Sunday, October 31, 2010
As if recent price action in the Gold price wasn't enough, there is now a tantalizing play on the Gold miners available for speculators in the junior Gold patch. Long term options (LEAPS) on the GDXJ ETF that expire in January of 2012 and January of 2013 are now available.
I remain a patient watcher of the Gold market and am still largely on the sidelines when it comes to Gold miners. On the next decent spike down in Gold stocks, however, I will be loading the boat with 2013 LEAP option calls on GDXJ. What's holding me back right now is the chart of the ratio of Gold to Gold stocks (using $HUI:$GOLD as a proxy) and what I believe is a short-term bottom forming in the U.S. Dollar. Here's a 10.5 year chart of the $HUI:$GOLD ratio thru Friday's close:
I think we are in correction mode in the Gold patch, just what's needed to cool the sector off a little. I think the next thrust up is going to be big in the Gold patch and I think Gold stocks are going to outperform. I am hoping a good opportunity to buy Gold stocks and more physical Gold presents itself before the year is over. I remain bearish on general stocks/the stock market, but am eagerly anticipating putting every penny of my speculative trading money into 2013 expiration bullish call options on GDXJ. I will be sure to post when I start buying.
Due to some new interests that will keep me busy for a while, posting will remain sporadic. I remain a rabid Gold bull for the long term. The Dow to Gold ratio will reach 2 (and may well go below 1) before the current secular Gold bull market is over.
Wednesday, October 6, 2010
One chart says it all (chart stolen from Market Harmonics):
There is no need for me to cheerlead in Gold, as everyone thinks this time is different and Gold is going straight to $2,000/oz. here. Perhaps it will. Wouldn't bother me a bit. Perhaps the stock market is going to new highs (that would bother me...). Perhaps hyperinflation has already begun but for the first time in history it is starting with bond yields at record secular lows. Perhaps Wall Street and Ber-spank-me can make stocks go up forever and at will.
But perhaps this time isn't different. And perhaps the market is about to collapse. And perhaps the Dollar is about to stage a massive counter-trend rally that no one expects, just like in the spring of 2008 when everyone knew the dollar was going straight to zero.
I think we are set up for a 1937-style Dow / stock market collapse (chart stolen from sharelynx):
Everyone who though Ber-spank-me and widdle Timmy Geithner and the government would prop up markets forever in 2007 and 2008 now believes they are going to have better success this time around.
I own Gold because I believe we are in a deflationary depression and Kondratieff Winter. When apparatchiks try to "print" their way out (as they always do throughout history), the money simply makes it way into Gold, as there are no good macro-economic opportunities available to use all the money productively. There is always monetary inflation, but at this stage of the cycle, only Gold and Gold miners are poised to benefit from it. Though the rallies in risk assets have been fast, furious and at times relentless, another crash will make everyone remember where we are in the economic cycle. I'm just another guy with an opinion who isn't try to sell you anything, but I think we're set up for another massive market dislocation. Be careful out there.