tag:blogger.com,1999:blog-23574911645841290382024-03-14T02:15:02.035-07:00Gold Versus PaperFinancial site dedicated to Gold, markets, cycles, charting and investment ideas/themes.Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comBlogger646125tag:blogger.com,1999:blog-2357491164584129038.post-72595359829530888822013-07-19T10:17:00.004-07:002013-07-19T10:17:52.896-07:00Gold Stocks - All Perspective Has Been Lost<br />
Many recent published commentaries appear to have lost perspective on the now much-hated Gold stock sector. The fact of the matter is that, technically, the secular bull market in Gold stocks has not even been confirmed. I do believe that in retrospect, the late 2000 bottom in Gold stock indices will be "the" bottom, much like the 1974 bottom in the Dow Jones Industrial Average (DJIA) was the true nominal bottom in this common stock index at that time. Here is a long term chart of the DJIA from 1940 thru 1985 (stolen from <a href="http://chartsrus.com/">chartsrus.com</a>) to show you what I mean:<br />
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<a href="http://3.bp.blogspot.com/-zlah7vd07KQ/UelpzFeXKdI/AAAAAAAAIqQ/bVb0nykR1Uo/s1600/USDJIND1940-1985-sharelynx.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="300" src="http://3.bp.blogspot.com/-zlah7vd07KQ/UelpzFeXKdI/AAAAAAAAIqQ/bVb0nykR1Uo/s400/USDJIND1940-1985-sharelynx.PNG" width="400" /></a></div>
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And yet, we already have people pronouncing the secular bull market in Gold over despite the fact that we haven't even had a confirmed secular bull market in Gold stocks yet! Now I realize that mining stocks and physical Gold are not the same thing. Indeed, I have no long-term investments in mining companies and prefer the safety of physical Gold (and silver) held outside the banking system for long-term investment purposes.<br />
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However, to say that Gold is (or was, to be respectful to bears with whom I disagree) in a long-term bull market and Gold stocks are (or were) not seems a little bit far fetched to me. As a speculator in the paper markets, I am not even thinking about the end of a secular bull market that hasn't even truly begun yet! Here is a very long-term chart of Gold stocks compiled by Frank Barbera (stolen from a <a href="http://www.financialsensearchive.com/editorials/barbera/2005/0414.html">great and classic article</a>) that only extends thru 2005, but gives a true "big picture" perspective:<br />
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<a href="http://4.bp.blogspot.com/-6HIB5DJnSEc/UelsQKquE6I/AAAAAAAAIqg/8IBAphUS_Rg/s1600/Gold+stocks+1915-2005-Barbera.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="120" src="http://4.bp.blogspot.com/-6HIB5DJnSEc/UelsQKquE6I/AAAAAAAAIqg/8IBAphUS_Rg/s400/Gold+stocks+1915-2005-Barbera.PNG" width="400" /></a></div>
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And here is a chart of Barron's BGMI Index thru the recent nasty downdraft in Gold stocks (stolen from <a href="http://www.sharelynx.com/chartstemp/free/fchart-BGMI.php">sharelynx.com</a>):<br />
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<a href="http://2.bp.blogspot.com/-VzLJ4ao649E/UeluEWKoGAI/AAAAAAAAIqw/9cFKzSEiw1k/s1600/BGMI-chart+-+1970s+thru+2013+-+sharelynx.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="262" src="http://2.bp.blogspot.com/-VzLJ4ao649E/UeluEWKoGAI/AAAAAAAAIqw/9cFKzSEiw1k/s400/BGMI-chart+-+1970s+thru+2013+-+sharelynx.png" width="400" /></a></div>
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Now, once the secular breakout is confirmed with sustained action (i.e. measured in years, not days or weeks) above around the 1300 level in the BGMI index, then we can start to talk about where the secular bull market in Gold stocks may end. Until then, this is just a major cyclical buying opportunity (a la late 2008) in an early secular trend, nothing more.<br />
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In fact the past few years worth of price action in senior Gold stock indices remind me of this:<br />
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<a href="http://3.bp.blogspot.com/-LhAnROPVTvI/UelwBcu4WXI/AAAAAAAAIrA/EIC8WI-ZDOA/s1600/COMPQ+1985-1992.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="http://3.bp.blogspot.com/-LhAnROPVTvI/UelwBcu4WXI/AAAAAAAAIrA/EIC8WI-ZDOA/s400/COMPQ+1985-1992.png" width="318" /></a></div>
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Even if Barrick goes out of business (who in the Gold community would miss them?), Gold stock indices are headed much, much higher. I think the problem with most commentaries on the Gold sector I have seen lately is that they are too short-term oriented and fail to consider the bigger picture (a sign of the times as money gets "printed" faster and faster by our central banksta wizards). The Gold stock secular bull cycle likely has at least another 10 years to go. And if history is a guide, some of the largest gains in the Gold stocks will occur after the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold</a> ratio bottoms. Until the Dow to Gold ratio hits 2 (and a ratio less than 1 seems quite possible this cycle as power shifts from West to East), you can forget the long-term bearish thesis in my opinion.<br />
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If you would like some help trading the paper markets with an emphasis on the PM sector, I offer a <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">low cost subscription service</a> for only $15/month.<br />
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<br />Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-85715096564028093252013-04-06T14:14:00.004-07:002013-04-06T14:14:43.188-07:00Gold - Are We There Yet?<br />
It has been a 1.5-2 year sideways affair for the precious metals (PM), depending on whether you look at silver (peak in April of 2011) or Gold (peak in August of 2011). PM stocks, on the other hand, have done quite a bit worse than go sideways. While the more conservative Gold has only fallen a maximum of 20% from its August of 2011 highs, the more volatile silver and senior PM stock indices (e.g., XAU, HUI, GDX) have both fallen close to 50%. The junior PM stock sector has been decimated, with the GLDX ETF, as a representation of the very small cap/explorer sector having fallen almost 75% over the past 2 years.<br />
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One of the funny things about asset price declines is that they are met with the opposite emotional reaction of what is healthy. In other words, people should get more bullish as asset prices decline in an inflationary world, and yet the opposite happens. So, while Gold and silver are approaching the low end of their recent trading ranges, sentiment and trader positioning are at extreme bearish levels, just as they were last summer.<br />
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I am not a "pure" chartist or technical analyst when it comes to asset prices, but I think price charts tell a fundamental story rather well. Investing and speculating are risky ventures, to be sure, but we live in an era of global anchorless paper currencies. This means that the fruits of one's labor cannot be buried under a mattress using the official medium of exchange, as these scraps of paper (i.e. currency units) received for that labor are being thrown into the air by our masters at a pace that would make even rappers blush.<br />
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Though I thought last summer's lows in the PM sector would be enough to halt the correction and start a new cyclical bull market, one more vicious whoosh lower in the PM sector has caused all but the hard core Gold bulls to abandon the barbarous relics and the firms that waste their time digging treasure out of the ground. After all, treasure can be printed by governments and central bankstaz with a few simple key strokes, so who needs shiny pieces of metal?<br />
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In reality, we have likely just completed the 1987 crash equivalent in the PM sector when it comes to relative valuations of common stocks versus Gold. The current "Dow to Gold" ratio move has gone on much longer than I anticipated, to be sure. But it is clear to me that we are in no way positioned for a shift of the secular tides at this juncture. Here is a chart of the "Gold to S&P 500" ratio back around the time of the 1987 crash in common stocks using a weekly log scale chart:<br />
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<a href="http://3.bp.blogspot.com/-wsLA92ZGQ7c/UWCCU6mdMwI/AAAAAAAAIMQ/lDzjlqlN-qg/s1600/Gold+to+SP500+ratio+1980+to+December+1987.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://3.bp.blogspot.com/-wsLA92ZGQ7c/UWCCU6mdMwI/AAAAAAAAIMQ/lDzjlqlN-qg/s320/Gold+to+SP500+ratio+1980+to+December+1987.PNG" width="255" /></a></div>
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Of course, the Gold bulls may have been a little premature in their celebration back then as this next chart shows:<br />
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<a href="http://3.bp.blogspot.com/-RdUbxBvVKts/UWCC8yo1xZI/AAAAAAAAIMY/bI9P4ZZGwJA/s1600/Gold+to+SP500+ratio+1980+to+2000.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://3.bp.blogspot.com/-RdUbxBvVKts/UWCC8yo1xZI/AAAAAAAAIMY/bI9P4ZZGwJA/s320/Gold+to+SP500+ratio+1980+to+2000.PNG" width="255" /></a></div>
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And currently, we have the <a href="http://goldversuspaper.blogspot.com/2009/10/paperbugs.html">paperbugs</a> rejoicing giddily in the streets as counterfeiting enormous amounts of money has propped up financial assets to the point where it seems as though Gold is once again irrelevant when compared to common stocks using the "S&P 500 to Gold" ratio:<br />
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<a href="http://1.bp.blogspot.com/-B7FLdXtfFik/UWCD2O-TrkI/AAAAAAAAIMg/WoeWd3U0Ipo/s1600/SP500+to+Gold+ratio+1999+to+April+2013.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://1.bp.blogspot.com/-B7FLdXtfFik/UWCD2O-TrkI/AAAAAAAAIMg/WoeWd3U0Ipo/s320/SP500+to+Gold+ratio+1999+to+April+2013.PNG" width="255" /></a></div>
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Keeping the biggest of "big picture" perspectives in mind, here is the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">"Dow to Gold" ratio</a> chart since 1980:<br />
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<a href="http://2.bp.blogspot.com/-h9Gv89jlW00/UWCE1DVTxxI/AAAAAAAAIMo/eGFtz1UcbZ0/s1600/Dow+to+Gold+ratio+1980+to+April+2013.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://2.bp.blogspot.com/-h9Gv89jlW00/UWCE1DVTxxI/AAAAAAAAIMo/eGFtz1UcbZ0/s320/Dow+to+Gold+ratio+1980+to+April+2013.png" width="255" /></a></div>
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Now, I don't expect it will take another decade to get back to 1980-type levels in this ratio, but I'm prepared to keep riding the Golden bull that long if that's what it takes. The big money is made by sitting tight and holding on during a big bull market. Those who held common stocks thru the 1987 crash certainly didn't regret it for long. Meanwhile, using silver as a more volatile proxy for the Gold bull market, it seems as though we may be at the end of a big 4th wave-type correction that suggests a mania phase dead ahead:<br />
