by Bill Downey     Price Analysis of Gold and Silver
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Technical Analysis Trading Gold, Trading Silver/ analysis By Bill Downey providing key turning points & charts for investors and speculators in Precious Metals Trading, and Precious Metals Markets


Bill Downey, of Gold, LLC, is an Independent Investment Analyst with over twenty years of study. YOU SHOULD NOT TAKE ANY MATERIAL posted on this WEBSITE AS RECOMMENDATIONS TO BUY OR SELL GOLD OR ANY OTHER INVESTMENT VEHICLE LISTED. Do your own due diligence. No one knows tomorrow's price or circumstance. The author intends to portray his thoughts and ideas on the subject which may s be used as a tool for the reader. GoldTrends does not accept responsibility for being incorrect in its speculations on market trend or key turning points that it may discuss since they are at best a calculated analysis based on historical price observations.

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  • 02 Feb 2016 8:01 PM | Bill Downey (Administrator)

    Chart of the Day: A “Silver Rush” in Chin

    By Eric Fry
    January 30, 2016

    Sometimes, if you can’t get to a party, you’ve got to bring the party to you. This approximate philosophy seems to be inspiring a surge of silver buying by the Chinese.

    Since the Chinese government is making it difficult for its citizens to take currency out of the country, many Chinese nationals are bringing a “better currency” into the country. They are buying silver hand over fist.


    China’s silver imports recently hit their highest level in four years. Most likely, the Chinese are stepping up their silver purchases as a way to protect themselves from the risk that their currency, the renminbi, will continue to lose value against the U.S. dollar.

    During the last five months, the renminbi has fallen more than 5% against the dollar. This loss of value, combined with China’s collapsing property and stock markets, has triggered a massive “capital flight” from China into various offshore assets.

    A whopping $1 trillion has fled the country during the last 12 months, according to estimates by Bloomberg Intelligence. That’s about $770 for every man, woman and child in China!


    Because so much capital is fleeing the country so quickly, the Chinese government has stepped up its efforts to block the exits.

    The laws and regulations that were already on the books limited annual overseas transfers to $50,000 per person. But for many years, wealthy Chinese have used a variety of tactics to maneuver around this limitation.

    The government is now making the game much more difficult.

    Bloomberg News provided the following insight into the Chinese government’s latest efforts to prevent capital flight:

    • Increased scrutiny of transfers overseas – Some Shanghai banks have recently asked their outlets to closely check whether individuals sent money abroad by breaking up foreign currency purchases into smaller transactions and to take punitive action if violations were discovered, according to people familiar with the matter. Each person can send $50,000 abroad annually, so large sums can be transferred by utilizing the bank accounts and quotas of a range of individuals, a tactic known as smurfing.
    • Outbound investment quotas frozen – China has suspended new applications under the Renminbi Qualified Domestic Institutional Investor (QDII) program, which allows yuan from the mainland to be used to buy offshore securities denominated in the currency. It has also refrained from granting new quotas for residents to invest in overseas markets via the QDII program.
    • UnionPay debit card clampdown – New measures were introduced in December to crack down on illegal China UnionPay card machines, which were suspected of being used to channel funds offshore via fake transactions, most notably in Macau casinos.
    • Underground banking clampdown – China busted the nation’s biggest “underground bank,” which handled 410 billion yuan ($62 billion) of illegal foreign exchange transactions, the official People’s Daily reported in November. The Shanghai branch of the State Administration of Foreign Exchange said last week that it will crack down on illegal currency transactions, including underground banking.

    Perhaps these new government tactics will slow the exodus of capital over the short term. But capital controls rarely succeed over the long term. To the contrary, they are an ominous warning sign – the reddest of red flags. They announce to the world that it’s time to get local currency out of the country as fast as you can, and then swap that currency for hard assets offshore.

    But since that is easier said than done in China, some Chinese nationals are doing the next best thing: They are importing the hard assets from offshore and using their local currency to do it.

    So far, the recent surge of Chinese silver buying has not sparked a corresponding bounce in the silver price… at least not yet.

    But interestingly, the last time the Chinese ramped up their silver buying was in 2009 and 2010 – several months before the silver price rocketed from $15 an ounce to $50 an ounce.

    So if past is prologue, there might be a great big silver bull market heading our way.


    Eric J. Fry
    For The Non-Dollar Report

    Gold Short Term

    The NFP report on Friday will most likely be the event of the week for Gold.  

    Resistance is the 1130-1138 area and then 1142-1146.  Most important is the uptrend channel and the momentum channel in short term gold is meeting at the 1130-1138 area.  A Friday close above 1143 would put price just above the uptrend channel and open the potential for the momentum channel to continue tracking gold price.  A close below 1115-1117 would take us out of the momentum channel and expose gold to retest the 1090 area.  There's also support at 1101-1109.   The bottom line is things might remain quiet in gold on Wednesday and Thursday in anticipation of the NFP payroll report on Friday morning.  The short term trend remains up.  A close below 1101 would turn the trend neutral.  

    Gold Medium Term

    Weekly gold arriving at the moving averages (1117 Blue and 1139 Red).  We need two weekly and a MONTHLY CLOSE above both to go from Bearish Medium Term Gold to Neutral.   Neutral is not bullish, but it ain't bearish.  The Dual Yellow trend line's upper end is the 1172-1222 area. Look how there is almost no resistance above the Dual Yellow lines for quite a distance. A monthly close above 1255 would be a significant event.  It takes a monthly close below 1033 in order to extend the bear market lower.  Odds still favor the low is either in Dec 2015 (Armstrong 51.6 month cycle) or March/April 2016 (A Fibonacci 55 months from the high).  So far, December has been the lowest price at 1045.  If the bear market in gold is over, it needs to take out the Dual Yellow trend line on a monthly close for further confirmation. 

