Precious metals have rebounded strongly over the past week, following
comments from the Federal Reserve. While the FED dropped the word
“patient” from their statement last week in relation to raising interest
rates, Yellen clarified that removing the term patient does not mean the
Fed is impatient. To the contrary, the FED plans to remain “highly
accommodative” even after the first rate hike occurs.
The FED walked back expectations of significant rate increases. Any 2015
rate hikes are now expected to be marginal and 2016 forecasts have been
revised lower from 2.25%-4.0% to 1.5% to 2%. Our view is that the FED
will not be raising rates by any meaningful amount anytime soon. The
economic recovery remains too fragile to digest such a move and inflation
remains well below the FED’s target. They continue to fear deflation much
more than inflation.
Given this outlook, we believe the dollar index had been bid up
too high over the past year and precious metals have been sold off too
sharply. The markets have also started to take notice of imbalance as
the USD index has pulled back from above 100 to 97 in the past week. The
momentum indicators suggest additional downside ahead with support in the
94-95 range.
Gold has bounced sharply off support at $1,141 and climbed just shy of
$1,200 in the past week. The bounce off $1,141 was particularly bullish, as
gold did not drop below the November low of $1,130 and instead put in a
higher low. This increases the chances that gold will resume the uptrend
that started in November, despite the correction throughout
February and early March. Gold broke upward through this corrective downtrend
line last week. The RSI and MACD on the gold technical chart both
suggest that the price has additional upside in the short term.
Expectations of the FED raising interest rates significantly higher in
2015 remain incorrectly priced into gold and silver. Precious
metals remain oversold and undervalued in our view. This is especially
true of mining stocks, which remain near the most undervalued levels (relative
to gold and silver) that they have been in roughly 15 years.
Accordingly, we have been using the latest dip to add to our positions in
quality miners and streaming/royalty plays. Our latest addition is up over
20% in the past two weeks alone and we believe it could easily double as
silver climbs back towards $20. The next move higher in these markets is
going be incredibly explosive and it is important to be positioned before the
train leaves the station. To view which stocks we hold in the portfolio,
receive the top-rated GSB Contrarian Gold Report and get our weekly
updates, click
here to get started for just $95.
If the newsletter does not pay for itself or you don’t find value
after trying it out for 30 days, simply email us to request a full
refund. We offer a 100% satisfaction guarantee with no obligation to continue
if you aren’t benefiting from our research. If you agree that gold and silver
have bottomed and are heading much higher in the next few years, now is the
time to take
action. These discount prices are not likely to last much longer.
