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Let’s
start off today with an old classic by Olivia Newton John, “Let’s
get Physical”.
Cheesy? Absolutely. But, as it applies to the precious
metals market, it’s what you really want to do.
The
price smashing is really futures driven and not driven by the physical market
as, from what I’m hearing, demand is soaring on this correction for
really physical metal.
Going
forward, it’s going to be the physical market that drives price. I’ve noted before that there is
a disconnect between the market price you see quoted and the price
you’ll actually pay for that ounce of metal.
The
disconnect, or premium will only increase over time and as long as futures
are allowed to trade with leverage, the disconnect will always be there. Even as of this writing 1 oz silver
coins are going for well over $40 and there are several bids on them on eBay.
I’ve
said before that using the ETF’s is a great way to trade the metals but
you must own your allotment of physical first, as the premium will approach
or even surpass 100% in time.
As
for the markets the past week would have been one better spent on the beach
or at the links or anywhere other than in front of the computer. There was a lot of money to be made no
doubt, but chances are if you weren’t day trading you lost money.
At
times such as this it’s best to step aside and watch and wait for
bottoms and chart patterns to form and that’s what we have been doing
in general.
Sometimes
it’s best to do nothing.
Our
longer-term mining portfolio has been hit pretty hard and in many cases is
trading back to our entry points.
This is giving us a super chance to add to those positions. We’re also looking at brand new
positions.
There
is always opportunity in every situation, you just have to find it. While swing trading is not wise right
now, looking to accumulate battered miners is where I do see great
opportunity. That’s the main
focus during the day these days, finding new miners and trying to pick
bottoms.
I
don’t really see any good entries yet, but they could come any day now
as the move lower in silver and gold looks to be coming to an end.
Let’s
take a look at some charts and see how close to an end we really are.
Metals review
Let’s
begin with a longer term weekly chart of the US Dollar. It’s put in a short-term bottom
and looks to be headed higher still.
I wonder if this dollar bounce is real though, as the US bought up $1 billion of US Dollars in March
to help strengthen the currency.
This is reported with a large lag so we won’t find out if this
buying has continued.
Funny
how everything that’s been working stops working as the dollar
reverses. It truly is all in the
US Dollar and it’s moves in so many ways.
The
beauty of that idea though, makes it easy. What’s your longer-term view of
the US Dollar? Mine is that it
continues lower.
If
you think the dollar will continue lower still, then look at what’s
been working since the dollar hit it’s peak
in 2002. The US Dollar hit 120 in
2002 and has trended lower since, to today’s level in the
mid-70’s.
What’s
been working so far?
Gold,
Silver, oil and most commodities in general.
As
the saying goes, history rhymes.
If
you think, as I do, the US Dollar will continue to depreciate then your move
is simple. Use this massive flash
sale to decide or add to you convictions. It’s far from too late to join
this trade.
As
for where we could be headed short term in the US Dollar I’d have to
say a move to test the old uptrend line which coincides with the 61%
Fibonacci Level around 78 would be a good bet.
Gold
only fell 0.03% for the past week as many would have guessed it fell much
further. While gold didn’t
experience the huge moves higher that silver did, it’s not crashing to
the same extent either.
Some
may tell you gold is slow money, but at least it’s been steady at
around 18% annually compounded over the past decade. Those numbers look set to continue and
have helped me sleep at night wonderfully.
It
still blows my mind to see some things people are putting money into after
all these years. A very close
family member told me recently they bought into on
of the large banks of America.
They couldn’t really give a reason other than it was cheap.
I
think heading down to the coin shop would have been a far better idea, but
then again that would raise a red flag with me as he’ll be one of the
last to buy the physical metal, and I guarantee he’ll do at against my
advice at the time!
I
talked with subscribers this past week extensively about how they are the
best indicator of bubbles. The
gist of it was most people don’t know anyone still, even after all the
bubble talk, who own anything other than perhaps some large-cap miners or have
perhaps have traded the ETF’s and are now hurting.
I
said to ignore the TV talk and think about it yourself. You’ll know it’s a bubble
when your bad-bank buying buddy finally comes over to show you his new shiny
gold or silver coin.
We’re
far from that as far as I can see.
I am very comfortable with massive volatility
though, so as I say often, do what allows you to sleep easy every night under
any market circumstance.
Looking
at the most recent COT report tells me gold is
the trade going forward, not that silver won’t do well, but large money
is betting on gold here, and it’s the smart money. More speculative money is trading
silver and it is a much smaller market so small money is much bigger over
there. Silver does remain my
choice for the heaviest weighting in my metals portfolio though, as it will
be much more volatile, but will grow much more on a percentage basis over
time.
