More Reasons to Buy Gold & Silver !!!!!!More Reasons to Buy Gold & Silver
By Roger Wiegand
April 12, 2007
www.tradertracks.com
"The long list of doubters wanes as more analysts and traders are jumping aboard the gold and silver trading train. The power of precious metals markets is now way to obvious to deny." -Traderrog
We see obvious resistance for the GDM metal stocks index at 1150. Price has broken out twice above a triangle pattern on this weekly chart that originated one year ago.
Next week we expect a breakout above that number on the fourth try. Should the fourth try fail, a pullback to 1050 support would be expected. Notice the continuing higher lows, positive MACD and Fast STO indicators. Price remains above all moving averages and the RSI (Top Box) is staying above the 50 line after producing a reverse head and shoulders pattern which is bullish. We see a rally for most of the next 3-4 trading weeks. Early May is the normal cycle for profit taking and selling.
Gold & Silver Move Higher with Normal Technicals
For those breathlessly hanging onto each tick-by-tick precious metals trading days can be long and arduous producing more gray hair. We would suggest instead a renewed focus on the basics of why these markets are long and why we should use weekly charts for trend identification.
As gold moved higher this week arriving at major price resistance and support near $680, a pause was to be expected. Also, silver has produced powerful strength, slipped by $13.50 without much anguish and has settled near $13.85. Both metals are pausing near technical and emotional supports while prices tell traders to take some profits for now.
Here are More Reasons to Remain Bullish
1. Current prices of gold and silver are above the moving averages.
2. Chart patterns for June 2007 gold futures indicate a bullish-breakout with price at $681.
3. Charts patterns for May, 2007 silver futures indicate a bullish-breakout with price at $13.90.
4. The U. S. Dollar remains weak and is getting weaker for the longer term. Metals are bullish in response as they trade inversely and the dollar is a primary gold and silver market mover.
5. Crude oil prices are rising and most of its producers remain in geopolitical turmoil. Metals follow oil higher most of the time. Threatening Middle East politics is always a precious metals support for several reasons.
6. April 19th is a key wedding festival day for India. They are the largest users of raw gold for jewelry and much of the spending is tied to this holiday. Indian demand for gold is expected to rise 20-30% this month for just this event.
7. Gold production has hit a 10 year low as producers struggle to fight increasing production costs and declining reserves. Politicians in gold producing nations are pushing for more of the take. Supply and demand factors drive prices higher.
8. Higher prices for gold and silver are encouraging new production. Operating some of the mines at much lower prices wouldn’t make sense. As prices continue with a relentless climb, miners are straining to produce all they can for these larger profits. Supplies are tight and getting tighter.
9. Commodity cycles historically last 13-17 years. This cycle is still young as we move into our seventh year. The best is yet to come.
10. Based on upon inflation adjustments gold should be over $2,000 per ounce not the current $681. Silver at $13.90 should be adjusted to nearly $24 per ounce. The really big moves in precious metals have not yet arrived. When the real fun begins it will be stunning indeed.
11. Economic conditions today, especially in the United States are demanding trading moves from declining fiat currencies to safer markets with little downside and lots of upside. Preventing losses is paramount. If a trader can stop losses and grab large gains in precious metals it’s adios to the other markets. Investable cash has never been more plentiful in history.
12. Some central banks have not only stopped selling gold but are buying it. These are not stupid people despite the political pressures. They are doing it quietly.
13. Asia, specifically China, and Japan followed by India and Korea are moving into new precious metals trading vehicles and formats and are encouraging precious metals purchases for their consumers; so are the Arabs in Dubai.
14. GFMS has forecast gold de-hedging to increase for 2007. Much of this is history but they report 7.5mm ounces or 233 tons will be de-hedged if the current de-hedging run-rate is maintained. This firms gold prices as they buy back positions.
15. Bullish markets for base metals are normally bullish for precious metals. There were recent pull-backs in base metal prices which had become way over-heated. New price supports were found and rallies are under way in Copper, Zinc, Nickel, Aluminum and lead. We think China got tired of paying near $4 per pound for copper and quit buying for awhile. This created copper selling but China is back buying again and they imported a record 307,740 tons in March. On today’s price that’s $7,000 per ton.
16. Professional traders are always seeking moving markets. They cannot make money when a market sector is stuck within a trading range. As precious metals keep moving, prices accelerate living on these rallies propelled with trader price action. The higher gold and silver can rise, the faster and higher the trading volumes.
As good as these markets have been the best is yet to come. The current spring rallies can provide some excellent trading. From fall of 2007 through 2009, we are expecting some mind boggling PM price increases as the dollar falls further along with the general stock markets throughout the world. –Traderrog