UPDATE - GOLD, PLATINUM

my earlier hunch that USD may not fall further turns out to be partly correct at least for now, it may still be true overall, read on.

GBP and Euro are getting no where but AUD rebounded strongly [still it hasnt hit new high]. iron ore prices rose 65% this year on agreement between mining companies and major steel producers which lead to the runup of AUD.

you can now look at the charts above for the outlook of gold and platinum. the shangahi composite index SCI chart serves as guidance on how fast the runup in gold prices will lead to at least a short term peak. the fall will also be drastic.

the sci is about 1000 mid 2005 and hit 2000 nov 2006 [about 17 mths], then it hit 4000 mar07 [just 4 months, incredible breakout], then another 6 months it almost hit 6000. what are all these telling us, shanghai stock market [a closed one] is not as mature as the gold market, so it went crazy once it broke out.

now look at platinum, in about one year it rose from 1200 to 2100 almost 900 and percentage wise 75%. there are shortages, but also speculation, the final 600 rise in only 2 months. this is short squeezing no matter what fundamentals.

gold is also in a similar shape, it is worst. if it once hit 1000 above, it will correct sharply. the contrast with platinum is it is pure financial play since industrial use is not a great demand. the all time low 335 for platinum and 252 for gold happened roughly about the same time. the ratio at that time is 1.32 much less than the current 2 - reasons: platinum has a lot of industrial uses and demand supply is much tighter.

both gold and platinum charts point to excessive speculation and will hit a wall soon, it will then correct sharply which will hit AUD.

UPDATE

A lot of readers ask questions like when will this or that happen. The truth is I dont know. I only interpret the happenings from the chart given the circumstances. Most of the time they are correct and they happened within the time frame I mentioned. However, there are always exceptions like acts of god - a good case in point is the lengthy snow storm in China. It may disrupt certain chart patterns or delay or accelerate the forecasted happenings.

It is important to be patient in order to bear out the truth especially when you are waiting for a pattern formation. Sometimes a multi top chart takes longer than expected to form and break out. Go back in this blog and check out the chart related to HSBC - it first formed a head/shoulder chart with target to hit 132, but it went back straight up and almost retried the old high then formed another multi top chart with target 110. Both targets got hit but each has a very different outlook right after it was hit.

The reasons that I wrote in detail is to tell layman investors to be patient and when you sense something, wait for a pattern to be formed or about to be formed and take the necessary actions instead of trying to be god to foretell all events coming which is impossible.

Now comes the big part.

There are some strange observations recently, thus I sense something is coming along, but not on very solid grounds so you have to watch carefully the charts to be able to tell whether my hunch is correct.

Observations:

• AUD old high is about 94 to USD, given the USD rate cuts and AUD rate increase, why hasnt it reached new high?
• GBP fell a lot from it's recent high of 199 not to mention that the old high above 2 is very far fetch;
  
• EUR has maintained their rates still it didnt reach it's old high after fed rate cuts;
  
• Crude never even retry 95 or above after hitting 100, it rallies on news that weather will get cold in North Amercia shortly;
  
• GOLD is actually falling [hit 918 fell back to 860] before the rate cuts but reached new high of 933 only to fall back to 890, but it managed to ride high again after crude oil resume a rally up towards 92.

What are all these telling us, my hunch "pure hunch" is that the USD money supply is contracting and fast, so every time some +ve news such as rate cuts and fiscal spending like tax rebates are announced, the currencies above or gold or crude oil reacted on the news but cant reach their old highs.

Therefore my predictions are that, oil rally will falter hitting gold along the way and also currencies will fall against the USD before it can rally back up if it will. GBP is the weakest, EUR will rally back up after hitting 130-135 so will AUD.

The charts will take a little bit longer to confirm the above if they ever will.