Gold shines in it’s “Moment of Truth” technical breakout!

On June 8th I posted this chart on gold, calling it — “gold’s moment of truth.”

http://goldsilverstockcharts.wordpress.com/2008/06/08/is-this-golds-moment-of-truth/

In my opinion, this is the most significant technical move that gold has made since the December bottom last year, held at the November highs, and led gold to new all time highs in March.

Here is gold’s “moment of truth” technical breakout.

gold chart - moment of truth breakout!

With the ECB calling out Ben Bernanke to defend the dollar, by hiking rates; this sets up a situation where Bernanke’s hands may be tied through the November elections, given the weakening US economy.

And that is going to set the stage for the next major rally in gold, in which my price target is
$1,270.

$1270 Gold will also coincide with what I feel is a realistic 10:1 ratio of gold to oil. Oil is overdue for a technical correction to the mid $120’s. The correction in oil will also free up speculative capital which will re-enter the gold market.

While gold bears argue that the Fed has ceased cutting rates, and that the global economy is slowing, which will cap the commodity plays. I believe, that the key for gold is the negative real rates that exist in the U.S.

I also feel that Ben Bernanke may shock markets, and actually continue with 2, if not 3, or 4 more interest rate cuts, as the US banking crisis is poised for another seizure, and perhaps the failure of a major bank. Treasury Secretary Hank Paulson has just warned the European banking community of a coming major bank collapse, and is preparing the markets for a non-bailout of the next failure.

Lehman Brothers is experiencing a “Bear Stearnsesque” run on the bank, and Citicorp is virtually bankrupt, and will need to raise yet more capital. With Oil reaching speculative extremes, I believe that gold will soon resume it’s flight to safety haven status in times of economic, or geopolitcal turmoil – of which the world has both in spades.

Buckle up, and get ready for the next major rally in gold, because gold has shined in it’s moment of truth, and the technical & fundamentals couldn’t look any better.

– Michael Cerulean

Bernanke unleashes the “inflation trade.”

The Fed has finally chosen between runaway inflation and saving Wall Street insiders from the collapse of the housing, subprime and derivatives bubbles.

Inflation has been unleashed and given the slowing U.S. economy and the continued effects of the collapse of the housing & subprime lending bubbles – “stagflation” is now waiting in the wings.

This chart says it all:

 The Gold Genie has  broken out of Bernanke’s bottle!

Of particular note – Gold led the CRB index on this move and that tells me that this move will be based on a “gold is money” move – and not a broad based rally in all commodities.

For those “true believers” who saw all the positive currency signals that gold was transmitting over the last few months, and who used this recent correction from the shakeout of over-leveraged Yen-Carry Traders to load up on more gold,  I say: Boo-Yah!

 Gold is back!

 Back leading all commodities.

Back as true and free money.

 And back as the true and honest indicator of irresponsible monetary inflation by nearly all global central banks.

Hang on for the ride – this one’s just getting started!

And the best part of this move is that gold and silver stocks are still cheap. Gold has led this initial move and both physical silver and gold & silver stocks remain historically cheap to gold.

It’s time to load thy boat and hold on tight.

In my next post, I’ll review my favorite, individual gold and silver stock picks.

Michael Cerulean

The Euro Dollar says – Gold is doing just fine!

Gold bulls have now endured 14 months of consolidation & distrubition and many are now throwing in the towel. But, should they? Is the great gold & silver bull dead? Have we already seen the highs for this cycle? Or, are gold and silver merely in a long, drawn out consolidation phase?

For answers you need only look to the Euro. The Euro is now among the strongest of global currencies. So, let’s set the bar high and take a look at gold vs. the Euro.

Here’s the chart that holds many answers:

         

 Given the recent dumping of gold onto the market by Central Banks,  gold is showing amazing resiliency. We’re still riding on the 200 dma and as noted in “red” – and every penetration below the 200 dma has led to an immediate influx of strong buying and a “V-Rally.”

 As traders we have two plays here. The first is based on value. Add to positions and buy gold on any dip below the 200 dma – just set stops 5-6% below the 200 dma.