  • 29 Jan 2016 7:51 PM | Bill Downey (Administrator)
    Let's take a look at what the charts have to say

    Gold Cycles and Technicals

    The next cycle is due Feb 8th (plus or minus 72 hours). That means the cycle opens up by Feb 5th.  We pulled back from weekly resistance 1122-1127 hitting 1128 and pulled back to first support, the downtrend line from the October peak at the highest blue cycle on the chart.  There's another line underneath that pegs support at 1101-1109 (1095 also).  Bottom line, the short term uptrend is still in play, but cycles will be here by the end of next week.   We can still pullback a bit more and move back up during mid week next week. We got to 1108 on Friday but reversed back up there so we know there's a band of support at 1101-1109.  That's what it comes down to early next week.  On the resistance side, look for 1122-1125 and then 1128-1133 where the 200 day average resides.  We get above 1145 then look for 1160-1190. 

    In summary,  the 200 day average is the biggest target if the bulls win at 1133.  The bears meanwhile would like to get back below 1095.  if the cycle plays out, there should be one more push higher (odds 70%). 


    After 6 months of not making a new low, the HUI index gave way and then did something that should be watched closely, or at least on your radar.  Prices reversed and marched right back to a strong resistance area on the chart.  The first thing a bear market must do is reverse a new yearly low.  It has done that. We should at least make note of it.  

     Now comes the 1st resistance test and that's the ability to move above the first resistance points of the market.  A close above this area would favor the HUI moving to the 140-145 area.  

    Gold and the short term current price point

    The bottom line for next week is we must get above 1133-1143 in order to push higher (1160-1190).  As long as we're in the channel, we're in the 2016 uptrend.  Support should be 1095-1107.   Resistance we have 1122-1127 then the 200 day at 1133 and the November High at 1143.  A new MONTH begins Monday. 

    On a medium term basis, the key is really the moving averages 1119-1138 and the dual down trend line.  That is the strongest resistance on the chart and the last solid resistance (medium term) until 1272-1322.  This is the price potential if gold can exceed these two most important resistance point until a couple of hundred bucks higher.   Key next week also is the November high at 1143.  We get a close above there and 1172-1190 would be the target.  

    On the intermediate term time basis, a Feb high and pullback into March is still the most favored outcome, so watch that cycle turn and the November high.  

    On a longer term basis

    Odds favor the bear market in gold ends Dec 2015-June 2015 (with March as the ideal) in a price range of 850-1050.   If the low wasn't December then the Ideal time for it will be in March on the 55th month of the correction.  

    We needed a close above 1119.50 on Friday to be above the 34 week moving average. We got within 90 cents.  But we did not get above it.  Is a dollar close enough?    Not if we follow the rule.  But it should be watched just the same.  Nothing is that PRECISE.  Nevertheless, we did not get a MONTHLY close above the average.  Doesn't mean we won't in February.  Suffice to say, this 1130-1145 area in gold is the most important area for a couple hundred dollars.

  • 26 Jan 2016 12:52 PM | Bill Downey (Administrator)

     According to the Hong Kong Census and Statistics Department, in December Chinese gold imports via the main conduit Hong Kong surged to the highest in more than two years, as - in Reuters words - "investors lost faith in collapsing stock markets and a weakening currency and snapped up bullion."

    That was the highest monthly number since October 2013 when imports stood at 130 tonnes.

    According to Bloomberg, "Investors took advantage of the lowest global prices in almost six years to stock up on bullion amid share market gyrations and concerns the central bank would let the currency depreciate to boost slowing growth in the world’s second-biggest economy. Consumers were also buying in the run-up to Chinese New Year in February, the peak demand season."

    As China's equities slumped and its yuan currency finished 2015 with a record yearly loss, "people looked at other investment  alternatives that's why there was huge demand for gold," said Brian Lan, managing director at gold dealer GoldSilver Central in  Singapore.

    't just suddenly soaring demand for phiscal gold: a jump in physical deliveries from the Shanghai Gold Exchange was also a sign of demand, Wang said.

    Also, Hong Kong wasn't the only source: Swiss exports of gold to China jumped to 59 tons in December from 16.5 tons a month earlier, according to the website of Swiss Federal Customs Administration.

    Gold Short Term

    Gold has arrived at 1st weekly resistance in the 1122-1125 area.  Additional resistance lies at the 1129-1136 area.  Today's options expiration has unshakled and now the FOMC minutes and meeting will adjourn on Wednesday afternoon.  Key is whether the FED comes out with more dovish statements in lieu of what has happened to the stock markets globally and the deteriorating global economies.  These are the highest gold prices we have seen since November 6th 2015.  It is still possible to reach resistance # 2 as short covering and buying are taking place.  Odds are that would take place tomorrow during mid week Wednesday if we do plow above 1125.  Support is now forming at the 1095-1102 area and the 1080-1085 area.  Short term trends remain up, but odds do favor gold's peak this week to be either 1122-1125 or 1129-1136.   

    Gold Medium Term

    On a medium term basis,  the blue moving average is at 1119 and the Red at 1138.  Thus we should see perhaps resistance attempts at both places.  It takes TWO monthly closes above both averages for the medium term to go from bearish to neutral and it takes a monthly close for the blue average to be above the red and price as well to get a trend change to bullish.  The dual yellow lines are also defined as the current downtrend lines lines to watch.   Two monthly closes above the dual yellow line would be 2nd confirmation that the medium term trend has turned up for the 1st time since 2013.  

