Will the Gold Rally Continue Next Week? Look at This Chart

Gold had a strong week. And my Gold & Resource Trader subscribers added a new position after banking some gains on non-gold positions. But will this rally continue.

I could get into a long list of fundamentals about gold. But let's stick with a chart that may shed some light on the subject ...

(Updated chart)

Looking at this chart, you can see that gold tends to rally every six months. If gold follows the pattern it set previously, we can expect a rally to the $1,400 area. 

What happens there is hard to predict. I have my reasons for thinking the rally might continue. You'll have to do your own analysis.

My Recent Articles on Palladium, Shale, Nickel, Oil

Here are some recent articles I've written.

It's San Andreas' Fault

Excerpt:

Last week, the EIA said that it expects to release a new detailed estimate on the recoverable amount of oil from the Monterey Shale in California. You could hear jaws dropping all over the California oil patch when the EIA announced its preliminary findings. According to the EIA’s revised estimates, the Monterey Shale contains only about 600 million barrels of oil. That’s 96% less than the 13.7 billion barrels previously predicted.

In one stroke, the EIA put an end to California Dreamin’ about vast, new oil wealth. The EIA’s revision also slashed America’s total recoverable shale oil estimate by two-thirds. That’s because the Monterey Shale represents a huge part of America’s undeveloped shale oil deposits.

“Not all reserves are created equal,” EIA Administrator Adam Sieminski told reporters at the Financial Times and Energy Intelligence Oil & Gas Summit in New York. “It just turned out it’s harder to frack that reserve and get it out of the ground.”

It’s true things look bad. However, the EIA’s latest report is not the last word on this topic. Let’s take a brief look at the challenges facing drillers in the Monterey Shale, why the EIA changed its mind on how much oil can be recovered… and why I think they’ll change their minds AGAIN down the road.

The Rodney Dangerfield of Metals Gets Respect

Excerpt:

Palladium recently jumped to $830 an ounce. Soon, it could challenge its 2011 highs just above $860. And once it gets above that, I think we’ll easily see another 10% rally. But how about longer term?

So let’s take a look at three factors that are greatly affecting the palladium supply and demand picture.

The Nickel Supply Squeeze Is Just Getting Started

Excerpt:

... the supply/demand squeeze powering nickel's surge is likely to get stronger.
The biggest user of nickel is China. Nickel is used to make stainless steel, and China makes a lot of it. Stockpiles of nickel in China are falling. According to Deutsche Bank, China's nickel stockpile is now down to one month's supply, a drop of 26% in just a month.

A big supply crunch is coming for China.

What's more, the global nickel market will swing to a deficit of 132,200 tons next year from a surplus of 13,800 tons this year, according to Citigroup.

What will that do to prices? The price of nickel was recently $8.91 per pound, or $19,615 per metric ton. Citi forecasts nickel prices to rise to more than $30,000 per metric ton next year. That's a rise of more than 50%!

The Oil Boom Has Reached a Tipping Point

Excerpt:

U.S. exports of gasoline, diesel and other petroleum products jumped to a record 4.3 million barrels per day (bpd) at the end of last year, according to the Energy Information Administration (EIA). That's more than twice the 2.1 million bpd of petroleum products that the U.S. imported.

As a result, total U.S. net imports of energy declined last year to their lowest level in more than 20 years!

Updated US GDP Analysis -- Mind the Shrinkage

On May 5, I posted about US GDP. Back then, everyone was concerned about potential GDP shrinkage of 0.1%.  Turns out it was just revised today to a drop of 1%.

In fact, this was lower than the consensus estimate of a 0.5% decline.

We are hearing many excuses for the shrinkage. Many economists are blaming the weather.  In addition there was there was a drop in private inventories. And that certainly subtracted 1.62 percentage points from growth, way up from the 0.57 percentage points in the first estimate.

At the same time, personal consumption expenditures growth was revised slightly higher to 3.1% from 3.0%; however, that only bumped up the contribution to GDP to 2.09 percentage points from 2.05 percentage points.

Real final sales of domestic product, which excludes the change in inventories, rose just 0.6%.

Bottom line: First quarter economic activity was a disappointment that can't be explained away simply by the weather.

More importantly, how is the market taking the news? Quite well, actually, with stocks rallying and bond yields dropping like hot turds out of the wrong end of a horse.

Why is the market rallying? Because the shrinkage in GDP makes it less likely that the US Fed will stop the easy money party anytime soon. This is a theme I have been exploring with Gold & Resource Trader subscribers for the past two weeks, and we are investing accordingly.

Update on US Dollar Chart

I've been busy all month, and haven't had a chance to update the blog. My apologies.

On May 1, I posted a chart of the US Dollar Index, talking about the potential for the dollar to rally in May, as it has every May for the past 5 years.  I also had a story in FreeMarketCafe.com's Daily Grind that explained the Dollar's May rally effect in more detail. I called it "The Single Most Successful Investment in May."

Time for an updated chart ...

(updated chart)

So how does the US dollar perform in June ... or in the rest of the year? Here's a chart ...

Maybe it's time to bank those dollar profits, if you got 'em. 

One Reason GDP Came in Below Expectations

Some people were shocked by how low the U.S. Q1 GDP number was last week. It's not that surprising, considering how much of a drag austerity is ...

You can read an analysis of this HERE.

The good news is the recovery should continue to limp along.

Chart of New Highs Isn't Bearish

Twitter was abuzz with the view that the New Highs on the NYSE Composite stocks were falling off a cliff.  That's not true. 



(Updated chart)

In general, a stock index is deemed strong (bullish) when Net New Highs is positive, which means new highs exceed new lows. Conversely, a stock index is deemed weak (bearish) when Net New Highs is negative, which means new lows exceed new highs.

That said, I'm not bullish on stocks right now. In fact, to point out one example, the action in the Nasdaq-100 as tracked by the Powershares QQQ Trust (QQQs) was pretty bearish today, as it tried to retake its 50-day moving average and failed ... again.

(Updated chart)

We'll see if stocks can move from where they are now, which is stuck in the mud.

US Dollar at Support -- Will it Break Down or Bounce?

It's time to place your bets folks. The US dollar is at support ...

(Updated chart)

Over the past five years, the US dollar has rallied every May. Is that going to happen this time around? We'll see.  As for gold -- Dollar weakness isn't helping it. Maybe dollar strength will help.