Rebel Yell: L-T Trends for Gold, Dollar, Silver and Precious Metal Stocks

Update: Long-Term Trends for the Dollar, Gold, Silver and Precious Metal Stocks

It’s an excellent idea to look at the long-term charts of the investments you own or are considering.

From time to time, we do look at the long-term trends of the markets, and the investments we’ve recommended and follow.

You can learn a lot by analyzing long-term charts: is the investment cyclical, is it in a long-term uptrend, a long-term down trend, where are major long-term support and resistance levels, are prices stuck in long-term trading ranges.

Below we look at the long-term price trends of the dollar, silver, gold and precious metal equities.


Theoretically, a falling weak dollar is bullish for gold because gold is denominated in dollars and it makes it cheaper for global investors to buy, and investors need a hedge like gold if a currency/dollar is falling to protect the purchasing power of your currency/dollar.

The opposite is true if the dollar is rising.

Below is a long-term chart for the dollar:

Click to enlarge

Click to enlarge

If we take out the highs and lows of the dollar, we see that the dollar has mostly traded from 80 to 97. The dollar has fallen back, and is now at the top of its long-term trading range, around 95.

The dollar’s decline started with the terrorist attacks on the U.S. on 9/11. The other main causes of the dollar’s accelerated descent includes: the popping of the housing bubble, the financial crisis of 2008, the Great Recession, and the Federal Reserve’s quantitative easing (money printing).

The strong dollar of the 1990s was mostly due to the digital, technology revolution that created lots of wealth and growth for the U.S. economy.

Past strong economic growth were often associated with major new technologies, industries: autos, aviation, electronics.…


Below is a long-term chart for gold:


Gold was stuck in a trading range for many years, from $250 to $400. The trading range is called basing, a consolidation period after the bear market of the early 1980s.

In the late 1990s central banks around the world were selling their gold reserves putting downward pressure on gold.

The black solid trendline is the bullish long-term trend for gold, and prices remain above the bullish long-term trendline.

Prices accelerated and prices have pulled back to the dotted trendline.

It was easy for gold prices to break the first accelerated trendline. The trajectory was not sustainable.

There are many reasons for the gold’s bull run:

  • 9/11 crisis, and the start of the descent of the dollar.
  • The cost to find and produce (royalties, leases, environment cleanup, labor, equipment) gold keeps increasing.
  • Part of the increasing cost is the remaining supply is more difficult and expensive to extract and produce.
  • Strong demand for gold
  • Gold ETFs were introduced making it easier for investors to buy gold. Gold ETFs became very popular.
  • The financial crisis of 2008
  • Federal Reserve’s quantitative easing, money printing

Some of these trends have reversed (end of quantitative easing, rising dollar, lower demand) causing gold to fall.


Below is a long-term chart for silver:


Silver does have some of the same price action characteristics as gold: trading range/basing for many years (without central bank selling), followed by a strong bull market and selloff in prices.

What is different for silver is the dramatic increase from about $5 to almost 50 dollars, about 900% times. Gold did well, about 700% times from its bottom.

Silver’s fall was much more than gold.

The parabolic move of silver was not sustainable, and the trend was very easy to break.

Silver could be a good trading vehicle because its moves are more dramatic and its moves are more on a percentage basis.

Precious Metals Index, Symbol XAU

The XAU is an index of gold, silver and precious metal companies.

Below is a long-term chart for the XAU:


The XAU has lost all of its bull market gains.

There are many reasons for the poor performance for precious metal companies: bad management, bad acquisitions, too much debt, bad allocation of capital, rising expenses, labor strikes….

We’re not surprised this has happened, we’ve written many times that we prefer to invest and own gold and silver versus precious metal stocks.

Precious metal companies need to find their bottom, and then they need to base ( a consolidation period after finding a bottom in a bear market).

Most basing periods last about seven months, but they can last for years as we’ve seen with gold and silver.

Collectors, Investors and even Rare Coin Dealers, Falling Victim!

Some new suggestions on how to buy and sell safely!

By James DiGeorgia

Over the years I have preached to collectors and investors just like you, to be careful not to give their rare coins and or precious metals to ANY dealer or broker for storage.

Having literally grown up and in the rare coin and precious metals market, I have seen virtually every scam and convenient bankruptcy possible. Among the most expensive have been the collapses of so called “independently audited” storage facilities as well as brokers and dealers that issue “certificates of precious metals deposits”.

In my opinion, if you don’t take physical possession, you’re setting yourself to be robbed. Always take physical possession, rent a safety deposit box and store your precious metals and rare coins on your own. The cost of insurance for even a great deal of value is very inexpensive.

