Gold Correction Over? The Tactics!

 

    1.    There is a battle going on in the silver market for the $25 level.  A lot of silver investors that bought silver on the rebound after the 1980 collapse saw price stopped dead in its tracks at $25.  Now, decades later, they want out at break-even.  That is 99% of the reason why silver halted at $25.

    2.    The difference between the amateur and the professional investor can be summed up in one sentence by each group.

    3.    “We’ll see what happens”. –Amateur Investor.

    4.    “We’ll respond to what happens” – Professional Investor.

    5.    As you know, I don’t respond to statements such as, “price is getting away, buy now!”, “you are missing out, buy now!”, “China likes gold, buy now!”, “price is going parabolic, buy now!”, or “this time is different, buy now!”.

    6.    I respond to Gold price weakness with the cold execution of buy orders.  I respond to price strength with the same cold execution of sell orders, all in a pyramid formation that can reach dozens, or even hundreds of orders, at a myriad of price levels.  

    7.    That’s not just what I do; it’s what I am.

    8.    As gold’s price rose towards Gold $1387 and Silver $25, I continued to execute on my profit-booking sell orders, and urged you to do the same.  I took a lot of “flak emails” for not chasing price.  Many never understood that somebody who bought the sell-offs into the lows of $1156, $1045, $905, $860, and $680, particularly with Gold Stock, and urged you to do the same, is not really interested in paying $1380 in a price chase, for what he already bought at all those lower prices.  Higher Gold & Silver prices are not getting away from me.  They are making me money.  

    9.    Most did not notice the loss of price momentum that began in the metals over 6 weeks ago as I continued to say, “Do not buy.  Sell.”.  As a rule of thumb, and I suggest you read this next sentence 100 times, I like to add to my positions with 1-2% of my risk capital on every $50 fall in price, and sell approx. the same way on strength.   

    10.     So, when I am selling into strength of $200 an ounce, like we just had from $1156, I am booking profit on a total of maybe 4-8% of my metals position holdings.  There are no wild “sell everything!” or “back up the truck and buy!” statements or actions.  

    11.    In terms of my Gold market actions, and hopefully yours, think fine wine sipping, not…cocaine snorting.  One activity builds financial life.  The other destroys it.  

    12.     Now, everyone notices “the correction”.  Analysts and investors are lined up now that price has fallen (below their latest buy prices) to predict, “you are going to experience a correction”.  

    13.     I say, you just did.  More importantly, you are experiencing, in the Gold market, the difference between seeing what happens, and responding as a professional with buy and sell Gold & Silver market orders.

    14.    Here’s the bottom line:  There may or may not be further price weakness from these levels.   

    15.     All those who urged you to keep selling into Gold $1156 (and all the other low points, but to buy into 1387), are now urging you to stand aside for “the correction”.  You should already be on the buy, not calling for higher or lower prices.  Telling me your prediction of where price is going is a total waste of my time, and a much bigger waste of your time.  

    16.    Tell me whether you bought anything Gold or Gold-related on this sell off.  Right here, right now.  That is all that matters.  You had your chance to bomb me with emails as to why I had to chase price at Gold $1380.  Now it’s my turn.  My turn to ask the question, “Are you on the buy here and now?  Yes or No?”  What did you buy into 1320?  Nothing?  Prediction of what others will buy to carry your price-chased positions higher, is nothing more than a pipedream.  Specific buy action, specific price response action here and now into current weakness, by you, is for winners.

    17.      Here’s the Daily Silver Chart.  That chart shows, at least so far, what I would term a majestic correction in Silver.  It is not a flag pattern, because price has not risen vertically before going into the correction, but it is flag-like.  It is a drifting minor rectangle, and the possibility exists of an astro-blast through the $25 area, and on to prices as high as $28, or even $33.

    18.    If you are a silver player, and bought silver at $24-25 on the way up, but no silver on the two dollar an ounce correction that has already occurred, my strongest suggestion is that you drive to the nearest grocery store, find the nearest old lady buying groceries on sale, and give her full power of attorney to manage all your investments.  In fact, make an arrangement that the grocery store owner puts silver in the store and I guarantee you that when it goes on sale, like it just did, Granny will be on the buy.  

    19.     For all practical intents and purposes, all the world’s Grannies just bought some Silver at $23 an ounce and some Gold at $1320. Who cares about Granny.  The question is: Did you buy, yes or no?  

