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We’re in
the midst of an amazing run off the recent lows in the stock market. As tempting as it is to buy some of
leaders now, I think it would be a grave mistake. Nothing goes straight up so we have to
be patient and wait for the proper buy points.
Gold
and silver had a nice week and look ready to move one way or the other in the
next couple days and the mining stocks are unbelievably cheap right now.
If
you’re not close to, or already accumulating these mining stock that
are on sale then you’ve got to really take a hard look at things.
We
are not going through another 2008, so as far as I can see the low has
already been put in for most mining stocks. Now may be the last best chance to get
into this market before the mania phase begins, and you do not want to miss
that, I promise you.
Fortunes
will be made from owning the right miners going forward.
Metals review
Gold rose 2.47%
for the week and contrary to most observers opinions on the technical picture
I think it looks good here.
Last
week I said it was a toss up at the time if the
pattern was a bearish bear flag or a bullish U pattern one. It is still up in the air here to a
degree but a break above the 100 day moving average should push us higher to
at least the $1,750 area ad confirm the U pattern.
I
like the low volume as this base builds steam for the move higher.
The
one thing that bugs me is late in the week a revised target was issued by one
of the largest and most bearish institutions who
came out saying what us in the know have been saying for years, that gold is
an insurance policy during times of economic uncertainty.
They
put a target of $2,150 on gold for Q4, 2011.
These
upgrades always worry me as the instrument in question usually trades the
other way in short order. We
shall soon see, but it is nice to see some large players talk about gold and
it’s uses as we are moving later into this precious metals bull market
where we should be approaching the mania phase in the next two or three years.
The
company also reiterated that miners are “way undervalued”. I know that and I’m sure most of
you do as well. They’ve
been undervalued since 2008 for the most part.
The
miners just can’t seem to get out of their own way. The best plan is to just accumulate
your favourite companies on big dips such as we’re seeing now and wait
for the crazy stuff to begin.
When
was the last time you saw a mining IPO?
I don’t recall seeing one in a long time and the odd one
that comes through certainly isn’t a high flyer by any means.
We
have much further to go and we are still on the ground floor when it comes to
many mining stocks. Fortunes will
be made in the years to come.
As
for the GLD ETF this past week, volume was quite low which is normal for a
stock to commodity to do as it builds steam for a breakout higher. As always though we know gold does not
trade nice and orderly so if you’re trying to trade it be very carful. Even better don’t,
just buy bullion during this weakness.
Silver
rose 3.02% this past week and is still trading within it’s symmetrical triangle pattern here which
can go either way. We’re
very near a resolution one way or another here very soon as volume is drying
up and price action is becoming very tight here.
You
could play the break either way, if that’s your style, using tight
stops if we see a reversal but preferably if we break higher get more
physical while it’s this cheap or if we break lower try and get an even
better price.
The
SLV ETF also saw very low volume for the week which is as it should be as we
near the end of this pattern.
Platinum
gained 3.34% this past week off the lows under $1,450. A nice $100 off the lows is sweet but
this rising channel is not so good.
Platinum is a much more industrial metal and trades as such, more
attuned to the economy which isn’t good.
To
me so far it doesn’t look great but then again Friday saw large volume
on a break above resistance. If
the markets continue to act as strongly as they have been the past couple
weeks then we could well see platinum continue higher from here but really I
have no clue what to expect going forward at this time.
The
PPLT ETF saw low volume with the exception of Wednesday’s high which
was so so.
What has me worried here is the lack of volume Friday when compared to
the futures chart posted above.
This has me leaning toward the side that we will see the bear channel
play out and we will soon see lower prices again.
Palladium
rose 5.71% and looks to have broken out to the upside here. A break above the ascending triangle
pattern here is very good for palladium although volume certainly
wasn’t 100% convincing. I
much prefer to see heavy volume on breakouts and the fact that platinum is wishy washy has me suspect, but the price action was
great.
The
PALL ETF chart also looks great and is showing a breakout but the volume just
isn’t there. Maybe if we
can manage a move above the 21 day average I will be more convinced this
breakout is for real but I am not trying to trade it here at all.
Fundamental Review
We
saw three banks fail this past week which is more than we’ve seen since
August 19th. This years list of biggest losers continues to grow
at a snails pace.
While
the banks aren’t dropping as quickly as they were last year we did see Harrisburg, the capital of Pennsylvania, fail this
past week. Well they
didn’t so much fail but they did file for bankruptcy which is failing
in my books.
Let’s
hope we don’t see more municipal failures as they are much worse than a
bank failure. Unfortunately I
don’t have my hopes up. California
could go bankrupt tomorrow, or should have already if they were a
business. Actually the whole of
the U.S. should be bankrupt. Now
that is a scary thought but it’s all but inevitable at this point.
Bill
Gross told clients that 2011 was a stinker
recently. His fund is up only
1.3% this year which is pathetic.
We’ve actually had our best year ever, and by a long shot!
Bill
has returned a paltry 7.8% over the past five years. While he does have to manage a huge
amount of money and that would be very difficult, I’d still be
embarrassed having lost heavily when taking inflation into account.
I
wonder why he would not manage a more manageable amount and try and actually
make money for his clients...ah yes, management fees would be the
reason. He makes more money off
of that in a year than you or I could hope to make in ten years.
It
doesn’t seem right does it, but if you’re that naive to give him
your money then all the power to you.
One
of my favourite big fun managers, David Einhorn, has two of his largest positions in gold and a gold ETF. For a value investor that is quite
impressive and should tell you that gold and it’s related equities are very undervalued at
this point in time.
Buy,
buy, buy!!!
Dubai
gold buyers are increasingly moving towards buying bullion rather than jewellery. It only makes sense as with physical
gold and silver it’s about how many ounces you own, not what they look
like or what historical significance they represent.
Owning
bullion in the cheapest way possible has been and remains the best way in my
view. These choices change as
premiums and availability change also.
Sometimes junk silver is cheapest, sometimes pandas or eagles. It’s not hard to find out what
the best deal is at any given time, just ask your dealer.
I
love this article which talks about a gold rush
emerging from this poor economy.
Larry Lindsey who is federal reserve governor and former Bush economic
advisor said that the weight of history is leaning towards gold.
Lindsey
also said that we are likely to return to a gold standard in perhaps ten
years.
I
couldn’t agree more and talk about it near weekly here. We have to go back to a type of
currency that is backed by something and not able to be printed out of thin
air.
Gold
is the obvious choice as it’s not really used up unlike any other
commodity. This idea is not new
and has happened countless time throughout history. The periods we are going through now
is normal as governments become more and more irresponsible and get out of
control.
Owning
physical gold and silver is a form of insurance against the stupid
authorities who are ruining your currency. Not only will precious metals protect
your wealth, they will increase it as whatever new form of currency emerges
will surely value gold well above 5k and more likely above 10k.
You
can’t go wrong owning physical gold and silver.
I
hope you’re in accumulation mode right now when it comes to mining
stocks as well as the precious metals themselves. You won’t regret it!
Until
next week take care and thank you for reading.
Warren Bevan
www.preciousmetalstockreview.com
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