Besides storage risk, there’s a growing risk of being scammed in the rare coin and precious metals business that you must not ignore. This rising threat is not only putting investor/collectors like you at risk, but this scam has also put professional dealers with decades of experience at risk. [Read more…]

“Coming Your Way: Debt Defaults and a Bond Meltdown!”

“While Congress bickers about spending cuts and prepares to fight over the debt ceiling—again!—there are not one but two far more serious financial crises approaching.

“As investors, we can and must prepare for the fallout. Thankfully, there’s one single investment that’s positioned to profit from both of these crises. That’s our topic this month!”

Two major financial crises are facing America. They will cause wrenching disruptions to our nation as a whole, and to our lives as individuals.

On a national level, they can’t be avoided. But on an individual level, they can. In fact, you can take huge profits as they unfold—if you play them right.

Let’s start our discussion by asking… [Read more…]

Could Gold and the US Dollar Rise in Tandem?

chart one

Featured is the weekly gold chart, with the US dollar at the top.  Five times during the past five years did gold and the US dollar rise in tandem.  The sixth time could happen any day.  In 1973 and in 2005, gold and the mining stocks rose along with the U.S. dollar from April to December.

The study of money, above all other fields in economics, is one in which complexity is used to disguise the truth, or to evade truth, NOT to reveal it.”     …John K. Galbraith. [Read more…]

“Will the Bond Market Melt Down in 2013?”

“The ongoing circus in Washington has grave implications for the US bond market, and therefore for your investments as well.

“This month: the three major threats to the bond market, and three paths to making big profits from the current turmoil!”

“When written in Chinese, the word crisis is composed of two characters. One represents danger, and the other represents opportunity.”

John F. Kennedy, in a speech on April 12, 1959

If any two words describe today’s investing climate, they’re “danger and opportunity.”

The list of dangers is long, and growing. But where there is danger, there is also much opportunity.

When markets are overcome with fear, large moves are possible in a short time. And large moves can mean large profits.

That’s our theme in this issue: the big dangers and big opportunities that await us in 2013.

We’ll start with a brief look at… [Read more…]

Goldman Sachs Dead Wrong on Gold!

Gold Investors Should Prepare for New Highs

Major investment firms have a pretty great strategy when it comes to producing the outcomes that they desire the most. In effect, this strategy involves saying something might or might not end up being true, and repeating that thing over and over again until the markets respond in a way that makes it true. It’s a sort of corporate, self-fulfilling prophecy that was worked wonders for companies like Goldman Sachs. And it is because of this type of prophecy-making that consumers should be wary when Goldman and others come out with major predictions about commodities, gold prices, economic recoveries, and other matters that impact how people live their daily lives.

Goldman Sachs recently released a report that borders on bullish. In many areas, it is actually entirely bullish. One of these areas is the economic recovery and, connected to it, the price of gold per ounce. Over the past five years or so, the price of an ounce of gold has skyrocketed from just around $600 to more than $1,700 this year. That’s an amazing increase, and it’s one that has largely been due to the unique conditions of the latest economic downturn. In 2013, Goldman Sachs believes these conditions will subside and, with them, the price of gold will do the same.

They may be right. They may also, however, be quite wrong. Most independent experts believe that Goldman’s motives are suspect and that their forecast likely won’t come to fruition. This prophecy might be a bridge too far for the company.

For Reference, Consider the Company’s Stance on Oil Futures

Back in 2008, when Barack Obama and John McCain were battling to see who would help to control the effects of the latest recession, oil prices were rising to $157 per barrel. It was a big spike that was causing real concern among consumers, and one that both candidates resolved to fix when they took office in early 2009. The oil prices were bad, but Goldman Sachs was forecasting that they were about to get a lot worse.

That year, the company released a forecast in which it predicted that oil futures would continue to climb dramatically, reaching as high as $220 per barrel by the end of 2008 or sometime in 2009. That was a bold and scary prediction at the time, and it is one that was never fully borne out by reality. Eventually, the price increases subsided and oil futures stabilized. This, however, was probably not the outcome that Goldman Sachs was looking for.

The company was later discovered to have been running the world’s single largest oil trading desk. That means that, for every increase in oil prices, Goldman Sachs made a pretty big increase in profit. It’s no coincidence, then, that the company was forecasting high oil futures, likely in an attempt to make them a reality. The same might hold true for gold in this year’s forecast.

