Wednesday, October 21, 2009

Gold: 1100 in 3 weeks?

With oil hitting $82, it makes my year end prediction of $90 seem conservative. Nevertheless it confirms the breakout in gold, as is other commodities such as copper which is now over $3 again for the first time since this time last year. $90 on oil will be reached sooner than later at which time I will probably up the ante. For now we'll stay there. The Euro is now over 1.50 a whole $.08 from my year end target for that at 1.58. If the euro was to exceed my target I will not amend it because frankly, it doesn't matter. You either own gold, or you're everyone else.

$1200 is the target on gold. $1100 will be reached from what I believe will be 2 to 3 weeks. The reason for this is the dollar beginning to plummet faster than an "organized decline". These quick violent rallies will be short lived and are classic examples of a bear market. It has a few minor support points, but for the most part will be 74 in a very short period of time. Aside from that, has the gold market seemed rather quite to you recently? Just not as much buying action as you would think on some days? Just consolidating in between 1045 and 1070, kinda like it was as it broke out from 950 six weeks ago? And then again at 1000 in early October? Not to mention the lack of caring one way or the other that the miners have displayed recently, same as they were when this all started. Don't short a quite market. It's getting ready to move big again. The fact of the matter is, most people buying and trading gold, don't even know why there doing it! Ask them! The usual answer is "My financial adviser said I needed to be more diversified." Or "Cramer told me to buy Agnico Eagle. I don't know anything about the company but..." For them, it's just the same game with different players. These people have the attention span of a gnat, when gold stops performing, there on to something else. I can't tell you how many people I talk to who shake there head saying "Your right your right! Gold's gonna go crazy!" right up until the point where it stops for a few days and then there selling there gold shares for Yahoo. Frustrating, yes, but gold will always go crazy when everybody is frustrated with it, and when they least expect it.

Probably the best in technical analysis, Dan Norcini pointed out something a few days ago that I had also been telling people about. Gold has consolidated within a $25 range while the RSI has fallen into a downtrend, just as it did throughout September. When the downtrend was broken gold launched $40 upwards. When this trend is broken, gold will skyrocket sending it to $1100 easily. The first downtrend in the RSI was broken almost exactly 1 month after it began. The current downtrend has been in play for about 2 weeks. Very quickly people have become accustom to gold above $1000, $1100 will secure it's move higher and further the "ney-sayers" to continue their theory on the gold "bubble". These same people who reject the validity of a higher move in gold at $1000 will be buying like hell at $2000, they just don't know it yet.

The gears of monetary destruction grind faster and faster. Gains that took gold years to accomplish before will soon take weeks. Those that constantly look for a bubble where there is none will inadvertently create it themselves as they buy gold at astronomical prices. What was a "bad investment" at $1000 will be the only investment at $2000. The smart ones among us won't ask what the price of gold is, because we know that Gold is the price.

By year end it is as follows:
USD index= 72

If your buying Microsoft today because there earnings were so good and Windows 7 is going to be awesome... you've missed the point.

-Jonathan M. Mergott
Alchemy Financial Management

Thursday, October 15, 2009

Change you can be afraid of...

Just for the record I figured I'd post the weekly chart of the DJIA with the obvious downtrend from where it closed at over 14,000 some 2 years ago. We are now officially half way from the top and half way from the bottom. Hooray. As I posted yesterday, the Dow has done absolutely nothing for 10 years but lose to inflation. Now I would like to tell you the reality of just how badly it has. In the 10 years since the Dow first hit 10,000 The US dollar has dropped by 25%. Adjusted for that the DJIA is at a pathetic 7,537. Barely 1,000 off the low. Way too go! (and they call gold a lousy investment! Which by the way is up 350% since the end of Oct 1999.... yeah....) This information on the Dow I would like to say is from the website which If you have never been there has some more than interesting stuff, and I do recommend it. (To quote someone from that website, "I want my 10 years back")

As most people who know me can tell you I try not to concern myself with the DJIA so onward to the point.

