Seeking Alpha

Przemyslaw Rado...'s  Instablog

Przemyslaw Radomski, CFA
Send Message
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
My company:
Sunshine Profits
My blog:
Sunshine Profits' Articles
  • Sunshine Profits: Bearish Picture For Gold From The Perspective Of The Dollar And The Stock Market 0 comments
    Jun 11, 2013 9:23 AM | about stocks: GLD, SLV, GDX, UUP, UDN, SPY, DIA, DGP, DZZ, DGZ, UBG, UBM, USV, PTM, PTD, JJM, JJN, IAU, GDXJ

    Bearish Picture for Gold from the Perspective of the Dollar and the Stock Market

    The recent collapse in gold price hasn't discouraged consumers across Asia, and in particular from China and India from buying yellow metal. Taken together, China and India account for more than half of the total consumer bullion demand worldwide. What we are seeing now is an exceptional phenomenon because Indian demand for gold is up 200% from a year ago.

    Gold demand in India, the world's largest buyer, is heading for a quarterly record as imports reach 300 to 400 metric tons, the World Gold Council said in a report last week. Again, we're only getting close to the mid-way point of the year and the amount quoted by the WGC is equal to almost half of the total shipments for all of last year. We read that banks are actually being told to discourage gold investment and suggest financial products instead. Interesting isn't it?

    It looks like Indian, Chinese and Middle Eastern consumers are taking a long-term view on the prospects for gold. I'm not surprised you would want something to decline in price to buy more for yourself, but are you sure that the recent gold price collapse is as great a buying opportunity as it seems?

    Let's look at the charts and search for some answers. We'll start with the USD Index long-term chart (charts courtesy by stockcharts.com).

    (click to enlarge)

    In this week's long-term USD Index chart we see the index is still above the declining support line and the bullish medium-term outlook has not been invalidated here. That's why last week's decline has very little impact from this perspective. We discussed the underperformance of the precious metals relative to the USD Index several times last week beginning with Monday's Market Alert:

    … gold is responding strongly to the dollar's rallies but responds less significantly to its declines. This is a bearish situation as it means that gold would likely decline even if the USD was just trading sideways.

    This underperformance (responding less significantly to declines) was clearly taken to the extreme on Thursday.

    The situation remains bullish for the USD Index. Does it look bullish for the general stock market, too? Let's find out.

    (click to enlarge)

    As we wrote in our essay on gold, stocks and the dollar on May 17,2013:

    The situation is overbought on a short-term basis, but we do not expect to see an invalidation of the breakout above the 2007 high. If anything, we could see stocks move back to this level, which could further verify the breakout and allow them to gather strength in advance of the next rally.

    Although the last correction was deeper than the previous one it doesn't change the overall picture of the market. As long as stocks are able to hold up above the 2007 high the uptrend is not threatened. That's why we think that the bottom for the latest decline may be in. The main buyers arguments are certainly two support lines because price levels bounced off the intersection of them.

    This could mean that the bottom in the stock market is in anyway.

    Now that we know how the situation looks from the perspective of the dollar and the stock market, it's time to take a look at the yellow metal itself.

    (click to enlarge)

    In this week's very long-term gold chart, we see that the trend remains down. Despite a $20 move up last week the outlook continues to be bearish (it's hard to take this small increase as a sign of improvement especially as we consider the whole decline.

    Gold could still decline heavily based on the long-term cyclical turning point, which is due approximately this week. In both 2008 and 2009, local tops formed slightly after the cyclical turning point, so it is possible that the reversal in the downtrend won't be seen until after the cyclical turning point once again, leaving a number of days in which further declines could be seen.

    Summing up, the long-term outlook is bullish for the USD Index at this time. As for stocks, the situation remains bullish for the medium term, and although the last correction was deeper than previous one we don't expect to see a bearish trend immediately. It seems that higher stock prices will be seen without further declines. Finally, gold's picture provides us with bearish indications.

    Overall, it seems that the final bottom in the yellow metal is not yet in.

    We know keeping an eye on the market is very important to you, as you care about your savings and that's why we hope you've enjoyed reading this essay and that it will help you to decide whether or not buy gold Asian style, anytime soon.

    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 investment 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. Have a great and profitable week!

    Przemyslaw Radomski, CFA

    Founder, Editor-in-chief

    Gold Investment & Silver Investment 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.

Back To Przemyslaw Radomski, CFA's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.