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Przemyslaw Radomski, CFA
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Przemyslaw Radomski, CFA (PR) is a precious metals investor and analyst who takes advantage of the emotionality on the markets, and invites you to do the same. His company, Sunshine Profits, publishes analytical software that anyone can use in order to get an accurate and unbiased view on the... More
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  • Sunshine Profits: Will Gold And Silver Increase From Here?

    Will Gold and Silver Increase from Here?

    Based on the January 10th, 2014 Premium Update. Visit our archives for more gold & silver articles.

    In our previous article on gold, we examined the situation in the U.S. dollar and the euro as many times in the past they gave us important clues about future precious metals' moves. At that time we wrote in the summary:

    (…) gold's lack of will to really (!) react to positive news, like the dollar's huge intra-day drop, is a bearish piece of information on its own and an indication that gold is likely to move lower in the short run.

    On the next trading day, after the essay was posted, gold and silver declined and dropped to their fresh monthly lows. With this downward move gold almost touched the June low. This strong support level encouraged buyers to push the buy button and the yellow metal, which last week saw its best week since October, rebounded to around $1,250. At the same time, silver came back above $20.

    Will the recent week's rally continue? Before we try to answer this question, we'll examine the long-term charts of gold and silver to see if there's anything on the horizon that could these precious metals higher or lower in the near future. We'll start with the long-term chart of gold (charts courtesy by stockcharts.com).

    (click to enlarge)

    Even though a lot happened last and this week, from the long-term perspective not much changed on the gold market.

    We saw a move back to the rising long-term resistance line (currently close to $1,250), but gold only touched it, only to decline once again. At this time the medium-term outlook remains bearish. Any additional rally is not likely to move significantly above this level (from this perspective significantly means not more than $50 above it, which takes significant intra-day volatility into account).

    Our previous essay on gold we wrote the following:

    Please note that the exact target for gold is quite difficult to provide. In the cases of silver and mining stocks there are respectively: combinations of strong support levels, and a major support in the form of the 2008 low. In the case of gold, there are 4 support levels that could stop the decline and each of them is coincidentally located $50 below the previous one starting at $1,150: $1,150, $1,100, $1,050, and $1,000.

    Taking into account the current situation in the yellow metal, the above price targets remain valid.

    Let's take a look at the chart featuring gold's price from the non-USD perspective.

    (click to enlarge)

    From the non-USD perspective, gold simply moved back to the previously broken support line and verified it as resistance. There was only an intra-week move above it, but the price is already back below the line, and it seems that it will close the week below it as well. Please note that in the final part of 2013 we also saw one intra-week move back above this line and this move was even more significant than what we saw this week. It too didn't invalidate the breakdown. In fact, it was followed by a significant downswing. We can expect the situation to be quite similar shortly, if gold does indeed rally. The move higher could be temporary, and unless we have a weekly close above the rising support line (dashed line, currently close to 46), we will not have any bullish implications whatsoever.

    Even if we see some strength, the ratio would have to move above 48 (where the upper declining resistance line is currently located) in order for the situation to become bullish.

    Consequently, some short-term strength is clearly possible, but we don't think that the medium-term downtrend will be invalidated.

    Having discussed the current situation in gold, let's take a look at the long-term chart of silver.

    (click to enlarge)

    It is often said that history repeats itself (or that it rhymes) and it surely applies when we look at silver's recent performance.

    At the end of December silver moved temporarily back above the rising support/resistance line, but didn't manage to hold this level. The white metal gave up the gains and dropped below both long-term support/resistance lines, which triggered further deterioration.

    This week, the white metal made another attempt to move back above the resistance lines, but failed to move above the upper of them and ultimately the breakdown below these lines was not invalidated.

    The next downside target is the previous 2013 low, slightly above the $18 level. Once we see silver below it, the next (and probably final) stop will likely be close to $16. Overall, the trend remains down.

    Summing up, looking at the current situation in gold and silver, we see that the medium-term trends remain down and the outlook for both remains bearish. However, on a short-term basis we can expect to see a temporary move higher. In case of gold, it doesn't seem that the yellow metal will move above $1,250, and even if that happened, it would not be likely to move above $1,285 and change the medium-term trend. In the case of silver, given the white metal's back-and-forth performance in the recent weeks, we also can't rule out another move higher before the next big move down materializes.

