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Gold and Silver Parabola Update

Stewart Thomson
May 11, 2010

1. Michael Crook from Barclays Wealth (Transfer) Management says he knows gold is going to $800. That’s an interesting name he has, “Mr. Crook”. The Crook argues that after all the liquidity has been extracted from the system, the fair price for gold is $800.

2. That’s like saying that as 100 nuclear bombers fly towards their targeted cities, “after all the radiation is gone I expect the cities to do well, that’s my prediction”.

3. Sorry Mr. Crook, but here’s my message to you: quantitative easing is not ending, liquidity is not being extracted. QE is being ramped up, and exponentially. The Crook apparently is based in England, which in my view is the leading candidate to take centre stage next, in the great global govt paper money crisis. I hope he’s prepared, because if the pound takes the kind of beating against gold that I think it can, I would suggest that the Crook might want to consider leaving town, before a lynch mob of enraged clients, clutching nothing but burning toilet paper money, come looking for him. Bottom Line:

4. The Gold Punisher is on the warpath. Are You Prepared?

5. I’ve spoken repeatedly about being equally prepared to handle yourself at gold $700 and $1400 pricing. We’re closer to the latter now. What if Mr. Crook and the rest of the wealth transfer agents turn out of be correct in their gold price “prediction”? The answer is that you want to be a buyer of gold at $1100, $1000, $900, $800, $700, $600, $500, $400, $300, $200, $100, and $1. Whether price actually goes to any of those prices, we can’t know. All we can do is hold the cash necessarily to be able to act if we are lucky enough to see lower prices.

6. The Crookster, and other annoying gold bear flies, will always be buzzing around your bullion. They operate on fear-mongering. The banksters operate these fly-puppets to create mindsets of fear, and they are phenomenally successful at the game. “What if ABC happens, you could be wiped out, sell everything now!” is always the bottom line of their “analysis”. There are never any tactics to actually buy into their targeted lower prices, just a “sell now before it’s too late!” rant chant.

7. Take out a piece of your gold bullion and take a hard look at it. Does it look any different since the Crook made his statement? No. Bullion is bullion. Flies are flies.

8. Now, let’s look at some facts: Here’s the weekly gold chart. I want to you to look VERY carefully at RSI, Relative Strength Index. Gold Weekly Chart Highlighting RSI

9. While a price advance can end at any time, the history of this gold bull market has mostly seen RSI go to “extreme overbought” (well above 70 on the RSI) before each intermediate decline occurs.

10. The one exception was the decline from 1000 to 860. I advised booking profit into that 1000 point on price strength in a pyramid formation, and buying into 860 the exact same way. That’s clearly documented. I called 860 the likely right shoulder of the mega bull h&s continuation pattern, which is exactly what it developed into.

11. The short term Stochastics on the weekly gold chart is severely overbought, but that’s normal action not only during a big surge, but leading up to it. David Morgan has noted that metals can gain 90% of their total price appreciation in the last 10% in time in a bull market. That’s true, and it applies to intermediate trends as well. Gold could “supersprout” towards 1400 before any intermediate decline occurs.

12. The other major oscillators on the weekly chart are all on buy signals. Will gold blast thru 1225? The answer is of course yes it will, and perhaps today, sending the gold bear flies back to the closet to bury their latest failed predictions, and start with a fresh set of new top calls. Some of these gold bear fruitloops actually represent metals dealers, and seem to get off on terrifying their own customers, rather than thanking them for their business. Don’t bite the hand that feeds, or it may come back to haunt you, like a firestorm.

13. At a minimum, 1215 is within reach today. So is my flyswatter, and it’s got various gold bear fly names engraved on it. Here’s a look at the GDXJ. Looks very very solid.
GDXJ Gold Juniors Power Chart

14. What you are looking at is a chart with relative strength rising up from a pullback to the 50 marker, and all the oscillators hooking into buy signals. I predicted in January that the global theme for 2010 is: The Gold Punisher. Soon Queen Gold is going to turn her wrath on the gold-stock bashers, in a very big way. Gold stocks, and particularly gold juniors, handled the Dow Meltorama last week extremely well. As I write this, gold is about 1209 and the Dow futures are down about 100 points. This is NOT 2008. It’s 2010, the year of the Gold Punisher. Those living their financial lives today like it is 2008, will be financially obliterated again. That is the only similarity between now and 2008.

