This Week’s Commentary – February 9, 2008 – Time to Start Playing Again?

I have very little to say this week, because, market-wise, very little happened this week.

(Lots happened this week. My plane flight got cancelled on Wednesday due to the weather, and I had the pleasure of spending eight hours in a car in a blizzard that evening to get to my destination. However, that has nothing to do with the market, except, as my wife pointed out, “you can’t predict the weather or the market”, but I digress).

Here’s what I think: very little happened this week.

There was no crash, which is good news. Does that mean we have retested the lows and we are putting in a base? Perhaps, but it’s too early to tell.

As this chart for FRG.TO – Fronteer Development Group Inc. shows, we are back down to the August and September lows, and the RSI and MACD are at buying levels, but until the chart starts to turn up, buying may be premature at these levels.

(A quick glance at the chart of the spot price of uranium on the right hand side of this page shows a similar pattern).

The gold stocks look more promising (and yes, I realize that Fronteer is both a uranium and a gold play).

This chart of K.TO – Kinross Gold Corp. shows a pullback to the line joining the September and January lows, which appear to be holding. (Of course you could draw the line off the December lows as well, which shows that we are well above the uptrend line). The RSI and MACD levels are also favourable.

My conclusion? Gold appears to have paused, and is now resuming it’s upward trend.

It would appear that once a new high is made, which could be anytime, the run to $1,000 per ounce will be fairly quick. $1,000 is a psychologically important level; when gold makes $1,000, it will be on the front page of every newspaper, the public will wake up, and start buying, which probably drives the price to $1,200 fairly quickly, by which time we will have taken profits.

As an aside, it would appear that in the U.S. the Democrats will win the White House on a “change” platform, and once in they will reduce war spending, but only marginally, but they will significantly increase health care and other spending, which will continue the dollar’s decline, and will be good for gold.

Therefore, I will probably be increasing my gold and silver holdings this week, since I’m sitting on lots of cash at the moment.

I was down 7.6% on the year last week, now I’m down 8.2%, but I remain 64% in cash at the moment, and I suspect some of that cash will get used this week.

Thanks for reading, and please continue to post your thoughts on the Buy High Sell Higher Forum.