A Look at Why It’s Good for Goldman When Gold Goes Down

As of 2013, a key change is coming to the banking industry in the United States. Banks will be able to use gold to underwrite their operations to a much larger extent, giving the precious metal a renewed sense of value and power that it currently does not have, even with its relatively high value.

At the beginning of next year, major banks throughout the country will be able to use 100 percent of gold’s value as collateral for their accounts and assets. Currently, only 50 percent of the value of gold can be used for this purpose. This will have major implications on the value of gold itself, setting it up for another big rise in the coming year if economic conditions do not improve dramatically, like Goldman Sachs is now predicting that they will.

The implications of this rule change are not favorable to Goldman Sachs, generally speaking, and thus it makes sense for them to forecast a strong 2013 economy and a weak overall picture for the value of gold. Gold, though, is likely not going anywhere but up. That’s due in large part to an economy that is barely limping along, and will likely continue to do so at similar levels throughout most of the upcoming year.

Bulls and Bears: Who Wins Out in the Upcoming Year?

The most optimistic economists in the country are predicting that 2013 will be a pretty good year for the American economy, but none of them is quite as sold on the idea of an “accelerated” recovery toward the end of the year like Goldman Sachs’ analysts have indicated. Instead, even those with the best idea of 2013’s economic picture assume that the nation’s economy will continue to limp ahead at about 2 percent growth for the next twelve months, give or take a few tenths of a point. That is hardly “accelerated.”

With an economic growth rate of just 2 percent, it would be extremely hard to see Ben Bernanke, Chairman of the Federal Reserve, changing course on major economic policies put in place since the recession began a half-decade ago. His goal is to aggressively pursue full employment, keep credit markets open, and maintain low interest rates and a low overall value for the dollar. With 2 percent growth, there will be no policy changes needed in pursuit of these objectives.

Without a major shift in policy at the Fed, and especially without a major interest rate hike for the first time in years, gold’s value is certainly not going to decrease. The conditions that are in place today are among the most favorable in a century for the value of gold. Those conditions will inevitably change, perhaps in 2014 or 2015. After that, gold may experience some struggles making upward progress. That is not going to happen in 2013, however.

Don’t Believe the Anti-Gold Messaging from Investment Firms

Investment firms like Goldman Sachs are generally looking out for the best interest of their own bottom line and their customers’ accounts. In many cases, that doesn’t involve gold. Don’t let companies like these make gold seem like a risky investment. Gold’s high prices today are likely to be its floor for the upcoming year, as it continues to rise amid a shaky economy and the same fiscal policies that have been in place for the past four to five years.

Whether or not gold will rise another $1,100 per ounce over the next half-decade is a matter of more sophisticated debate, however. The value of an ounce of gold will likely continue its upward climb for a while. Its trajectory may even out in a few years, and it may stabilize for quite some time, after the economic recovery does begin in earnest.

Until then, investing in gold is easily one of the soundest investments any American can make with their money. It’s certainly a better bet than chasing things like oil, stock market futures, and a whole host of other risky investments that are still seeking to find solid, stable ground after the worst economic downturn of the past 80 years. Consumers looking to get into gold have no time like the present, especially if prices again rise and make that initial investment even more costly to undertake.


Where Gold is Going in Today’s Global Market

Wall Street today is of the belief that gold and the related commodity stocks will hover where they are for the coming year. The thought is that interest rates will be rising. Goldman Sachs cut their twelve-month forecast by 7.2 percent with this thinking.

What Goldman Sachs is Thinking

Goldman Sachs claims that gold is “near an inflection point.” They believe that as the United States economy rallies in the coming year, and interest rates rise in real terms over the same period, investors will look to other types of investments.

One thing most firms agree on is that the global economy will begin to rebound in the coming year. This will cause European and American bankers to raise the cost of borrowing at a rate that is higher than that of inflation. Bankers are likely, however, to push ahead further and harder than the global economy will allow, driving interest rates lower and lower in real terms.

The Economy in Europe

Mario Draghi, president of the ECB, talked about how they discussed charging banks to hold money at the ECB. This implementation of negative deposit rates has some potential. Likewise, there was also significant talk about a rate cut. The ECB, too, cut their growth estimate for the next year. They predict that, if anything, the economy will retreat by three tenths of a percent in the coming year.

Europe has reason to be wary of positive predictions. Manufacturing in the Eurozone shrank again, making it ten months in a row of decreases. Spain has a record high unemployment level, with just under five million people without jobs. Their youth unemployment rate has reached a shocking fifty percent. Meanwhile, unemployment in Greece reached 26 percent. The ECB is understandably cautious in raising interest rates higher than the rate of inflation in this sort of atmosphere.

