June 2008 Weekly Updates & Forecasts:

6-23-08 Update:

Gold & Dollar:

Gold got hit again, today, just as predicted. It seems the "powers" have now perfected the art of making the dollar go up so as to make their gold-hits more palatable to the investing public. Today's dollar news is that the euro's chances for a rate hike were supposedly put into doubt by some negative economic numbers and a forecast of a slight contraction of the German economy in Q2.

All of that is pure BS. The ECB will hike in July, no matter what. It was already clear that there was little chance of additional hikes after that before today, so these numbers changed nothing in the actual outlook. This news, by itself, could never cause such a powerful, half-point rise for the dollar.

That tells me that currency traders are either an extremely confused bunch who don't know what signals to trade on, or that the currency markets are as rigged as all other markets are. My guess is the former, though, because the currency markets are a little too deep and too broad for such rigging to be effective.

As of Friday, gold's chart looked like this:

The first solid triangle shows the likely breakout point without further suppression efforts, and the second one marked by thinner lines shows the breakout point including, but in spite of, such efforts.

Gold Stocks (XAU):

The XAU continues to show surprising and extraordinary strength, and that in spite of both gold and silver falling precipitously and staying below their drop-off points. Take a look at this snapshot of the Kitco charts on the Monitor Members Lounge:

This is very curious because these two indexes are by now virtually identical in the kinds of stocks they carry, with only different weightings as to each stock. If silver's performance doesn't explain the difference, then what does? I will investigate this further.

Rates:

Things are getting "curioser and curioser" all the time. Today, the shorter dated rates are climbing while the longer dated ones are slightly falling. If this was strictly investor-driven, one would have to conclude that longer term maturities are in higher demand - but in the currently creepy inflation climate, that would be insane.

Since insanity is becoming more and more the province of our elected and appointed leaders and their financier handlers, one can only conclude that these same handlers got their fingers in this game. Bernie must be hard at work buying longer term maturities, as he promised in his famous "helicopter" speech.

The Dow:

US stock indexes are nervously oscillating around the flatline level today, with all but the NYSE mainly on the downside and only the NYSE sporting a sizable gain of 50 cents at 11:36 am CST.

The Dow is getting closer and closer to its 11,750 support line. We will see what happens during the rest of the day. It will probably stay the way it is. Maybe there will even be a late afternoon rally. Another favorite fake-out signal of the financial powers.

Ultimately, all of these machinations are doomed to fail, and the day of reckoning is closing in at accelerating speed. Too bad so many good people will go down with the powers, but that's the price for not paying attention, I suppose. Your Monitor subscription is far, far cheaper than what they will have to pay.

6-15-08 Update:

The Dollar:

Bernie and Hank's recent hot air emissions regarding dollar support were curbed today when the euro zone showed massive inflation while the slumping NY manufacturing index kicked the dollar's wobbly legs out from under it. US inflation figures meanwhile had to continue to be distorted downward so the Fed wouldn't be forced to actually make good on its empty threat of raising the federal funds rate. That left the euro rising like a phoenix while the dollar ate its dust - or rather, its ashes.

The dollar's chart still looks positive - but its fundamentals have just turned really, really bad, and that will soon reflect in the chart as well.

Silver in Charge:

Silver is now clearly leading gold's fortunes, and that is a good sign. The proof of this can be seen in the fact that the XAU, which contains stocks of silver producers, is now outperforming the HUI, which doesn't.

And here is silver's performance today. Silver immediately recovered from its mini-breakdown and jumped right back into its triangle formation.

Even though silver's chart looks more bearish than that of gold, it has outperformed gold recently, and the fundamentals mentioned last week determine everything.

Gold:

Gold has made a false breakdown below the rising lower pennant line that runs parallel to its 200-day moving average, but according to today's euro-bullish news has made it back to that line already. Since the recent two weeks' weakness was induced by the gaseous emissions of the two individuals mentioned above, that breakdown essentially means nothing.

Watch Hank and Bernie squirm for the rest of this week as they try to figure out which oral incantations to use as a counter to the ECB's rock-solid curve ball. The outcome, however, is only too predictable.