  • 25 Jan 2016 10:56 AM | Bill Downey (Administrator)

    Gold Report ~ Jan 25 2015


    Long Term ~ Bearish- Need a monthly close above 1800 to confirm the bull market final phase underway. Need a monthly close above 1560 to neutralize the trend.

    Medium Term ~ Bearish- Need a monthly close above 1255 to bring attention to the medium term trend. Two weekly and a monthly close above 1141 would upgrade the trend from bearish to neutral.

    Intermediate Term ~ Neutral– The intermediate term is in neutral mode for the most part but a close above 1114 flips the trend to bullish.

    Short Term ~Bullish- Any close above 1114 extends the trend. Any close below 1072 reverses the trend to down.

    Initial Resistance 1107-1114 2nd tier 1122-1132

    Support 1082-1092 2nd tier 1065-1075

    OPTIONS EXPIRATION for Feb gold ends after Trading on Tuesday Jan 26th. Thus we’re going to find out this week if gold can move and sustain above 1100. The shackles will be released, and now its up to gold.

    Also, rollover out of Feb Gold and into April will take place on the futures markets.

    On Wednesday, minutes of the FOMC will be released.  Keep a watch for that also as a potential price mover in gold.

    What about the Stock Market?

    The correction thus far has reached the deepest level of long term uptrend support at the moving averages and trend line. Here is where the stock market should try and bounce and it may be underway from last week’s low. The long term averages are at 16030 – 16700. A monthly close below 15900-16000 is the next step as to whether we get a continued selloff. Watch January’s close to see if it’s above 16000. As we arrive in February,  the US stock market is at critical levels. It has not yet broken the long term uptrend.   But on this next Chart.........

    Dow Quarterly Chart

    On Dec 31st we posted this chart on Twitter.  It gave a long term sell signal on the quarterly chart.  Since then a correction has taken us to the chart above.  Monthly closes below 15300 would be add to the bearishness already witnessed.  Odds favor that a rebound at these levels will take place, but we doubt if the carnage is over in stocks.

    What about interest rates?

    Interest rates have at this moment moved to neutral on a long term basis. But the real decision continues to be put off as rates keep hitting off the grend trend line. We have completed a Fibonacci 34 years of lower rates. Odds favor that higher rates are in our future. Odds also favor that it will be due to FEAR and not global growth.

    Higher rates should be bullish for gold. Perhaps not right away, but certainly once the trend gets established higher. There is no other chart more important as one that shows the COST OF MONEY - for it sets the pace of everything else.  As we arrive In February, the long term trend for rates has yet to turn up.

    What about Commodities?

    The chart shows we are at the most important of all support points. Below this area warns of Global Depression.

    What about Gold?

    Gold is nearing the Edge of the Wedge, but it still can have one final low in March/June 2016.  If gold is to turn up in 2016, odds favor that it needs commodities to turn up also.

    Gold Short term

    The chart below shows the key area we need to move above (1107-1114) in gold in order to favor higher towards 1121-1131 or 1141-1146. Support is 1088-1094 and then 1072-1082 for this week. IF we can close above 1114, odds favor moving higher into month end and 1st week of February.

  • 19 Jan 2016 12:31 PM | Bill Downey (Administrator)

    Gold Short Term

    On a short term basis gold is trying to form an uptrend channel from the November lows.  From a pattern perspective, it is choppy and overlapping from lows to highs.  That in-itself suggests (so far at least) that it is a counter trend rally.  In other words, the main medium term trend is still down overall. The pullback from the highs retraced a Fibonacci 61% almost to exactness, and then pushed back to 1100 before this latest pullback where it now brings us to the 1085 level.  On this short term basis, price needs to hold at or near that 1072 level in order to maintain the current upswing.  A close below 1065 and then 1055 would warn that gold is once again weakening and will open up the potential for gold to move to new lows under 1040. Support is the 1070-1080 area and resistance is 1097-1107.  It takes a close above 1114 to favor higher prices into February.  A close below 1065 would put a bearish short term damper on gold.  (Subscribers to gold trends went long gold at 1072 (just one dollar above the low established on the pullback for a short term trade). Lets now go look at the short term cycles.

    Gold Cycles

    The next short term cycle turn is Jan 23rd (plus or minus 72 hours).  That means that the gold window for an upturn begins tomorrow but could be as late as next week.  We discussed on the website updates that gold was expected to pullback this week from that push we got from 1072 to 1100.  That pullback is taking place and now its a matter of when gold makes this next short term low on the blue cycle.  These cycles work about 70% of the time at the turns.  The other 30% are called inversions.  This is when prices don't turn on a cycle window but instead move in the same direction until the next cycle.  When that happens, the colors rotate and the red becomes the place on the chart where bottoms occur and vice versa.  In summary, we are looking for gold to establish a short term low within the upcoming blue cycle and  then rally into the week of Feb 9th.  Odds on that are about 70%. Since the pattern is choppy and overlapping its good to be careful because it does warn that this rebound (so far) is a weak one.  In other words,  there is more of a chance of inversions occurring when the market is rallying in a counter trend move.  Keep that in mind.   

    Should the blue cycle make a low, the next rally into Feb would initially target the 1122-1127 area.  

  • 13 Jan 2016 10:01 AM | Bill Downey (Administrator)

    About That "Surging" Chinese Trade Data, There Is Just One Thing...

