TigerSoft Freedom News Service 12/17/2008 www.tigersoft.com
DON'T ALWAYS TRUST GOLD BUGS' FEAR TACTICS
THE GOLD BUGS ARE NOW SHOUTING
TigerSoft's Charts of Gold, NEM (gold), US Dollar,
Yen, Euro, Crude Oil and Treasuries.
by William Schmidt, Ph.D. (Columbia University)
(C) 2008 All rights reserved. Reproducing any part of this page without
giving full acknowledgement is a copyright infringement.
THE GOLD BUGS ARE SHOUTING
While I have written Blogs about the dangers of a collapsing dollar
and the lessons of the Argentine and Weimar Germany inflation, the circumstances
now appear very different. The biggest risk now is that a galloping, spiraling Deflation
will become a Depression. Deflation is not possible if the Dollar collapses.
And we can readily now see very real signs of deflation, especially in rapidly
falling housing and oil prices, not to mention stock prices. The rising unemployment
and underemployment numbers would seem to make inflation a very low
Gold's rise may now be getting over-done. A 40-day Stochastic shows this.
TigerSoft shows a simple trading system using this tool would have gained an
investor 65% for the past year. That system is very close to giving a new Sell.
NEM's rise (below) from 22 to 42 in the last 3 weeks, almost 100%, would seem to
place it in the over-bought category. A 6-week 120 rally like this in 1998, from 14 to 30
completely evaporated in a few months. You can see all its yearly fluctuations
in a TigerSoft research report -
Much of Gold's demand comes from jewelers. But purchasing expensive
jewelry is not high in this year's Christmas shopping list for most hard-pressed
consumers. Mining companies are certainly benefiting from lower fuel costs.
But that may stimulate more production.
When Silver was topping out in early 2008 at $21/ounce and when
Gold was peaking at over $1000/ounce, you could readily find investment
advisors and self-interested coin dealers that were every day readily assuring
anyone who would listen that the Dollar was about to collapse and people
should immediately go out and buy all the silver and gold coins they could find
and afford. Many of these folks are always bullish Gold. But the plain truth
is that markets fluctuate, and so do gold and silver markets. Investors would
do much better not to buy and hold Gold forever, but to use TigerSoft's
charts to spot insider buying and selling and trade their swings. Our TigerSoft
Blogs have offered nearly all the instruction you need if you start using
TigerSoft to catch these price swings.
We have done many, many studies of insider trading. Probably
more than Bush SEC has done, in their non-regulatory, insider-trading-is-OK
See the warnings we put out this past year as illustrations.
2/21/2008 - TigerSoft on Gold and Newmont Mining's Predictive ...
8/6/2008 - Use TigerSoft's Unique Technical Tools with Gold, Copper and Silver Stocks
9/4/2008 TigerSoftt New Service/Blog - How To Trade Silver (SLV) and SIlver ...
And public comments noting the bottom.
12/10/2008 Tiger Software's Stock of The Day - Newmont ...
See also: Commodity/Futures Trading (1) (2) Commodities Grains
Gold Silver Silver, Gold / Silver Stocks(1) (2) Gold Stocks, Metals Crude Oil (1) (2) (3)
A Look at TigerSoft's Charts of NEM (gold), the Dollar, Yen, Euro,
Crude Oil and Treasuries Show The Dollar Is Stronger Than The Gold Bugs
Would Want Us To Believe.
Gold Stocks like NEM (Newmont) are rallying strongly. Look at the
TigerSoft chart of NEM below. You can see how sharply it turned upwards
just after a successful test of its low near 22 in November. Our powerful
tool, the TigerSoft Closing Power called the turn nearly perfectly.
Now that the stock has reached 40, the "Gold Bugs", investment
advisors that are perpetually bullish on gold and gold stocks, are shouting
that the US Federal Reserve is risking the destruction of the Dollar's value
by giving trillions to banks to stave off a banking collapse and prevent
a 1930's style Depression. They correctly warn that the amount of money
they have put in potential circulation has risen a "staggering 76% in
just 3 months". But, as we all know, banks are NOT lending this money,
not even to each other. They don't trust one another! They are using
these colossal sums to stay solvent and meet the 8% capital requirements
banks have as home prices keep on falling. So this new money is
not going into circulation. "Velocity", like interest rates, is approaching zero!
Will that change? Not until housing prices stop falling is my guess.
Or Obama public works programs change the picture enough to get consumers
to start buying again.
I see a number of problems with their reasoning, when they say that
hyper-inflation lies just ahead.
Gold has a strongly bullish seasonality from mid-November to
mid-January. See Gold''s Seasonal Chart I presented in my Blog on the
Dollar, Gold and Crude Oil back in September 13, 2007. So, some of
the advance we are seeing owes to that seasonal tendency.
It's certainly true that the US Dollar, against a basket of other currencies,
has formed a head and shoulders top in the last two weeks and broken its
recent uptrendlines. See how the TigerSoft Closing Power broke its
uptrend recently BEFORE the top pattern was completed. The Dollar's
downtrend is clearly in effect now.
The US Dollar remains well above its lows of the Summer of 2008.
There is no run on the Dollar, yet!
I must say that the Japanese Yen is rising powerfully. It is now
at an all-time high versus the Dollar. It showed bullish Accumulation
and Insider Buying at the bottom and is in a powerful uptrend.
Japanese policy makers may use its strength to cut interest rates
there. That would tend to weaken the Yen against the US Dollar
and prop the Dollar back up.
The EURO has also reversed upwards versus the Dollar. The Tiger
Indicators show that it should go still higher. So, this chart suggests
more weakness is ahead for the Dollar.
Inflation and a weak Dollar usually take place with rising Crude Oil
prices. That is not true now, or at least yet. Crude Oil, here measured by
the Oil ETF, has fallen by nearly 2/3 from its highs and the Tiger Closing
Power is still declining. So are the other key indicators we watch.
Another factor working against a run on the Dollar is the strength
show in US Treasuries and debt instruments. If the Dollar were really
so weak, we would expect the Federal Reserve to have to raise not
lower interest rates to attract buyers. The fear that is in the stock
market has caused many investors simply to run for cover by buying
US Treasury notes. The Treasury is not wanting for borrowers.
This strength gives the Federal Reserve a lot more room to maneuver.