Monday, October 4, 2010

Caution Is Again Advised

I remain cautious regarding moves higher in Precious Metals prices from here, despite Friday's extension of September gains in these markets. Both Silver and Gold were squeezed higher upon the release of news Friday regarding the continued strength in Chinese manufacturing.

China's Manufacturing Growing
BEIJING—China's manufacturing activity expanded in September and accelerated from the previous month, an official gauge showed Friday, adding to evidence that Chinese growth remains robust and that its slowdown from extraordinary growth rates earlier this year will be mild.

China's Purchasing Managers Index rose to 53.8 in September from 51.7 in August, the China Federation of Logistics and Purchasing, which issues the data with the National Bureau of Statistics, said in a statement.

A PMI reading above 50 indicates an expansion in manufacturing activity, while a reading below 50 indicates contraction.

"The continuing rise in the September PMI indicates that the process of economic growth adjusting downward from a high level has already moderated," said CFLP analyst Zhang Liqun in a note. "Economic growth will shift from being supported by stimulus policies to being supported by market forces."

The Chinese economy continues to confound the Western financial market pundits. This news will no doubt add fuel to the US Congress' push to punish China for keeping it's currency weak, and supposedly stealing jobs from America because of it.

When will these clowns in the US Congress come to the realization that American jobs left the country because of their endless government regulations and rising taxes? American business are in business to make money, not fund the US Treasury.

It is not the responsibility of the US Government to create jobs. that is the job of the PRIVATE business man. This is the foundation of capitalism. The US Government has worked overtime to destroy the private sector base of our economy, and has decide to blame the Chinese for it's own mistakes instead of getting off American business' back.

The Precious Metals have not followed thru higher on Friday's squeeze in prices, and I suspect this head fake could signal the end of this tired leg up in these markets. The Precious Metals are NOWHERE NEAR A TOP, and "the bubble" is not about to burst. No markets go straight up, and a rest here in Silver and Gold would not only be welcome, but constructive to prices moving forward this Fall. Whether we see a correction in prices, and a retest of recent breakouts, or a consolidation in prices remains to be seen. Either scenario should NOT shake you off this Precious Metals Bull, but could offer some excellent trading opportunities over the next few weeks.

Investors, as always, be right and sit tight...or add to your positions at support.

Gold Report 9-30-2010
By Ira Epstein
A rally in the Dollar could initially bring with it a down draft in gold prices over the short term. Longer term, I view price breaks as buying opportunities.

What bothers me is that practically everywhere I turn I see recommendations from trade advisors to get into gold, for investors to have a portion of their portfolio in gold and so on. While the advice is good, seeing so much of it take place at new all time highs has me concerned.

It’s important to remember that markets can and do correct. Few go in straight lines, gold included.

A popular seasonal play I mentioned in past reports was to go long in early to mid September and be out on October 1st. That idea worked out nicely, given where prices are as I write this report.

Below is a Seasonal Chart of Gold prices produced and provided by Moore Research Center, Inc, ( In my last report I wrote about gold’s tendency to see prices turn up in mid to late August and run up in the fall. Last week I mentioned that September 10th began another seasonal time frame for a run up in prices.

Gold has followed its historical pattern.

Now gold may be ready to correct before beginning another up leg, late this year.

I welcome a price break as I think it offers those not involved yet in gold, a possible entry point at lower prices.

On the WEEKLY charts both Gold and Silver remain strong in their respective accents to higher prices. It would take major corrections in both to negate the current bullish posture in the markets. However, on the daily charts, and with respect to the seasonal charts in both Gold and Silver, a rest for the bull is warranted. The month of October is annually a weak one for both metals. However, with respect to the ongoing global financial fiasco, seasonal patterns may not be as reliable an indicator of strength or weakness in these markets. BUT, they must be respected. Particularly when the daily chart technicals warn of a pending change in the "daily" trend.

In today's economic news we get more of the same: deceitful headlines.

Top Stories
Pending Home Sales Rise 4.3 Percent in August- AP
The number of people who signed contracts to buy homes rose in August for the second straight month but remained far below last year's pace. The weak economy and fears that prices will fall are keeping many consumers away from the housing market.

August factory orders decline 0.5 percent- AP

Regarding the pending home slaes number, it is important to note that July's number was revised DOWN 0.7% to make August's number appear better than it actually was. Yes, the pending home sales numbers still stink compared to a year ago. Just pointing out how they continue to polish these turds and expect the public to accept them as Baby Ruth bars.

In light of Friday's Chinese manufacturing report, today's August factory orders number for the US should be hidden as a global embarrassment.

Stay on your toes this week folks. Opportunity may be knocking along with sales prices on the Precious Metals.

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