    20.    Here’s a closer look at the Silver chart, clearly showing the drifting rectangle supply and demand line borders in detail.   Through The Looking Glass. Silver.

    21.     You can see that price has broken out, upside, from the supply line border, and has done so, ironically, as the price-chasers now “assume the position” for a rest in the Silver market.  Sorry, but the rest already happened.  There could be further weakness in Silver, yes.  The rectangle could blow up.  Price could take out the $23 area lows and begin a more severe correction.  If it happens, those of you who are Silver market investors, will not waste time analyzing the situation.  What you will do, is buy Silver in greater size than you did into $23, alongside Granny, as she does the same, at the Silver Grocery Market.  We can’t know if Silver is going to have a further correction or burst upside, but we can, and will, respond professionally to what does happen.

    22.     Let’s move on to GOLD.  In the Gold market, we are witnessing the “battle of the head and shoulders patterns”.   Here’s the chart with those patterns highlighted in detail. Gold Bullion Chart.

    23.     Notice there is a small head and shoulders top formation contained in a bigger one.  The bigger one lacks symmetry, thus it doesn’t carry the “weight” that it could.  The two bear h&s tops are doing battle with the highly symmetrical h&s bottom on the right side of the screen.

24.    Here’s a 2nd chart. Gold Bull Wedge Breakout  This chart shows the breakout.  Notice the correct method of drawing a down wedge.  The wedge, in a down move, must be started from a supply point high, not a demand point low.  The bull wedge and the bull h&s bottom are locked in a battle against the bear h&s tops, and, sadly, against the total failure of the gold community to buy any of this weakness.  Let’s change that action.  The odds are probably 50-50 that we rise to the $1450 area or fall to the $1265 area, but whatever the odds are is irrelevant.  What is totally relevant is how you will respond to price at either of those points.  You know the answer.  Do what must be done, one ounce and one share at a time.  Subscribers were buyers of $1320 Gold and sellers of a portion of what was bought into $1350 yesterday.  As I send this off, we are back at $1330 and Granny is back on the buy.  Are you?  A week ago I asked readers if you were prepared to buy as price fell.  Most of course, had just finished chasing price in size into $1387 and couldn’t buy anything.  Now a feeling of confusion is beginning to permeate the golden air.  “Why has gold stopped rising?” is the question.   My suggestion:  Forget the questions, and get on the buy.  I’m buying gold every $3 down with each buy order bigger than the previous.  Join me!  See you out there.  On the Golden Gridlines!





Thanks!
Cheers!
                st

 

 

Thank-you
Stewart Thomson
Graceland Updates

 

www.gracelandupdates.com
Email: stewart@gracelandupdates.com


 

 

 

 

Risks, Disclaimers, Legal
Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualifed investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is: 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an investor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line:   
Are You Prepared?


Community Talk

Re: Gold Correction Over? The Tactics!

Long live humans. Go straight to hell mkmalls45.

Re: Gold Correction Over? The Tactics!

The Top Reasons to Buy Gold Now 
 

Published 10/22/2010 

Print This Article
Return To Article
Normal Text
Large Text

Email Share

 

Having reached an all-time high of US$1,387.35 an ounce on Oct. 14, some run-of-the-mill profit taking by short-term traders and institutional speculators on world futures markets triggered last week's swift downward correction in the yellow metal's price.  

Then, this Monday's surprise announcement by the People's Bank of China that it would soon raise short-term interest rates to combat domestic inflation knocked the price still lower – not so much because there was more selling but because many buyers paused to reassess the metal's short-term prospects.  

Having traded as low as $1,315, the correction to date is not as large as headlines and media attention might suggest.  All in all, the past week's peak-to-trough decline represented a loss of little more than 4% -- not much as corrections go.  

Gold is still up more than 20% this year – outpacing equities, bonds, real estate and most other commodities, and, almost certainly, it will rack up its tenth consecutive annual gain.  

After the meteoric rise in the past couple of months, a rise that has seen gold achieve new historic highs, it is not surprising to see a modest correction.  Indeed, at Rosland Capital, we have consistently warned investors to expect great volatility – both up and down – as the yellow metal continues its long-term advance to new record-high prices.  

Looking beneath the surface at recent market intelligence suggests that downside risks are limited while key market fundamentals suggest upside potential remains great.  Indeed, even if the recent downtrend continues, my confidence in the metal's bright future remains strong.  The bullish case for gold not only remains intact -- but looks increasingly more powerful.  

