Contents

Introduction GoldWaveAnalysis

Volume2,Issue41,08December2011
www.globalspeculator.com.au

SOMETHINGISABOUTTOGIVE
Lastissuewediscussedtheneedforthegeneralmarketstobecomeheavily oversold before we get the next meaningful rally in gold stocks. At present, youreallydogetthefeelingthingsarefragile.Itwouldnttakemuchtospark the next major sell off. Many market participants presently share this view. Contrarians might argue that this is a sign that a major reversal higher is imminent.I foronedisagree. ThefirsttwochartsbelowlookattheDowJonesIndexandtheAustralianAll OrdinariesIndex.AsIseeit,wearepresentlyinawave2rallyhigherwhichis starting to look a little long in the tooth. Government and Central Bank interventionistryingdesperatelytoholdthingstogether,butthecollapsethey arefightingdoggedlytoavoidseemsinevitable.Theyrehope,ofcourse,isto waterdowntheeffects makingthingsmorepalatable. As wetouched onlastissue,thepastmajorcorrectionsinthemarkets(blue circles) have all ended in deeply oversold territory (weekly RSI sub 25). Its difficulttoseethisoccasionplayingoutdifferently.Thetopsectionofourtwo chartslooksattheXAUandtheAPIrespectively.Bothindexes,whilstcloseto record highs, remain vulnerable. Despite reasonable fundamentals, gold mining companies trade on the same exchanges as everything else. As markets tumble they become guilty by association. Nothing scares a market participantmore than the drying up of liquidity and the inability to get a fair price. Most prefer to sell rather than hold on. Fear often trumps strong fundamentals. Forthe XAU,my guess is 150170 looms large as a potential downsidesupporttarget.FortheAPI,Ihavedrawnapotentiallineinthesand at750. AsfortheDowJonesandAllOrdinariesindexes,wehavedownsidetargetsof 9,600and3,300respectively.Fromthesedeeplyoversoldlevels,Ithinkboth theXAUandAPIwillhavethepotentialtodoubleinveryquicktimeasmoney reentersthegoldsector.Myguessisboththegoldpriceandgoldshareswill likelymakenewhighstowardsthesecondhalfof2012. ThethirdchartbelowisourCOTreportwhichanalyzesthecommercialopen interestinthefuturesmarket.Thenetcommercialshortpositioncontinuesto make its way lower, consistent with a consolidation in the gold price. We briefly enteredthe bullish green zone which saw the gold price rallyback up towards US$1,800/oz (a to b rally: see Gold Wave Analysis section). My feelingiswewillseeasecondmorepronouncedmoveintothiszone,marking the completion of this consolidation. It is more than likely to occur in conjunctionwiththenextwavelowerinthemarkets.

