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It was indeed
quite the week with Spain reeling now in debt issues and interest rates
soaring. I guess Greece is fixed!
But
we all know that the list of troubled countries is long and getting longer
and we’ve yet to fix any of them, we’ve only see the can kicked
down the road a bit.
US
markets all but collapsed early in the week but then seemingly got back on
the “apple a day regiment” it’s used to and then moved
higher and so far has annulled bearish chart patterns. Huge earnings from the
iCompany continued and it’s pulled the rest
of the markets higher in 2012 thus far and that looks like it may well
continue.
While
we’re certainly in no raging bull market at the moment we are getting
closer and could see some large breakouts coming soon.
Gold
and silver also had some major technical developments this past week and gold
especially is looking very nice here. They have both put in bottoms now and that
means it’s time to complete your buying of the physical metals as well
as the mining shares who’ve been taken to slaughter in 2012, but are
soon to re-emerge from the depths.
As
the old adage goes, buy when the blood is running in the streets. This is the
case in the mining sector at the moment.
Metals review
Gold
rose 1.21% this past week in stunning fashion. Recent Federal Reserve talk
has moved gold lower but the effect has been diminishing each time. This
time, Wednesday, gold was hit immediately as Ben Bernanke opened his mouth.
It didn’t last long and gold roared back to actually close the day in
positive territory.
I
issued an alert to all paid subscribers as well as subscribers to my free
reports that this was a bottom signal. As far as I’m concerned the low
is now in for gold so load up!
This
also means that the mining shares should now begin to turn around after a
very painful and stressful few of months. It’s not been fun.
While
we may not see prices roar immediately, many of these stocks are small and it
doesn’t take much to move them so they may well move quite quickly from
here. Couple that with the fact that shorts must be beginning to feel a
little squirmy as downside momentum is all but dead.
Shorts
covering will drive up prices.
This
past week gold just bested an important downtrend line Friday but volume
wasn’t superb. Personally, I think we’ll take a couple more weeks
or so building out a base here and building up the power to move above the
moving averages which are from the $1,575 to $1,700 level.
Volume
was very solid in both the GLD ETF as well as the futures market off the lows
Wednesday and then Thursday which solidifies my view that a bottom is in for
sure now. The lower volume break of resistance Friday has me thinking
we’re not ready to fly quite yet and that is fine.
Some
more base building here would make the next move much stronger and this gives
us time to accumulate more metal and more shares. It’s the gift that
keeps on giving.
Silver slid
1.29% this past week but also looks to have put in a very important low now.
Wednesday also saw a hit in silver which was quickly reversed on heavy volume.
I’m
very confident we’ve seen the lows now.
I
don’t expect wonders from silver though until the $32 level is cleared
and that could take another week or two.
Heavy
volume marked Wednesday's low in both the futures and SLV ETF.
Platinum
fell 0.23% this past week and has broken down and could well see lower prices.
The
$1,535 support level held well this week but volume off the low isn’t
telling me the bottom is in quite yet even though the chart looks great and
as if a bottom is in fact in now.
We’ll
soon enough find out but I’d not be considering any long positions
until the downtrend line is cleared around $1,575 but preferably a breakout
of the $1,600 level on strong volume would be the next best buy area in my
view.
Volume
was quite strong on the move into the lows this past week in the futures
market but lighter in the PPLT ETF. All in all, the volume isn’t
telling me we have a low in and we could well take another step lower.
Palladium
rose a solid 5.51% this past week and the chart looks pretty snazzy here now.
A
super break of this downtrend line on hefty volume is a breakout, plain and
simple.
The
only real impediment we’ve got here before moving back to $710 is the
200 day moving average at $682, which stopped it on Friday for now. We need
to move above that area soon.
All
looks good here for palladium with great volume in both the PALL ETF and
futures market right when it was breaking out.
Fundamental Review
The
LME recently voiced an opinion whereby they are considering allowing
traders to settle contracts using the Chinese renminbi.
We’re seeing more and more use of the Chinese currency in trading of
goods and now it’s being considered in use in futures.