    Submitted by Tyler Durden on 01/13/2016 

    While Chinese New Year seasonals are undoubtedly one factor in last night's "surprisingly good" Chinese trade data, the following chart shows the level of "bullshit factor" was extreme by anyone's measure. Three years ago we first brought China's 'fake' trade data and abundant discrepancies to the public's attention and despite an apparent crackdown by regulators, the gaping difference between imports from Hong Kong and exports to Hong Kong is downright embarrassing for China's SAFE as it is clear that capital outflows are being disguised as exports with "over-invoicing" back in play.

    Last night, China unveiled the following double-rainbow of better-than-expected trade data with Exports shockingly positive YoY (smashing expectations of a furtther collapse)...

    Chinese New Year seasonals (export-boosting into year-end) and despite China importing a record amount of oil, or 33.2 million tons, the trade surplus apparently surged and everything is proved awesome in China.

    But, as we initially explained in 2013, one reason for the "surge" in recent data may be the demand of the new Politburo to telegraph that all is well following the recent turmoil since the magnitude of the surprise beat  could indicate exporters’ rush to finish year-end orders and government pressure to report exports before the end of the year to reach the government’s growth target.

    However, possible explanation for how Chinese companies are cooking their export books comes from none other than Goldman:

    “It is possible that local governments may have tried to boost exports data by either making round trips in special trade zones” or by exporting “earlier than otherwise in an attempt to improve the annual exports data,” Goldman Sachs’ Beijing- based economists Yu Song and Yin Zhang wrote the same day.


    Rushed shipments and even faked exports to secure tax refunds may have contributed to the stronger growth data, according to Alistair Thornton and Ren Xianfang, Beijing-based analysts at IHS Inc.


    Some trading companies are turning to transportation providers like Shenzhen Global Express Logistics Ltd. for help in shipping goods through so-called bonded zones to claim export tax rebates or charge higher import prices for goods without them physically leaving the country. Shenzhen Global offers customs clearing and other freight services including a “one-day tour,” Lin Yongtai, a manager with the company in the city bordering Hong Kong, said in a telephone interview.


    For a fee of 1,000 yuan ($161) per vehicle per day, the company will drive trucks into warehouses in bonded zones, where cargo must clear customs, so that businesses can obtain a refund of value-added tax on the “export” of their products or boost sale prices for goods that carry the cachet of being imported.


    “A poor villager can boast he has thousands of yuan of turnover every day, but people later discover he only has one bull -- he takes the bull out every morning and brings it back every evening,” Lin said. “The same applies to some parts of China’s foreign trade.

    Of course, there is also the simple test of matching one country's exports to another one's imports (after all, it is a closed loop).

    To wit... The massive over-invoicing "Exports" to HK relative to the smooth HK "Imports" from China...


    Once more, it appears that China is literally pulling numbers out of thin air:

    UBS economists led by Hong Kong-based Wang Tao pointed to a “quite obvious discrepancy” in the growth of China’s exports to Taiwan and South Korea and those economies’ reported imports from China in recent months, even as historically they have tracked each other well.

    Finally, that China is openly making up numbers is no surprise: it will continue doing that until, like everywhere else, the discrepancy between perception and reality (usually manifested in the case of China by a lot of angry people breaking something or simply rioting) becomes too glaring for even the most optimistically inclined to ignore.

    (End of Zerohedge Article)

    Gold Short Term

    Although we can't rule out 1067-1072 A gold low should form today (Wednesday) potentially at 1077-1080 and it could possible be the low for this week.  We've tested the 50% retracement of this rally and thus a push back to 1087-1094 (1st resistance) could be in the cards for Wednesday.   The ideal target remains 1067-1072, but lets see what gold does at the 1080 support point.  The 1080 area is the yearly 2014 support and is a logical place for price to try and bounce as well.  

  • 11 Jan 2016 10:49 AM | Bill Downey (Administrator)


    China, The End Of History And The Last Great Commodities Boom

    Jan. 10, 2016

    China's economic deceleration is occurring because it has reached a particular point of development where the easy economic gains have been made.

    Significantly lower economic growth in China is now the way of the future.

    The greatest commodities boom ever known has come to an end, with sharply weaker commodity prices now the new normal.

    Article  (Charts follow article on gold and silver)

    The drivers of global economic growth have changed with the end of emerging markets as the key engine of economic growth.

    It was only just over two decades ago that philosopher Francis Fukuyama released his controversial book, The End of History and the Last Man. In it, he expounded his theory that the collapse of communism and adoption of liberal democracy in Eastern Europe, through a series of velvet revolutions, broke the traditional paradigm through which mankind viewed history. These revolutions, he argued, symbolized the end of mankind's ideological evolution and the adoption of the final form of government.

    Now we are witnessing events of equal magnitude, with the last major socialist stalwart China emerging from the economic darkness and embracing the central tenets of capitalism and the free market system to become a global economic super power.

    The completion of this transition, I believe, signifies the end of one global developmental epoch and the emergence of a new global economic system which needs to be viewed through a different conceptual paradigm. This paradigm shift brings with it considerable changes for the global economic system and financial markets with it signifying the end of the last great commodities boom witnessed in modern times.

    The creation of the greatest commodities boom ever

    After the end of the civil war and the accession to power of the communists under Mao, China's economy stagnated. Then from the 1970s, China initiated a series of policies aimed at modernizing the nation. It was these that led to China's eventual rapid economic and social transition, triggering the greatest commodities boom ever witnessed in modern times.