XAUAnalysis

APIAnalysis AustralianTheoretical GoldPriceUpdate ClosingComments Disclaimer

AssociatedSponsors

TheGlobalSpeculator

Volume1,Issue4,5June2006

Volume2,Issue41,08December2011
www.globalspeculator.com.au

DowJonesversustheXAU

TheGlobalSpeculator

Volume1,Issue4,5June2006

Volume2,Issue41,08December2011
www.globalspeculator.com.au

AllOrdinariesversustheAPI

TheGlobalSpeculator

Volume1,Issue4,5June2006

Volume2,Issue41,08December2011
www.globalspeculator.com.au

COTReport

TheGlobalSpeculator

Volume1,Issue4,5June2006

Volume2,Issue41,08December2011
www.globalspeculator.com.au

GoldWaveAnalysisUpdate

COMMENTARY
Last issue (Sep 2011): If our recent highs are in fact a temporary peak, my feeling is we could now see another more conventional consolidationphasefor the metalwithperhapsa trading rangeofUS$1,500 US$1,800/oz. I see this occurring within the current corrective phase of the markets which could see a marketbottomputinbyOctober/November. Whetherwemayormaynothaveseenamarketbottomputin,thegoldpricehasbeenconsolidatingmoreorless within our range. Again we are looking for the primary a, b, c pattern to mark our consolidation low. By my reckoning, wemayhaverecentlyputintheatobrallyandarenowawaitingthebtoccorrection,possiblytaking usbackdowntotheUS$1,550US$1,600level.Thiswouldmorethanlikelyoccurinconjunctionwithasharpfall in the main stream markets. If the fall is particularly severe and we see the 10,000 level taken out for the Dow Jones, we may even see the gold price briefly correct down to US$1,300 US$1,400. This would present a wonderfulbuyingopportunity. Inthisissue,wehavealsoincludedtheXAUtodemonstratethea,b,cpatternitalsotendstofollow.Ifthegold pricehascommenceditsbtoccorrection,IwouldexpecttheXAUtocorrectbackdowntowardsthe170level.If thefallinthegoldpriceandgeneralmarketsismoresevere,thenwemayseesupporttestedat130150.

TheGlobalSpeculator

Volume1,Issue4,5June2006

Volume2,Issue41,08December2011
www.globalspeculator.com.au

XAU
ThechartbelowhighlightskeypointsintimewhentheXAUisoverbought(RSI35)andoversold(RSI70),relative togold(oppositetoourusualunderstandingofRSI).Oncetherespectiveindicatorstrigger (blueverticallines),it then becomes a task of following trends in the ratio looking for definitive breaks to signify entry (green vertical lines) and exit (red vertical lines) points for gold stocks. The gold price wave analysis above helps us get our bearings. Our last definitive buy signals were in November and December 2008 (during the GFC) and we unfortunately never saw a definitive overbought indication (RSI less than 35) although one came very close to occurring in March 2011 (our Australian analysis below got a definitive breakdown). This period has seen gold th stocksrally119%alongwiththegoldpricewhichisup92%throughtothe11 ofMarch2011.Sincethen,wehave had the usual outperformance of the gold price which has beaten gold stocks by 33%. We are now awaiting an entrysignaltopointouttheidealtimetobecomeoverweightingoldstocksonceagain.

GOLD/XAU LONGTERMPICTURE

TheGlobalSpeculator

Volume1,Issue4,5June2006

Volume2,Issue41,08December2011
www.globalspeculator.com.au

GOLDXAU RATIO
Extreme KeyDates 30/08/2002 23/12/2003 20/08/2004 03/03/2006 28/11/2008 11/03/2011 Current (05/12/11) Gold/XAU 4.50 3.94 4.29 4.12 8.02 6.83 8.65 XAU 69 104 95 137 102 223 201 XAU Performance 10% 51% 9% 44% 26% 119% 9% Gold Price 313 409 411 565 815 1,412 1,744 Gold Performance 3% 31% 0% 37% 44% 73% 24% Net Position 7% 20% 9% 7% 70% 46% 33%

GOLD/XAU INTERMEDIATE TERM

TheGlobalSpeculator

Volume1,Issue4,5June2006

Volume2,Issue41,08December2011
www.globalspeculator.com.au

COMMENTARY
Goldstockscontinuetobeinaholdingpatternawaitingdirectionfromthemainstreammarkets.TheGold/XAUratiois effectivelytradinginarangebetween8and9.Abreakthrough8wouldbebullishandpotentiallysignalthebeginning ofthenextsubstantialrallyingoldstocks.Amovethrough9 wouldbebearishandsignal shorttointermediateterm pain.Thebestpartaboutusingthisindicatoristhereisnobias.Whilstmyoutlookremainsfirmlynegative(Iexpect9 tobetakenout),adefinitivebreakthroughthe8levelwouldforcemetoreassessmyoutlook.Itwouldsuggesttome thepossibilityofastrongintermediatetermrallyintheXAUtonewhighs(say270280).Youcertainlycouldntrulethis outanditwouldbeconsistentwiththeviewsofcontrarianswhofeelthereisfartoomuchnegativityoutthere.Wewill followthisintriguingbattleoverthecomingweeksandmonths.