In
reality it can be used now already after being exchanged but skipping that
small step has huge ramifications for US and European currency domination.
We
saw five banks fail this past week which is the most in quite some time.
Please see this weeks
large list of biggest losers here.
Twelve countries increased their gold reserves as
recently as March of 2012. At least 58 tonnes of gold were purchase
by central banks in March alone. This will continue and the price of gold
won’t matter, but when it is depressed as it has been recently I expect
countries to take a little more advantage of the opportunity of cheap gold.
Top
buyers were Russia and Mexico who bought over 16 tonnes each.
Of
course, who knows if these numbers are totally correct and who knows about
other countries who are less transparent when
reporting these numbers. Chances are the true number of tonnes being
accumulated by central banks is much much higher.
It’s
a major shift from recent years when gold was being sold by countries. This
says that gold is indeed money, contrary to what Benny Bernanke says, and
that the current major currencies around the world aren’t necessarily
the best or safest places for investors and central banks alike to store
wealth.
Wealth
is a funny word isn’t it. Would you consider someone with $10 million
wealthy if they had it all in cash?
Or
perhaps would you consider someone with $1 million in cash and $9 million in
property and businesses wealthy?
Personally
I take the second choice as wealthy and the first as quite rich.
But
the real question is how would you distinguish between someone with the same
$10 million in cash and someone with $9 million in physical gold and silver
and $1 million in cash?
Personally
I’d consider the one with the metals wealthy.
Cash
can burn or be burnt by government debt which leads to inflation or
devaluation of money. There are countless currencies out there that are collectors items now and are not
a currency anymore. I have yet to run into a gold coin that’s not worth
it’s weight in gold
and perhaps much more if historical/numismatic value is assigned to it.
Owning
gold and silver is a no-brainer for me and it’s becoming more and more
so for the smart money across the world.
Qatar
has $30 billion to spend this year for their sovereign wealth fund. They see commodities as being a key investment.
While they didn’t specify, I imagine a portion of this investing money
will be used to buy physical gold as many other nations are increasing their
hoards as well. It only makes sense really.
The
price of gold is becoming and will become more irrelevant as time passes and
they want a higher ratio of gold to cash in their reserves. This is evidenced
by Argentina who in 2011 bought up 7 tonnes of gold while it was at it’s record high.
Albeit, Argentina doesn’t have the best record when it comes to matters
of the currency as their inflation is around 10% now, but the fact is they
wanted more gold so they bought it. This is the first time they’ve
added to the gold reserve since 2005.
I
caught a quick street survey on CNBC the other week where a choice was given
between an iPad, an equal amount of cash or gold.
The only person who chose gold was a Canadian out in California on vacation!
It
sure made me proud to be Canadian that day!
What
would you choose?
The
mining industry is still struggling to attract new employees, especially
those who are skilled. I remain convinced that we’ve got far too many
lawyers and wall street geniuses around and that the best path for young
folks these days is to become a geologist or even a farmer. Find a path that
you’d enjoy and that is less travelled and the youth will do fine.
Here is a great article on the struggles some mining
companies are facing today and the future they see.
Even
if we find huge deposits of gold or any other metal we can’t mine and
refine it unless we’ve got the people who know how to and are willing
to mine it. In a way we’re kind of stuck right now at peak gold
production in much the same way peak oil has past as only so much can be
refined no matter how much we pull out of the ground.
Let’s
finish off with a little fun. A monkey experiment which reflect real life at many times.
It just ain’t fair!
And
finally for those surfers out there an amazing compilation of beautiful
photographs. While I’m not a surfer, I do appreciate scenery and get
out into as often as I can. I’m sure most of you will enjoy this slideshow which also
happens to have some amazing music along with it. The best of both
worlds.
Have
an awesome weekend and please consider signing up to receive my daily updates
which tend to be between 20 and 30 pages everyday
and filled with charts of trading setups, gold and silver, US equity markets
and also our dividend and mining holdings along with anything else I find
relevant on said day.
It’s
a lot of work but well worth it.
Warren Bevan
www.preciousmetalstockreview.com
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