    To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.

    Thank you for reading.

    Przemyslaw Radomski, CFA

    Founder, Editor-in-chief

    Tools for Effective Gold & Silver Investments - SunshineProfits.com

    Tools für Effektives Gold- und Silber-Investment - SunshineProfits.DE

    * * * * *

    About Sunshine Profits

    Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

    Disclaimer

    All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

    Jan 10 12:11 PM | Link | Comment!
  • Sunshine Profits: Will Precious Metals Drop Any Further?

    Will Precious Metals Drop Any Further?

    Based on the December 20th, 2013 Premium Update. Visit our archives for more gold & silver articles.

    Many times in our previous essays we have written that if you want to be an effective and profitable investor, you should look at the situation from different perspectives and make sure that the actions that you are about to take are really justified. Therefore, at the beginning of the month we examined gold and silver mining stocks to find out what kind of impact they could have on precious metals' future moves. Back then, we concluded that the medium-term outlook for gold was bearish and mining stocks seemed to be leading gold lower. To make sure that our assumptions were correct, we decided to check the chart featuring gold's price from the non-USD perspective and also from the European perspective. You could read the conclusions in our essay from Dec. 6, 2013.

    A week ago we introduced you to 3 signs of gold s upcoming decline. At that time we wrote in the summary:

    (…) the medium-term outlook for gold remains bearish and it seems that we might see another sizable downswing shortly.

    In the following days, after the essay was posted, gold, silver and mining stocks reversed and started their recent declines. Day by day, we saw lower values of gold, silver and mining stock indices. With this downward move, the yellow metal, the HUI Index and the AXU Index declined below their December's lows (to be precise: at the same time silver dropped to slightly above its previous low).

    Taking these circumstances into account, you are probably wondering whether the recent declines will continue or not. Although we saw a small rebound in the early European session, we clearly see that the precious metal sector remains weak.

    As we emphasized in our previous essays, many times in the past the situation in the U.S. dollar and the euro gave us important clues about future precious metals' moves. Therefore, today we'll examine the US Dollar Index (from many perspectives) and the Euro Index to see if there's anything on the horizon that could drive the precious metal market higher or lower in the near future. We'll start with the medium-term USD Index chart (charts courtesy by stockcharts.com).

    (click to enlarge)

    Looking at the above chart, we see that earlier this week we had a similar situation to the one that we saw last week. Just like a week ago, the USD Index broke below the medium-term support line based on the February 2012, September 2012 and January 2013 lows (the bold black line) and the lower medium-term line based on the September 2012 and the January 2013 lows (the thin black line). However, once again this deterioration was only temporary. The dollar quickly rebounded and invalidated the breakdown below both medium-term support/resistance lines, which is a sign of strength and a bullish factor. From this perspective, there was no true breakdown and the trend remains up.

    Let's check the short-term outlook.

    (click to enlarge)

    On the above chart, we see that earlier this week, the USD Index tried to break above its horizontal support line based on the June low without a positive result. These circumstances triggered a sharp decline on Wednesday - just before the Fed released its statement. However, the greenback quickly reversed course when the Federal Reserve announced that it will start winding down its stimulus program (small, but still) and rallied above the 80.5 level.

    With this upswing, the U.S. dollar broke above the declining short-term resistance line. Although, the USD Index declined in the following hours and came back below both resistance lines, it turned out on the following day that this small deterioration was temporary. On Tuesday, the greenback extended its rally and moved higher breaking above both resistance lines once again. Taking this fact into account, we can conclude that the outlook remains bullish and that it could be the case that the decline is already over and that another rally in the US Dollar is just starting.

    Let's now take a look at the long-term Euro Index chart.

    (click to enlarge)

    The first thing that catches the eye on the above chart is the target area, which was reached once again.

    In the previous week, the European currency almost reached the October high. Back then, it seemed that further growth was limited, not only because of this resistance level, but - even more importantly - because of the long-term declining resistance line based on the 2008 and 2011 highs (in terms of weekly closing prices). As a reminder, this strong resistance line successfully stopped growth in October and triggered a sharp decline. Additionally, at that time, a similar situation preceded a local top in precious metals. On top of that, previous tops (in 2008 and then in 2011) were followed by major declines in the precious metals sector. If history repeats itself, we may see similar price action in this situation.