    As China modernized, and the required infrastructure was developed and put in place to support its economic transition, its consumption of iron ore, coking and thermal coal, base metals and other raw materials skyrocketed.

    It pays to be a 'catch-up economy'

    The boom really heated up in the early 2000s as Beijing's economic reforms started to gain traction and the experiment with the free market began in earnest. It is easy to see why China's rate of modernization and economic growth was so rapid and fueled what is probably the greatest commodity boom of all time.

    Most importantly, at the start of the development cycle it pays to be a 'catch-up economy'.

    You see, provided that other factors are equal, poorer less developed economies grow far more rapidly than partially developed or developed countries. This is because they are coming from a lower economic and developmental baseline.

    They also have the advantage of being able to rapidly close the development gap by following the lead of developed nations through technology transfers and capital injections to achieve 'catch-up growth'.

    Another key factor in China's rapid development was the immense physical capital that it was able to access and mobilize resources in order to develop new productive assets and infrastructure.

    This is because both the size and accessibility of a country's physical capital significantly influences the pace of growth. In the case of China, these are tremendous and can never be replicated by another nation with them being specific to China.

    Foremost among them is China's copious population which is the largest of any country, thus endowing it with tremendous human capital. This human capital for a variety of socio-economic and cultural reasons was ready to be mobilized with a range of catalysts putting in motion the greatest wave of rural-to-urban migration the world has ever seen.

    In fact, this rate of migration was unprecedented, causing the population of the majority of China's major cities to double or even more between 1990 and 2000. The scale of this migration continued to grow throughout the 21st century, with an incredible 145 million migrants in 2009 alone.

    Urbanization is an important driver of economic growth, and for it to be occurring on such an unprecedented scale is one of the decisive reasons for China's rapid economic transition.

    As a population migrates from country to city seeking better lives and higher incomes, consumption patterns change. This is because a higher income per person results in a marked increase in demand for consumer goods, food, services, and accordingly, the raw materials required to produce them. Once incomes start to rise they create a growing middle-class that causes demand to surge.

    China's massive wave of urban migration created unprecedented demand for the resources to build cities as well as the transport, technology, energy and logistics to support them.

    It fueled an unparalleled construction boom that was responsible for China's construction industry becoming the single most important consumer globally of a range of commodities, including steel, copper, zinc and nickel.

    Such a massive population shift only added additional momentum to China's rapid pace of economic development with it providing a readily available and super-exploitable workforce to support the process of industrialization. Between 2001 and 2011, China's industrial output more than doubled and this rapid growth further stimulated the already swift rate of rural-to-urban migration.

    Rapacious commodities demand triggers once in a lifetime bull market

    As China industrialized and wages as well as the standard of living improved, there was even greater consumption and demand for resources. By 2011, China had become the world's single largest energy consumer and the second largest consumer of crude after the U.S. This ardent appetite for energy caused China's consumption of thermal coal and oil (NYSEARCA:USO) to double between 2001 and 2011.

    Furthermore, the surge in demand for basic materials is particularly evident when looking at China's consumption of iron ore and other metals.

    China was responsible for 53% of the world's iron ore consumption in 2011, or more than four times the amount of iron ore it had consumed a decade earlier. For the same year, iron ore imports amounted to 61% of the global total or almost eight times more than China's iron ore imports in 2001.

    The consumption of copper (NYSEARCA:CPER) grew more than fourfold for the decade from 2001 to 2011 when China became the largest single global consumer of copper.

    This swelling demand for raw materials caused the prices of commodities such as iron ore, coal and copper to soar to stratospheric heights, triggering an investment frenzy among miners as they sought to cash on the 'boom that would never end'.

    The price of iron ore peaked in 2011 at $187 per tonne or more than 14 times higher than it was a decade earlier. Coking coal, another key ingredient in steel manufacturing, peaked at $147 per tonne at the end of 2008 or almost four times its value in 2001.

    Other metals also grew exponentially in value, copper more than doubled in value between 2001 and 2011, while zinc's price by 2008 had quadrupled in comparison to 2001. Nickel (NYSEARCA:NINI) also wasn't left behind, with its price peaking in 2007 at eight times higher than it was in 2001.

    Meanwhile, China's insatiable thirst for energy saw thermal coal, its primary energy source, peak at $192 per ton in 2007 or six times its value in 2001.

    This rapacious demand for commodities triggered a soaring commodities bull market that many industry insiders claimed would never end.

    The end of the greatest commodities boom ever

    Nonetheless, like all economic bubbles, it eventually did end for one key reason, China's economy came off the boil and its economic growth began to slow markedly. By the third quarter 2015, China's GDP growth had slumped to 6.9% or 50 basis points lower than a year before and its lowest level since the global financial crisis.

    It is expected that this decline will continue and I certainly don't expect to see any return to the double-digit figures recorded during the heady days of its economic boom between 2004 and 2010.

    There are a number of reasons for this rapid economic growth and then decline.

    Key being that once a particular point of development is reached economic growth slows as the advantages of being a 'catch-up' economy decline.

    China has now reached that point on its developmental journey where rapid industrialization, urbanization and expansion of the economy has peaked and is now falling into decline. This means that future economic growth will never again reach the heady double-digit figures of the past decade, which triggered a massive demand for basic materials but will instead continue at a more sedate rate.

    The latest data out of China confirms this. China's third-quarter GDP growth rate dipped to 6.9%, its lowest rate of growth since the global financial crisis. Analysts and economists expect China's growth to slow even further, with full-year 2015 GDP estimated to be 6.5%, which will decline to 6.2% annually by 2017.