Economic Factors in the United States

Meanwhile in the United States, the state of labor and unemployment continues to be terrible. The November NFP report shows clearly that it is far from viable, leaving the U.S. economy in dire straights. Bernanke is ready for the end of the Federal Operation Twist, that initiative to stabilize the economy. He’ll be able to purchase MBS and treasuries to the tune of 85 billion dollars per month. This sort of massive purchase amounts almost to sabotage of the American economy.

While the reports show that 146 thousand new jobs were created, Bernanke can still see the situation calling for a program like his own free-money style interest rate policy. It’s likely to be necessary for years in the future. Meanwhile, everyone will need to take new measures to try to enhance the money supply growth before it’s too late.

Another twenty two thousand jobs were lost in the goods production sector, despite net growth in job creation. This means that the jobs that are created are those that promote spending and borrowing. This is in contrast to the types of jobs that bolster production, increase wealth and benefit the economy. At the same time, the Labor Force Participation Rate dropped to only 63.6 percent this month. This is down both from the level of last November, and from where it was at the start of our current Great Recession.

American Unemployment

The ratio of employment to population fell as well, down from 62.7 percent in 2007 to today’s 58.7 percent. This is unchanged from last year, but that isn’t necessarily positive. Many claim that the lower number of people working or looking for work is a direct result of the generally increasing age in the U.S. demographics.

Continuing the trend of generally decreased numbers, we take a look at the peak earners between the ages of 25 and 54. Their levels are down as well. In 2007 they were at 82.9 percent, but today they are only 81.1 percent. What does this mean? People are dropping out of the workforce, but not because they are retiring. Instead, they simply cannot find adequate employment with their current jobs.

One factor that did not decrease from last November to this month was the number of people marginally attached to the workforce. This number, 2.5 million people, are those who were not included in the labor force surveys because they had not actively been searching for work over the previous four weeks. As of last month’s survey, as well, there were a total of 4.78 million people not only out of work, but who have been out of work for at least 27 weeks. This is one thing that helps curtail Bernanke’s plans, because it tells the Fed that they will likely need to launch QE IV next week during the FOMC meeting.

The Effect on Gold Prices

What does all of this have to do with gold? Well, if the interest rates next year do increase, it will be due to the free market attempting to keep pace with inflation. The banks will have little to do with it in their attempts to keep ahead of money growth. This means the main reason commodities have boomed over the last decade is still whole.

The price per ounce of gold in 2001 was a mere $250. Today, that same ounce is worth $1,700. This change in price is due to negative real interest rates. If, as expected, interest rates will fall again in the coming year, gold will continue to rise. It won’t be a high boom like the beginning of the 2000s, but it will increase. All of the factors that lead to gold increasing in the past are still present and accounted for.


Outlook For Silver in China Excellent as Demand Increases

By James DeGeorgia –

John Embry, Chief Investment Strategist for Sprott Asset Management, recently confirmed in an interview with King World News that the outlook for silver in China is excellent. According to Embry, the demand for silver in this country has increased over the past ten years. In addition to discussing silver, he briefly discussed gold and the impact he expects both silver and gold to have on the world. According to Embry, if what we are currently experiencing goes beyond the “fiscal cliff” the results could be catastrophic. However, he indicated that he believes that action will be taken to prevent that from happening.

The Demand For Silver Has Increased All Over the World

Embry is very concerned on how much of an impact stimulus removal would have on the United States economy. Currently, the price of silver is approximately $1,650 less than gold. In Embry’s opinion, the price for silver is too low and should definitely be much more than what it is traded for now. He believes that the price of silver should be higher because there is such a great demand for silver around the world.

According to Embry, the demand for silver has increased around the world. In China alone, the demand for silver has dramatically increased in just the past ten years. In addition to China, Embry also indicates that there is a tremendous demand for silver in other parts of the world as the supplies of this precious metal have diminished over the years. As such, the price for this precious metal should be more than what it currently is.

The Demand For Silver May Have an Impact on Our Economy

With the demand much greater than the supply, Embry just is not certain how this can hold up on paper much longer. He hopes that will there be enough of this precious metal available to meet the demand in the future. However, that remains to be seen. Embry expects this to lead to additional problems.

Current Trends Indicate We Should Expect More Debt and Problems

He believes that what we are currently experiencing is an extended credit cycle. According to Embry, as we continue to rely on credit to get out of trouble we are having problems handling all of the debt that is currently in existence. As this vicious cycle continues, Embry truly believes that economic growth will be sluggish. He expects to see the some of the same recurring trends next year as estimates are expected to be lower in the coming year. He predicts this vicious cycle will ultimately lead to more money being printed simply to keep the whole system flowing.