In recent weeks, with gold moving from high to high, our friends in India report continuing strong local demand at this important seasonal time of year for the country's annual gold consumption.  

The historical experience suggests that high and rising prices not only inhibit Indian gold buying but, at the same time, elicit selling of old gold jewelry, investment bars and working inventory at local bullion merchants and jewelry shops.  In recent years, this price-sensitive behavior often capped gold-price rallies in world markets.  But in recent weeks, contrary to the historical experience, with prices near their highs, India remained a net buyer of gold.  Importantly, in the past few days with gold around $1,330 to $1,340 net Indian demand has picked up smartly.

Two distinct factors are contributing to the uncharacteristic behavior of Indian gold demand:

  • First, the approaching Diwali festival on Nov. 5 and the traditional December wedding season are propitious times for buying gold – as an investment, as an adornment and as a wedding dowry – and merchants have begun stocking up.  
  • Second, a large share of Indian gold interest comes from the agrarian sector – and this year's bountiful harvests, high agricultural prices and resulting healthy farm incomes mean that more money is available to buy gold.  

Friends in Vietnam and Thailand, both important gold-consuming markets, also report continuing strong demand in the past couple of months – and we hear local buying picked up as gold prices fell back in the past week.  

Turning to China, arguably the world's most important national gold market of late, we have seen buying interest – for both jewelry and investment – continue to grow and, indeed, expand in recent months as the metal's price has moved higher.  

In contrast to India, where rising prices often restrain demand, Chinese buyers, not wanting to miss the opportunity, are attracted by a rising price trend.  But not to miss a bargain, we hear from Shanghai that there has also been strong interest as the price moved into reverse last week.

Longer term, demand for both jewelry and investment has a strong correlation with growth in personal income.  As more people enter the middle class and enjoy some disposable income beyond the necessities of life, one of the first things people will buy is gold, and, over time, the more household incomes rise, more of this money will find its way into gold.

In this light, this week's news that China's central bank is beginning to raise interest rates in response to rising domestic inflation should be seen as a positive for gold.  

Over time, rising incomes are much more supportive of gold consumption than accelerating inflation.  Government policies that promote healthy but not excessive growth in national output – and avoid an unsustainable overheated inflationary boom – will also prove positive for the continuing expansion of the domestic gold market and a rising price for the metal in world markets.  

China and India aren't the only reasons to expect a quick resumption in gold's upward ascent.  A growing number of countries have been adding to their official gold reserves in order to reduce the risks associated with their US dollar-denominated holdings.  

Official central bank interest in gold is gaining momentum – with China, India, Russia, Mauritius, Sri Lanka, the Philippines, Kazakhstan, Venezuela, Saudi Arabia, Bangladesh and Thailand reporting gold purchases in the past year or two.  Now, South Korea is reportedly considering joining the list of central bank gold buyers.  Add to this at least a few other central banks and sovereign wealth funds that have bought gold but have so far preferred not to publicize their purchases.  

Most central banks take a very-long term approach to management of their official foreign currency and gold reserves.  Those with on-going gold-buying programs, rather than chase a rising price, typically buy on dips in the hope of minimizing their long-term average purchase price.  Thus, it is likely that official-sector demand – from Russia, China, and possibly a few other central banks – has also been a factor in recent days, limiting the correction and contributing to the recovery in the price of gold.  

Jeffrey Nichols, managing director of American Precious Metals Advisors and senior economic advisor to Rosland Capital, has been a precious metals economist for over 25 years.

Having reached an all-time high of US$1,387.35 an ounce on Oct. 14, some run-of-the-mill profit taking by short-term traders and institutional speculators on world futures markets triggered last week's swift downward correction in the yellow metal's price.  

Then, this Monday's surprise announcement by the People's Bank of China that it would soon raise short-term interest rates to combat domestic inflation knocked the price still lower – not so much because there was more selling but because many buyers paused to reassess the metal's short-term prospects.  

Having traded as low as $1,315, the correction to date is not as large as headlines and media attention might suggest.  All in all, the past week's peak-to-trough decline represented a loss of little more than 4% -- not much as corrections go.  

Gold is still up more than 20% this year – outpacing equities, bonds, real estate and most other commodities, and, almost certainly, it will rack up its tenth consecutive annual gain.  