    With China being a leading buyer of commodities, it certainly doesn't bode well for their outlook and explains why commodities prices have plunged.

    In fact, I believe that what we are now seeing is a paradigm shift among commodities and the move to a 'new normal' with indicators highlighting that double-digit growth is a thing of the past for China.

    Two economic sectors that are among the largest consumers of raw materials in China are caught in intractable slumps.

    The all-important construction sector is in terminal decline as is real estate development. By November of this year, investment in real estate development was less than a tenth of what it was at the start of the year and there are signs this downward trend will continue. Substantial inventories of vacant housing, coupled with slowing rural to urban migration, means that it will be some time before there is any uptick in demand for housing.

    This reduces the pressures on infrastructure which means the demand for new and/or additional infrastructure is declining, further placing pressure on the demand for commodities.

    I expect the rate of rural to urban migration to slow even further. This is because declining rates of industrialization, reduced labor intensity in manufacturing because of technological advancements, and falling industrial output are reducing the demand for labor and keeping a cap on wages, thereby removing probably the most important incentive.

    The decline in industrial activity is already apparent. For December 2015, China's industrial activity contracted for the fifth successive month. Then there is the decline in industrial growth, with output for 2015 having halved in comparison to 2011. Not only is this impacting the rate of rural to urban migration, but it is also having a sharply negative effect on the demand for commodities, particularly steel, base metals as well as energy such as oil and coal.

    There won't be any uptick in industrial activity for the foreseeable future because of softer global demand for China's manufactured products coupled with the considerable excess productive capacity that arose during the boom years.

    Significantly lower economic growth is the way of the future

    There are a range of indicators that highlight that economic growth in China will remain sharply lower for the foreseeable future and that the days of heady double-digit growth are well and truly over.

    Key among these is that China's rapid modernization and expansion has come to an end.

    Once a certain point of economic development has been reached, the benefits of being a 'catch-up economy' decline. This is because the easy gains have been made, while the higher standards of living attained increase the costs associated with industrial activity, making these economies' exports less competitive and investment more expensive.

    As a result, economic stagnation can ensue. Industrial growth starts to languish because of declining returns and a lack of investment, while higher incomes and standards of living lead to a lack of innovation and declining productivity.

    It is clear that this is occurring in China. Industrial profits continue to decline, falling for the tenth consecutive month in November, while manufacturing investment in 2015 is down by 80% from where it was in 2011.

    Then there is the risk of China falling into the 'middle income trap'. This would see it caught in a permanent state of economic stagnation interfused by extreme boom and bust cycles, much as Brazil has experienced in recent years. The middle income trap is where a developing economy's growth slows sharply and per capita income levels stagnate, thereby trapping the economy in the middle income category. There are many causes for this, but key among them is an over-reliance on driving economic growth through the extraction and export of minerals as well as the manufacture and export of low tech goods.

    With signs of this occurring, Beijing has moved quickly to adjust its policies in an attempt to prevent China from being permanently caught in this rut and make the transition to a developed economy. This has meant creating an environment conducive to the development of wealth and emergence of a broad-based middle class.

    To achieve this, Beijing needs to rebalance China's economy from one focused on investment in infrastructure and industry to consumption-driven growth, requiring it to reverse many of the policies that were responsible for its rapid economic development.

    As a result, Beijing has instituted a range of policies aimed at fostering growth in the country's weak services sector, reining in the excessive growth of the past and promoting consumption. This means that economic growth can only slow further and that the demand for commodities will continue to decline.

    Can other developing nations pick up the slack?

    Some analysts and industry insiders are touting the emergence of a range of other developing economies as being capable of picking up the massive excess capacity that now exists globally and fueling a new commodity boom.

    Among those countries are Indonesia, Vietnam, India, Pakistan and Nigeria. But this appears highly unlikely with each of them lacking the unique characteristics that fueled China's massive and rapid economic growth, triggering the greatest commodities boom of modern time. This is because each lacks the dynamics of China as well as the massive population base, access to vital resources, broad skill and educational base and geographic size of China.

    These factors along with each of them being substantially further along the developmental curve than China when it first started to modernize, means that the rate of industrial growth, infrastructure development and urbanization will be slower and not last as long.

    What does this mean for investors?

    Despite the claims of some analysts that commodities are long overdue to rebound, what we are witnessing is a fundamental paradigm shift in how to view the global economy and commodities. The shift to weaker commodities prices is reverberating across global markets.

    Not only has it triggered the end of rapid growth among some of the world's fastest growing emerging markets such as Brazil, but it has endangered the sustainability of the global financial system. This is because many miners and emerging economies have gorged themselves on cheap debt in order to live above their means along with the forlorn hope that an imminent recovery in commodities will fund repayments.

    Clearly, there is no recovery on the way and this has left a number of commodities miners in precarious financial positions.

    Mining heavy weights BHP Billiton (NYSE:BHP)(NYSE:BBL) and Rio Tinto (NYSE:RIO) REMAIN determined to grow production while cutting costs through economies of scale to drive higher cost producers out of the market

    Bottom line

    China's emergence as a global economic super power and the abrupt end to its catch-up growth phase has created a paradigm shift for the global economy and financial markets. It signifies the end of the greatest commodity boom of modern times and a fundamental shift in the growth drivers of the global economy, with the emerging markets growth model that had dominated global growth now seemingly broken. This means that investors need to become accustomed to significantly lower commodity prices that, with the exception of crude, now appear to be the new normal.