Volume
was heavy in the GLD ETF all week, but not extreme. All in all the gold chart looks good
and this correction was quite constructive.
While
it was volatile, once the dust settled silver only dropped 0.67% for the
week. Looking at the pattern
it’s technically put in a double bottom here this past week. I’d prefer the $30 area to be
tested but I’m sure many others would as well so in order to keep as
many offsides as possible we may begin to rally
from here.
We
may be making some big moves in the very near future with silver and several
great miners.
The
SLV ETF volume remained very very high this past
week with down days exceeding up days by a large margin. It’s hard to get a great feel
with the recent explosion in volume but I’m feeling pretty good calling
a tentative bottom here.
Platinum
fell 1.23% on the week and looks to have a bearish head and shoulders pattern
here. If it is confirmed lower then the target would be right at the double bottom from
last November.
The
PPLT ETF volume saw a volume spike on Wednesday then more average volume, but
still heavy on other days. I
wouldn’t touch this ETF right now unless we can get back above the
cluster of moving averages around $1,780 to $1,790.
Palladium
rose 0.55% on the week but it’s chart is nothing pretty at all. This is a very sloppy chart that has
the look of heading lower here as a little “h” pattern was just
drawn out.
I’m
watching this one and waiting for a nice base to form before trying to trade
the ETF.
The
PALL ETF saw heavy volume but not extreme all week. Be very careful trading anything these
days, including precious metals.
Fundamental Review
This
story should be in the funny section, but it’s not. In fact it was headline news this past
week. I’m not political
bashing here but Obama, yes he’s still alive, is urging
businesses to step up and hire more workers!
It’s
insane! If businesses needed or
could justify more workers they would.
Businesses love nothing more than to grow, but if the demand
isn’t there, it’s just not there. They can’t hire workers just for
the sake of it.
After
all, it’s not like they can just print money to pay for new salaries
like the US government can. Give
your head a shake Barak, or get a new speechwriter.
Although
he does make a decent point saying those companies and large banks who were
bailed out should step up and hire.
If they were to have been left to fail in the first place we’d
actually be seeing America in a real recovery right now. Alas, we are where we are.
Apparently
Central Banks haven't sold any gold recently according
to the World Gold Council, in fact they’ve been buyers. Really this is old news, but it
reinforces the bullish posture of the gold market going forward. Mexico’s 100 tonnes recent gold purchase is the
most recent public example of this gold accumulation by Central Banks.
Is
it any surprise that the Bank of Mexico’s chief also reiterated their bullish posture this
past week by stating when asked if gold would rise by the end of the year,
“It’s likely”.
Follow the big money.
Central banks are big money.
Canada’s
province of Quebec already offers essentially a 50% tax refund on exploration
activities making it one of the top places in the world to explore for
minerals, of which there is an abundance. They plan on now developing it’s huge north into a mining
powerhouse. The region
is all but uninhabited and unexplored making infrastructure a major hurdle
but it is their 25 year goal.
It’s attainable as long as commodity prices remain high and in
an uptrend.
I
talked about margin increases a bit above and how futures markets only matter
so much. The Shanghai Gold
Exchange raised margins on futures for the third time in a
month. Hopefully these
futures market players will take their cash hoards and just get physical!
Here’s
a neat little video on the process and increase in scrap precious metals
recycling taking place as their values continue to increase.
It
looks as if the Morganza Spillway is going to be
opened sometime today, Saturday.
It’s only the second time ever and the footage is sure to be amazing. Here is a nice
short video on it’s history and whatnot.
For
fun I hit the Onion News Network website sometimes. I found a great and very revealing video on the true motives behind Facebook.
I’ve never gotten into Facebook...I
always knew there was something fishy going on there :-)
To
finish off a little piece about a great new technology that so far shows
great potential in reversing blindness or other eye related issues (although
it won’t help those who lose a lens unbeknownst to them).
Apparently
stem cell coated contact lenses are being used to
actually cure blindness.
I don’t know what I’d do if I lost my sight, heaven
forbid, but I do have relatives who have serious issues that are getting
worse, and I’m sure nearly every one of you also know someone in that
situation. Let’s hope this
really does work. It’s
truly a miracle.
I
hope you’re building up that cash hoard these days in order to scoop up
these stellar deals in our favourite mining companies in the very near future.
Until
next week take care and thank you for reading.
Warren Bevan
www.preciousmetalstockreview.com
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