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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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  • Rally in Gold – Over or Yet to Be Seen? 0 comments
    Oct 12, 2011 4:41 PM | about stocks: GLD, SLV, GDX, UUP, UDN, SPY, DIA, DGP, DZZ, DGZ, UBG, UBM, USV, PTM, PTD, JJM, JJN, IAU, GDXJ

    Rally in Gold – Over or Yet to Be Seen?

     

     

    Based on the October 7th, 2011 Premium Update. Visit our archives for more gold & silver analysis.

     

    The news over the last few weeks, including worries about a possible major banking crisis could cripple the Eurozone economy as a whole, has sent global financial markets down heavily. Many around the world are worried that Europe is about to face a big bankruptcy or sudden default that could set off a new phase of panic in Europe and beyond. It’s been nearly two years since the euro crisis began with concerns about the solvency of Greece. Since then it has been a slow-motion drain of confidence and credibility as Europe’s leaders have been putting out fires one at a time.

     

    Still, with a new (European) bailout plan ahead, the near time price movements in stocks don’t have to be bearish.

     

    The situation is more complicated in case of the precious metals market, because of multiple factors being in place right now. We will start with the analysis of gold itself (charts courtesy by http://stockcharts.com.)

     

     


     

    Let’s take a look at the very long-term chart (if you’re reading this essay on SunhineProfits.com, you can the above chart to enlarge). Last week began with sharp declines in gold prices but the direction soon reversed and gold rallied strongly later in the week. RSI levels also moved slightly higher.

     

    Last week’s declines tested the support level and since it held, the situation remains bullish. Actually, since there have now been verifications of this support level, the situation is slightly more bullish than it was before. Other than the decline and subsequent bounce, little else has changed in the gold market.


     

    In the long-term chart for gold from a non-USD perspective, index levels did not decline significantly last week although gold’s price did (temporarily). This was due to the rally in the USD Index, which pretty much canceled out the decline from a non-USD perspective. The recent breakout here has been invalidated and with a strong support in place, the index is likely to rally from here.



     

    Looking at gold from the perspective of the Japanese yen, we see the usual price action along the lower border of the trading channel of the chart. It appears that a rally is ahead and the only question appears to be whether the index will move to the mid-channel range or to the upper border of the trading channel. There appears to be about a 50-50 likelihood of either move at this point.

     

    It appears that our opinion from an essay on a possible gold rally has been confirmed to a large extent. One week ago we stated:

     

    Looking at gold from the perspective of the Japanese yen, we also see RSI levels now oversold. Recently we have seen a decline that was much sharper than in the past. Each time the upper border of the trading channel was surpassed, index levels quickly moved to the lower border and this marked an important bottom from the USD perspective as well. Such has been the case once again, as the index moved below the lower border of the trend channel and quickly reversed. It is now right at this level. Similar price action patterns have been seen in the past and a rally generally has followed. The implications are bullish for gold.

     

    The implications were bullish back then, and they still are given that no meaningful rally has been seen from the yen perspective yet.



     

    In the short-term GLD ETF chart, once again we see an invalidation of a breakdown. The price action has continued with a sharp move to and briefly below the level of the previous bottom. A quick reversal invalidated the breakdown and prices are now above the 61.8% Fibonacci retracement level. While volume levels have not been significant, this is generally not of concern near market bottoms. It is however, an important factor for local tops in the GLD ETF.

     

    Summing up, the situation remains bullish for the yellow metal although there were some scary moments last week. It appears that we have been through a slight period of price correction and the outlook from here is bullish.

     

    To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us today and additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. It's free and you may unsubscribe at any time.

     

    Thank you for reading. Have a great and profitable week!

     

    P. Radomski

    Editor

    www.SunshineProfits.com

     

     

    * * * * *

     

    Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

     

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    Gold & Silver Investors and Traders.

     

    Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits’ Premium Service gain access to Gold Charts, Gold Investment Tools and Analysis of Gold & Silver Prices Naturally, you may browse the sample version and easily sign-up for a free weekly trial to see if the Premium Service meets your expectations.

     

    All essays, research and information found above represent analyses and opinions of Mr. Radomski 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, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

     

    By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, 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.

     

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