Gold and Silver: To Buy or Not to Buy?

Historically, and based on 35 years of data, gold usually puts in a bottom in March and a top in April. We’ve had the bottom in March (on March 18^th), and we await a top in April.

This top in April usually lasts for several months, resulting in sideways action with a downward bias and another buying opportunity in June or July.

The next question is: Can we count on gold rising to a top in April, or is this a year where we cannot count on historical data?

(In the case of silver we most often see a top in May followed by seasonal weakness).

For the answers to our questions we turn to the charts.

Charts courtesy www.stockcharts.com and Federal Reserve Bank of St. Louis.

Featured is the weekly gold chart. The blue arrows point to the bottoming of the 7 – 8 week gold cycle. The last bottom came in week #9 and we are currently operating in week #2. Price on Thursday morning is testing the multi-month support line. It is at this juncture that people either step in and buy, or panic and sell out. As long as the fundamentals are bullish for gold (and they are), then it makes more sense to buy gold here than to sell gold. The expectation is that since we are in week #3 of the 7 – 8 week cycle, gold is more likely to rise from here than to fall below the support line.

My Gold Direction Indicator is registering +72% which is a buy signal. The supporting indicators (RSI and MACD) are positive.

Featured is the index that compares the gold and silver stocks of the HUI index to the price of gold. On Wednesday April 1^st this index flashed a buy signal, as price established itself above the 200DMA. A rising trend in this index is bullish for both gold and gold and silver stocks. The supporting indicators are positive.

Featured is the SLV silver ETF. The last three times price came near the rising support line, (including so far on April 2^nd), buyers forced the price back up again (blue arrow). Volume has been declining during the pull-back which is bullish (green arrow). The RSI is at multi-month support (horizontal green line), and the 50DMA has just moved into positive alignment with the 200DMA, which is another bullish signal.

Featured is the chart that reflects the total bank credit at the US commercial banks. It reflects the loose policies of the Fed, as the trend is in the process of going exponential. The aim of the FED is obviously to push the trend higher. Notice at the top of the chart, some reluctance on the part of bank credit to keep rising. This reflects a slowdown in the increase in bank credit despite the Fed’s efforts to force banks to have and make credit available to the market place. This in turn will cause the FED to pump money into the system even faster, as they do not want this trend to turn down. This chart then presents a picture that is bullish for gold and silver, as it makes a strong case for further accommodation on the part of the Fed.

Featured is the chart that shows the current and projected US government deficits as charted by the US G.A.O.

Federal deficits always lead to monetary inflation which leads to price inflation which leads to commodity inflation (including and especially gold and silver).

Featured is the CEF, Central Fund of Canada. The uptrend is well defined. The supporting indicators are positive. Volume has been declining during the recent pull-back which is bullish. Earlier Thursday (April 2^nd) I added to my holdings in CEF by buying at the 50DMA (blue arrow), and I then sent out an alert to my many subscribers, so they could do the same if they so desired.

Summary: As long as the fundamentals for gold and silver are bullish (and they are – current Washington policies guarantee it), every price dip presents an opportunity to buy.

During a bull market, every time price moves near the 50DMA it is an opportunity to buy.

Comments

[DONE_SONZ:]

Fundamentals or charts?Take your pick.I will stick with fundamentals.

Apr 05 06:56 AM

[Gigem77:]

The fundamentals were much touted as bullish last year. Gold broke over 1000 and then fell for months until it hit 680. The charts don't look so good either. Look at a daily or weekly chart for the past 2 years. Do you see the double top just over 1000? The price is already more than 10% lower. It looks like a re-run of last years swoon is well underway. Next support is at 850, then 800. Will 700 be hit again this year?

The ECB dumped 35.5 tonnes of gold on the market last week. The IMF is preparing to sell 400 tonnes already approved by the G20. World mining production is running about 20 tonnes per week. Demand from India is nearly zero. Will investment demand continue to take up the slack as the broad market rises or will money flow back to stocks?

When the GLD holders decide that they would rather have some solar stocks or some biotech, look out below.

Apr 05 12:08 PM

[robert99:]

Yep, that's what I'm waiting on. I'm already 15% in gold and silver, and 30% is my target. The massive accumulation of GLD seems like another bubble waiting to burst to me. Too many traders and weak hands right now. At some point very soon, I think many of them will move elsewhere, and that is when I will buy.


On Apr 05 12:08 PM Gigem77 wrote:

> When the GLD holders decide that they would rather have some solar
> stocks or some biotech, look out below.

Apr 05 01:07 PM

[bruno12:]

If the broad markets continue to rally, I think the hot money will move from gold and silver into other sectors. I think this is what will happen for a few months, then combined with more favorable seasonal factors and the broad market rally running out of steam, money will move back into gold and silver. Also right now I think the powers that be (banks etc) are putting downward pressure on gold and silver. I look for a repeat of last year's downtrend in gold and silver.

Apr 05 03:38 PM

[Pradip Patel:]

THE RETURNS ON THE PRESENT STOCK MARKETS IS PULLING MONEY AWAY FROM GOLD ASSUMING THIS IS THE FIRST RALLY OF THE BULL MARKET,WHICH IT MAY BE DUE TO ITS GRADUAL UPSIDE,BUT AS SOON AS GAINS HAVE BEEN MADE THERE WILL BE A SELL OFF,THIS COULD BE THE LAST CHANCE TO BUY GOLD AND SILVER BEFORE THE REALITY OF SUPER INFLATION BAKES IN,I PERSONALLY SEE AN UPSIDE TO GOLD /SILVER BY END OF THE YEAR.

Apr 05 09:10 PM

[Jake2:]

"My Gold Direction Indicator is registering +72% which is a buy signal. The supporting indicators (RSI and MACD) are positive"
Your article is dated April 5 yet you use statisics for gold dated April 1.
Your figures are dated. As of 4/3 all parameters for gold are negative: the RSI is down (39.88), your so-called support line has been breeched, the 20 day EMA is in a negative cross down, the MACD and full Sochastics are both bearish. The next so-called "support level" is the 200 Day M.A. at 860. The long term view for gold might still be positive, given future prospects for increased inflation, but your analysis based on figures for April 1 is misleading. And your argument . . . . tendentious?

Apr 06 01:17 AM