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<a href="http://2.bp.blogspot.com/-8OR0b42IFgQ/UWCHFHabeqI/AAAAAAAAIMw/qquh-TyjGg4/s1600/Silver+secular+bull+to+April+2013.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://2.bp.blogspot.com/-8OR0b42IFgQ/UWCHFHabeqI/AAAAAAAAIMw/qquh-TyjGg4/s320/Silver+secular+bull+to+April+2013.png" width="255" /></a></div>
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If you accept this Elliott Wave labeling (not saying it is correct - this is just an opinion), it would suggest that the first wave resulted in a roughly 5.3 fold gain and the third wave roughly a 5.9 fold gain. Thus, since the first and third waves are roughly of equal magnitude, the fifth (and final) wave higher is likely to be of the extended variety and thus perhaps a 9-11 fold gain is coming. This would mean a peak for silver in the $200-$300 USD per ounce range. To anyone who thinks this is an outrageous number, I would ask: what do you think of one quadrillion as a number tracking the amount of outstanding financial derivative instruments in existence or one trillion dollars being the annual deficit of the world's current largest single country economy (i.e. USA). As last week's policy announcement from the Bank of Japan proved, there is no limit to the insanity induced by drinking the collective Kool Aid.<br />
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And oh, the hated Gold stocks. Using the XAU Mining Index as a proxy for the senior Gold miners, we can see that 30 years of price history tells us when to get excited about the Gold stocks and that time is now. Instead of greed, there is only fear, loathing and/or disinterest:<br />
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<a href="http://1.bp.blogspot.com/-Hea1jFnWDL0/UWCKPCtw4QI/AAAAAAAAIM4/tynPnVQW1e4/s1600/XAU+1983+thru+April+6+2013.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://1.bp.blogspot.com/-Hea1jFnWDL0/UWCKPCtw4QI/AAAAAAAAIM4/tynPnVQW1e4/s320/XAU+1983+thru+April+6+2013.png" width="255" /></a></div>
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This is a juicy set up for a trade, if nothing more. I think it will be much, much more. Much as in the last cycle (i.e. 2003-2008), it may well be another commodity price spike that derails the current "Goldilocks" scenario. I think Gold and silver are set to lead such a spike as business conditions continue to deteriorate globally. Meanwhile, the futures COT (commitment of traders) report indicates unusually skewed bearishness for all but the commercial traders (large banks like JP Morgan), who are now as bullish on silver as they ever seem to get (chart below stolen from <a href="http://www.cotpricecharts.com/commitmentscurrent/">Software North</a>):<br />
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<a href="http://1.bp.blogspot.com/-LmI-EKHG02E/UWCMu0vbeaI/AAAAAAAAINE/4IJ6Omiwwww/s1600/Silver+COT+April+2+2013.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="220" src="http://1.bp.blogspot.com/-LmI-EKHG02E/UWCMu0vbeaI/AAAAAAAAINE/4IJ6Omiwwww/s320/Silver+COT+April+2+2013.png" width="320" /></a></div>
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This is a potentially explosive situation that strongly favors a resolution in the PM bulls' favor. I don't think there has been a reading of greater than 45% bullish for the commercial traders in the past 10 years, and they are now at 43%. The momentum-chasing hedge funds are piling on the shorts here right as we hit trading range support. With an expanding open interest (rather than the usual decline into a low), an explosive short covering rally could occur with the slightest hint of a bottom (such as, say, with the action to end last week?).<br />
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If you would like some help in trying to trade the precious metals and PM stocks, I offer a <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">low-cost subscription service</a> (one month trial is only $15). If not, keep your physical metal safe and outside the banking system until the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a> hits 2 (and we may well go below 1 this cycle). In other words, don't get Cyprus'd!<br />
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<a href="http://www.bullionvault.com/#abrochert"><img alt="Buy gold online - quickly, safely and at low prices" border="0" height="60" src="http://www.bullionvault.com/images/adverts/Buy_Gold_Today_Banner.gif" title="Buy gold online - quickly, safely and at low prices" width="468" /></a><br />
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<a href="http://www.kitco.com/connecting.html"><img alt="[Most Recent Charts from www.kitco.com]" border="0" src="http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif" /></a>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-32793305976456683032013-01-05T11:43:00.001-08:002013-01-05T11:43:32.241-08:002013 - The Year of the Gold Bull?<br />
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2012 wasn't a fun year for most Gold bulls. Seeing the S&P 500 outperform Gold and seeing Gold stocks get decimated through the 1st half of the year was enough to create suicidal sentiment that is now only marginally improved after another prolonged correction in the precious metals (PM) sector to end the year. But as the many calls for an end of the PM bull market by several of the same people who have been wrong / missed out the whole way up get louder, the risk in the PM sector gets lower and lower.<br />
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The bigger picture hasn't changed and isn't going to for some time: a major private sector secular economic contraction in the West being fought with manufactured money/credit units by governments and central bankstaz. This is not a period to favor paper, as reflected by common stocks, over Gold. My trade of the year for 2013 is the same as my favored trade back in August: go long the "Gold to Dow" ratio (or short the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">"Dow to Gold" ratio</a>).<br />
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The secular chart of the S&P 500 (a broader index) to Gold ratio shows that time has run out for the <a href="http://goldversuspaper.blogspot.com/2009/10/paperbugs.html">paperbugs</a> on this correction:<br />
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<a href="http://1.bp.blogspot.com/-M4HHYdlt4F0/UOh8rDMA-NI/AAAAAAAAG24/RceIyq7az5o/s1600/SPX+to+Gold+30+years+thru+1-5-13.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="http://1.bp.blogspot.com/-M4HHYdlt4F0/UOh8rDMA-NI/AAAAAAAAG24/RceIyq7az5o/s400/SPX+to+Gold+30+years+thru+1-5-13.png" width="318" /></a></div>
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Of course, such a ratio chart doesn't tell us anything about nominal prices of either of these items. But it does tell us that a shiny piece of metal with no dividends or growth prospects should continue to trounce the wizards of Wall Street over the next several years. This is the forest one does not want to lose sight of the next time Warren Buffett talks about how perplexed he is by Gold. Perhaps Warren should have listened to his father, Howard (a congressman), a little more:<br />
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<blockquote class="tr_bq">
<i><span style="background-color: white; font-family: Helvetica, Arial, sans-serif; font-size: 13px; line-height: 16px;">"I warn you that politicians of both parties will oppose the restoration of gold, although they may outwardly seemingly favor it, </span><span style="font-family: Helvetica, Arial, sans-serif; font-size: 13px; line-height: 16px;">unless you are willing to surrender your children and your country to galloping inflation, war and slavery then this cause demands your support.</span><span style="background-color: white; font-family: Helvetica, Arial, sans-serif; font-size: 13px; line-height: 16px;"> For if human liberty is to survive in America, we must win the battle to restore honest money."</span></i></blockquote>
<span style="font-family: Helvetica, Arial, sans-serif; font-size: 13px; line-height: 16px;">[Read more:</span><span style="font-family: Helvetica, Arial, sans-serif; font-size: 13px; line-height: 16px;"> </span><a href="http://www.businessinsider.com/tired-of-warren-buffett-trashing-gold-here-are-some-quotes-from-his-gold-loving-father-2012-2?op=1#ixzz2GeRslYDz" style="color: #003399; font-family: Helvetica, Arial, sans-serif; font-size: 13px; line-height: 16px; text-decoration: initial;">http://www.businessinsider.com/tired-of-warren-buffett-trashing-gold-here-are-some-quotes-from-his-gold-loving-father-2012-2?op=1#ixzz2GeRslYDz</a>]<br />
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Now, I am not interested in politics, as I fully expect politicians to play their role and do the exact opposite of the right thing regardless of which party or platform they claim to represent. I also don't believe that a Gold standard can fix the world's problems, as governments controlling money is the problem, not the form of monetary system governments foist upon the masses. In most countries in the world currently, one is free to save in Gold rather than paper currency, which is the important thing for pragmatists like myself. But if one uses history as a guide, I think Howard Buffett was closer to the mark than his son Warren.<br />
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In any case, Gold will win over Warren and his paperbug minions this cycle because it is simply the time for this to occur. Cycles in markets exist much like cycles in nature, as financial markets are but a manifestation of the thoughts and emotions of one of nature's more curious species. We are in a secular fear and uncertainty cycle for conventional financial assets, which benefits Gold.<br />
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Moving from the philosophical to the tactical, now is the time to be bullish on Gold and its derivatives, not bearish. The intermediate term correction from the fall 2012 highs in the PM sector was much longer and deeper than I thought it would be, but we are where we are now. And keeping a healthy perspective on the intermediate term, the current set up is much more likely to lead to a bullish outcome than a bearish one. Here's a 12 year weekly chart of Gold thru Friday's close to show you what I mean:<br />
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<a href="http://2.bp.blogspot.com/-sW19H0d6Ln8/UOh_XXTqtEI/AAAAAAAAG3I/JaaVXnGziGo/s1600/Gold+12+year+weekly+thru+1-5-13.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="http://2.bp.blogspot.com/-sW19H0d6Ln8/UOh_XXTqtEI/AAAAAAAAG3I/JaaVXnGziGo/s400/Gold+12+year+weekly+thru+1-5-13.png" width="318" /></a></div>
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And the beleaguered Gold stock sector is also oversold and significantly undervalued for the 3rd time in the past year. An interesting phenomenon occurred to end last week, however, in the small cap Gold mining sector. Using the GLDX ETF as a proxy for the explorer/small cap Gold mining sector, here is the weekly price action over the past few years thru Friday's close:<br />