AUSTRALIANPRODUCERSINDEX (API)
TheAustralianGoldProducersIndexhasaconsistentformattothatoftheXAU.Therelativestrengthcomparisonis with a USD gold price instead of an Australian dollar gold price. This is because Australian gold shares tend to be influencedmorebytheUSDgoldprice.

GOLD(USD)/API LONGTERMPICTURE

TheGlobalSpeculator

Volume1,Issue4,5June2006

Volume2,Issue41,08December2011
www.globalspeculator.com.au

GOLD(USD) APIRELATIVEAMOUNT
Extreme KeyDates 25/07/2003 17/10/2003 08/07/2005 17/02/2006 19/12/2008 28/01/2011 Current (06/12/11) Gold/API 2.39 1.97 2.14 1.27 2.30 1.45 1.63 API 152 188 198 435 363 907 1,045 24% 5% 120% 16% 150% 15% API Performance Gold Price 363 370 424 552 836 1,319 1,708 2% 14% 30% 51% 58% 30% 22% 9% 90% 35% 92% 15% Gold Performance Net Position

GOLD(USD)/API INTERMEDIATETERM

TheGlobalSpeculator

Volume1,Issue4,5June2006

Volume2,Issue41,08December2011
www.globalspeculator.com.au

COMMENTARY
LastIssue(Sep2011): Istillthinktheindexisdueacorrectionbeforewegetourgoldstockbuysignal.IfthedropisshallowIwould expect850tohold.Ifthegoldpricedoesntfairsowell,Iwouldexpectthenextlevelofsupporttobe750.We willcontinuetomonitortheAPI/Goldratioforcluesofapotentialmajorrallyingoldstockswheretheshares outperformthemetal.Wehavealreadyhitthegoldoverbought/goldsharesoversoldRSIlevel(RSI70)twice signalingwearegettingcloser. Wehadasharpfall toaslowas892beforetheAPIralliedbackstronglytoover1,050.TheAussiegoldsectorhas beenverytrickytoread.ThechartoftheAPIismuchstrongerthantheXAUandispresentlyformingasymmetrical triangle,indicatinganundecidedmarket.TheGold/APIratiohasbrokeninabullishfashionsignalingfuturestrength.If thisweretocontinuefallingandbreakthenexttrendlineatabout1.6,coincidingwiththeAPIbreakingupoutofthe triangle,thiswouldprovidefurtherconfirmationofthebullishintermediatetermtrend.GivenmybearishbiasIremain cautious.

TheGlobalSpeculator

Volume1,Issue4,5June2006

10

Volume2,Issue41,08December2011
www.globalspeculator.com.au

AUSTRALIANTHEORETICAL PRICEOF GOLDUPDATE

Date Jun11 Jul11 Aug11 Sep11 Oct11 10Year AGB Interest Rates 5.16 4.81 4.37 4.22 4.51 3.50 Headline CPI 3.60 M3 Aggregate Money Supply 1,341.0 1,352.6 1,354.8 1,389.7 1,395.6 Rateof Australian M3 Change 0.0005% 0.8650% 0.0016% 2.5760% 0.0042% Gold Production AvAnnual Increase (1.73%) 0.14% 0.14% 0.14% 0.14% 0.14% Australian Theoretical GoldPrice 4,027.52 4,056.72 4,051.11 4,149.79 4,144.16 Actual Gold Price (AUD) 1,401.89 1,486.67 1,696.29 1,656.27 1,638.59 Actualasa %of Theoretical 35% 37% 42% 40% 40%

