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Despite current weakness in gold (GLD) around the $1650
area we expect a turnaround in gold with a new leg up to $1800 area and eventual
breakout at $2000 in 2013. Taking inflation into account over the past forty
years gold may have much further to go. Inflationary forces continue to rise
globally on the back of worldwide stimulative moves
most notably by the Europeans, Americans and Japanese. This move could
reverse the undervaluation of the junior gold and silver miners (SIL) who
have not been keeping pace with bullion over the past two years. Increased
amounts of participation from funds seeking alternatives may look to the undervalued
miners for leverage.
The media reports exaggerate the minority in the Fed
who are pushing for a purported exit from quantitative easing. However, the
majority of our bankers, politicians and central banks around the world have
flooded the markets with fiat currency and quantitative easing.
This may be why Germany is transferring
$36 billion worth of gold from Paris and New York to Frankfurt. They want to
make sure they have it in their own hands should an
downward inflationary spiral intensify.
This may be teaching us get your hands on precious
metals and natural resources while you can.
 
An inflationary rally may be beginning as silver (SLV)
and platinum (PTM) begin to outperform gold. For weeks platinum (PPLT) was cheaper
than gold. This turned out to be a discount opportunity as platinum is now
higher than gold. The recovery in China is supporting the auto industry where
GM sells more cars in Asia than in the United States.
This
may be indicating an inflationary rally as platinum is used both as an
industrial metal and as a monetary metal. Mine supply is limited as over
90% of current supply comes from unstable jurisdictions such as South Africa
and Zimbabwe.
Also
keep a close eye on the uranium miners (URA) where we are seeing
increased M&A activity and the return of the nuclear renaissance as
countries such as China, Japan Russia and India move full speed ahead. The
uranium miners closed above the 200 day moving average today which is an
indicator that tracks the long term trend. We may be witnessing a major
reversal in the beaten down and forgotten nuclear sector (NLR) as major
capital is flowing in through acquistions of
undervalued assets.
The dollar (UUP) and the yen (FXY) may fall into new
lows under record stimulus from central banks placing further inflationary
pressures to boost commodities (DBC). Too much paper will begin chasing too
few goods. Be prepared as there is a lot of cash on the sidelines to chase
the tiny junior mining sector.
Around the world gold and the miners have outstripped
every competitive currency for the past ten years, yet the mainstream media
fails to understand the importance of owning gold and the gold miners (GDX).
Recently we have been in a sideways basing period in gold where the price has
bounced between $1800 and $1550. Gold may now be forming the base for a major
breakout at $1800 as the U.S. deals with record deficits and soaring
entitlements.
For the past ten years gold and wealth in the earth
have been the place to be yet the masses have still not yet participated.
This recent consolidation like 2008 may prove to be a great discount
opportunity in not only gold but in platinum, silver and the undervalued
junior miners. Time to get in before the masses?
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