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<a href="http://3.bp.blogspot.com/-2aL2VxqyWQY/UOiBbkfAynI/AAAAAAAAG3Y/BEeLQtbBiCU/s1600/GLDX+weekly+thru+1-5-13.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="http://3.bp.blogspot.com/-2aL2VxqyWQY/UOiBbkfAynI/AAAAAAAAG3Y/BEeLQtbBiCU/s400/GLDX+weekly+thru+1-5-13.png" width="318" /></a></div>
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I remain wildly bullish on the whole PM sector. If you would like some assistance navigating the PM sector with an orientation towards trading the intermediate-term swings, I publish a <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">low cost subscription trading service</a> that is only $15/month. Otherwise, keep the faith and hold onto your PM sector items tight. Don't let the short and intermediate-term noise distract you from what still promises to be a secular bull market for the history books. The <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a> will hit 2 (and we may well go below 1 this cycle).<br />
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</a>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-1160347030821927742012-10-31T15:18:00.000-07:002012-10-31T15:18:08.149-07:00A Gold Stock Bull Gives Thanks To Mr. Hendry<span class="Apple-style-span" style="font-family: inherit;"><br /></span>
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<span class="Apple-style-span" style="font-family: inherit;">Mr. Hugh Hendry is a successful hedge fund manager with a bit of a rock star aura in the financial community. He has a colorful personality and keen insights to accompany his track record of making good money for his investors. <a href="http://www.zerohedge.com/news/2012-10-25/hugh-hendry-i-have-no-idea-where-stock-market-going-be-am-long-gold-and-short-sp">In a recent interview</a>, he said the following:</span><br />
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<i><span class="Apple-style-span" style="font-family: inherit;"><span class="Apple-style-span" style="background-color: white; line-height: 16px;">"I am long gold and I am short gold mining equities. There is no rationale for owning gold mining equities. </span></span><span class="Apple-style-span" style="font-family: inherit;"><span class="Apple-style-span" style="background-color: white; line-height: 16px;">It is as close as you get to insanity."</span> </span></i><br />
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I want to thank Mr. Hendry for calling the bottom of the recent correction in the "Gold stocks to Gold" ratio. Because this was only a minor/short-term correction in a fledgling new uptrend in this ratio, Hendry's comment was not as powerful a contrarian signal as the plethora of articles on how crappy Gold stocks are relative to Gold that appeared last spring and summer (<a href="http://news.goldseek.com/GoldSeek/1335987000.php">like this one</a>). However, this recent comment sure is going to prove to be timely in my opinion. I would take the other side of Mr. Hendry's trade, but unfortunately I am long Gold as an investment and long Gold stocks as a speculation and don't see any rational reason to short Gold. In other words, I am talking my book just like Mr. Hendry, so take everything I say with a grain of salt. But I believe Mr. Hendry is going to get stopped out of his "long Gold, short Gold stocks" trade rather soon.<br />
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To be fair, Mr. Hendry also mentioned that he is long Gold and short the S&P 500, which is <a href="http://goldversuspaper.blogspot.com/2012/08/trade-of-year-gold-versus-paper.html">Gold Versus Paper's trade of the year</a>, so we certainly see eye to eye on other issues. Gold stocks are set to go on a tear and I stand by my call that the GDX ETF will be at 80 by the end of May, 2013. That is my conservative target, by the way, and a triple digit price on GDX by then is not at all an unreasonable proposition in my opinion.<br />
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Here's the daily action of the "Gold stocks to Gold" ratio, using GDX:GLD as a proxy, over the last 8 months:<br />
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<a href="http://1.bp.blogspot.com/-uuOlQs6QupY/UJGYNLaX6xI/AAAAAAAAGCA/7KzK0630uJo/s1600/GDX+to+Gold+ratio+short+term.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://1.bp.blogspot.com/-uuOlQs6QupY/UJGYNLaX6xI/AAAAAAAAGCA/7KzK0630uJo/s320/GDX+to+Gold+ratio+short+term.png" width="255" /></a></div>
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Of course, this is a shorter term consideration over the next few months or so, and ignores the bigger picture. Here's a monthly "Gold stocks to Gold" ratio over the past 30 years or so, using the XAU mining index as a proxy for senior Gold miners:<br />
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<a href="http://4.bp.blogspot.com/-bYdCLeRCzCU/UJGau6OerqI/AAAAAAAAGCQ/jZSZqWfoiag/s1600/XAU+to+Gold+long+term.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://4.bp.blogspot.com/-bYdCLeRCzCU/UJGau6OerqI/AAAAAAAAGCQ/jZSZqWfoiag/s320/XAU+to+Gold+long+term.png" width="255" /></a></div>
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We just completed our third positive month in a row for this ratio. Today's Halloween action also suggests the correction in precious metals (PM) stocks is over. The silver stock ETF (ticker: SIL) has been relentlessly strong even during a steeper silver correction. The chart of the last 8 month's action shows the importance of today's volume on this early stage breakout higher, with the "silver stocks to silver" ratio (using SIL:SLV as a proxy) charted below to show the incredible relative strength of silver miners lately:<br />
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<a href="http://2.bp.blogspot.com/-D2XsNHh_Af0/UJGdf-D4UJI/AAAAAAAAGCg/3ulqFlHdWUA/s1600/SIL+ETF.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://2.bp.blogspot.com/-D2XsNHh_Af0/UJGdf-D4UJI/AAAAAAAAGCg/3ulqFlHdWUA/s320/SIL+ETF.png" width="255" /></a></div>
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When Gold and silver stocks are leading their respective metals, this leads to the most consistent and the strongest cyclical bull moves in the PM sector for both the miners and metals (a la late 2000-2003, 2005-6 and 1973-1974). It is actually to the Gold stock bulls' benefit that Mr. Hendry and many other hedge funds are short Gold stocks right now, as their short covering will add fuel to the bullish fire. My subscribers and I finished buying into a new long Gold stocks position last week in anticipation of today's action and I continue to believe Gold stocks will outperform Gold over the next several months, though I expect both to continue rising.<br />
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For the very long term, I am a "Gold guy," not a "Gold stocks" guy, but the speculative opportunity in Gold and silver stocks right now is as good as it gets in my opinion (at least relative to the obvious bottoming this past spring and summer in Gold stocks).<br />
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If you are interested in speculating in the precious metals sector and would like some assistance, I run a <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">low-cost subscription trading service</a> that focuses on the shiny stuff and the companies that dig it out of the ground. A one month trial is only $15. Of course, there is nothing wrong with avoiding the speculative pool of sharks completely and simply holding on to your barbarous relics until the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a> hits 2 (and we may well go below 1 this cycle).<br />
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</a>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-40286222328803007142012-09-26T13:59:00.000-07:002012-09-26T13:59:24.013-07:00Silver and the Myth of Diminishing Returns From QE<br />
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There is lots of talk in the financial media about how there are diminishing returns from QE (i.e. money printing) with each successive round of counterfeiting. This is only true because such commentators are stuck in <a href="http://goldversuspaper.blogspot.com/2009/10/paperbugs.html">paperbug</a> world and focusing on common stocks. But common stocks are in a secular bear market, so it makes sense that there could be diminishing returns on common equities related to bailing out banks and governments by destroying the purchasing power of the currencies of the world.<br />
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But before we dismiss money printing as ineffective, we have to view it from the perspective of the investor that holds silver instead of paper money, certificates of confiscation (government bonds) or common equities. Helicopter Ben's experiment with everyone else's savings is going quite well from the perspective of one invested in silver. Here's a 4 year weekly chart of the silver price in US Dollars to show you what I mean:<br />
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<a href="http://4.bp.blogspot.com/-0M-xNR_dZp8/UGNhnndMAcI/AAAAAAAAFc8/GgBUuBj0FaE/s1600/Silver+4+year+weekly+chart+thru+9-26-12.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://4.bp.blogspot.com/-0M-xNR_dZp8/UGNhnndMAcI/AAAAAAAAFc8/GgBUuBj0FaE/s320/Silver+4+year+weekly+chart+thru+9-26-12.png" width="255" /></a></div>
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I think $100/oz. or so sounds about right for silver within the next 1-2 years. Gold and silver stocks certainly flew out of the gates to end the summer as if anticipating this kind of potential move in the metals. As secular bull markets mature, the cyclical bull moves within them get stronger and faster. We have already started a new cyclical bull market in the PM sector in my opinion.<br />
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One of the sneaky tricks about inflation is that once money is counterfeited and passed around to those with connections to the printing press, we little folks don't always know where the subsequent price inflation is going to come from. While I may be wrong in thinking the best performing asset class over the next few years will be precious metals, the precious metals sector is certainly the easiest, most conservative, no-brainer choice to put both investment and speculative money to work. The federal reserve and other central bankstaz around the world will get price inflation by creating insane amounts of money out of thin air, it just may not be price inflation in the items they want.<br />
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In fact, as someone who always harps on the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a>, I thought the silver to S&P 500 ratio chart may offer a clue as to how much further the run in silver relative to common stocks has to go if we maintain the current course for the next several years:<br />
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<a href="http://2.bp.blogspot.com/-G11ZYgewihU/UGNk2cxRJ4I/AAAAAAAAFdM/F9F49OFTV4o/s1600/Silver+to+SP500+monthly+ratio+chart+-+1980+thru+9-26-2012.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://2.bp.blogspot.com/-G11ZYgewihU/UGNk2cxRJ4I/AAAAAAAAFdM/F9F49OFTV4o/s320/Silver+to+SP500+monthly+ratio+chart+-+1980+thru+9-26-2012.png" width="255" /></a></div>
