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By Louise Yamada Technical Research Advisors, LLC ("LYA")
January 9 (King World News) - Gold spot price (GOLDS-1,563.70) this year nearly achieved our target at 2,000, for a 96% advance from the breakout in 2009, no doubt getting a bit ahead of itself. The 20% decline to date may simply represent the initial stage of a consolidation phase, not unlike that which took place in 2008 (see Figure 20). The previous correction carried down 34% over seven months, peak to trough, and thereafter began to improve. A decline today of 34% could carry Gold to 1,270 which nearly equates to approximately a 50% Fibonacci retracement. Note that then, as now, the intermediate-term weekly momentum model was negative (red arrows) and declining until the setback came to an end.
Currently, the 40-week moving average (MA) has been breached for the first time since the 2008 uptrend began. That uptrend intersects now near 1,540-1,530 (just tested), offering a point of support at current price levels. Recognize that in 2008, the 2005 uptrend (not shown) was breached in the course of the 2008 corrective phase, so there is precedent for a trend break within the context of a corrective trend, were the current uptrend also to be violated. In 2008 the decline spanned seven months.
The possibility exists that Gold profits are being used to offset 2011 losses in other areas. We will see what the new year brings with regard to price action. Nevertheless, we would anticipate that Gold remains in a corrective trend which could extend for a number of months. We do know that if the equity market were to sell off further, as in 2008, Gold could also be expected to decline in tandem. To identify a renewed advance from current levels, an eventual lift through 1,800 would be needed technically.
We do not have technical evidence that the longer-term bull market for Gold has come to an end; yet we know, too, that as during the prior dollar rallies in 2008 and 2010, Gold also declined.
Lastly, in favor of a continued longer-term bull market for Gold, we reiterate our Special Feature last month noting that as long as negative interest rates remain in place, the structural trend for Gold should remain up, notwithstanding interim pullbacks, as in particular, when the dollar experiences a rally.
(Noteworthy non-technical observations come through: 1) David Rosenberg noted that Central Banks bought a record 148.3 tonnes of Gold in Q3 with more in 2011 than any other year since the Bretton Woods system collapsed four decades ago; 2) Paul Brodsky notes that as the Gold futures have come down, the stocks of physical Gold with dealers have depleted at a significantly faster pace; and 3) As to the concern of Gold having experienced a bubble this year, Ian McAvity lends a wonderful statistical perspective: “At $1,900 Gold recently, it was 2.2x its early 1980 peak. US GDP & US Federal Debt are about 5.5x their early 1980 levels, while the S&P 500 and Total Credit Market Debt are at 11 ½ -to-12 times their early 1980 levels. The real bubble has been the issuance of debt that is increasingly stifling any real recovery in the Main Street economy.”)
Gold versus Gold Stocks
Gold versus Gold stocks is a debate that comes up frequently (see Figure 21). We have been of the technical opinion that we would rather hold Gold, because as the Gold ETFs proliferated, one can see on the chart that the XAU / Gold ratio broke a 20-plus-year support level suggesting Gold, the metal, should continue to outperform Gold stocks.
Silver: Still Unwinding.
Silver spot price (SILV-27.84, see Figure 22), which carries an industrial component and is a smaller market than Gold, suffered a more severe 46% decline in 2011, than that of Gold to date. Silver carries a similar pattern of reversing a portion of a very large advance of 170%, which had gotten way ahead of itself. The weekly momentum model continues to decline (see red arrow), suggesting that the repair, and possibly the decline, have not yet run their course.
We continue to cite support at 25, at the intersect of the 2008 uptrend line. But with the weekly
momentum still declining, there is the possibility that Silver could even retrace toward its decades-long breakout at 20 before restoring an advancing trend. A move through 35 would be needed from current levels to suggest a renewed advance under way.
Both Silver and Gold would undoubtedly suffer further if the overall equity market were to weaken, as has happened before, since margin positions, if called, require selling, and generally all markets can come under pressure.
Louise Yamada
Copyright 2012 Louise Yamada Technical Research Advisors, LLC. All rights reserved.
January 9, 2012
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The above snippets and charts were a small portion of her incredible 45 page report she puts together each month. Louise is legendary for her technical work on Wall Street. She formed LYA an independent research company in 2005 to provide the same in-depth research that clients had come to expect during her 25 years at Smith Barney (Citigroup) as a top-ranked "Institutional Investor" technical analyst.
As Managing Director and Head of Technical Research for Smith Barney, Louise was a perennial leader in the Institutional Investor poll, and was the top-ranked market technician in 2001, 2002, 2003 and 2004, before going independent. To subscribe to Louise Yamada Technical Research Advisors, LLC ("LYA") CLICK HERE.
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
Eric King
Louise Yamada - Gold & Silver Bulls to Continue Stampede
With gold hanging around the $1,600 level and silver near $29, today King World News is pleased to share with KWN readers a piece of legendary technical analyst Louise Yamada’s “Technical Perspectives” report. This information is not available to the public and we are grateful to Louise for sharing her incredible work with KWN readers globally.
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
January 9, 2012
