One would believe that
from recent action this week particularly in the precious metals sector that
“Dear Me, The Sky Is Falling!”. In
reality, very little has changed in the specter that is haunting the global
economy.
There is an old French
saying, “The more things change, the more they remain the same.”
Observe that the Germans are ambivalent about bearing more gifts to the
Greeks. Portugal, Italy, Spain are still in fiscal trouble. The vaunted
employment figures omit the millions of our citizens who are living on
unemployment benefits. What about the millions of bread winners over 50 years
of age who have given up the search for employment.
Our facile economists and politicians are masters at
“spinning” data to suit their thesis. So the mob is mesmerized
and all is right with the world. Gold Stock Trades posits that there is much
in the world’s sovereign economies that requires healing.
The Professors are saying that our economy has
recovered. Look they say on the one hand unemployment is declining, housing
is turning the corner and our economy is on the verge of happy days are here
again.
On the other hand, the academics are saying that the
unemployment situation is a question mark, the housing recovery may or may
not be in recovery mode and that stimulus is being shelved. Today we have
witnessed the old Orwellian game of double-speak and double-think.
Our economists are in a bind. The so called positive
advances in our economy has resulted from the very stimulus that they say to
the public is no longer needed. Does this mean that the moribund banks of
Europe who have just requested and accepted a second round of printed
currency valued around $700 billion will return it to the Central Bankers?
The PhD’s in
economics coming from our best universities can continue to stimulate by
devices and means beyond the comprehension of mere mortals. We can be told
that stimulus is passe but the reality is it will
continue to be done before our very eyes. Do investors really think that they
would accept declining fiat dollars and tissue paper treasuries in exchange
for solid gold and silver?
The recent selloff is just one of the many shakeouts
that somehow manages to occur when precious metals are about to take off. For
weeks we have stated that we were on the verge of a breakout at $35 in
silver, $4 copper and $1800 gold. Coincidence??? Gold Stock Trades thinks
not.
In 2012, we have recently witnessed a dramatic 18%
move in gold from $1525 to approximately $1800 gold and silver has made an
impressive 30% move from $27.5 to $37.50 since the beginning of the year. It
is characteristic in gold and silver to witness short term volatile pullbacks
at the beginning of major moves to shakeout the short term speculators
looking for overnight riches and who lack patience and fortitude.
Weeks such as these occur periodically as attempts
to delay the inevitable. The trajectory of precious metals remains firmly
upwards. The 50 day moving average has not been violated by today’s
action and remains sloping upward. Indeed, this selloff may be providing a
secondary entry point to add to precious metal positions. This pullback may
have a few more days to run so patience and fortitude may be indicated. The
U.S. dollar and long term treasuries have bounced into strong resistance and
should turn lower. Remember, there aren’t any roads that don’t
have a pothole.
While the recent decline in gold and silver was
precipitous, nevertheless, technical damage if any was minor. There were only
200 more declines than advances in the overall Dow Jones Industrials. Let the
summer soldiers and the sunshine patriots run away as they catch their first
whiff of gunpowder in 2012.
We remain steadfast in our advocacy of wealth in the
earth equities. Its not
what Bernanke said, its what he didn’t say.
Some investors may have been waiting for him to hint at a QE3. He
didn’t go down that road this time. This may have created a certain
amount of concern. Perhaps it was desired by the Fed to quell what they
thought was excessive speculation and a possible runaway move in the precious
metals market.
In conclusion, it may be that Bernanke’s actions was a diversionary tactic. On the other side of
the Ocean, The European Central Bank (ECB) injected more than $700 billion
into over 800 banks throughout Europe. This brings the total to over $1
trillion dollars. It may be entirely possible that the Federal Reserve
acquiesced in this action by the ECB through the long arm of the
International Monetary Fund, which usually acts as a cat’s paw.
Call it what you will, quantitative easing, monetary
stimulus, liquidity injection, long term refinancing option, operation
twist...the net result is the printing of paper money and the debasement of
currency. This may only accrue to the benefit of wealth in the earth assets
and precious metals.
We are just seeing another attempt by our monetary
authorities to delay the inevitable and kick the can down the road. We may be
assured precious metals and natural resources will resume its
the long march upward sooner rather than later.
Gold Stock Trades will be presenting a workshop at
PDAC, one of the largest mining investment shows in the World this Sunday
March 4th from 10-10:25 AM at the Metro Toronto Convention Centre in Room
801. Come listen to our latest forecasts and the potential catalysts which
could send gold, silver, uranium and critical metal miners higher in 2012 and
beyond. To learn
more about the conference.
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