In this update...

- Editorial: Final Bottom Coming
- Gold & Silver Analysis
- Premium Sample


Editorial

Editorial: Final Bottom Coming in Gold Stocks

The gold stocks are on the cusp of a potential major double bottom. In this article we show the similarities between the potential 2012-2013 double bottom and the 2004-2005 double bottom. Also, we note the major trendline support which connnects the 2000 and 2008 lows. On a daily closing basis the line comes in near 350. On a weekly closing basis the line comes in near 385. The HUI's May 2012 closing low was 375. Friday's close was 400.

So we could see another 5-12% downside. I'd bet on the double bottom but don't rule out a move to new lows which freaks everyone out yet only to reverse course at 375. Also note that when viewing a long-term chart, there isn't much difference between 350 and 375.

In any event, pay attention to how oversold the gold stocks get and how they open and close the trading day. This is in context of the support at 375. I always like to see the gold stocks approach strong support in a very oversold state. Back in May 2012, the HUI declined from 402 to 375 in just two days! The market was already in an oversold state and then declined 7% in two days while reaching strong support. We'll see what happens this time around...

Gold & Silver

Gold remains in a tight range (on the weekly chart) between $1650 and $1700. Further support sits at $1630. A break of $1700 and we go to $1800. The problem is I don't see a higher move in Gold until we get a bottom in the gold stocks.

Silver is holding up better than Gold. It has strong support at $29-$30 and is trying to push through $32. A break there would lead to $34-$35. However, the silver stocks have performed quite poorly lately.

Premium Sample

We didn't do any buying last week but figure there is a much better chance of that this week. We are waiting for that final dump and test of the aforementioned major support. In TDG #291 we provided a few comments on most of our holdings as well as some on our watch list. We also updated our report on an exploration company which has corrected but fundamentally remains very strong. We noted the preferred price range for buying.

With the sector in a drawn out consolidation, the objective is to accumulate preferred positions at a discount. It is hard to do. Many times I've jumped on board thinking a breakout was coming, only to be wrong. And many times I've failed to buy at the low, thinking there was 10-20% more downside. Here we are at one of those times again. You have to buy companies with strong fundamentals. The most important fundamental is cash in the bank and/or cash flow growth. Cash hedges your risk and cash flow growth is what the market wants.

Earlier today we put out Global #24 (our add-on service which covers commodities, bonds, emerging markets, etc. We believe the US equity market is flashing warning signs but has more upside left. The internals are strong but sentiment is now too bullish as professionals are essentially all-in on stocks. Now they are trying to get everyone else to increase positions so they can then distribute their positions, lock in gains and avoid the coming cyclical bear market. As for upside, our inital target for the S&P is 1575-1600.

This week we will get back to precious metals analysis exclusively. We are planning on producing a new report on how to construct and manage a precious metals portfolio (with metals & shares) as well as a watch list update and further critical analysis of our positions. If you haven't considered a subscription, then click the link below to learn more. Now is a great time to subscribe.

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Wishing you good health and profits,

-Jordan

Disclaimer: Sponsor Companies are paid sponsor companies of TheDailyGold.com website and this free newsletter. Do not construe sponsorship with a recommendation. We are not a registered investment advisor and information and analysis provided is for informational and educational purposes only. This newsletter is intended for informational and educational purposes only and should not be considered investment advice. The author is not a registered investment advisor. You should consult with an investment advisor and due your own due diligence.