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I
have good reason to believe that the general markets are headed lower here
immediately and there is a good potential of a low being put in this coming
week or the next before we may well see a strong rally through the end of
2011. I hate making predictions and this isn’t one but as detailed in
the subscriber section, that’s the way the charts are looking to me
right now.
As
for the large economies of the world, I’m trying my best to ignore the
daily headlines of bailouts and potential defaults. The focus shifts
from one region to the next with seamless fluidity once the area of focus is
temporarily bailed out.
These
measures are all bandaids and all result in one
the, the printing of money out of thin air.
Unfortunately
the currency debasement is hurting more fiscally responsible countries like
Canada and Switzerland as well. Both countries have vowed to intervene in their
currencies in order to not let
them rise versus the US Dollar in canada’s
case and the Euro is the case of Switzerland.
The
story continues as the two heavyweight currencies of the world, the US Dollar
and the Euro, drag down the rest of the major
currencies.
It’s
been inevitable for a decade and becoming crystal clear now that there is
some type of currency change coming our way. As always, I think owning
physical gold and silver is perhaps the best way to protect what capital you
have and quite likely increase it’s
purchasing power as we move into this new paradigm.
That
doesn’t mean we can’t have some fun though. While we hold a
large percentage in physical precious metals we also own hefty paying
dividend stocks for income as well as miners who are getting slammed these
days but our swing trading portfolio provides us with the most explosive
return and the most fun as it’s much more actively traded.
Let’s
move into the charts this week and take a good look at the monthly charts
which don’t look that bad and really help us put things into
perspective.
Metals review
Gold
dropped 10.97% for the month of September but it was up 0.55% this past
week. Taking a look at this monthly chart it’s quite clear the
significance of the $1,000 level before we broke above it after building a
nice base in 2009.
When
$1,000 was breached the first time, the gold price fell about $300 and people
thought gold was done for. Alas, we’re soon to be double that
level.
This
most recent $300 correction has many saying gold is done once again but the
problem is most of them have been bears the whole time and still don’t
own any gold.
Personally,
I don’t know anybody who is selling gold here and those whom I respect
and read are actually buying.
I’m
betting a substantial amount that gold is not even close to being done and
I’m not selling a single ounce.
It
looks like the low is in for gold after a quick move lower to test support at the $1,550 level early in the week. In fact
the low was put in before the US markets opened Monday morning as the wise
gold happy Asians greedily snapped up the bargains.
The
GLD ETF saw it’s heaviest volume off the
Monday lows and then exhibited competent volume the rest of the week but
nothing extraordinary. To me it looks like the low is in for gold right
now but some sideways base building action would be fantastic.
For
the month of September silver fell a massive 27.9%, most of which came in the
third week alone. For this last week silver fell only 2.33% as
it’s trying to do some sideways work here after having put in what
appears to be a bottom very early this past trading week.
Looking
at the long-term chart it’s definitely ugly but as we’re all
painfully aware silver doesn’t trade as it should and ignores technical
analysis nearly all the time. It’s got a life of it’s own and marches to it’s
own beat and that’s why I try and avoid trading it, rather I enjoy
owning silver in the physical form only.
It
would be quite conceivable to see silver test the strong support area at $20,
but that gift would really be too much. Already, with this nice decline refiners
are struggling or simply can’t keep up with demand.
Realistically
it looks like the low is is around the $28 area
already but we are likely to see some sideways action to build a nice support
or base area before we move to challenge new highs once again.
The
SLV ETF saw it’s
highest volumes early in the week and then they fell off pretty well for the
rest of the week. Volume isn’t really telling me much other than
this ETF is being avoided to a large degree for now.
Platinum
dropped 17.68% during September with 5.91% of that coming this past week
alone. A move to test strong support under $1,400 is not out of the cards by
any means as investors aren’t snapping this precious metal up as much
as their brethren gold and silver.
The
PPLT ETF volume was indicative of a further move lower as heavy volume
accompanied the drop and we kept on falling on medium volume near the end of
the week.
Palladium
slid 21.91% this past month and 3.48% in the past week. Looking at this
monthly chart it’s not hard to make the case for a move under $600 and
even a move down to test good support just under $500.
Since
platinum and palladium are seen as more of an industrial metal they just may
not be supported as much as gold and silver as recession is here or appears
to be around the corner for much of the developed world which could allow for
a prolonged drop.
That
being said if the supply shortages persist in silver and gold, then investors
may opt to buy platinum and palladium more rampantly as they are a store of
wealth when it comes down to brass tacks.
The
PALL ETF saw heavy volume on the declines early in the week then heavy volume
Friday as it continue to make new lows. This means palladium is headed one
way and one way only now, lower.
Fundamental Review
Really
there isn’t much to talk about as the sovereign debt issues have been
dominating the headlines for far too long.
Personally,
I try and ignore the scary and tedious details of it all since the outcome is
set in stone as far as I can see and that outcome is currency failure.
To
try and dissect the minute details is both beyond my pay grade and my threshold
for absolutely boring and worthless detail.
Holding
the physical metals has worked for a decade. I expect it to continue
working with the odd minor or major sale, I mean hiccup, where new investors
have the opportunity to enter.
The
secular bull market in precious metals won’t end until the world is
cleansed of these debt issues and that is a few years away or more the way
they’ve been prolonging it to date.
Enough
of that since many of you dear readers are already convinced of the life
altering benefits of precious metals.
But
before I move on I would like to point out one of the most salient points
I’ve heard in a long time. Doug Casey makes the excellent and true
point that in times of currency crisis it’s the middle class that gets
hurt since they save in cash.
Poor
folks get taken care of by the government, rich folks have their assets well
diversified and in things worth value for the most part while the hard
working middle class saves in cash that is to become worthless or heavily
devalued in the years ahead.
Even
if you’re not rich you maybe should be thinking like you are and try to
invest accordingly within your means. Silver is still cheap and just about
anybody can afford a few ounces or more a week.
There
has been a lot of talk about the coming Pan Asian Gold Exchange which is scheduled to open in China this coming spring. It’s
not news that Chinese are heavy into gold and this will facilitate their
hunger to a degree and it will also help drive and perhaps even begin to
control or dictate the price of gold.
Either
way, I think it’s great to see a new gold trading platform where the
price of gold will hopefully trade more freely. Yes, I have and still do
believe gold is controlled at times. It’s a fact that governments and central banks are intervening
in stock markets, currencies and bonds so to think they’re not involved
in the precious metals/real money markets at times is foolhardy in my view.
The failed bank list out of the US is only growing
at a trickle now as only six banks failed and joined this year’s
list of biggest losers
in all of September. I expect the bank failure rate to begin to pick back up
again over the next few months.
Mints are having a hard time keeping up with
demand for silver as
those in the know are snapping it up while it’s on sale here.
It’s a fact that there is only so much silver in the world. A good
portion is used up in industry and that number is increasing.
There will be a day where you won’t be able to
buy silver at the spot price and you will have
to pay a premium of perhaps 100%. Get it now while you can at a reasonable
price. As there are more buyers than
sellers premiums increase.
A wreck was found this past week with about $210 million
worth of silver onboard.
What an exciting discovery! The silver will likely sell at a premium as
the historic value will be high and really this metal will be sold at auction
not I the open market so there is no danger of a flood of metals coming into
the market.
Until next week take care and thank you for reading.
Warren Bevan
www.preciousmetalstockreview.com
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