After the meteoric rise in the past couple of months, a rise that has seen gold achieve new historic highs, it is not surprising to see a modest correction.  Indeed, at Rosland Capital, we have consistently warned investors to expect great volatility – both up and down – as the yellow metal continues its long-term advance to new record-high prices.  

Looking beneath the surface at recent market intelligence suggests that downside risks are limited while key market fundamentals suggest upside potential remains great.  Indeed, even if the recent downtrend continues, my confidence in the metal's bright future remains strong.  The bullish case for gold not only remains intact -- but looks increasingly more powerful.  

In recent weeks, with gold moving from high to high, our friends in India report continuing strong local demand at this important seasonal time of year for the country's annual gold consumption.  

The historical experience suggests that high and rising prices not only inhibit Indian gold buying but, at the same time, elicit selling of old gold jewelry, investment bars and working inventory at local bullion merchants and jewelry shops.  In recent years, this price-sensitive behavior often capped gold-price rallies in world markets.  But in recent weeks, contrary to the historical experience, with prices near their highs, India remained a net buyer of gold.  Importantly, in the past few days with gold around $1,330 to $1,340 net Indian demand has picked up smartly.

Two distinct factors are contributing to the uncharacteristic behavior of Indian gold demand:

  • First, the approaching Diwali festival on Nov. 5 and the traditional December wedding season are propitious times for buying gold – as an investment, as an adornment and as a wedding dowry – and merchants have begun stocking up.  
  • Second, a large share of Indian gold interest comes from the agrarian sector – and this year's bountiful harvests, high agricultural prices and resulting healthy farm incomes mean that more money is available to buy gold.  

Friends in Vietnam and Thailand, both important gold-consuming markets, also report continuing strong demand in the past couple of months – and we hear local buying picked up as gold prices fell back in the past week.  

Turning to China, arguably the world's most important national gold market of late, we have seen buying interest – for both jewelry and investment – continue to grow and, indeed, expand in recent months as the metal's price has moved higher.  

In contrast to India, where rising prices often restrain demand, Chinese buyers, not wanting to miss the opportunity, are attracted by a rising price trend.  But not to miss a bargain, we hear from Shanghai that there has also been strong interest as the price moved into reverse last week.

Longer term, demand for both jewelry and investment has a strong correlation with growth in personal income.  As more people enter the middle class and enjoy some disposable income beyond the necessities of life, one of the first things people will buy is gold, and, over time, the more household incomes rise, more of this money will find its way into gold.

In this light, this week's news that China's central bank is beginning to raise interest rates in response to rising domestic inflation should be seen as a positive for gold.  

Over time, rising incomes are much more supportive of gold consumption than accelerating inflation.  Government policies that promote healthy but not excessive growth in national output – and avoid an unsustainable overheated inflationary boom – will also prove positive for the continuing expansion of the domestic gold market and a rising price for the metal in world markets.  

China and India aren't the only reasons to expect a quick resumption in gold's upward ascent.  A growing number of countries have been adding to their official gold reserves in order to reduce the risks associated with their US dollar-denominated holdings.  

Official central bank interest in gold is gaining momentum – with China, India, Russia, Mauritius, Sri Lanka, the Philippines, Kazakhstan, Venezuela, Saudi Arabia, Bangladesh and Thailand reporting gold purchases in the past year or two.  Now, South Korea is reportedly considering joining the list of central bank gold buyers.  Add to this at least a few other central banks and sovereign wealth funds that have bought gold but have so far preferred not to publicize their purchases.  

Most central banks take a very-long term approach to management of their official foreign currency and gold reserves.  Those with on-going gold-buying programs, rather than chase a rising price, typically buy on dips in the hope of minimizing their long-term average purchase price.  Thus, it is likely that official-sector demand – from Russia, China, and possibly a few other central banks – has also been a factor in recent days, limiting the correction and contributing to the recovery in the price of gold.  

Jeffrey Nichols, managing director of American Precious Metals Advisors and senior economic advisor to Rosland Capital, has been a precious metals economist for over 25 years.

 

Email This Article

 

Re: Gold Correction Over? The Tactics!

There is an obvious pause in the ascent of Gold.   However with Q.E going to infinity this soon will change -   I predict by Nov. 15th at the latest all this will change & gold will surge once again.    It has no place to go but up IMHO.