Long Term Bottom in Place Across Entire PM Sector, Gold Stocks Set To Overwhelm Gold

Submitted by Morris Hubbartt:

My technical analysis indicates that a major long term bottom is in place, across the entire precious metals sector.  The intermediate term gold target is $2015, but gold could move even higher before correcting significantly.   When daily CCI spikes lower, as it did recently, followed by RSI touching the 30 level, a trending move higher is very likely.    The short term target is $1850, and it could be acquired quickly.

Fundamental and technical analysis suggests higher gold stock prices are coming. What is most compelling about gold stocks is the undervaluation of the sector against gold itself.   GDX is currently as cheap as it was during the meltdown of 2008.   There is a substantial head & shoulders pattern in play now.   I am projecting that gold stocks will rise to about .44 on this ratio chart, which is almost a 50% gain from the current price.

 

US Dollar Indicator Rollover Chart

 

  • The topping process in the US dollar is accelerating. Currency analysis requires patience, because during a rollover, technical indicators can move at a snail’s pace.

 

  • The declining indicators are accompanied by weak volume, suggesting the price of the dollar is heading quite a bit lower.

 

  • My focus is the neckline on the head & shoulders top at 78.60. Once the dollar closes below that level for two consecutive trading days, a downside target of 73 will be in play.

 

  • Note the clear sell signals on both technical indicators.  I like to see the slow Stokes falling under 80, soon after the CCI has spiked to at least 200.  These indicator sell signals suggest there is a high probability that the right shoulder of the h&s top will quickly collapse.

 

  • This bearish US dollar chart is very good news, for gold investors!

 

Gold Arc Breakout Chart

 

  • My technical analysis indicates that a major long term bottom is in place, across the entire precious metals sector. The intermediate term target is $2015, but gold could move even higher before correcting significantly.

 

  • When daily CCI spikes lower, as it did recently, followed by RSI touching the 30 level, a trending move higher is very likely.

 

  • Note the large green Fibonacci arc pattern that I have highlighted.  Gold rose touched the outer arc in September.  From there, it pulled back, bottoming in early November.

 

  • Gold has now exhibited several daily closes above that outer arc, which is very bullish.  The short term target is $1850, and it could be acquired quickly.

 

GDX Arc Action Chart

 

  • The technical pattern in GDX that is developing is bullish. Fibonacci arc analysis suggests that once GDX closes over $53, a new bull leg is in play.

 

  • My intermediate term target is $66.  If gold overshoots $2015, I believe GDX could rise to $72.

 

GDX Overwhelms Gold Chart

 

  • Fundamental and technical analysis suggests higher gold stock prices are coming. What is most compelling about gold stocks is the undervaluation of the sector against gold itself.

 

  • On this chart, you can see that GDX is as cheap as it was during the meltdown of 2008.

 

  • There is a substantial head & shoulders pattern in play now.  Aggressive investors could consider selling some bullion, and using the proceeds to take an overweight position in gold stocks.

 

  • I am projecting that gold stocks will rise to about .44 on this ratio chart, which is almost a 50% gain from the current price.

 

GDXJ Uptrend Time Chart

 

  • The debt crisis could transform into a currency crisis.  That would create a surge in demand for gold.  The source of new metal is junior mining companies.

 

  • Fundamentally, gold juniors probably have more to offer than any sector in the precious metals sector.  Senior companies are having a hard time proving up new reserves.

 

  • In the short term, I expect GDXJ to acquire a price of $28 per share.  That would take it to the outer edge of the Fibonacci arc, and usher in an enormous trending move to the upside.

 

Silver Turn and Confirm Chart

 

  • Silver is my second largest holding.  Sentiment seems to be, “just about right”, for a powerful move higher.

 

  • Bob Moriarty of 321Gold recently pointed out that the premium on the Sprott Physical Silver Trust hit an important low. This is very encouraging.

 

  • Silver is trading about 27% off its highs of last summer.  Note how similarly CCI and RSI are positioned now, compared to the August period.  A huge rally occurred then.  I expect an even bigger one now.

 

  • After pulling back to the downtrend line that defined the entire correction, silver is beginning to move higher.  All my “technical lights” are green!

 

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Comments

  1. Excellent article, thank you very much. Gold is good for preserving purchasing power, but as an investment silver is better. I present of ounces of silver to my family at Christmas.

  2. What other product or service is cheaper now than in spring of 2011? Even after the Mayday drive by silver was higher.
    If the economy wasn’t a rotting corpse and the banks weren’t bombing it daily, we’d be looking at $90 silver and $2500 gold right now.
    Any move down will be punished, and reversed quickly now. I figure next week will be a ruckus, but the month of December should go green for most holders of silver. Those of you that are badly in the red, from the high prices just before Mayday, you will have to wait a little longer.  Don’t sell, wait for it, your day is coming. 
    I wish you all best of luck.

    • Silver at 90$ and gold at 2500$ makes their ratio at about 27.78 ounces of silver for one ounce of gold. But that’s not happening now because the cartel are suppressing gold and silver’s prices so that people won’t be panicking. 
       