15. With each passing day, gold stocks are breaking their asset-destruction link to the Dow, and tightening their link to gold bullion. It is an ever-more leveraged link, as the hedging programs are wound down and even eliminated. The gold community’s wiener prediction that Barrick would blow up on their hedging program, has done the way of the do-do bird, as the banksters simply billed the $5billion tab to new shareholders with a stock issue, while banking the other side of the trade, 5 billion dollars, for themselves. Today is another test day, one I believe gold stocks will pass. Down Dow, Up Gold Bullion, Down Gold Juniors is morphing into: Down Dow, Up Gold Bullion, Gold Juniors Super Sprout!

16. Remember that the transition is not an event. It’s a process.

17. Here’s the weekly chart for GDX, going back to the early part of the bull market. The gold wiener patrol wants you to believe there is a “non-confirmation” between gold stocks and gold. WRONG. There’s a TRANSITION between gold stocks following the Dow, which is far from making a new high, to following gold. My gold glass is half full while the wiener patrol’s glass is all-empty. What’s yours?

18. GDX Weekly Chart Launch Pad's Major HSR Line If price goes over 57, you better make sure you are glued into your gold stock rocket seats, because the adrenaline you’re going to feel is going to power that rocket alone. Notice where I drew the blue arrows too, and notice they are blue, not red. The bears are slowly building their own coffins while the banksters laugh hysterically. If the DOW joins the hyperinflation party, those blue arrows, on the GDX chart screen, could become a tiny blip!

19. What of the Dow? Team Shorty Pants found the banksters declared the 900 dow point rout “an accident”, and many couldn’t book profit except at prices 600 pts off the lows! Many put their shorts on after price started down, so they actually lost on the deal. Gold marched higher. Use Dow weakness to accumulate Dow longs –modestly- as an asset, not to play top calling wiener.

20. By yesterday the Dow had retraced all its losses, totally demoralizing what remained of team Dow Shorty Pants. I booked profit on my modest Dow shorting program into the weakness, and remain focused on buying the Chinese mkt as a play on the greatest industrial revolution in the history of the world, not on this or that Asian mini boom or micro bust. I handled a 70% decline in the FXI profitably, so the banksters’ current game of calling the 21% decline a “bear market” is not a concern. Buy the major markets on weakness if you own nothing, trading a portion into strength.

21. Here’s a look at the Dow, the weekly chart also extending back to the early part of the gold bull market.
Key Dow Gridlines Chart

22. The May-Oct period is typically the “weak season” for the Dow, and Aug-Oct is hurricane season. But if you want to be a real Dow player, you need to get on the field, and focus-only- on the gridlines. All that matters is where YOU are, not where the Dow might be going. You must have your capital allocated so you can respond with buy and sell action at all those gridlines.

23. You can tweak the gridlines, but don’t ignore them, or the banksters will give you the same lesson they just gave team Shorty Pants. A number of people in the gold community predicted the crash and deserve major kudos. Unfortunately, the major issue at hand isn’t whether your guru was correct or not. The issue, if you shorted it, is whether you booked profit or not. If not, why not?

24. Subscriber GoldLion, who is the greatest gold juniors trader in the gold community and the world, and recently laid out an upside Gold Gridline to $1400, routinely books 100 wins a week in gold juniors stocks using my pyramid generator. He has committed to a monster silver buy program into $14, which he completed, and has been extending his sell points, eyeing an incredible $33 an ounce for this coming intermediate move. Silver is not a replacement for gold. You don’t need much, but you have something in silver, here and now, that you don’t have with gold and that is: The Silver Gridline. The high for silver in 1980 was $52.50 by some counts, $54 an ounce using the highest point reached on the futures contracts. With Gold, we’re in new high territory, and gridlines are theoretical, not historical, except for the inflation-adjust chart, which does have value. With silver, you have historical actual silver horizontal support and resistance gridlines, an HSR roadmap if you will, all the way to basically $50 an ounce!


May 11, 2010
Stewart Thomson
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