7YearPerformanceSnapshot
2011/12* ActualGold TheoreticalGold M3Growth CPI(Latest) *Thisfinancialyearsofar. 17% 3% 4% 3.5% 2010/11 4% 8% 9% 3.6% 2009/10 26% 3% 4% 3.1% 2008/09 19% 13% 14% 2.5% 2007/08 26% 17% 19% 4.5% 2006/07 16% 14% 16% 2% 2005/06 18% 16% 17% 4%

M3Growth (%),10YearGovernmentBond(%)andGold

TheGlobalSpeculator

Volume1,Issue4,5June2006

11

Volume2,Issue41,08December2011
www.globalspeculator.com.au

Gold(A$)VersusM3Growth (%)/10YearGovernmentBond(%)(3monthMA)

COMMENTARY
M3 is again growing at close to 10% (annualized rate) versus a 10 year bond rate which at the time of writing has declinedtojust3.95%(4.51%asatOct11).Astheabovechartdemonstrates,theseconditionsareAussiegoldprice friendly.When money supply growth is strong and interest rates fail to keep pace, this creates a climate where the purchasingpowerofmoneyiseroded.Intheabovechartthisisdemonstratedbytheblueline,whichdenotestheratio ofmoneysupplygrowthtolongterminterestratesintermsofa3monthmovingaverage.Whenthisistrendinghigher the Australian dollar gold priceis strongest.When we get a substantial declinein this ratio, as we did in 2009/2010 (circled area), the gold price becomes subdued. Fast forward to the present and we can see this ratio is firmly entrenchedinanuptrend.WiththeRBAcuttinginterestratesandalltheturmoilsurroundingEurope,thishassetthe stageforafriendlyAussiedollargoldpriceenvironment. If we look at the price chart of the Aussie dollar gold price on the following page, we can see we are presently consolidatinginside a symmetrical triangle signaling a cross roadsscenario. Using the above chart, we can surmise thatthebalanceofprobabilityistippedinfavorofabreaktotheupside.Thiswouldalsobeconsistentwithourbearish view on equity markets. Another significant wave lower would see the Aussie dollar come under immense selling pressure.Asin2008,this wouldbemorethanenoughtooffsetanyshortterm weaknessintheUSdollargoldprice (ourbtoccorrectionasdiscussedintheGoldWaveAnalysisabove).

TheGlobalSpeculator

Volume1,Issue4,5June2006

12

Volume2,Issue41,08December2011
www.globalspeculator.com.au

AUSTRALIANGOLDPRICE (EFT: ASX:GOLD)

CLOSINGCOMMENTS
Thepresentmarketconditions verymuchresemblesawaitandseescenario.Thelongermarketstypicallystayinthe oneplace,themorepressurebuildsforasubstantialmoveineitherdirection.Forme itisbecomingincreasinglyharder tofindpositives.Asfornegativecatalysts,takeyourpick!Whileacontrarianatheart,Icanthelpbutfeelthatinvestors are largely sitting on the sidelines for good reason. The markets tome resemble nothingmorethan a contrived and uglymess.Thereisfartoomuchoutsideinterventionwhich,ifhistoryisaguide,neverendswell.Themoreyoutryand pushamarketinthedirectionitdoesntwanttogo,themorepronouncedthemovewillbeintheopposingdirection. Thisissomethingourcentralbankersandgovernmentofficialsfromaroundtheworldsimplywontaccept.

TroySchwensen
Editor
www.globalspeculator.com.auww.goldnerds.com.au

www.globalspeculator.com.au

DISCLAIMER
TheGlobalSpeculator Volume1,Issue4,5June2006 13

Volume2,Issue41,08December2011
www.globalspeculator.com.au

Thispublicationhasbeenpreparedfromawidevarietyofsourceswhichtheeditor,tothebestofhisknowledgeand belief,considersaccurate.Theeditordoesnotwarranttheaccuracyoftheinformationandforecastscontainedinthis publication. This information is provided for educational purposes and nothing written should be construed as a solicitationtobuyandsellsecurities.

TheGlobalSpeculator

Volume1,Issue4,5June2006

14