The Economy And Gold/Silver Stocks/Metals
Since the recession of 2001 what fueled the now deceased multi-year economic upcycle was massive stimulus in the form of rock bottom interest rates and an easy credit stance at the Federal Reserve Bank, which led to a massive real estate and mortgage refinancing boom (housing affordability rose dramatically as mortgage rates plummeted, which led to huge home price increases), that went bust about a year ago. Credit cards were a major economic stimulus factor due to an easy lending policy at the Fed and at the banks the Fed lended to during the recent multi-year economic upcycle. Also, President Bush's massive tax cuts were another huge source of economic stimulus in recent years, as were massive budget deficits.
The bubble that occurred in 1999/2000 was a very long term upcycle peaking for the major averages (in March 2000, except for the Dow Jones Industrials, whose Secular Bull Market/very long term upcycle is peaking (probably) this year in rollover mode), and, was also a very long term economic upcycle peaking. Without the massive stimulus in recent years the US and much of the rest of the world would have been in a severe recession/depression. The Fed and the Bush Administration fought a severe economic bust with a huge amount of stimulus, and, despite 911, were able to manufacture a reasonably good multi-year economic upcycle. At what cost remains to be seen.
The precious metals sector does well in an inflationary rising interest rate economic upcycle, which explains why HUI/NEM/XAU enjoyed a Wave 1 Cyclical Bull Market from October 2000 for NEM/XAU/from November 2000 for HUI until January 31, 2006 for NEM/until May 11, 2006 for HUI/XAU.
Now however a multi-year economic downcycle is in effect, as evidenced by the weak +1.6% GDP growth (latest quarter) reported today versus the expected 2% growth, the -17.1% decline in residential housing construction in the latest quarter, the most in 15 years, and, the -9.7% year over year decline in home prices, which is the most in 36 years! This deflationary declining interest rate environment economic bust explains the precious metals/commodities sector collapse recently (HUI/XAU's Wave 2 Cyclical Bear Market that began on 5-11-06 and is now in Wave B up since 10-4-06).
The monthly cycle since 10-4-06 is the start of the 3-6 monthish Wave B up of HUI/XAU's Wave 2 Cyclical Bear Market since 5-11-06. NEM's Wave 2 Cyclical Bear Market that began on 1-31-06 ended on 10-4-06 at 39.84, so, reliable lead indicator NEM is probably in a 5 yearish Wave 3 Cyclical Bull Market since 10-4-06, see chart 3 at http://www.joefrocks.com/GoldStockCharts.html ........ http://www.JoeFRocks.com/
HUI NEM XAU
The bubble that occurred in 1999/2000 was a very long term upcycle peaking for the major averages (in March 2000, except for the Dow Jones Industrials, whose Secular Bull Market/very long term upcycle is peaking (probably) this year in rollover mode), and, was also a very long term economic upcycle peaking. Without the massive stimulus in recent years the US and much of the rest of the world would have been in a severe recession/depression. The Fed and the Bush Administration fought a severe economic bust with a huge amount of stimulus, and, despite 911, were able to manufacture a reasonably good multi-year economic upcycle. At what cost remains to be seen.
The precious metals sector does well in an inflationary rising interest rate economic upcycle, which explains why HUI/NEM/XAU enjoyed a Wave 1 Cyclical Bull Market from October 2000 for NEM/XAU/from November 2000 for HUI until January 31, 2006 for NEM/until May 11, 2006 for HUI/XAU.
Now however a multi-year economic downcycle is in effect, as evidenced by the weak +1.6% GDP growth (latest quarter) reported today versus the expected 2% growth, the -17.1% decline in residential housing construction in the latest quarter, the most in 15 years, and, the -9.7% year over year decline in home prices, which is the most in 36 years! This deflationary declining interest rate environment economic bust explains the precious metals/commodities sector collapse recently (HUI/XAU's Wave 2 Cyclical Bear Market that began on 5-11-06 and is now in Wave B up since 10-4-06).
The monthly cycle since 10-4-06 is the start of the 3-6 monthish Wave B up of HUI/XAU's Wave 2 Cyclical Bear Market since 5-11-06. NEM's Wave 2 Cyclical Bear Market that began on 1-31-06 ended on 10-4-06 at 39.84, so, reliable lead indicator NEM is probably in a 5 yearish Wave 3 Cyclical Bull Market since 10-4-06, see chart 3 at http://www.joefrocks.com/GoldStockCharts.html ........ http://www.JoeFRocks.com/
HUI NEM XAU
posted by Joe Ferrazzano at
10:02 AM
