing to pay for them, racking up deep oceans of sovereign debt in the absence of that currency policeman. Debts that cannot be repaid in today's value currencies, at spending levels that cannot be sustained in any currency.
We are involved in the slow-but-accelerating-motion involuntary global restoration of sound money, which "smart money" figured out quite some time ago. Given the size and depth of that "ocean of irresponsibility," and given that there are really few alternatives for the world's wealth to seek safe haven, we conclude that there is little chance that 2012 will be a year where confidence in fiat currencies increases and confidence in gold decreases. To the contrary, we are more likely still in Act I of this Greek Tragedy, in Intermission, about ready for the curtain to open for Act II.
Vultures (Got Gold Report subscribers) will find much more about the gold and silver markets in our technical charts located on the password-protected subscriber pages. For this particular GGR we plan to focus on some of the indicators we track for gold, silver and the small miners and explorers we love to 'game.' We believe it is a time for cautious optimism, as we do indeed see a few tentative signs of life beginning to show.
With that brief introduction, let's pause here and move directly into the full Got Gold Report.
Got Gold Report
First things first, the Got Gold Report - the full report - is published ad hoc, as conditions change, usually about biweekly, but at least 18 times per year. Between full GGR reports we communicate more regularly on the GGR web log, which is always free and open to the public, or in our COT Flash reports, via email Special Notes and Vulture Bargain Hunter (VB Updates) reserved exclusively for subscribers. COT Flash reports appear on off weeks for the Got Gold Report when there are what we consider important changes in the commitments of traders reports which cannot wait until the next full report. VB Update offerings appear ad hoc (usually monthly) as there are developments we feel merit comment for and in the resource company issues we track closely. Email Special Notes are used sparingly, but are used to communicate issues we deem important between other offerings.
Our aim is to briefly summarize our positioning for the gold and silver markets, and to highlight a few of the dozens of indicators, ratios and graphs we keep in constant touch with. Vultures, after logging in,please see the commentary in our numerous technical charts located in their own section of the password-protected subscriber pages. We update most of the Got Gold Report linked charts each week (some holidays excepted), placing our commentary in dialog boxes in the charts themselves. Changes to the linked charts are almost always completed by 6:00 pm ET on Sunday evening (except when Monday is a holiday) and occasionally during the week as events unfold.
To continue reading, please log in or click here to subscribe to a Got Gold Report Membership.A land developer, professional numismatist, self-taught bullion trader and investor since 1980, Gene Arensberg analyzes technical and fundamental developments in the precious metals markets. In 2000 Gene started sharing his own market research with fellow traders and fund managers. Those email reports evolved into his popular Got Gold Report, a biweekly look at important indicators for gold and silver published on the web. Gene's more in-depth market reports, insights and trading ideas are available at www.GotGoldReport.com.