-- Posted 4 April, 2007 | | Source: SilverSeek.com
Wait, hold on! This chart may appear busy, but it just needs a little explanation. Actually you commodity hacks should find it fascinating.
The red trend line depicts the number of barrels of oil it takes at any time to buy an ounce of gold. I recall a couple of years ago we gold bugs were all afluff how cheap gold was getting in oil terms. Back in '05 you get gold for about 6 1/2 barrels. Today it'll cost you over ten. Back in January you get nearly 12 barrels for an ounce.
Y'all know by this time I use the weekly MACD & SlowSTO as two of my primary indicators, so from now on I'm not going to belabor you anymore about what they are. At this point in the cycle we're beyond the preliminaries; you can find out for yourself.
You should study this chart on your own without any prompting. One new feature: Bollinger Bands. They are the blue wavy lines with a dotted line running between the two boundary lines. The Ratio (red line) meanders between them.
The MACD bars have yet to turn up and the SlowSTO has yet to have a crossover. They already have on a daily chart, but using weeklies as I do, I feel is safer.
For the kicker, I've added the silver price (green dotted line). For a while the silver price seemed to travel right along at the Bollinger Band's middle line, but NEVER since Sep '05 has it gone below it! That's one observation. Not sure it means anything. But one thing I see that does seem meaningful: when the red Ratio line approaches the upper Bollinger boundary (blue line) it's time to expect a correction in silver at any time. Along with charting silver (gold) MACDs and SlowSTOs independently, watch the Ratio indicators for a reversal as well. You can never have too many correlations. When we see that weekly MACD & SlowSTO reversals, silver will begin to punch sharply higher - - if not already as indicated by the daily chart.
You see, we're not talking prices here, but relative values. We're going on nearly two years now where oil has been depreciating in precious metals terms. How much longer do you think OPEC or any other producer of anything will go on accepting exchange mediums (paper money) that are not rewarding the producers for their loss in natural resources and weakening national security? All paper monies have lost the required characteristic of being a store of value. For now the US$ is still fungible ("a dollar is a dollar is a dollar..."). But, it, and other paper is only accepted as exchange because the recipient knows he can pass it along for things he needs. (Those central bank dollar hoards must be a cancer overlayed on an ulcer for financial leaders). The problem becoming apparent now is that the recipient is in need of more and more of that same paper to replenish his own stocks of what he needs.
What does a worker do when he can't wrangle more of the paper from his employer that he needs to replenish his stocks of food and board? He works less, that's what he does. When he realizes it's not worth the hassle he'll go on the dole or depend on family for his support. Why do you think the savings rate now in America is a minus .1%? Government spending will get larger and the number of bureaucrats to administer those programs will grow. More votes for more benefits.
Money that's in commodities will stay there. It'll just slosh between one current fad and another, but investors will begin keeping their reserves in gold and silver. As newcomers to commodities will be looking to hedge the value of their savings, they'll go to what's outperforming all others, and that will be gold and silver. Those people's lives will never be the same thereafter.
Especially the Chinese.
Sarasoti, an exhausted but proud Chhetrini, pauses from pounding grain. In addition to beaded necklaces from trading trips in India, silver coins from
British-ruled India, fashioned by kamis, the blacksmith caste of Humla, adorn
her chest.
-- Posted 4 April, 2007 | |