  3. Great post. But be aware that illegal JPM/Gov. manipulation trumps FA and TA any day. When QE3 was announced in Sept we also had Fundamental and technical analysis going for us but metals drop 10% in the following weeks instead, only recovering the past few days. Before Thanksgiving we were actually in the negatives since QE3 was announced. Although i totally agree we’re trending up and $35 silver is still a deal, the market is still corrupt and rigged by JPM/USGov. Reward for anyone who can take down the terrorist criminal organization known as JP Morgan.

    • JPM is WAY too big for any of us or all of us together to take down.  Their day is coming, though.  My guess is that they will fall on their own sword as their derivatives book implodes.  It will be at that point that they, at last, recognize that “net” derivatives obligations aren’t worth a flaming damn when all of their counter-parties go TU and cannot pay what they owe to JPM.  It is absolutely insane that a company with a new worth of $250B or so can be on the derivatives hook for a WHOPPING $80T.  Yeah, that really is more than 300 times their net worth, so if even 0.3% of those contracts blow up, JPM will be toast.  Personally, I do not care if they want to live on the razor’s edge and hurtle into the dust bin of business history as they implode financially, but I hate the fact that they could take the US and world economies down with them.

    • JPM’s time is numbered but until we hit  a trigger point nothing will happen.

    • Right! Analyzing the gold and silver’s charts from the markets these days is like getting illusions while looking at these charts. 35$ per ounce for silver is still a great deal because historically, silver was more expensive compare to today.

  4. Seriously folks, anyone who quotes Bob Moriarty has no credibility.  Follow Ron Rosen instead.

  5. charts fundamentals …. it doesnt mean a lot in a market thats rigged …. the german repatriation of their gold is far more important … break the banks to fix the markets …

  6. Mathematically the destruction of fiat is assured. The timing is down to faith in fiat. 
    We stackers will not make the difference. Institutional moves to precious metals will cause the stampede.

    A question in my mind is, will institutions still run to the wrong vehicles , i.e. paper representations, or will they see the light and go straight for the real deal. I think the former first as they are still in denial and think there are still legs in this charade.

    This would be positive for us in the long run as the eventual realisation will be all the more great.

    This is where the repatriation stories come in. If nations and then high end private holders go to reclaim their physical assets, the game will be up even quicker and all hell will break lose when Jim Willie’s observations come to fruition.

    Interesting times are ahead.

    All this means is stack whilst you can as these prices will a distant dream, especially double digit silver.
    And I believe the theories of $100 – $150 silver are but a drop in the ocean. Add another zero on the end within 2 years.

    We’re in this together, but we are a very small band. I come across complete lack of understanding in precious metals here in the UK.
    In fact it’s worse than that. People seem to virtually not know silver exists as a precious commodity. Gold is understood loosely, but more in the sense of ‘now is the time to sell’!!!

     People are going to be completely blown away when this ponzi crashes. I just hope we can then create the right start in a new paradigm and not fall for another ponzi.

    I don’t want a gold backed currency. I want gold and silver to be monetized but to float freely against currencies, the freegold idea, but both metals. I am reading FOA’s goldtrail at the USAgold.com site.

    This is a recommended read. I know FOFOA is pro gold and anti silver. I’ve yet to read if FOA is the same. Regardless they both have interesting views and I am very pro silver. 

    I don’t know how this will all pan out and I will continue to formulate my ideas. I’d be interested to know other SD fans thoughts. 

    Thanks for this site Doc, it’s a daily ritual :)  

    • “ People are going to be completely blown away when this ponzi crashes. I just hope we can then create the right start in a new paradigm and not fall for another ponzi.”

      Agreed.  But the people WILL be offered another Ponzi AFTER they have suffered sufficiently from the current Ponzi’s collapse.  As they eagerly try to end the suffering, they will likely grasp at any straw they can, even if it is the same kind of Ponzi that caused the collapse!  The appropriate response at that point will be to say, “Sorry, but no.  That path leads to the financial dark side and we just aren’t going there ever again.”

    • Most people don’t realize that it is mathematically proven that fiat currencies will be destroyed soon. They don’t even know that the fiat dollar is losing values and I can prove it to everyone mathematically but they won’t believe me.

  7. It will be interesting to see how mining companies can produce and survive in a hyper inflationary invironment where costs cannot be accurately predicted.

  8. right,
    anyone who would quote a moron like bob moriarity
    has no credibility. also, anyone who says silver is
    the “second” biggest holding is clueless. SILVER
    is the best investment in the world, and will outperfrom
    gold by four or five to 1. we’ll see a 10 to 1 ratio.
    roger, economicrant.com

    • What about copper? Copper is way more undervalued than silver if you compare its recent price to its historical price. Silver is also undervalued but copper is even more. Also, copper is undervalued way longer than silver.

  9. Really? I just bought some physical silver just yesterday! :( Yesterday, it was at about 34$ per ounce and now, it is stable at 33.70$. So, it dropped by 0.30$. At least, I’ll be able to buy some physical gold a lot more cheaper and that silver won’t go lower than 30$ per ounce.

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