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Richard Russell’s Remarks – July 15, 2013

I told you to sit tight with your gold. But perhaps you sold it, and paid your taxes. Now you’re out, and you may want to get back into gold. At what point should you enter? Who knows, it’s your call — you just have to close your eyes, and place your order. Would you have been better off sitting with your gold? Probably, but who knows. In a bull market, you stay with your initial purchases, you don’t trade them; you stay with them until the item climbs deep into its third, speculative “blow off” phase, and that’s where you swap your items for cash.

Cash — Below, the fading US dollar — once the ultimate safe haven. Alas, thanks to the Fed, cash is losing its purchasing power.

07.11.13 US Dollar Index

Yeah, I know, this market has been rigged by the Bernanke Federal Reserve, and inflation is a lot higher than what we’ve been told. The US is choking on debt, and interest rates are heading higher. The unemployment statistics that we are given are a scandal, and the price of gas is heading up.

For months we’ve been listening to horror stories about gold. Gold is not money, gold is overpriced, gold is a has-been, gold is too expensive compared with copper, gold’s bull market is over, gold has been manipulated, gold is being accumulated by China, India and Asia, gold is just a shiny relic of previous ages, gold is actually worth $750 an ounce, gold (says billionaire Warren Buffett) is a waste of time.

Put it all together and, for me, it’s worth absolutely nothing. I just watch the price of gold, and I eliminate all the noise and goof-ball comments. As far as gold is concerned, what I really care about is PRICE. Furthermore, I care about whether a trail of daily gold prices are forming a recognizable chart pattern.

OK, let’s forget about all the talk and opinions and the gossip and noise. Below is what I’m interested in, as far as gold is concerned. First, I note that the price of gold has turned up from gold’s recent low. Then I note that gold is approaching a (blue) declining trendline. Interestingly, the trendline and gold’s (blue) 50-day moving average are almost meeting at this time. If gold can rally to 1350, it will have climbed above both the declining trendline and its 50-day MA. Next, I note that the RSI (relative strength) line for gold is rising and is near the neutral level of 50. Finally, I see that MACD has formed a series of rising lows and has tuned up. The histograms are on the plus side. All in all, gold, despite the noise and negative opinions, looks good to me.

07.12.13 Gold Spot Price

My conclusion is that gold is looking good on the chart, and the chart is made up of a series of prices. I don’t care what the noise and gossip is, just give me the prices, and I’ll make up my own mind.

Conclusion — Price is reality, and price-reality trumps all the talk and opinions.

Next, let’s turn to a P&F chart of gold. Below we see gold, up-dated through Friday’s close. And here too we have good news. The consolidation in the 1200s area appears to have carved out a legitimate bottom.

I say this because the formation was created amid an atmosphere of extreme fear and bearish sentiment. In other words, it seems as though seasoned investors were accumulating the metal in the face of black-bearish sentiment towards gold. The proof arrived last week as gold broke out above its preceding column of Xs, halting at the 1290 box on the chart. The next immediate task for gold is to rally above the column of Xs that ends at the 1300 box.

If gold can rise to 1310, the rally should gain upside momentum, and the next target will be in the 1400s.

07.12.13 Gold Spot Price

Late Notes — The markets, really all of them, are strung out on the Fed’s QE, Twist and ZIRP. As a result, market analysis has become Bernanke analysis.

I’m asked, what would happen if Bernanke halted his gabbing and actually started to “taper?” If that occurred, I think interest rates would surge and housing would slump. The stock market would plunge, and the nation would sink into a sudden and deep recession.

Thus, the Fed has painted itself into a ridiculous corner. As a result, I see all the Fed’s QE stimulus being extended as far as the eye can see.

Gold fooled me — I thought it would be stronger after last week’s stellar performance. I’d like to see gold close over 1320, but so far, it hasn’t been able to do that. I see gold as wobbly below 1320, but long-term bullish. I think gold may remain in a base below 1320 for quite a while. But ultimately, I see gold as a good holding.