The second trade, a safer play –  is to add to positions on any momentum breakout above the blue-dotted trendline, which I think is imminent.

 All the fundamentals of the gold bull remain intact. We are witnessing  an unprecedented increase in global money supply. Derivatives are growing exponentially and we are seeing the smartest of smart money like Sam Zell and the Blackstone Group – cashing out. The U.S. used a credit and debt bubble to create an asset bubble in housing, and presently in U.S. equities. With cracks developing in subprime and mortgage backed securities, we’ve seen the warning signals in the derivatives market. It will be when, not if – when the meltdown in derivatives becomes a once-in-twenty year rogue wave event. Be prepared, stay the course, buy gold on any and all dips at and below the Gold:Euro 200 dma trendline and get ready for the imminent breakout back about the trendline. The U.S. Dollar is on life-support and Central Banks are doing their very best to keep the “yellow canary” in the coal mine silent.

They don’t call patience a virtue for nothing. Stay the course and be patient. When, not if… gold and silver will re-launch for part II of this generational bull market.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

HUI Gold Stock Index Signals New Highs

After 8 gut-wrenching months, the HUI gold stock index has finally signaled it’s ready to move through last May’s sector highs. Here’s a snapshot of the present cycle for gold, using the HUI gold bugs index.

Each new up-leg of this cycle for gold & gold stocks has required a consolidation phase.  Technical bottoms are formed via selling exhaustion. Ideally, they correspond with a positive change in underlying fundamentals and investor sentiment.

The Fed has utilized every tool in it’s bag of tricks to keep the U.S. consumer and the economy afloat. They removed M-3 from public scrutiny, they’ve manipulated PPI & CPI numbers to where official inflation numbers have become a public joke. They’ve created one asset bubble after another and have flooded the world with U.S. Dollars.

But, sooner, or later – all chickens come home to roost.

 The beauty of Gold is in it’s versatility. Gold can trade as a commodity, it can trade as a currency and it always trades as the ultimate safe-haven during times of geopolitical and economic turmoil.

On the commodity side, we are only in the early stages of a generational bull market. There are three undeniable long term catalysts for this move.

1. The insatiable appetite of China, India and the emerging economies of the world.
2. A generational repudiation of paper currency for hard assets.
3. Massive global inflation and expansion of the money supply that can not and will not stop.

As a currency, Gold offers the lone refuge from the ravages of inflation. We have reached an unprecedented level of global inflation and it is not just the USA that is running the fiat printing presses on overtime. Here are the expansion rates in money supply for the major global economies over the last year.

- Russia has increased money supply by + 43%.
- India has increased money supply by + 20%.
- Brazil has increased money supply by + 17%.
- China has increased money supply by + 15%.
- Great Britain has increased money supply by + 11%.
- France has increased money supply by + 8%.

Golds biggest moves occur when it leads (not follows) the commodity sector. These initial moves often emerge with great stealth and remain under the radar of most traders.  And that is exactly what happened in November. While gold was in the midst of yet another correction – here is what we saw:

Gold confirms the global helicopter drop of fiat currency and errupts against all  currencies.

 

 Gold re-establishes it’s leadership to the CRB commodity index.

Gold breaks out agains the DOW – even as it hits new highs.

In my next post I’ll talk about where I believe gold & gold stocks are going and what the catalysts of this phase of the generational gold bull will be.

 Buckle up, it’s going to be one helluva ride!

Gold and commodity correction over?

This recent collapse of crude oil rocked the world of commodity bulls.

But, Oil is bouncing back, hard and fast.

As is Gold…

                  

Since last May’s blow-off top in commodities; every explosive rally in gold has led to an equally violent correction. But, gold bulls have endured and persevered.

The question remains: Is this just another wild whipsaw ride, or are we  witnessing the formation of the next major breakout in the gold cycle?

In my next post, I’ll share some charts that I believe support the case for this being the next major move for gold and gold stocks.

And this one is going to shock even the most bullish of the gold bulls!