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If Gold is going to $3500/oz and beyond (and I wouldn't bet against Jim Sinclair even with JP Morgan's money), silver will have a price in the triple digits. It's not that I think the federal reserve (not federal and has no reserves, so I see no reason to capitalize their name) can stop another stock market crash and/or major common stock bear market from happening. But they have proven to me that they are determined to destroy what's left of the value of the US Dollar and no one with any authority is interested in stopping them. Once a few more percent of the general population catch on to this in the advanced economies of the world, which are all going thru the same escalating serial currency abuse process, critical mass will be reached and the real Gold and silver stampede will begin. We're not there yet, but it's coming...<br />
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Hold onto your Gold, silver, platinum and PM stocks. While things are a little overbought in the short-term, we're going much higher in the PM sector. I stand by <a href="http://goldversuspaper.blogspot.com/2012/06/new-cyclical-gold-stock-bull-market-is.html">my call made in May of this year</a> that GDX is going to 80 by May of 2013 and I suspect it could go much higher (GDX will likely get to triple digits before silver will).<br />
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If you would like some help in navigating these markets with a focus on the PM sector and short term trading tactics to augment core PM positions, I run a <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">low cost subscription service</a>. A one month trial is only $15.<br />
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</a>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-71829987808609393122012-08-19T10:04:00.003-07:002012-08-19T10:07:11.775-07:00Trade of the Year - Gold Versus Paper<br />
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I often harp on the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a>, as I think it is the easiest way to see the "bigger picture" secular trend of poorly performing common stock markets (i.e. paper) relative to the free market's real money (i.e. Gold). I have been not-so-patiently waiting for a turn in this ratio back to the advantage of the Gold bulls. Well, we have now gotten to the point where I feel comfortable arguing that this ratio now is likely to provide the best trade over the next 12 months. When I say best trade, I mean the best potential reward/return relative to the risk.<br />
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I now see the risk as negligible and the potential reward as substantial in this trade. Here's a long-term monthly log scale chart of the "Gold to S&P 500" ($GOLD:$SPX) ratio as a proxy for the "Gold versus paper" trade to show you why I think the risk is low for this trade:<br />
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<a href="http://2.bp.blogspot.com/--BO0SJqjnEk/UDEVHr7oxZI/AAAAAAAAFDc/3GZoC-m4Gfo/s1600/Gold+to+SP500+30+year+monthly+chart+thru+8-19-12.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://2.bp.blogspot.com/--BO0SJqjnEk/UDEVHr7oxZI/AAAAAAAAFDc/3GZoC-m4Gfo/s320/Gold+to+SP500+30+year+monthly+chart+thru+8-19-12.PNG" width="255" /></a></div>
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Once a trend was established, and the current trend in Gold outperforming common stocks is very well-entrenched, the 40 month moving average held every time except one in the past 31 or so years. And that includes during the Great Fall Panic of 2008. Pretty good track record, which is why I think the risk for this trade is very low right now and the ability to place a stop loss in case "this time is different" is clear. Scaling in to the weekly chart of this ratio, this time using the $SPX:$GOLD ratio instead of vice versa, shows that the time to start scaling into this trade is during the second half of August (i.e. now):<br />
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<a href="http://4.bp.blogspot.com/-_iRo7hgsnQ4/UDEWgNUL2JI/AAAAAAAAFDk/qAG5ct85T0E/s1600/SP500+to+Gold+ratio+weekly+10+year+chart+thru+8-19-12.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://4.bp.blogspot.com/-_iRo7hgsnQ4/UDEWgNUL2JI/AAAAAAAAFDk/qAG5ct85T0E/s320/SP500+to+Gold+ratio+weekly+10+year+chart+thru+8-19-12.PNG" width="255" /></a></div>
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The easiest way to play this trade in a decrepit paper money system is to go long physical Gold. However, since this is a ratio trade, the “pure” way to play it is by going long Gold
while shorting an identical dollar amount of the S&P 500 (or Dow Jones Industrial Average) at the same time. There is a double leveraged FSG ETF designed
to profit from upward moves in the $GOLD:$SPX ratio, but it is highly illiquid
and thus I cannot recommend this ETF since I am partly interested in mentioning
this trade because of its low risk profile.</div>
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<span style="font-family: "Times New Roman"; font-size: 12.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">There is another way to play this ratio that is a
derivative trade, and one most Gold bulls are tired of hearing about: going long Gold
stocks. This is a higher risk trade, but with potential for higher reward. The under performance of Gold stocks relative to Gold has been rough over the past year. Make no mistake: </span>Gold is safer than Gold stocks and will probably outperform Gold stocks as a sector over the full secular cycle of a declining Dow to Gold ratio. However, I am wildly <a href="http://goldversuspaper.blogspot.com/2012/07/gold-stocks-bottom-re-test-launch.html">bullish on Gold stocks right now</a> and think they are set to outperform to start the next cyclical bull market in the precious metals sector. Why is that?<br />
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Well, below is a weekly subscriber letter from August 12th that summarizes the reasons why.<br />
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<a href="http://www.scribd.com/doc/103271317/Gold-Versus-Paper-August-11-2012-Letter" style="-x-system-font: none; display: block; font-family: Helvetica,Arial,Sans-serif; font-size-adjust: none; font-size: 14px; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal; margin: 12px auto 6px auto; text-decoration: underline;" title="View Gold Versus Paper August 11 2012 Letter on Scribd">Gold Versus Paper August 11 2012 Letter</a><iframe class="scribd_iframe_embed" data-aspect-ratio="" data-auto-height="true" frameborder="0" height="600" id="doc_54785" scrolling="no" src="http://www.scribd.com/embeds/103271317/content?start_page=1&view_mode=scroll&access_key=key-18kpae458e1eeza8bod2" width="100%"></iframe><br />
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If this type of analysis interests you, consider a <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">one month trial subscription</a> - it's only $15. Hold onto your Gold and keep it away from Jon Corzine and other depraved banksta-types. Until the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a> hits 2 (and we may well go below 1 this cycle), Warren Buffet and other traditional Wall Street gods will continue to under perform a shiny piece of metal.<br />
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Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-70050878616138540322012-07-15T17:26:00.000-07:002012-07-15T17:26:14.704-07:00Gold Stocks: Bottom, Re-Test, Launch?<br />
<span style="background-color: white;">Though I favor physical Gold held outside the banking system that can't get MF Global'd over those paper Gold derivatives known as Gold stocks, there are times when a speculative opportunity presents itself that cannot be ignored (at least not by me). Now is such a time in Gold stocks. In my last post, I welcomed a new cyclical Gold stock bull market. I continue to believe a new cyclical Gold stock bull market has already begun and we are now completing (if we haven't already) the re-test of the mid-May, 2012 lows. What comes next? The launch!</span><br />
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Here's a 6 month daily chart of the GDX ETF thru Friday's close to show you my thoughts:<br />
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<a href="http://1.bp.blogspot.com/-UMn9maeADqE/UANBrQk91WI/AAAAAAAAEcY/ZbwxeHuJx1c/s1600/GDX+6+month+chart+thru+7-14-12.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://1.bp.blogspot.com/-UMn9maeADqE/UANBrQk91WI/AAAAAAAAEcY/ZbwxeHuJx1c/s320/GDX+6+month+chart+thru+7-14-12.png" width="255" /></a></div>
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It is important to understand that fundamental valuations and "bigger picture"/longer term technical analysis both support a bottoming process here. <a href="http://goldversuspaper.blogspot.com/2012/06/new-cyclical-gold-stock-bull-market-is.html">My last post discussed some of these factors</a>. And here is yet another important fundamental piece of data courtesy of the Tocqueville Gold Fund <a href="http://tocqueville.com/sites/default/files/Tocqueville_Gold_Monitor_2Q12.pdf">2nd quarter 2012 investor letter</a> (there are many other great data points at this link and the chart below is apparently courtesy of BMO Capital Markets):<br />
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<a href="http://2.bp.blogspot.com/-cWlbhLgnZ00/UANFYxJYlcI/AAAAAAAAEck/HaLWtrxqAfo/s1600/p-fcf+FOR+SENIOR+GOLD+MINERS+THRU+MID+2012.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="202" src="http://2.bp.blogspot.com/-cWlbhLgnZ00/UANFYxJYlcI/AAAAAAAAEck/HaLWtrxqAfo/s320/p-fcf+FOR+SENIOR+GOLD+MINERS+THRU+MID+2012.PNG" width="320" /></a></div>
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The dark blue line in the chart above demonstrates that the price of senior Gold mining stocks relative to their current year cash flows is at levels last seen at the depths of the 2008 crash and the beginning of the current Gold stock secular bull market at the end of 2000. The Gold stock bears keep screaming about the rising costs of Gold mining. They are right about rising costs, but they neglect to mention the other side of the argument, which is more important: margins are RISING for large cap Gold miners, not falling, because the price of Gold is rising faster than costs are. And we are entering another coordinated global recession (no, there won't be any decoupling this time, either), which means the price of general commodities (like oil) should fall relative to Gold. This will further improve margins for Gold miners.<br />
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<span style="background-color: white;">We have seen several bottoms in Gold stocks in the past that resemble the current set-up. H</span>ere are some examples of the "bottom, re-test, launch" sequence that I believe is repeating right in front of our eyes. First up, the 2004 bottom, using the HUI Mining Index ($HUI):<br />
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<a href="http://1.bp.blogspot.com/-QmJV-TRv7h0/UANJoFk2YVI/AAAAAAAAEcw/IOTnjey2G7E/s1600/HUI+2004+sequence.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://1.bp.blogspot.com/-QmJV-TRv7h0/UANJoFk2YVI/AAAAAAAAEcw/IOTnjey2G7E/s320/HUI+2004+sequence.png" width="255" /></a></div>
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Next up, late 2008, also using the HUI mining index:<br />