Our Economy May be in Jeopardy

Embry has indicated that everyone should expect to see more of the same in 2013. However, in 2013 there is a strong possibility that something can go wrong. He believes that there is more room for a geopolitical or economic disaster in 2013. However, China is expected to experience some growth in 2013.

Outlook For Economic Growth in China Looks Good

Although the outlook may not be so great in other parts of the world, Embry has confirmed that the outlook for China is good. Unlike other countries that continue to struggle, he believes that China will be able sustain its own economy simply by injecting additional stimulus into its economy. Unfortunately, the same will not be true for every other country facing the same dilemma.

Gold and Silver Going to Peak in 2013

While things are expected to remain the same for both silver and gold, Embry did suggest that he believes that the price of silver and gold is going to be the highest it has ever been in 2013. He suggested that the price will be at record highs because the demand for these precious metals is increasing worldwide. As the banks in the East continue to buy gold, our supplies of this precious metal are dwindling. Embry also expects the demand for silver to increase on the home front as well. He predicts this will all lead to more money being printed.

The Demand For Silver and Gold Will Have an Impact on Paper Money

Ultimately, Embry predicts that the demand for silver and gold will lead to the obliteration of paper money. Since silver and gold was always the preferred currency for hundreds of years, paper money may just be running its course and at the end of its natural life expectancy. Ultimately, Embry expects the deterioration of paper money to lead to an increase in the price of both silver and gold.


Gold and Silver: Solutions to the Financial Crisis

 By: James DiGeorgia

Gold and silver markets have a history of significant fluctuations. One of the foremost experts concerning precious metal commodities, Stephen Leeb, recently explained his thoughts concerning these markets. Mr. Leeb promotes the purchase of gold and silver as a hedge against massive inflation caused by excessive printing of paper currency.

“Everyone should own physical gold and silver,” Leeb said. “For people who are discouraged in gold or mining shares, don’t be. Your day is coming.”

Gold Rush

Mr. Leeb is not the only one advocating the purchase of gold and silver. Investors around the world are generating a massive gold rush by buying gold bullion and coins at an unprecedented rate. As with most financial issues, governments of many countries are seizing an opportunity to turn commodity markets in their favor. Some governments are intentionally taking steps to alter the prices associated with buying and selling gold.

“Right now there is a sense of desperation about gold,” Leeb said. “This is why governments are so active manipulating gold. That’s just the way it is.”

The Federal Reserve and the Economic Crisis

Leeb went on to take the United States Federal Reserve to task over their contribution to the global economic crisis. Leeb blames the Fed for irresponsible policies, citing their actions regarding paper currency as a prime example.

“The Fed didn’t surprise too many people when they announced they were going to buy $1 trillion worth of paper each year.” said Leeb.

Failure of the Fed

Mr. Leeb continued his indictment of the Federal Reserve. He made a point of identifying the source of financial turmoil in the United States. He described the Federal Reserve as an organization determined to continue its spending while disregarding the economic plight of the average American citizen.

“I care about this country and the people that live here,” said Leeb. “When you see money being printed like tissue paper, you know most bond certificates are going to be used to burn wood and keep houses warm. You start thinking about $1 trillion and it’s hard to get your mind around it.”

Problems with Foreign Economies

Mr. Leeb went on to discuss the widespread nature of this crisis. He believes that, because the United States is a major part of the global economy, it affects and is affected by changes in the global marketplace. Noting similarities between the Fed’s spending and the financial maneuvers in foreign nations, Leeb voiced his displeasure with global economic policy.

“The Japanese yen yesterday was getting crushed…here you are in a world where every major economic bloc is printing money as fast as they can. This is really making me angry.” said Leeb.

The Future of Money

Despite some very troubling facts, Mr. Leeb does not rule out the possibility of personal financial solvency in the coming years. Of course, he advises many people to be wise in their spending habits. He also sincerely encourages everyone to strongly consider making an investment in precious metals.

“Gold is heading to $10,000 with or without people reading this,” Leeb remarked. “Gold and silver are really the de facto currencies in today’s world and they will be the leaders going forward, not paper assets.”

Although no one can predict precisely which turns economies will take, it behooves serious investors to consider proactive solutions. Stephen Leeb promotes the notion of obtaining personal financial security before economic circumstances become any worse. The price of gold will soon increase and investing now will pay significant dividends in the near future.


James DiGeorgia Appears on FOX Business News Gold