    (End of Public Internet Article - Did not see Author listed)

    GoldTrend Charts

    Short Term

    The next short term cycle turn is in play (Dec 10th - Plus or minus 72 hours).  Odds are 70% that a pullback comes in play either at the 1112 area (reached) or the 1122-1127 area.   IF we do get this pullback,  the 1072-1085 area should be a good support zone.  The next cycle turn is January 23rd (Plus or minus 72 hours).   Any close above 1112 after Wednesday would favor higher into the next cycle and 1st resistance would become 1122-1127.


    There is no doubt that gold likes January.   That is why if there is a pullback into the next short term cycle, odds favor it will be a good buying opportunity.   Any close above 1112 after Wednesday could warn of a cycle inversion and higher prices into the next blue cycle (Odds at 30%).  If we get the pullback, odds favor it will be a good trade opportunity.  If cycles play for us, then the final week of January into February should provide gold with upside.

    Gold's Longest Bear Markets

    The chart below shows the longest bear markets in gold.  If we do get a repeat,  we are still a year away from the low.   Keep in mind this chart is only a gauge for you to view the length of this current bear market and should not be considered a timing tool.  


    The accumulation of physical silver should be a strong consideration between 10 to 14 dollars per ounce.  I personally added some for my own physical holdings.   The maximum draw down should be the 2008 low at 8 dollars.   On a short term basis,  resistance is 14.40 - 14.60 and 16.25.   Support is 13.10-13.60.

    Stock Market

    The stock market is approaching a key support area, the 34 month moving average.  Since 1975, this is where the market either crashes or supports.   Odds favor a bounce is going to be attempted between 1815-1915 on the S&P.   Any weekly/Monthly close below 16000 on the Dow would favor much lower prices.  

  • 06 Jan 2016 12:06 AM | Bill Downey (Administrator)

    Gold Medium Term

    Long Term Trend ~ Bearish since Oct 2013 @ 1361

    Long term Moving averages 1230 – 1330

    Medium Term Trend ~bearish

    Moving Averages 1126-1147

    We have been calling for a low to develop in gold between Oct 2015 and June 2016. We are now in the window to turn the trend. Now price has to perform in order to complete the bottom. Until we get two monthly closes above the moving averages and that dual yellow downtrend line, the trend is still down. On the other hand, we have tested where there is three major support lines and we have just supported on our first RED LINE on the chart. Long term readers know those lines have been on this chart for over 5 years. Those red lines are the IDEAL price range for “the low” to occur. The first clue that the real “low” is in place would be for gold to get two monthly closes above the dual gold downtrend lines. Another clue will come when the BLUE moving averages close above the red average with price above both. In summary, price and time are finally coming together for the “low” to develop.

    Gold closed the year above the first red uptrend line. As long as we are above that line, it is possible to rally toward the dual yellow downtrend channel line into Mid-Frebruary.

  • 18 Dec 2015 2:59 PM | Bill Downey (Administrator)

    Gold is catching a bid today as the stock markets sell off again today.  At one point the NIKKI was down 1000 points as the BOJ disappointed and the Dow as well has had a huge selloff in the last two days.   Add the fact that the Chinese Yuan has been down for the last 10 days against the dollar.   Add the High Yield bond market collapse and you have most likely what is moving gold higher today.

    Gold Short term

    We have discussed that in order for gold to confirm higher prices on the short term, was to see a close above 1085.  That has yet to happen.  Also,  we said that gold must close above the blue moving average and as you can see below,  we have yet to do that as well.   We have said how important the 1072-1082 area is on a number of occasions this year and as you can see, this bounce from the end of November has not been able to make that an area of support as of this update.  Indeed, today's high was 1072.  As long as we remain below 1085 on a closing basis,  the short term trend remains down.  Resistance is 1072-1085.  Support is the 1033-1044 area and then the 1023 zone and 1006.   

    Gold Cycles

    The next short term cycle turn is due Dec 25th (plus or minus 72 hours).   If we can get another low into next week, it should set us up for a January-February bounce.

    Long term Gold

    On a long term basis, gold is fast approaching the ideal time and price points.  The 21st century uptrend line is the odds favored point for where the low will occur,  but we can't eliminate the 975-1040 area.   The time range for the low is Oct 2015-June 2016.  

    But more specifically, there are two spots we are looking for a gold low and that is either Dec 2015 or March 2016.  March 2016 is the ideal spot as gold will have completed a Fibonacci 55 month bear market.  The ideal price would be in the 850 area but like we said,  we can't eliminate the 975-1040 area. Suffice to say that the bear market is approaching its end in gold.


    As you can see commodities have retraced all the gains made from the 2008 crash.  If this was gold, price would be at 680.  So even though gold has looked weak, it is actually a lot stronger than it looks.   The inverse of that of course is that gold could have one final leg down from this 1050 area that would most likely remove the last of the perma bulls in gold.  

    Gold Weekly Price Chart

    On our weekly chart,  the three red lines below price is the ideal range from where the low should occur.  We have reached the first line and here again, we know we are getting closer and closer to the ideal bottom.  On the other side, gold must have two monthly closes above the dual yellow trend lines just above price in order to turn the trend from Bearish to Neutral and potentially bullish.  To really be bullish,  the blue moving average is also going to have to exceed the red moving average (along with price) and obtain two monthly closes with the blue average higher.   

    SIlver is also at a major crossroad in long term support.  A monthly close below 13 dollars would allow for further price drop,  but at this point in time,  the physical accumulation of silver should be higher considered at each dollar drop from here.  