There is a hurricane brewing and it's name is "monetary policy". It's coming soon and faster than I originally thought. I have said time and time again my predictions for the rest of 2009. I will state them again.

Euro V Dollar =1.58-1.60
US$ index= .72 or lower

I'm starting to think I'm being way too conservative. Especially on the dollar, and possibly on gold and oil too.

Everything comes down too the dollar, and I don't just mean market wise either. Gold is the leading indicator, whether Mark Haines wants to admit it or not. It is the lone element right now screaming to us that inflation is coming. Now, either it's predicting things to come, or it's a fluke and all the gold bugs are crazy. Today the move higher in gold was from what I believe confirmed by a breakout of oil from it's $75 resistance point. As the dollar continues to decline and oil production falls from the obvious peak we have hit, things will only go up from here. The crowd that says oil's rise is do to economic recovery and how $65 a barrel is good for the consumer and $72 a barrel confirms the markets move higher/economic recovery, will now look at things from a new perspective as oil reaches dangerously close to triple digits once again. They will walk on egg shells as they realize that $90 barrel of oil is way ahead of any recovery in the economy and with an unemployment rate of 10% , not at all good for the consumer. Today there was an article on about "Sticker shock" at the grocery store. We are beginning to feel it and it only gets worse from here.

This is all centered around the dollar. Oil and other commodities will begin to move higher and everyday costs will go up. Jim Rogers 20 year bull market in commodities is dead on. Gold and oil will continue to rise and the dollar will continue to go down. And then it will happen. The dollar will have the floor pulled out from under it. The only reason that a weaker dollar is "good" for the market as far as anyone is concerned is because they know there will be a recovery and when there is, they know that the dollar will reverse and move higher. The day is approaching soon when it will begin to dawn on people that that may not happen. That the dollar has fallen a little too far a little too fast. Markets are the leading indicators. The people on Wall St see it before the people on Main St. This will not be the case this time around. It will be universal.

I think gold is getting ready for another big move to the upside soon. (And when I say soon I mean a few weeks at the most) One that will take out the 1080 resistance point people have been talking about and possibly beyond 1100 too. The powers that be will not let the dollar fall too drastically as most people including myself predicted it would as it breaks through .76. The consensus is that a organized decline in the dollar is ok, so for now an organized decline is what they will get, on it's way to .74 which gold has already factored in. (Far too organized if your paying attention.)

Stay long Gold and Oil, and remember, this is what we voted for.

-Jonathan M. Mergott
Alchemy Financial Management

Wednesday, October 14, 2009

Dow 10,000

Wow. Look at how far we have come. From 1999-2009 the DJIA has managed to do nothing. Wait, If you bought into the DJIA at 10,000 10 years ago, your money quantity is now the same, It's buying power however... you would have been better off in a savings account.

Everyone is always playing yesterday's game.

Tuesday, October 13, 2009

An explanation of the misinformation on inflation

An explanation of the misinformation on inflation

inflation is a money supply inclination (simply put)
inclination leads to devaluation (of currency)
devaluation leads to isolation (of the country and it's debt)
isolation leads to desperation (of government to borrow money)
desperation leads to starvation (of it's citizens)
starvation leads to totalitarian nation (anyone that promises food)
totalitarian nation leads to confiscation ( guns, gold & freedom)
confiscation leads to desolation (death of the population)
desolation leads to condemnation (who's fault is this?)
condemnation leads to extermination (of all that are to blame)

Therefore, inflation leads to the extermination of your nation.


Round 2 begins.

The Dollar/Dow negative association is starting to crumble. Martin Armstrong said the top will be reached in Sept, and I have a feeling he's right. Today the dollar declines while commodities (gold) is up and the Dow follows the dollar. The idea that a weaker currency is good for anything is now or soon will be shattered. The fact remains no civilization in the history of mankind has ever benefited from a devaluing currency and we will be no exception. When the USD index breaks below 75.80 (where there has been some questionable support from where I will allude to but not admit, lets just say it's TWSAU: Those who Stand Against Us) 74 will come in a mighty hurry.

