Sunday, February 19, 2012
Back to Bullish on PM Sector
Closed out my "short senior Gold stocks" trade last week for good profits. My subscribers and I bought the early Thursday AM lows in senior Gold stocks and silver. Think we have begun a 4-6 week bull run into a spring top. After that, we'll have to wait and see what happens.
I will be very interested to see how Gold does during this move. I think it re-tests the 2011 summer highs. Here's a one year daily chart thru Friday's close:
After the spring top in mid to late March, we'll likely get a significant correction. A new all-time high in Gold would likely indicate a milder correction than if the price gets stopped at or before the old highs. Either way, I am bullish for the next month in the precious metal (PM) sector for my trading account and think all PM sectors will do well.
Longer term, I own physical metal and don't worry about it as an investment at all. Now that the ECB is trying to [further] undermine the integrity of its bond markets by putting itself at the front of the line and subordinating other European sovereign debt holders in the Greek debacle, the final pillar is coming into play. That pillar has been pointed out by Mr. James Sinclair at jsmineset.com and it is that of the bond markets of the Western world. Once people are seriously worried about the safety of bond markets and currencies, Gold will really start to, ahem, shine. Everything is lining up to create "the mother of all bull markets" in Gold and silver.
Of course, this is all just a normal reaction to the financial mania that preceded the current secular Gold bull market. A secular correction in the Dow to Gold ratio down to 2 or less (we may well go below 1 this cycle) will teach everyone to avoid common stocks forever. Everyone will have learned their lesson the hard way. This, of course, is when it will finally make sense to buy common stocks again as a "buy and hold" proposition. In the mean time, it's all about the bling bling for this secular cycle. All you have to do to ride the wave is buy pieces of shiny metal and watch your wealth and real purchasing power grow while paper assets are debased into oblivion. What could be easier?