    Looking at the above chart, we clearly see that earlier this week the Euro Index reversed course after reaching a strong resistance zone and declined below the level of 137. What's most interesting, precious metals followed that decline, which suggests that we'll likely see further deterioration in the PM's sector - similarly to the one seen in the past.

    Please take a moment to compare the euro's performance in the past few weeks with the performance of the precious metals sector (lower part of the above chart).

    Let's now take a look at the medium-term Euro Index chart.

    (click to enlarge)

    Looking at the above chart, we see that the Euro Index climbed once again this week and reached its very strong resistance zone created by the previous 2013 high and the short-term rising support line based on the July and September lows. As you see on the weekly chart, the European currency didn't manage to break above these levels, which triggered a sharp decline and pushed the euro slightly above the 38.2% Fibonacci retracement level based on the Nov.-Dec. rally. From this perspective, the outlook for the coming weeks is bearish.

    Having discussed the above, let's take a look at our Correlation Matrix to find out how all this can translate to precious metals and mining stock prices.

    (click to enlarge)

    Basically, the short-term numbers don't tell us much at this time when we look at them directly, but can tell us something if we look a bit beyond them.

    The correlation between the USD Index and the precious metals sector is slightly positive in the 30-day column (and even moderately significant in the case of the mining stocks), which tells us that in the past 30 days PMs and the USD Index have moved on average in a similar direction. However, this was the case when they both declined. When the USD moved higher (this week), metals and miners declined even more. This is a very bearish combination - whatever the USD does, the precious metals sector seems to either decline modestly or strongly.

    Once we know the relationship between the U.S. currency and the precious metal sector, let's check the current situation in gold.

    (click to enlarge)

    In our essay on gold from Dec. 6, 2013 we wrote the following:

    (…) earlier this week we saw a major change on the above chart as gold broke below the rising long-term support line (…) the implications are bearish, especially that the RSI indicator is currently not oversold - it's above 30 and well above its previous 2013 lows. Back in 2008, the RSI indicator moved close to its previous lows when the final bottom was in. In this case we would need to see much lower gold prices to have RSI close to the 20 level. The next stop for gold is at its 2013 low, slightly above $1,170. It seems to us, however, that this will not be the final bottom for this decline, we expect the final one to form close to $1,100, possibly even at $1,050.

    Last week, we saw a very temporary move above the previously-broken rising long-term support line, which was followed by another decline. In our previous Premium Update, we wrote that if gold was not able to hold above this line despite a decline in the USD Index, then it was truly a weak market and quite likely to decline much more.

    Looking at the above chart, we see that earlier this week we had such price action. Gold didn't manage to successfully climb above the rising long-term support line (not to mention staying above it), which triggered a sharp decline. With this downward move, the yellow metal not only declined below last week's low, but also slipped below the level of $1,200. These circumstances clearly show the weakness of the buyers and it seems that the previous 2013 low will be reached quite soon.

    The exact target for gold is quite difficult to provide. For silver and mining stocks there are, respectively: combinations of strong support levels, and a major support in the form of the 2008 low. In the case of gold, there are 4 support levels that could stop the decline and each of them is coincidentally located $50 below the previous one starting at $1,150: $1,150, $1,100, $1,050, and $1,000.

    Summing up, the current situation in both currencies suggests that we are likely to see further deterioration in the Euro Index and improvement in the USD Index in the near future. Taking these facts into account and combining them with the current relationship between the U.S. dollar and the PMs, we can conclude that the implications for the precious metal market are bearish. Please note that the exact target for gold is quite difficult to provide based on the gold chart alone. While it's likely that the final bottom will form below $1,150 and above $1,000 (or at least not much below this level), if we want to get a more specific price projection, we should use other techniques, especially those which worked in mid-2013 when the previous gold's low was formed.

    Thank you for reading.

    Przemyslaw Radomski, CFA

    Founder, Editor-in-chief

    Tools for Effective Gold & Silver Investments - SunshineProfits.com

    Tools für Effektives Gold- und Silber-Investment - SunshineProfits.DE

    * * * * *

    About Sunshine Profits

    Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

    Disclaimer

    All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

    Dec 20 12:26 PM | Link | Comment!
  • Sunshine Profits: Mining Stocks Suggest Further Declines

    Mining Stocks Suggest Further Declines

    Based on the December 4th, 2013 Premium Update. Visit our archives for more gold & silver articles.