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<a href="http://2.bp.blogspot.com/-O_OjNpHtVUI/UANKLC8QNHI/AAAAAAAAEc4/wy2jqVcDTwQ/s1600/HUI+2008+sequence.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://2.bp.blogspot.com/-O_OjNpHtVUI/UANKLC8QNHI/AAAAAAAAEc4/wy2jqVcDTwQ/s320/HUI+2008+sequence.png" width="255" /></a></div>
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Or even way back in 2000 to start the secular Gold stock bull market using the XAU mining index:<br />
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<a href="http://2.bp.blogspot.com/-Pp2mVDBKdMI/UANPh4KSk4I/AAAAAAAAEdE/6C_S2tsNORo/s1600/XAU+2000+sequence.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://2.bp.blogspot.com/-Pp2mVDBKdMI/UANPh4KSk4I/AAAAAAAAEdE/6C_S2tsNORo/s320/XAU+2000+sequence.png" width="255" /></a></div>
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Could this time be different? Sure, anything is possible in markets. But given the low valuations in Gold stocks by multiple measures, recent 40% bear market in Gold stocks (2nd worst of the last 12 years in percentage terms and longer than average duration), and suicidal sentiment in the PM sector, the odds are now heavily favoring the Gold stock bulls here. Here is a chart of the "bullish percent index" for the GDM (the index that backs the GDX ETF) over the past 6 months to also show how beaten up the senior Gold stocks are ($BPGDM):<br />
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<a href="http://2.bp.blogspot.com/-hHM60u1lzhU/UANQpkE38RI/AAAAAAAAEdM/PlLSO5XppaA/s1600/BPGDM+6+month+chart+thru+7-14-12.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://2.bp.blogspot.com/-hHM60u1lzhU/UANQpkE38RI/AAAAAAAAEdM/PlLSO5XppaA/s320/BPGDM+6+month+chart+thru+7-14-12.png" width="255" /></a></div>
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Gold stocks are a speculation for me while physical Gold is my way of protecting my savings from the ravages of a financial and bureaucratic system out of control. Until the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a> gets to 2 (and we may well go below 1 this cycle), it is silly to be overly bearish on the precious metals sector. While traders bicker over whether Gold is about to break up or down right now, they miss the "forest": by the time we reach December 31st, Gold is likely to be up in percentage terms for the year, which would mark its 12TH YEAR IN A ROW. Is Gold a bubble or are there just a lot of sour grapes out there from those that have either missed the move so far or are desperately trying to prevent the inevitable "official" return of Gold as the anchor for a new international monetary system?<br />
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Hold onto your Gold. This thing is far from over. If you'd like to try speculating in the paper PM sector once you've established a core physical metal position, consider giving my <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">low-cost subscription service</a> a try. A one month trial subscription is only $15.<br />
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</a>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-36827165961805841532012-06-03T10:55:00.001-07:002012-06-03T11:55:16.616-07:00A New Cyclical Gold Stock Bull Market Is Born<br />
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And it is about time! After a 40% bear market (the second worst of the secular Gold stock bull so far), the large majority of investors and speculators have been worn out or scared out. The mid-May bottom was THE bottom in my opinion and we have a long way to go on the upside. The metals will rise as well, but Gold stocks will outperform this time.<br />
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Now, keep in mind that I favor physical Gold over Gold stocks over the long term and, in fact, own no Gold stocks for the long term. My long-term holdings are in physical Gold held outside the banking system. This is the safer place to be during this nasty secular common stock bear market, particularly when sovereign defaults are the theme of this next decade. We will not exit this secular common stock bear market until we have a new monetary system based on a modicum of common sense - in other words, one that involves Gold.<br />
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Let Charlie Munger speak of how uncivilized it is to make a lot more money than he has for shareholders over the past decade by holding a shiny piece of metal instead of the paper promises of Wall Street's "finest." Sounds like sour grapes to me. By the way, shiny metal will continue to far outperform the Berkshire Hathaway stock price over the next several years - of that, you can be sure.<br />
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To the charts, I say, as this is where the answers lie in my opinion once one understands the fundamentals. Here's a "big picture" view of the XAU Mining Index ($XAU) using a monthly log scale plot over roughly the past 30 years thru Friday's close:
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<a href="http://4.bp.blogspot.com/-xAW7c86a22w/T8uYC45721I/AAAAAAAAEOo/MONfYoCNZzc/s1600/XAU%2Bmonthly%2B1983%2Bthru%2B6-3-2012.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="http://4.bp.blogspot.com/-xAW7c86a22w/T8uYC45721I/AAAAAAAAEOo/MONfYoCNZzc/s400/XAU%2Bmonthly%2B1983%2Bthru%2B6-3-2012.png" width="320" /></a></div>
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Others might say that we are headed for another 2008-style meltdown and we are going to lose that blue support line again, as we did in 2008. Hey, that's what makes a market. But there are fundamental and technical reasons for why we ain't going there again any time soon. The most important, in my opinion, is the fact that Gold stocks have already crashed relative to the Gold price. Here's a monthly log scale view of the XAU Mining Index divided by the price of Gold ($XAU:$GOLD) thru Friday's close:
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<a href="http://4.bp.blogspot.com/--7DqIvQ4U6I/T8uZgCXCC-I/AAAAAAAAEO0/qoZ18lQXKx0/s1600/XAU%2Bto%2BGold%2Bratio%2Bmonthly%2B1983%2Bthru%2B6-3-2012.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="http://4.bp.blogspot.com/--7DqIvQ4U6I/T8uZgCXCC-I/AAAAAAAAEO0/qoZ18lQXKx0/s400/XAU%2Bto%2BGold%2Bratio%2Bmonthly%2B1983%2Bthru%2B6-3-2012.png" width="320" /></a></div>
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Over the long term, it is apparent that Gold stocks have underperformed the metal and may well continue to do so for the longer term haul (i.e. next decade). However, speculative gains during a cyclical Gold stock bull come fast and furious once Gold stocks decide it is their turn to lead the way. Next up, the "Gold stocks to common stocks" ratio, using the XAU and the S&P 500 as proxies ($XAU:$SPX) on a monthly chart over the past 13 years thru Friday's close:
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<a href="http://3.bp.blogspot.com/-COaff9BofLQ/T8uaua54SjI/AAAAAAAAEPA/X7fo3jHIO5Y/s1600/XAU%2Bto%2BSPX%2Bratio%2Bmonthly%2B1983%2Bthru%2B6-3-2012.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="http://3.bp.blogspot.com/-COaff9BofLQ/T8uaua54SjI/AAAAAAAAEPA/X7fo3jHIO5Y/s400/XAU%2Bto%2BSPX%2Bratio%2Bmonthly%2B1983%2Bthru%2B6-3-2012.png" width="320" /></a></div>
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Furthermore, the fundamentals continue to improve for producing Gold companies due to a rising "real price" of Gold. I learned this concept from Bob Hoye and it makes sense. When the Gold price is rising relative to the cost of mining (regardless of what the nominal price of Gold is doing), operating margins for producing miners should improve, all other things being equal (which they never are...). Using the Gold price divided by the price of a basket of commodities, we can get a rough estimate of this trend. Here is a 30 year monthly chart of Gold divided by the CCI commodities index ($GOLD:$CCI) thru Friday's close using a log scale format:
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<a href="http://1.bp.blogspot.com/-pkMhAhY26wQ/T8ucAoylT9I/AAAAAAAAEPM/9o4CenVJGEE/s1600/Gold%2Bto%2BCCI%2B20%2Byear%2Bratio%2Bchart%2Bthru%2B6-3-12.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="http://1.bp.blogspot.com/-pkMhAhY26wQ/T8ucAoylT9I/AAAAAAAAEPM/9o4CenVJGEE/s400/Gold%2Bto%2BCCI%2B20%2Byear%2Bratio%2Bchart%2Bthru%2B6-3-12.png" width="320" /></a></div>
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This is where the "Dollar to zero" and hyperinflation crowd misses some of the nuances along the way. Sure, every currency becomes worthless eventually, but the turns along the way are what make things interesting to those who follow markets. For example, despite being a staunch Gold bull, I have been looking for a new cyclical bull market in the US Dollar Index since last summer, and I don't think the one that seems to be developing is over yet by a long shot. All currencies are declining against Gold, but doing so at different rates.<br />
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And if you are into technical analysis, you should have noticed the volume on the GDX ETF. May was the highest monthly volume in the history of GDX (with a bullish monthly candle to mark a bottom) and Friday was the highest daily volume in the history of the GDX ETF. Clearly, the big boys see the same things I do and have now established their positions. They are doing so at a time when sentiment in the Gold stock sector is as poor as it has been since the darkest days of the 2008 panic.<br />
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I had to smile at the number of recent articles I have seen describing how much Gold stocks suck and how they will never outperform the metal. Perfect!
Here's my homemade sentiment chart using the data from the Rydex Precious Metals Mutual Fund (a PM stock fund), the plot showing the net asset value (NAV) of the fund (i.e. amount of money in the fund) over time. When the plot is low, the money in the fund is low, which is generally a combination of declining prices and money withdrawals from the fund. When the herd is bearish (i.e. NAV low), you want to be bullish and vice versa. Here's a 10 year plot of the NAV of the Rydex fund thru Friday's close:
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<a href="http://1.bp.blogspot.com/-CjQMkQhXhzo/T8ufBje1fMI/AAAAAAAAEPc/EU9OrR6_mo8/s1600/Rydex%2BPM%2BFund%2BNAV%2Bdata%2B10%2Byear%2Bchart%2Bthru%2B6-3-12.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="193" src="http://1.bp.blogspot.com/-CjQMkQhXhzo/T8ufBje1fMI/AAAAAAAAEPc/EU9OrR6_mo8/s400/Rydex%2BPM%2BFund%2BNAV%2Bdata%2B10%2Byear%2Bchart%2Bthru%2B6-3-12.PNG" width="347" /></a></div>
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I'd say we're not going to get much lower than the 2008 meltdown, but feel free to disagree.
The turn has already come and gone, in my opinion. However, the bulk of speculative gains in this cyclical Gold stock bull market are ahead of us. For those with a longer-term view, ignore the squiggles until the GDX is 80 or more and we'll get there within a year if history is reliable guide. For those who like to try to play/trade the shorter term swings in the volatile Gold mining sector, consider giving my <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">low cost subscription service</a> a try (it's only $15/month).
