Gold, Silver, Debt – Don’t Miss These Important Charts

In this article, contributor Peter De Graaf shows in five charts the long and short term corrections of the gold and silver price. Precious metals remain within their rising trendline, despite the negative sentiment among investors and trader. Moreover, the seriousness of the debt situation and the impact on the dollar “paper currency” is shown in four charts. The debt ceiling in the US being pushed upward for the 79th  time since 1960. Right after the last raise in 2011, the price of gold rose +17% between August 1st ($1620), and August 22nd ($1898) – that was +17% in just three weeks!   A similar reaction by gold at this time could result in price rising quickly from $1281 to $1498.

Gold Price Corrections

The current correction in gold started in August 2011 and has now gone on for 112 weeks – (it most likely bottomed on June 28th). This has been the longest correction since the current bull market started in 2002.

  • The correction of 2006 lasted 71 weeks before a new high was reached.  There followed then a 50% price rise, (+85% from bottom to the next top).
  • The correction of 2008 took 77 weeks before a new high was reached.  The gold price then advanced by 80%, (+325% from bottom to next top).

The expectation is for gold to advance by more than 50% as in 2006-2008, and more than 80% as in 2008-2011 during this next ‘leg up’, because of the depth of the current pullback.  Because of blatant manipulation of the gold price by large traders dumping oversized lumps of futures contracts during hours when trading is usually sparse; the price of gold is starting this next rally below its normal starting point.   This is likely to cause the price to act in slingshot fashion, and may very well surprise a lot of people.

Here is the gold chart that records the beginning of the current bull market, along with three upside breakouts and the expectation for the next breakout, marked by arrows.  (Charts courtesy www.stockcharts.com unless indicated).

gold_price_chart_2000_2013

The RSI (at top of chart) is ready to rise, the CCI (at upper bottom) is rising from oversold conditions, and the A/C line at the lower bottom is still in uptrend after merely leveling out.

This chart courtesy Incrementum.li shows us that the current correction in the gold price is not unusual, if we accept the principle that the higher the price, the larger the pullback.

corrections_gold_bull_market_1999_2012

Featured is the daily gold chart.  Price is carving out a rising channel that is anchored by two upside reversals (June 28th and Oct 15th).  On Oct. 17th price broke out from beneath three months of resistance, with a target at the 200DMA.  The three supporting indicators have all turned positive, including the Accumulation/Distribution line.  The Gold Direction Indicator (for details www.pdegraaf.com), turned bullish at 55%, compared to 44% on Wednesday.

gold_price_chart_april_october_2013

Debt Ceiling, Debt Per Capita, Dollar Inflation

This chart courtesy Goldchartsrus.com shows a gap that has opened up between the US debt limit and the price of gold.  Unless we expect the debt limit to be lowered, (how likely is that), we better prepare our portfolio for a rise in the price of gold, as the rubber band effect takes hold.

debt_limit_vs_gold_price_2000_2013

This chart courtesy BMGBullion.com shows the US Federal Debt on a per capita basis.  This debt cannot be paid off – it will be inflated away.  Gold and silver will be sought as protection against this inflation.

US_debt_per_capita_1900_2012

This chart courtesy Mark J. Lundeen shows the number of US dollar bills in circulation, compared to the number of ounces of gold supposedly stored at Fort Knox.  (These gold ounces have not been audited since 1953).

dollar_inflation_1945_2013

Silver Price and Silver Corrections

Here is the long-term chart for silver, along with the breakout points after a correction takes place, marked with arrows, including the expectation for the next breakout.  The three supporting indicators are beginning to rise up from support levels.

silver_price_chart_2001_2013

Featured is the index that compares silver to gold.  Since the second leg in the double bottoms of 2003 and 2008, the trend has favored silver over gold.  The two supporting indicators are turning positive.  The target for the current bounce is at the top of the blue channel.

silver_gold_ratio_2001_2013

Featured is the daily bar chart for TIP the bond fund that is indexed for inflation.  Price dropped sharply in May and June when it was thought that the FED might reduce its bond purchases (TIPs are bonds after all).  Recently however the people who buy TIPs are sniffing the first whiffs of price inflation, and the arrows point to breakouts while the supporting indicators are positive.  Price inflation is the delayed result of monetary inflation and a source of energy for gold and silver to rise.

bond_fund_april_october_2013

Peter Degraaf is an online stocks and bullion trader, with over 50 years of investing experience.  He produces a daily report for his many subscribers, in 17 different countries.  For a sample copy of a recent report contact him at itiswell@cogeco.net or visit his website www.pdegraaf.com. Please do your own due diligence.  Peter Degraaf is not responsible for your trading decisions.

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