The Bombay Stock Exchange

What is very interesting and important to watch here is the Indian stock market. If it performs poorly for the rest of the summer and beyond, that might well lead to the return of massive Indian gold buying this fall.

It seems to have put in a double bottom at 15,000. The question now is whether it will be able to pierce its resistance represented by its 50-day moving average (blue arrow), and its 200-day MA (red arrow). If it shies away from the 50-day MA and then falls below 15,000, this fall's bull run for gold will put any run that has occurred since 2001 to shame. My personal bet is that this is exactly what will transpire.

Rates and Bonds:

Rates are continuing to climb, and bonds are continuing to fall. The 2-year and 30-year Treasury price charts are very revealing. Both are very near support lines.

Once the 30-year breaks below its line at 112, there isn't much holding it up until the 105 level on the chart above. The way things are currently going, that can easily be reached by the end of August. It will constitute another push for the PM stocks and their metals.

The case for PM stocks is looking better and better, despite the continuation of the negative factors that have been weighing on it for so long.

6-08-08 Update:

Gold:

After gold took a huge initial hit on Tuesday after Hank & Bernie tried to talk it up a bit by expressing their "concerns" about the dollar, it stayed down for a day while putting in a "doji" performance, was pushed down further on Thursday even though silver moved sharply higher that day, and ended the week in positive territory after climbing a full $24 progressively worthless US dollars' worth on Friday.

The bottom line of this triangle runs all the way back to the bottom of the August 2007 low and runs above and parallel to the thin red 200-day moving average.

Except for Thursday's hard to explain under-performance, the recent lows have very nicely followed that line upwards, bouncing off it on their way into the apex of the triangle. It now rests just below its (blue) 50-day MA.

This indicates tremendous upward-pressure under gold, and that pressure is confirmed by the charts and the fundamentals for both the other metals and the precious metals stocks as we will see. There will either be a powerful breakout this coming week, or another desperate attempt to keep the precious metals and their stocks out of the investors' radar screens while the Dow continues its plunge toward investment-'sheol.'

No matter what happens, however, if the powers should succeed in dissing the metals again, all they will accomplish is for it to form a powerful double-bottom right at the $850 support line that goes back all the way to 1980. It will make the coming explosion upwards even more powerful, so don't worry about it. I don't think they will succeed in doing this, though.

Silver:

Silver is leading this current charge upwards. While gold took a serious series of hits from Tuesday to Thursday last week, silver simply outperformed.

With the exception of Tuesday, where it put in an only marginally negative performance after a huge initial drop and subsequent full recovery (the red "doji" on the chart above), silver had nothing but up-days last week, which to a large degree can be explained by the mounting physical coin shortage in the market. The metal crossed above its 50-day MA on Friday and will likely continue that way next week.

Platinum:

Platinum soared on Friday, shooting up by as much as $83 during the day before settling back at a gain of $63. In doing so, it has crossed way over its blue 50-day MA and is now well on its way of breaking back above the three thin resistance lines to exceed its most recent top at $2300/oz.

Only about $200 more, and Platinum will have exceeded that high. It can easily put those in inside of a week, but it will likely take about two. Yet, as far as industrial use goes, remember that, at these levels, there is tremendous pressure to convert to far cheaper palladium for use in catalytic converters, so demand from that end of the spectrum will likely suffer.

There is a very good chance, however, that this decrease will be made up by investment demand as silver will turn the world's eyes toward the precious metals sector as a whole, and that is especially true for the ...

Gold Stocks

You know I have been very bearish on gold stocks for quite a while now. They have actually held up better than I expected during that time. I have also noted slight anecdotal improvements recently and have pointed these out whenever they came along. In my mind, the time has come now for a serious comeback in precious metals stocks.

The previously demonstrated successive megaphone and even head and shoulder formations have now narrowed back to a triangle formation, which has resulted in what is known as a "diamond" pattern as observed in the June Monitor issue. That, from a charting perspective, is very bullish for the stocks.

Just like gold and silver, the HUI has also followed its ascending 200-day MA upwards, although its price swings have taken it below that line several times.

At the same time the descending red line points out the current squeeze pattern with convincing clarity. The nature of that pattern , when compared to similar development back in 2006, however, points to the strong possibility that when the HUI chart gets further squeezed this time, it will not result in an extended, one-year slightly upward-pointing sideways pattern, as it did back then.