For those with a lower risk tolerance, simply hold onto your Gold until the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a> gets to 2 (and we may well go below 1 this cycle). Speaking of my favorite secular road map chart, it looks like we have finally made the turn - here's a monthly log scale chart of $INDU:$GOLD over the past 15 years thru Friday's close:
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<a href="http://3.bp.blogspot.com/-NlqQrQ6NJGo/T8uirGqFIKI/AAAAAAAAEPs/pKuiDEvQSzo/s1600/Dow%2Bto%2BGold%2B15%2Byear%2Bratio%2Bchart%2Bthru%2B6-3-12.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="http://3.bp.blogspot.com/-NlqQrQ6NJGo/T8uirGqFIKI/AAAAAAAAEPs/pKuiDEvQSzo/s400/Dow%2Bto%2BGold%2B15%2Byear%2Bratio%2Bchart%2Bthru%2B6-3-12.png" width="320" /></a></div>
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</a>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-37796639303183684762012-04-19T18:40:00.011-07:002012-04-19T19:42:26.596-07:00And Yet Another One Bites the DustTo all those who say that deflationary collapses cannot happen in paper monetary systems, I ask you: don't the PIIGS-ies of Europe count? Because they're all falling, one right after the other, like dominoes. Today, the Spanish stock market ($SMSI) closed below its spring, 2009 lows. Here's a 5 year weekly chart through today's close:<br /><br /><br /><a href="http://2.bp.blogspot.com/-eVhmQyQbObY/T5C_mXKqaJI/AAAAAAAADNU/yvLdGg-FSk0/s1600/SMSI%2B5%2Byear%2Bweekly%2Bthru%2B4-19-12.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://2.bp.blogspot.com/-eVhmQyQbObY/T5C_mXKqaJI/AAAAAAAADNU/yvLdGg-FSk0/s400/SMSI%2B5%2Byear%2Bweekly%2Bthru%2B4-19-12.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5733292991417313426" /></a><br /><br /><br />Spain joins Greece, Portugal and Italy in slow motion deflationary stock market crashes. Italy (Milan [$MIB] Index) did a peek-a-boo below the spring, 2009 lows in 2011, and then had a weak rebound. It looks set to break to new lower lows soon. Here's a 20 year monthly chart of $MIB thru today's close:<br /><br /><br /><a href="http://4.bp.blogspot.com/-4YYVFljXdvY/T5DBnRxsJCI/AAAAAAAADNg/IOuIwI3flk8/s1600/MIB%2B20%2Byear%2Bmonthly%2Bchart%2Bthru%2B4-19-12.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://4.bp.blogspot.com/-4YYVFljXdvY/T5DBnRxsJCI/AAAAAAAADNg/IOuIwI3flk8/s400/MIB%2B20%2Byear%2Bmonthly%2Bchart%2Bthru%2B4-19-12.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5733295206173516834" /></a><br /><br /><br /><br />These are modern-day examples of deflationary stock market collapses right in front of our eyes. Those who say the bankstaz would never let it happen just don't want to face reality. Bankers can profit from both deflation and inflation. Who do you think is going to buy up the assets in these European countries for pennies on the dollar (after they print themselves up some fresh new money)? Now, I don't suspect that the larger economies with their own printing presses are going to go this route quietly, but Japan sure doesn't seem to have the inflationary central banksta rescue thing down so far after 22 years.<br /><br />Unlike many Gold bulls, I don't see stocks as a better play than cash or US bonds here. I am not a buy and hold investor of these asset classes (that's what Gold is for), but I don't expect the US bond market to crater any time soon with a global recession in the works. I also really like the US Dollar right now as a trade. I know it's blasphemy for a Gold bull to talk of US Dollar strength (relative to other paper currencies), but that's what I see coming.<br /><br />Will Gold survive a US Dollar rally? Is it remotely possible? Of course. Not every US Dollar rally causes a 2008-style meltdown. All currencies are sinking relative to Gold, simply at different rates (<a href="http://goldversuspaper.blogspot.com/2009/12/paper-currencies-trampoline-jumping.html">trampoline jumping</a> is what I like to call it). The bears in the PM sector are out in force and I even watched a recent interview (hat tip to John Rubino at dollarcollapse.com for the link) talking about the Gold "bubble" collapsing with a book to back it up (an "author" sound more authoritative than a "blogger," eh?) - <a href="http://finance.yahoo.com/blogs/daily-ticker/gold-heading-700-author-sees-impending-collapse-124847501.html;_ylt=AoxOSb9.Gxs03uAEQnAxOg6VuodG;_ylu=X3oDMTN0dGlpdm9jBG1pdANTZWN0aW9uIExpc3QEcGtnA2I4YzM1NjQ0LWFjMmUtMzIyOC1hZDVmLTBiN2NiNTgyZmQ0YwRwb3MDMgRzZWMDTWVkaWFTZWN0aW9uTGlzdAR2ZXIDNzgxYzZkYTAtODk1NS0xMWUxLWJjN2YtNTIyZGFmMDAxZjZj;_ylg=X3oDMTJ0cGk2ZHFtBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDNzNkMGIzOTEtZWUxNy0zZGY2LTlmMjEtODJhYjMxMjhlNWFjBHBzdGNhdANuZXdzBHB0A3N0b3J5cGFnZQR0ZXN0Aw--;_ylv=3">here's the link</a> for those interested in hearing the other side of the debate.<br /><br />Me? I'll stick with Gold. It's a no-brainer for the long term. Short-term? Sure, we can correct more. I would love a dip below $1600 to shake out a few more weak hands while Gold stocks take one more dive before starting a new cyclical bull market. But these are short-term, casino-related concerns, not the big picture. The big picture is shown below, a monthly chart of the Gold to Dow ratio ($GOLD:$INDU) from 1980 thru today's close:<br /><br /><br /><br /><a href="http://2.bp.blogspot.com/-oSJsA-GPaZ0/T5DGRpHlcCI/AAAAAAAADNs/wQ37nj2muUE/s1600/Gold%2Bto%2BDow%2Bratio%2B-%2Bmonth%2Bchart%2Bfrom%2B1980%2Bthru%2B4-19-12.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://2.bp.blogspot.com/-oSJsA-GPaZ0/T5DGRpHlcCI/AAAAAAAADNs/wQ37nj2muUE/s400/Gold%2Bto%2BDow%2Bratio%2B-%2Bmonth%2Bchart%2Bfrom%2B1980%2Bthru%2B4-19-12.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5733300332040384546" /></a><br /><br /><br /><br />Its stocks, real estate, cash, bonds or hard assets. I'll take cash in a secular economic contraction/Kondratieff winter/economic depression. However, I prefer cash that cannot be debased by decree, so I'll stick with Gold. I want to be like a banksta with the money left over to buy assets for pennies on the dollar some day when the house of cards finishes falling. The nice thing about Gold is that this will work in both a deflationary or hyperinflationary poop storm. Those who say Gold isn't a good hedge against deflation haven't studied their history. One of the hallmarks of a depression is that the purchasing power of Gold rises, which has been happening since 2000. The Gold to Dow ratio is only one example. Try the Gold to real estate ratio (in most parts of the world), Gold to commodities ratio or Gold to bonds ratio. They all add up to the same thing: Gold continues to trump other asset classes and this trend is nowhere near completion. And yes, I am aware of what happened to Gold in the fall of 2008. For anyone asking: are you aware that Gold was back at $1000/oz by February of 2009 (i.e. net flat during the deflationary crash) while stocks kept right on going lower into their March lows?<br /><br />Having settled the long term (in my own mind, at least), I still enjoy the short term. Short term tactics are technically based, not fundamentally based. Trading is a tough game and 95% of traders fail. I like the game and have learned to be quite good at it, but it is not for everyone. I will go long or short any asset class if I think there is money to be made when trading (for example, I have a short position in Gold stocks right now). As for investing, however, you couldn't get me to touch paper cash, bonds, most real estate, or most common stocks with a ten foot pole. I'll become a <a href="http://goldversuspaper.blogspot.com/2009/10/paperbugs.html">paperbug</a> again, but only once we have reached reasonable historical metrics to support such a move (e.g., how about a dividend yield for the average common stock in the 7-10% range?).<br /><br />Right now, my subscribers and I are waiting to buy the next low in the precious metals patch, which is certainly close to being here. If this pending low isn't "THE" low, it won't matter to me from a trading perspective, because I can still make a lot of money trading "a" low. If you are crazy enough to try to trade with a portion of your capital, consider trying my <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">low-cost subscription service</a>. A one month trial is only $15. If you're too smart to take that kind of risk, then hold onto to your shiny, precious, edible Gold until the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a> hits 2 (and we may well go below 1 this cycle).<br /><br /><br /><br /><br /><a href="http://www.bullionvault.com/#abrochert"><img src="http://www.bullionvault.com/images/adverts/Buy_Gold_Today_Banner.gif" title="Buy gold online - quickly, safely and at low prices" alt="Buy gold online - quickly, safely and at low prices" border="0" width="468" height="60"></a><A HREF="http://www.kitco.com/connecting.html"><IMG SRC="http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif" BORDER="0" ALT="[Most Recent Charts from www.kitco.com]"></A>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-24666082701018545652012-04-07T10:58:00.010-07:002012-04-07T11:23:11.129-07:00Eating Humble PieIt's hard to make predictions, especially about the future. At least so the saying goes. When you're wrong, in my opinion, best to admit it and move on. This is what all traders must do if they plan to survive long enough to become the 5% (or less) that can actually do it profitably over the long term.<br /><br />I thought the big neckline in Gold stocks would hold. My subscribers and I bought the neckline assuming it would. Instead, the neckline failed and we got out immediately with a loss. This is an ominous development for the precious metal (PM) stocks in particular and a warning for the whole PM sector in my opinion. This neckline is no secret and should be respected for what it is trying to tell us. Here's a 5 year chart of the GDX thru this week's close to show you what I mean:<br /><br /><br /><a href="http://4.bp.blogspot.com/-X238bVdPnE4/T4CCX-IKsYI/AAAAAAAAC1E/Mg1lTrgCBuk/s1600/GDX%2B5%2Byear%2Bweekly%2Bchart%2Bthru%2B4-7-12.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://4.bp.blogspot.com/-X238bVdPnE4/T4CCX-IKsYI/AAAAAAAAC1E/Mg1lTrgCBuk/s400/GDX%2B5%2Byear%2Bweekly%2Bchart%2Bthru%2B4-7-12.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5728722074341126530" /></a><br /><br /><br />It was a reasonable trade to go long at the neckline in my opinion given lousy PM sector sentiment, oversold momentum readings, low "Gold stocks to Gold" ratio and low "Gold stocks to common stocks" ratio readings. However, once that neckline broke, it was shown to be the wrong trade and out we go, waiting for a better opportunity. That opportunity may come from much lower levels.<br /><br />Gold stocks are "seeing" trouble up ahead. I suspect Gold stocks are leading global equities into the next cyclical common equity bear market. <br /><br />BUT IT CAN'T HAPPEN, BECAUSE IT'S AN ELECTION YEAR AND "THEY" WON'T LET MARKETS FALL UNTIL AFTER THE ELECTION.<br /><br />How'd that work out for you in 2008?<br /><br />If you are looking for advice in navigating and trading through what I believe to be impending market turmoil, consider trying my <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">low cost subscription service</a> - a one month trial is only $15. If not, my longer term advice is free: buy physical Gold, store it outside the banking system, and don't sell it until the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a> dips below 2 (and we may well go below 1 this cycle).