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Weekend Market Analysis 26 February 2017

Feb 26th, 2017

Gold price

The gold price is rampant and has broken up through resistance on the 2 year daily chart at the Oct low of $1243 and 200-Dema. It looks set to move up further despite both oscillators moving toward the overbought zone.

The short term 2 month chart illustrates the continued strong price climb from the 20 Dec 2016 low closing Friday at $1258.30 well ahead of the moving averages. The US Fed minutes from their Feb 2017 FOMC meeting were released this week, indicating a slightly more hesitant bias (dovish) as opposed to their ‘hawkish’ approach of 3 rate hikes this year, because of “substantial uncertainty of potential changes in fiscal, regulatory, and other government policy changes” coming from the Trump administration. Gold investors took this as bullish – hence the recent strong gold price.

 

The upward bias in precious metals prices is impacted negatively with no follow through by the miners underperformance which creates a normally bearish ‘divergent top’, unless the metal prices continue to rise to new highs which then induce the miners to follow. A major correction down is possible but it is also probable that the gold market is too strong as it emerges up from overdone suppression and manipulation during the down period, together with support from a weaker Dollar and confirmation of the 8 year cycle low in Dec 2015.

Miners need to increase above the previous top reached on 8 Feb to void this risk.

 

Silver price

Silver extends its strong 8 week price advance into week 9 including a Friday close at $18.41 as it penetrates up through the region of maximum resistance and the top resistance trendline in the 8 month long megaphone pattern.

 

The short term 2 month chart illustrates the continued strong price climb from the 20 Dec 2016 low closing Friday at $18.41 well ahead of the moving averages.

 

US$

The US$ has weakened in the last number of days to now approach finally forming a very threatening ‘head & shoulders’ pattern stretching back to mid-Nov 2016. Many commentaries, including Elliot Wave analysis, now indicate the start of a weaker Dollar period ahead which is positive for Gold and Silver.

The US$ Index closed Friday at 101.09 with the H&S neckline at 99.25, although the chart indicates a Hammer candle at the end which could induce a short term Dollar rise in the coming week.

US General Equities

US general equities are accelerating their upward advance, as embodied in the Dow Jones Ind Ave, with the breakout to an all time high in mid-Nov 2016 followed this month by yet another breakout up through the top resistance line in the rising wedge pattern. Despite many indications to the contrary this situation is likely to continue.

Note the rising volume up to the start of 2016 and falling volume since. Note also, the demise of currency values with the Dollar losing 97% of its value since Aug 1971 when $35 purchased 1oz of gold against $1250 today. The spectacular climb in US equities is of course therefore in massively devalued currency values and is illusionary.

The root of the problem is Debt. Debt has been growing exponentially everywhere since 1971, and it is backed by debt, based on debt, and leveraged with yet more debt. For example, today you can buy a bond (ie lend money) on margin (ie with borrowed money). In the monetary system we have, one party’s debt is another’s money. A debtor’s default will impact the creditor (who is probably also a debtor to yet other creditors), causing him to default, and so on. The time is coming when all debt will be defaulted, and when this begins in earnest (increasingly witnessed in the various banking crises) it will wipe out the banking system and thus everybody’s money. The paper currencies cannot survive this, and there is the increasing evidence of trouble from Greece to Italy, to Deutsche Bank, EU, etc., and eventually USA.

 

The short term 2 month chart illustrates the acceleration of the upward bias in the US equity market with no sign of change. The oscillators are all overbought and a correction is due anytime.

 

Conclusion

Gold and Silver prices continue to advance in breaking up through resistance levels, but are now impacted negatively with no follow through by the miners underperformance which creates a normally bearish ‘divergent top’. A major correction down is possible unless the metal prices continue to rise to new highs which then induce the miners to follow. It is also probable that the gold market is too strong as it emerges up from overdone suppression and manipulation during the down period, together with support from a weaker Dollar and confirmation of the 8 year cycle low in Dec 2015.

The US$ has weakened in the last number of days to now approach finally forming a very threatening ‘head & shoulders’ pattern stretching back to mid-Nov 2016. Many commentaries, including Elliot Wave analysis, now indicate the start of a weaker Dollar period ahead which is positive for Gold and Silver.

US general equities have accelerated price gains and will continue rising in the next period. However a correction is overdue.

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