There is an interesting commonality between a whole lot of different charts. Many of them are currently getting squeezed between their converging 50-day and 200-day moving averages. The gold stocks are an exception in that pack because the HUI's swings, for example, are frequently taking its chart outside of these two boundaries. That is only to be expected, however, since the PM stocks are traditionally far more volatile than the metals themselves.

The following chart shows how, this time, the HUI's behavior differs from 2006.

in 2006, there was a similar convergence between the blue and red moving averages, but it was accompanied by wild fluctuations of the chart above and below these lines without following them into a narrowing squeeze-pattern.

This resulted in the extended period of sideways movements in 2007, during which the moving averages stayed very close to each other and which terminated in August of 2007 after the stocks followed their metals in a brief dip into investment-outlook hell, from which they all quickly recovered and which launched their most recent bull run.

This time, we also have fluctuations above and below the boundaries set by the moving averages, but these fluctuations are resulting in a definite squeeze pattern that will soon break out. The reason why this time they will result on a breakout to the upside is that treasuries, the built-in alternative to the equities markets, have already formed multi-decade tops and are in the process of seriously breaking down.

Rates and Bonds:

All of the Us treasury notes and bonds are showing a very similar squeeze pattern. Their charts are (for the most part) lodged between their upper and descending blue 50-day MAs and their lower (still) rising 200-day MAs. There is one big difference, though: While gold and silver's chart patterns reveal bullish triangle formations that point to impending breakouts to the upside, the treasuries are in a decidedly bearish posture and are about to break down - and the 30-year bond price chart has already done so.

This is a classic example of a descending bearish triangle followed by a breakdown. US government debt is at the end of its almost three-decade long uptrend. All treasuries have peaked already, and the long bond has already broken down. The others will follow suit, in short order.

The clear head and shoulders pattern is another indication for the coming breakdown.

Here is the 2-year note's price chart, which shows an inverted cup-type pattern.

Both charts are currently wandering around in "breakdown desert" between their two moving averages, and both have already touched the red 200-day average.

When these charts break down as well, a veritable torrent of investor funds will pour from US treasury debt, and they won't be flowing into the stock indexes. Those will be busy breaking down from their own bearish chart patterns, whatever those may be.

The Dow:

Here is what the Dow looks like:

Ordinarily, this chart would have broken down straight from its right "handle", but the powers managed to let it bounce off support of its 2000 high at 11,750 - or maybe it was just the market's psychological reaction, who knows?

The point is that when it touches that level this time, there won't be a bounce. The Dow will get trounced, instead.

That is the case for a resumption of the bull market in gold stocks.

Oil:

What will help this development along tremendously is the continuously rising price of oil. As someone has once pointed out, the irony of this ongoing oil bull (doesn't that sound weird?) is that every time the Bushies or the 'Israelies' threaten Iran, they make the Iranians more money because these threats always result in oil market jitters.

We have just had two weeks of falling oil prices, for a change, and all it took was two days of threatening Israelites and we're back up to the upper boundary of the rising trend channel.

People are still by and large uneducated about the real causes of inflation, and so are traders and investors. Rising oil prices remind them more than anything else that we are n a highly inflationary period. They do understand that inflation is bad for bonds ("fixed income" investments).

The higher "inflation" is expected to be several years out, the less the purchasing power of the dollars they will get back when their loan to the government reaches its maturity date. The worse the inflationary expectations, the higher of a risk premium investors demand before they will put their money into bonds, and that means the higher the yield needs to be. Since the yield is the inverse function of price, only sharply declining prices will re-balance the risk-picture so as to lure investors back into trusting the government with their hard-earned credit-dollars.

That's why the 30-year bond las broken down already. The longer the time of the loan, the more unlikely it is that the investor will get the full value (in purchasing-power terms) of his investment back.

That's where we are right now.

It is possible that gold and silver will be "hit" again, just to keep the charade going for a little longer - but time is working against the powers. The gold stock break-"up" could happen within weeks, if not days.

I will let you know when the time comes to put money back into gold stock funds and other share-related investments.

That time is not yet.

See you next week.

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