<br /><br /><br /><br /><a href="http://www.bullionvault.com/#abrochert"><img src="http://www.bullionvault.com/images/adverts/Buy_Gold_Today_Banner.gif" title="Buy gold online - quickly, safely and at low prices" alt="Buy gold online - quickly, safely and at low prices" border="0" width="468" height="60"></a><A HREF="http://www.kitco.com/connecting.html"><IMG SRC="http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif" BORDER="0" ALT="[Most Recent Charts from www.kitco.com]"></A>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-49939027297287156022012-03-24T08:29:00.013-07:002012-03-24T21:45:08.083-07:00Calling Another Bottom in the Precious Metals SectorThe last time I called an important bottom in the precious metals sector was on December 29, 2011 (<a href="http://goldversuspaper.blogspot.com/2011/12/calling-bottom-in-precious-metals.html">as documented here</a>). Well, it's time for another important bottom. I believe the late December lows in the precious metals (PM) sector were THE lows for the metals, for the GDXJ ETF (a rough representation of the junior Gold mining sector) and for silver stocks (as represented by the SIL ETF). The current bottom is much more important for those seemingly perpetual laggards, the senior Gold mining stocks.<br /><br />And why do I think this is such an important bottom? Well, there are several reasons. These were summarized in a recent <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">subscriber</a> letter dated March 16th, re-published below:<br /><br /><br /><a title="View Gold Versus Paper March 16 2012 Letter on Scribd" href="http://www.scribd.com/doc/86574888/Gold-Versus-Paper-March-16-2012-Letter" style="margin: 12px auto 6px auto; font-family: Helvetica,Arial,Sans-serif; font-style: normal; font-variant: normal; font-weight: normal; font-size: 14px; line-height: normal; font-size-adjust: none; font-stretch: normal; -x-system-font: none; display: block; text-decoration: underline;">Gold Versus Paper March 16 2012 Letter</a><iframe class="scribd_iframe_embed" src="http://www.scribd.com/embeds/86574888/content?start_page=1&view_mode=list&access_key=key-3dxv3r4dls4cshniero" data-auto-height="true" data-aspect-ratio="0.772727272727273" scrolling="no" id="doc_13805" width="100%" height="600" frameborder="0"></iframe><br /><br /><br />Subsequent to this letter, we had last week's action. I believe Tuesday was THE low for the senior Gold mining sector and my subscribers and I bought our remaining 50% bullish position on Tuesday. This week (for once), senior Gold stocks (as represented by the GDX ETF) refused to make a new lower low with Gold on Thursday, setting up a nice short-term divergence at a time when the PM sector was so under loved and undervalued on a short-to-intermediate term basis that a survey of professional Gold market timers recommended a net short position (according to a blogger I respect, as I don't subscribe to this information - <a href="http://www.acting-man.com/?p=15689">link here</a>) and this graphic from sentimentrader.com was floating around the internet:<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://2.bp.blogspot.com/-gP3e3xk7eUs/T236PLRqHwI/AAAAAAAAC0s/F8PC85FgfAk/s1600/stock%2Band%2Bsector%2Bsentiment%2Bfrom%2Bsentimenttrader%2B-%2B3-16-2012.PNG"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 192px;" src="http://2.bp.blogspot.com/-gP3e3xk7eUs/T236PLRqHwI/AAAAAAAAC0s/F8PC85FgfAk/s400/stock%2Band%2Bsector%2Bsentiment%2Bfrom%2Bsentimenttrader%2B-%2B3-16-2012.PNG" border="0" alt=""id="BLOGGER_PHOTO_ID_5723505840089603842" /></a><br /><br /><br />And then we had the classic "fake out" drop in Gold on Thursday, as captured so well by candlestick charting, followed by a gap up candle on Friday morning. Here's a daily candlestick chart of the GLD ETF (as a proxy for the Gold price) over the past 8 months thru Friday's close to show you what I mean:<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://3.bp.blogspot.com/-vKilcRGybSo/T237bv7dW8I/AAAAAAAAC04/-mvUucnCB5M/s1600/GLD%2B10%2Bmonth%2Bdaily%2Bchart%2Bthru%2B3-23-2012.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://3.bp.blogspot.com/-vKilcRGybSo/T237bv7dW8I/AAAAAAAAC04/-mvUucnCB5M/s400/GLD%2B10%2Bmonth%2Bdaily%2Bchart%2Bthru%2B3-23-2012.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5723507155598662594" /></a><br /><br /><br />I think it is finally time for metal stocks to outperform the metal for a few months (at least). I am bullish on the whole PM sector, however, and think all items will do well. If this type of real-time actionable analysis appeals to you, consider trying my <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">low cost subscription service</a> - a one month trial is only $15.<br /><br />For those uninterested in the risk of speculating on the short-term chart squiggles with a portion of their capital, my advice is simple: buy physical Gold (and a little silver) and store it outside the banking system until the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a> hits 2 (and we may well go below 1 this cycle).<br /><br /><br /><br /><a href="http://www.bullionvault.com/#abrochert"><img src="http://www.bullionvault.com/images/adverts/Buy_Gold_Today_Banner.gif" title="Buy gold online - quickly, safely and at low prices" alt="Buy gold online - quickly, safely and at low prices" border="0" width="468" height="60"></a><A HREF="http://www.kitco.com/connecting.html"><IMG SRC="http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif" BORDER="0" ALT="[Most Recent Charts from www.kitco.com]"></A>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-63752549750596435322012-02-28T19:35:00.038-08:002012-02-28T20:32:00.033-08:00Why Are Precious Metals Bulls Scared?<a href="http://goldmoney.com/index.html?gmrefcode=Goldversuspaper"><img src="http://goldmoney.com/banners/gmy25.gif" width="468" height="60" alt="GoldMoney. The best way to buy gold & silver" /></a><br /><br /><br /><br />Well, first of all, bull markets climb a wall of worry. But second, there are some powerful media forces trying to maintain the status quo. They are constantly disparaging Gold and talking about imminent corrections, bubbles, etc. As a recent example, Warren Buffett did a recent hit piece on Gold published in the Wall Street Journal (<a href="http://online.wsj.com/video/buffett-las-acciones-aun-superan-a-oro-y-bonos/AD0527DB-47B1-437B-95E0-5001F71BBE6D.html">video talking head summary here</a>). And, of course, there is always Jon Nadler at kitco.com to make sure you are NEVER bullish on precious metals no matter what.<br /><br />Actually, specifically, kitco.com having Jon Nadler as its spokesperson is quite revealing and concerning. What is this company, which sells derivative positions in Gold (a la pooled accounts), trying to accomplish? As someone who learned all his lessons the hard way in the precious metals market, I can attest to the fact that this company talked me out of physical metal and encouraged me to buy a "pooled account" position in metal when I first began to try to invest in physical metal back in 2003. <br /><br />I would like to share some quotes from a recent piece by Jon Nadler. I no longer read his commentary and haven't for years, but Bob Moriarty over at 321gold.com posted one of his pieces, so I assumed it had some value and read it. What a mistake and waste of my time. Nadler is a plague on the Gold community but refuses to go away. How could anyone spend more time trying to disparage the product his company sells? The tone, the anger, the bearishness. It's so over-the-top that it seems beyond intentional and I believe is simply trying to make fun of those who have cast their lot with physical metal held outside the banking system. Anyone who does business with kitco.com knowing that Nadler is their main market commentator is asking for trouble. When the poop hits the fan exactly, I don't know, but this is a firm that should not be trusted primarily because they employ this fellow.<br /><br />Here are quotes from his most recent piece (<a href="http://www.kitco.com/ind/Nadler/feb272012A.html">link here</a>), with my comment following each quote:<br /><br /><blockquote><span style="font-weight:bold;">"That the latest round of price increases in gold has been an overwhelmingly fund-engendered phenomenon is quite obvious. More worrisome on the other hand are certain trends in the physical markets (we covered the potential erosion in India’s 2012 imports and the decline in USA-based physical investment in 2011 in last week’s articles)."</span></blockquote><br /><br />He sounds nervous that this is simply "hot money" chasing metal prices and that people aren't interested in physical metal at current prices. Gosh, maybe I should sell now and beat the herd to the exits.<br /><br /><blockquote><span style="font-weight:bold;">"Well, you can now add Vietnam to the roster of countries where domestic investors are suddenly ‘uncertain’ about continued, (some say endless) gains in gold."</span></blockquote><br /><br />Ohmygosh, those Vietnamese are some of the smartest and shrewdest Gold traders out there. If they are 'uncertain,' then I should be panicked!<br /><br /><blockquote><span style="font-weight:bold;">"In any case, gold’s “paper” bullish sentiment is approaching certain levels (above 90% according to trade-futures.com’s Daily Sentiment Index) from which previous sharp corrections have ensued. Silver has some work left to do as it begins to encounter overhead resistance that extends all the way up towards the $37.85 overhead resistance level. If and when support near $32.62 is breached, the tenor of the market will tilt towards deeper corrections."</span></blockquote><br /><br />Overhead resistance from here to Mars in silver - holy cow! That means the bulls have no chance whatsoever! My gosh, we are so close to breeching $32.62 that I better just sell now...<br /><br /><blockquote><span style="font-weight:bold;">"That’s the best such level of betting [<span style="font-style:italic;">in commodities- GVP</span>] since September of last year. However, this time, the bullish tilt (in gold for example) comes amid expectations for economic recovery (in the USA mainly) as opposed to the economic and financial Armageddon that many had expected to materialize for several years now. In so many words, this is now a niche that simply does not make room for anything but positive news. That’s when the worrying should begin…"</span></blockquote><br /><br />Wow! If the world is not coming to an end and bullets and beans are not the investment theme of the day, you're darn right I'm worried! Call kitco and tell them that I want to sell them every piece of physical metal I own and even my neighbor's metal that I don't own, since they understand pooling of resources and derivatives on physical metal better than I do!<br /><br /><blockquote><span style="font-weight:bold;">"The enthusiasm being seen in commodity futures and options positioning is most certainly not being mirrored in the still poorly performing mining share sector and the type of betting going on is itself being questioned by some: “The latest commodity flow numbers is catch-up with previous positive trends. People are moving into them based on a string of relatively positive numbers. Whether those will continue to carry weight is a little more questionable,” said one money flow analyst at EPFR Global in Cambridge, Mass."</span></blockquote><br /><br />CALL MY BROKER! AN UNNAMED BROKER AT SOME FIRM I HAVE NEVER HEARD OF IS BEARISH! Those smart Wall Street guys have been right on Gold since, well... I guess their track record sucks, BUT YOU NEVER KNOW!<br /><br />{Sarcasm off}<br /><br />In short, I call "foul" on kitco.com for doing a disservice to the very people they claim to try to represent and/or market to. Nadler is a mouthpiece, albeit a lousy one, for the status quo. And if he doesn't think so, well that is even worse. I have never seen a more bearish Gold analyst unless <a href="http://goldversuspaper.blogspot.com/2009/10/paperbugs.html">paperbugs</a> Warren Buffett and Nouriel (half-a-hit sort-of-wonder) Roubini count as Gold analysts. And let's not forget that Buffett would be broke right now if it weren't for government largess coming to his rescue. And Roubini, I assume, has already finished his Spam and has nothing left but paper to eat (try the hot sauce, dude!).