    In our last essay we examined the situation in the US Dollar Index (from many perspectives) and the Euro Index, as many times in the past it gave us important clues about future precious metals' moves. Back then we wrote that the implications for the precious metal market were bearish just as the outlook for the Euro Index and just as it was bullish for the USD Index.

    On the next trading day, after the essay was posted, gold, silver and mining stocks declined along with the European currency and hit their fresh monthly lows. Does it mean that the final bottom for the decline in gold, silver and mining stocks is already in?

    Many times in our previous essays we wrote that if you want to be an effective and profitable investor, you should look at the situation from different perspectives and make sure that the actions that you are about to take are really justified. That's why in today's essay we'll examine gold and silver mining stocks to find out what kind of impact they can have on precious metals' future moves.

    Additionally, it s been almost a month since we wrote in greater detail about the precious metals mining stock sector, so we thought that you might appreciate an update. As a reminder, on Nov. 8 we wrote that the outlook remained bearish and even though we couldn't rule out a few days of strength, it didn't seem that a rally would be a sustainable development.

    Let's start with two of the most followed commodity stock indices - the Philadelphia Gold/Silver XAU Index and the AMEX Gold Bugs HUI Index (charts courtesy of stockcharts.com).

    (click to enlarge)

    This week we saw a major breakdown below two critical support levels: the long-term rising support line and the 2013 low. Taking this fact into account, we can conclude that the implications are clearly bearish for the coming weeks.

    Now, let's have a look at the HUI Index. The chart below expresses a simplicity that betrays potential information on where this market may ultimately be heading.

    (click to enlarge)

    In our previous Premium Update, we wrote that the HUI Index extended declines and dropped below the previous 2013 low, which was a very bearish sign. Back then we also mentioned that a similar breakdown in mining stocks preceded the plunge in the entire precious metals sector in April and taking this fact into account we could expect big moves to the downside in the days or weeks ahead.

    Looking at the above chart, we see that we have indeed seen a big move to the downside, even though it's been only a few days since the above was posted. This is another bearish confirmation, as back in 2008 the breakdown below the previous local low meant that the final sharp downswing was already underway. We expect the final bottom to be seen close to the 150 level.

    What about the short term?

    (click to enlarge)

    Let's start by quoting what we wrote in Friday's Premium Update:

    From the short-term point of view, we see that the situation has deteriorated recently. At the beginning of the week mining stocks declined below the previous 2013 low and stayed there for three consecutive trading days. This means that the breakdown is confirmed at the moment and the implications are bearish.

    As you can see on the above chart, miners reached the medium-term declining support line created by the August and September high - similarly to what we saw at the beginning of the month. Back then, this line triggered a consolidation (just like now); however, as it turned out it was just a pause within a short-term decline.

    Taking this fact into account and combining it with the confirmed breakdown below the previous 2013 low, the current decline could become a major, medium-term decline.

    It seems that we indeed see mining stocks in a major medium-term decline as they dropped significantly this week.

    There was even another breakdown - below the declining support line based on the August and September highs. The implications of the above chart remain bearish.

    Finally, we would like to discuss the current situation in the gold-stocks-to-gold ratio.

    (click to enlarge)

    On the above chart, we clearly see that the situation has again deteriorated in recent days. On Monday, the HUI-to-gold ratio dropped slightly below its previous 2013 low and we saw it close there on Tuesday as well. The breakdown is not confirmed at the moment but just one more daily close below the previous 2013 low will make the situation much more bearish.

    Summing up, the medium-term trend remains down, the decline is quite likely to accelerate shortly and the outlook for the mining stocks sector is very bearish. It seems that practically all markets - gold, silver, main stock indices - are going down right now (except for crude oil, where we just saw a major breakout on huge volume) and mining stocks are declining along with them. Actually, they are leading the way.

    To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.

    Thank you for reading.

    Przemyslaw Radomski, CFA

    Founder, Editor-in-chief

    Gold Price Prediction Website - SunshineProfits.com

    * * * * *

    About Sunshine Profits

    Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

    Disclaimer

    All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

    Dec 05 7:07 AM | Link | Comment!
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