August looks set to be a bumper month for gold with the precious metal on course for substantial gains, according to CNBC’s Mad Money show host, Jim Cramer. He warns that the S&P 500 is facing a tough period, the government debt ceiling continues to grow and with gold extremely undervalued against Treasury bonds, all of the momentum is moving in the direction of the precious metal.
He explained, “The charts, as interpreted by the legendary Larry Williams, suggest that August could be a tough month for the S&P 500, but a terrific month for gold. Williams is long on gold for precisely the same reason he’s worried about the S&P: The seasonal pattern. Remember, during the original debt ceiling debacle a decade ago, the stock market broke down and … gold did great. Just since the beginning of the summer, [Williams] can point to three moments when the S&P rallied to higher highs, but the Advance/Decline line failed to make a higher reading, meaning the market went up on not-so-hot breadth…The S&P makes new highs, but the On Balance Volume stays flat. That’s another negative. Remember, for technicians, volume is like a lie detector. When it’s weak, that means a move is deceptive. One more reason Williams is worried about the rest of this seasonally challenging month.”
Gold is already showing strong signs that a rally is on the way, trading above £1,300 ($1,813) yesterday (Tuesday). Expect more to come.