    Interest Rates

    The real bubble is the bond markets of the world.  The 34 year move from 1947 to 1981 was for the most part growth oriented until the 60's. One can argue the move from 1975 to 1981 was one of panic and that's where gold had its move from 100 to 850.  We now have completed 34 years lower in rates and stand pretty much at HISTORIC LOWS.   Odds are high that the TREND is about to change.  This time odds favor its going to be panic that drives rates higher and if you think about it,  it looks like the FED is doing just that now.  Once the sell off begins in bonds, odds are high that a major liquidity squeeze will take place.  Its already happening now and that is WHY the US Dollar has undergone such a rally as it has.  Its the most liquid and deepest market on earth.  At some point in time, odds are high that gold is going to join the upside as well.  Gold for the most part rose thru all the higher rates into 1980.  With this low in rates now,  odds are high that gold will rise IF THE INTEREST RATE PANIC kicks in.  


    Odds favor that the final low in gold is not yet in.  Its not out of the question because we have reached the upper end of the price range and time range.  However the odds are still with gold being in its last leg down.  The best thing right now would be for gold to move lower to 850 into March 2016.  That would put high odds on the bear market in gold ending. 

    On a shorter term basis,  odds are high that a gold bounce should begin just before or after Christmas and lead to higher prices in January.  And then we'll see.

  • 14 Dec 2015 12:43 PM | Bill Downey (Administrator)

    Key Events In The Coming "Fed's First Hike In 9 Years" Week

    Submitted by Tyler Durden on 12/14/2015 09:22

    While this may well be the most important week for capital markets in the past 9 years, when the Fed is widely expected to hike rates on Wednesday, precisely 7 years to the day since it cut rates to zero, the week sets off with a quiet start today with just the Euro area industrial production reading due out this morning and nothing expected out of the US this afternoon.

    The focus on Tuesday morning will be in the UK where we get the November CPI/RPI/PPI docket. Euro area employment data and the German ZEW survey are also expected. Over in the US tomorrow afternoon, the November CPI print is the main focus (headline expected at 0.0% mom, core +0.2% mom), while average weekly earnings, empire manufacturing and the NAHB housing market index are also due.

    Wednesday is PMI day where we’ll get the December flash manufacturing, services and composite numbers for the Euro area, Germany and France. UK employment data is also due, along with the final reading for Euro area CPI. Over in the US on Wednesday the November housing starts and building permits data is due, along with industrial and manufacturing production, flash manufacturing PMI and also capacity utilization. The main focus will be the conclusion of the two-day FOMC meeting and Yellen press conference.

    Here is DB's quick summary of Wednesday' main event:

    This time last year we were convinced that the Fed wouldn't raise rates in 2015. We'll it looks like we'll be proved 15 days wrong. However with all that's going on in the world and with global nominal growth so low, it's hard for us to imagine they'll get very far in their hiking cycle. We suspect that the terminal funds rate will be lower than the market expects and certainly lower than the Fed expect. Assuming they do hike and that the US HY story doesn't escalate quickly and stop them in their tracks the main story will be how dovish they make the hike. It's hard to think they'll be hawkish given the current global uncertainty and the carnage in the $1.3tr US HY market.

    And here is BofA:

    Like the markets, we expect the Fed to raise interest rates by 25bp in December. We doubt the Fed will be able to satisfy expectations for a "dovish hike," however: the market has priced in just over two rate hikes next year and a much lower terminal rate. The FOMC is likely to stress a gradual pace of rate hikes and there may be dovish dissent. Yet we do not expect a significant decline in the dot plot or explicit forward guidance; the Fed will remain data dependent. Markets may selloff modestly on the announcement, but it should not trigger a sharp tightening of financial conditions.

    Unless, of course, as even Hilsenrath hinted, the Fed is merely hiking just so it has the green light to ease shortly thereafter, either back to ZIRP or to NIRP alongside even more QE.

    Early Thursday morning starts in Japan with the November trade numbers. That’s before we get the German IFO survey data and UK retail sales. In the US initial jobless claims, conference board’s leading index and the Philly Fed business outlook are all due. Closing out the week on Friday in Asia will be the latest China property price data and MNI business indicator reading along with the BoJ monetary policy decision.

    There’s nothing of note in the European session on Friday while in the US we’ll get the flash services and composite PMI’s, along with the Kansas City Fed manufacturing activity index. Fedspeak wise we’re due to hear from Lacker on Friday evening.

    Source: DB and BofA

    Short Term Gold

    The bottom line on short term gold is that we must close above 1085-1088 in order to see higher prices.   Resistance on the chart is at the blue moving average at 1076.  As you can see gold has NOT BEEN ABLE to overcome this key resistance.  There's also additional resistance just above the average at the midway trend line.  In summary, if we don't close above 1085-1088, then the downside potential for gold to year end remains a possibility.   

    Gold Cycles

    The other factor that is a concern is the gold cycles.   While inversions do happen 30% of the time,  that leaves the odds of this one going lower by 70% on the red cycle.  Part of the issue is that gold is now in the long term window (Oct 2015 - June 2016) to provide the final lows in gold and when that occurs, there will be a lot of volatility and as we saw on the week of August 17th (when the stock market big drop occurred) these cycles will have events that will occur and we can't expect the cycles to work at each occasion.   The good news is that the cycles do give us a very good indicator on the short term moves as to when peaks and bottoms occur.   Since it is a natural cycle, it will not disappear soon.    The next cycle is due December 25th (Plus or minus 72 hours).  The bottom line is that odds are beginning to favor lower prices into year end.  The FOMC interest rate decision will be this Wednesday.   Be prepared.

Technical Analysis :: Gold & Silver

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