The government has spent too much time and effort capping gold. They have failed. There only hope now is to "prop" the dollar, (which will intern cap gold, a bit but not much) This will fail too. The government cannot create or change a trend in a free market, they can only prolong the inevitable trend, and eventually always fail.

74 will change the tide. Jim Sinclair said yesterday 71.50 will be a turning point that will occur when the snow falls on the East Coast. As always he will be proven right.

The gears of monetary destruction turn faster and faster.


Friday, October 9, 2009

More on gold and GSS

I'm sure it's been as exciting and hectic for just about everyone in the gold business as it has been for me these last 6 weeks or so, so I hope no one blames me for not posting recently. Besides that, if I had the advice would be simple: Hold. This is not worth missing the boat over. As Dan Norcini said yesterday at there is an overwhelming enough people who are or are advising clients to wait to jump into gold until it pulls back to 1020, to make me think they will not get it. 1032 will be the best they will get, if they get anything at all.

As I posted a few days ago about the possibility of GSS being bought out most logically by Gold Fields (GFI), there is more going on there than just hoping for a buyout. GSS has exploded from a nearly month long pennant it created on this last run up by gold. In the process it rejected a new high and formed a double top at 3.70. its now consolidating nicely just under that in the mid 3.50's. A breakout is eminent. Although resistance in that area over top is sporadic ranging from 3.83 to 3.93 and finally onto the low 4's, there is much of it, and a big move in gold will blow it out of the 3 region on such a pattern. After such a long way up for gold so far, is there really steam left? Yes. 1050 was a goal that was accomplished and disrespected as gold moved onward to top out at 1060. It's next point is 1080 and onward to 1100. (as I've said over and over, 1200 by the end of the year...doesn't seem so "outlandish" anymore huh)

It's all about the dollar. The US Dollar Index has been playing on the brink of a significant break down from 76. (It almost accomplished this yesterday which would have been disastrous with the 12 billion dollar 30yr bond auction. Why would anyone give the government there money for 30yrs risking a dollar collapse if they can't keep it from collapsing for the next 30 min?) A breach below 76 will spell out a significant move downward for the dollar, possibly to 74 before finding any real support, from a technical perspective. It would also spell out a higher move in gold that Norcini said will take out 1100. (and he usually understates it).

A significant breakout in GSS will happen in less than 2 weeks. (Let's not forget that Buyout possibility) This move can very well send it to 4, so in short its my number one play for the next few trading days and it should be yours too.

That's why I'm all in GSS.

Don't trade your gold, shift. When GSS breaks up we sell and buy something else. Keep your eyes on GG and IAG.


Monday, October 5, 2009

All in on Golden Star

Action in Golden Star Resources has been odd all last week, ending on a particular note at 30 sec after the market closed somebody buying 65,000 shares for a 3 cent premium over the asking price. This was not the only occurrence as someone did the same thing Thursday too, only that was 35,000. Fridays after market did 300,000 shares while majority of the gold sectors after market volume was around 15,000. There was one other gold stock that had anywhere near that, Goldfields (GFI) at 340,000. Whats interesting about this is that Golden Star has only two operations both in Ghana. Goldfields has multiple mines including one that is a 70-20 joint venture with IAG, but the two sole owned mines for GFI just happen to be within spitting distance of GSS's... hmm. GSS's performance today is honestly pathetic, but being that if a buyout was going to happen it would have today may explain that the market is disappointed that it hasn't as I know I am far from the only one who came to this conclusion.

In short The gold miners are overdue for some consolidation, and with gold prices holding firmly at over 1000 would make this an appropriate time. Sure there are plenty of theories on buyouts and most won't be correct, I will maintain that GSS looks as good as ever for a major miner to purchase very soon. Goldfields would be the most logical, but of course I keep an open mind.

Just thought I'd tell you what I've been seeing and how my thinking is on the subject, I'll never leave you out on what I think is a good call.


P.S. oh yeah and other than a dismal 300 shares of TRE I've been holding for months, I'm all in on GSS. One way or another somethings gonna happen to it or the gold market and at 3.20 I like it and expect at least a run back to 3.50 or to the high at 3.71.