<br /><br />My <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">subscribers</a> and I are long silver and Gold stocks and have been since catching the bottom on February 16th. If you are looking for more reasonable advice than that spewed by Nadler and Buffett when it comes to the precious metals, why don't you give my <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">low cost subscription service</a> a try? And believe me, I can be bearish on the precious metals sector as well when appropriate, just not as a matter of course and not as a religious conviction that clouds every statement I make. Until the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a> gets to 2 (and we may well go below 1 this cycle), Gold will continue to make Buffett look like the feeble has-been paper permabull that he is (at least until he gets his next tranche of bailout money...).<br /><br /><br /><br /><a href="http://www.bullionvault.com/#abrochert"><img src="http://www.bullionvault.com/images/adverts/Buy_Gold_Today_Banner.gif" title="Buy gold online - quickly, safely and at low prices" alt="Buy gold online - quickly, safely and at low prices" border="0" width="468" height="60"></a><br /><br /><A HREF="http://www.kitco.com/connecting.html"><IMG SRC="http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif" BORDER="0" ALT="[Most Recent Charts from www.kitco.com]"></A>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-70200071582045492072012-02-19T15:04:00.000-08:002012-02-19T15:27:16.117-08:00Back to Bullish on PM Sector<a href="http://goldmoney.com/index.html?gmrefcode=Goldversuspaper"><img src="http://goldmoney.com/banners/gmy25.gif" width="468" height="60" alt="GoldMoney. The best way to buy gold & silver" /></a><br /><br /><br /><br />Closed out my "short senior Gold stocks" trade last week for good profits. My <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">subscribers</a> 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.<br /><br />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:<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://2.bp.blogspot.com/-6hBoRnlEum4/T0GBw5HT_CI/AAAAAAAAC0g/at4SMSWe9v0/s1600/Gold%2B1%2Byear%2Bdaily%2Bchart%2Bthru%2B2-18-12.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://2.bp.blogspot.com/-6hBoRnlEum4/T0GBw5HT_CI/AAAAAAAAC0g/at4SMSWe9v0/s400/Gold%2B1%2Byear%2Bdaily%2Bchart%2Bthru%2B2-18-12.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5710988479447694370" /></a><br /><br /><br />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.<br /><br />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.<br /><br />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 <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a> 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?<br /><br /><br /><br /><a href="http://www.bullionvault.com/#abrochert"><img src="http://www.bullionvault.com/images/adverts/Buy_Gold_Today_Banner.gif" title="Buy gold online - quickly, safely and at low prices" alt="Buy gold online - quickly, safely and at low prices" border="0" width="468" height="60"></a><A HREF="http://www.kitco.com/connecting.html"><IMG SRC="http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif" BORDER="0" ALT="[Most Recent Charts from www.kitco.com]"></A>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-22091241859926165862012-02-13T19:44:00.000-08:002012-02-13T20:29:16.163-08:00Ummm, Really?<a href="http://goldmoney.com/index.html?gmrefcode=Goldversuspaper"><img src="http://goldmoney.com/banners/gmy25.gif" width="468" height="60" alt="GoldMoney. The best way to buy gold & silver" /></a><br /><br /><br /><br />My worst trading performance has been when I have gone short. I have made big money (like when I was leveraged short during the fall of 2008 as documented <a href="http://goldversuspaper.blogspot.com/2008/10/commercial-real-estate-dream-short.html">here</a> and <a href="http://goldversuspaper.blogspot.com/2008/10/bank-of-america-ripe-short.html">here</a>), but I have also lost large amounts of money fighting the hoards of determined bulltards still stuck in last century's paradigms. The tsunami of paper depreciation unleashed upon us over the past decade makes shorting any market much more hazardous than being long. Trust me, I have learned my lesson in this regard the hard way.<br /><br />Right now, <a href="http://goldversuspaper.blogspot.com/2012/02/waiting-to-pounce-on-precious-metal.html">my subscribers and I are short senior Gold stocks</a> as a scalp trade (after catching the high in the GDX ETF on February 2nd). So far, so good. It is almost time to flip back to going bullish on the precious metals sector. When I look at the general common equity markets, I see rabid <a href="http://goldversuspaper.blogspot.com/2009/10/paperbugs.html">paperbug</a> froth everywhere. Just a few minor points of extremely bullish sentiment to point out.<br /><br />First up, here's a chart from a piece by <a href="http://sentimentrader.com/blog/archives/135">sentimentrader.com</a>, which examines the ratio of money flowing into a Rydex bull mutual fund versus a bear fund (i.e. examines retail money flows into bullish bets versus bearish bets):<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://4.bp.blogspot.com/-n5hrVMK3CnA/TznaFQcbzUI/AAAAAAAACz8/T6SPH47AzB8/s1600/20120208_rydex.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 364px;" src="http://4.bp.blogspot.com/-n5hrVMK3CnA/TznaFQcbzUI/AAAAAAAACz8/T6SPH47AzB8/s400/20120208_rydex.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5708833786517245250" /></a><br /><br /><br />Next up, a chart of a proprietary NASDAQ sentiment indicator from <a href="http://www.market-harmonics.com/free-charts/sentiment/nasdaq_sentiment.htm">Market Harmonics</a>:<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://4.bp.blogspot.com/-qIXDZ0YkC4c/TznaVD2Qw3I/AAAAAAAAC0I/yCIAnekZq9s/s1600/ndsi.gif"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 242px;" src="http://4.bp.blogspot.com/-qIXDZ0YkC4c/TznaVD2Qw3I/AAAAAAAAC0I/yCIAnekZq9s/s400/ndsi.gif" border="0" alt=""id="BLOGGER_PHOTO_ID_5708834058013819762" /></a><br /><br />Record highs, eh? I can see why, what with the super-strong economy and what not. And here's the opinion of the trusted and revered investment advisors that always buy low and sell high for their clients (sarcasm off). Following is the NAAIM (National Association of Active Investment Managers) sentiment survey thru last week:<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://2.bp.blogspot.com/-zq2O6P-d-gI/TzndpgEc5cI/AAAAAAAAC0U/IXwLypmC55I/s1600/NAAIM%2Bsentiment%2Bsurvey.PNG"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 351px;" src="http://2.bp.blogspot.com/-zq2O6P-d-gI/TzndpgEc5cI/AAAAAAAAC0U/IXwLypmC55I/s400/NAAIM%2Bsentiment%2Bsurvey.PNG" border="0" alt=""id="BLOGGER_PHOTO_ID_5708837707721795010" /></a><br /><br />I am thinking a sharp chop lower in common equities followed by a drunken and staggering final charge into a March peak. After that, we'll have to see. But for now, risk is exceedingly high in common equities. There's rarely a need to tell a Gold bull about such risk, as those who have crossed over to the dark side and embraced the secular bull market that is the <a href="http://goldversuspaper.blogspot.com/2009/12/gold-in-hands-of-public.html">enemy of the state</a> rarely need reminding that we are in the cycle where paper declines relative to real/hard assets.<br /><br />Own physical Gold and sleep well. When the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a> hits 2 (and we may well go below 1 this cycle), consider waking up from that comfortable financial sleep and looking for something to buy with your bling bling. And if you're interesting in speculating in the paper markets after you have established a core position of physical metal held outside the banking system, consider trying my <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">low cost subscription service</a>.<br /><br /><br /><br /><a href="http://www.bullionvault.com/#abrochert"><img src="http://www.bullionvault.com/images/adverts/Buy_Gold_Today_Banner.gif" title="Buy gold online - quickly, safely and at low prices" alt="Buy gold online - quickly, safely and at low prices" border="0" width="468" height="60"></a><A HREF="http://www.kitco.com/connecting.html"><IMG SRC="http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif" BORDER="0" ALT="[Most Recent Charts from www.kitco.com]"></A>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-3071466839137516872012-02-08T19:52:00.000-08:002012-02-08T20:40:08.023-08:00Waiting to Pounce on Precious Metal Profits<a href="http://goldmoney.com/index.html?gmrefcode=Goldversuspaper"><img src="http://goldmoney.com/banners/gmy25.gif" width="468" height="60" alt="GoldMoney. The best way to buy gold & silver" /></a><br /><br /><br /><br />Let me start by re-iterating that I am a secular permabull on physical precious metals, particularly Gold. When you're dealing with the end of the road for the current international monetary system (a la the 1930s and the 1970s), there's only one asset that is a complete no-brainer to own. As a hint, that asset is shiny and owned by every central bank in the world "just in case."<br /><br />However, I also like to trade. When trading, I would sell or buy anything if I though there was a profit to be had. For example, <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">my subscribers and I</a> have been short senior Gold stocks as a "scalp" trade over the past week. Does this make me a traitor? I don't think in those terms, as I am a more practical Gold bug/bull. The more paper I make, the more metal I can buy. <br /><br />However, once the current short-term correction finishes, it is back to bull mode. Gold, silver, and Gold and silver stocks - they're all going to go higher. The only real conundrum is which of these items to buy as a bull trade once the correction is complete. In another week or so, we'll hit bottom and find out which of these items will outperform.<br /><br />I like the prospects for the entire precious metals patch. From a trader's perspective, I think silver has an obvious minimum target when using the SLV ETF. Here's an 8 month daily chart of the SLV ETF thru today's close to show you what I mean:<br /><br /><br /><a href="http://3.bp.blogspot.com/-vPUYeokhCtY/TzNFXD45_nI/AAAAAAAACzY/sRUNYEvwRSs/s1600/SLV%2B8%2Bmonth%2Bdaily%2Bchart%2Bthru%2B2-8-12.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://3.bp.blogspot.com/-vPUYeokhCtY/TzNFXD45_nI/AAAAAAAACzY/sRUNYEvwRSs/s400/SLV%2B8%2Bmonth%2Bdaily%2Bchart%2Bthru%2B2-8-12.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5706981415291846258" /></a><br /><br /><br />Once we correct a little (likely in a scary fashion over a few days for silver and senior Gold stocks, as they both seem to enjoy volatility as much as Bernanke likes creating money out of thin air), a decent 15-20% move higher is likely. After that, we'll have to see. All precious metal bulls know that we'll ultimately make new highs in silver above $50/oz., but the exact timing is uncertain from a trader's perspective. This is why it is best to simply buy physical metal and hold on for the volatile ride. However, some of us like to speculate with a portion of our capital and this message is for you fellow punters out there in the PM patch.<br /><br />Now, the senior Gold stocks are the basket case of the PM sector. All this crap about Gold stocks leveraging the price of Gold and having bullish fundamentals doesn't mean anything if they won't perform here and now. And I'll be honest, I'm very concerned about their recent performance. That doesn't mean there isn't money to be made trading the senior Gold stock indices like the GDX ETF, but I am not impressed with the move off the late December bottom so far. Here's an $HUI:$GOLD ratio chart to show you what I mean:<br /><br /><br /><a href="http://2.bp.blogspot.com/-vqxAHuQAEBk/TzNHdecLVbI/AAAAAAAACzk/U_inbAkTUj4/s1600/HUI%2Bto%2BGold%2Bratio%2B8%2Bmonth%2Bdaily%2Bchart%2Bthru%2B2-8-12.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://2.bp.blogspot.com/-vqxAHuQAEBk/TzNHdecLVbI/AAAAAAAACzk/U_inbAkTUj4/s400/HUI%2Bto%2BGold%2Bratio%2B8%2Bmonth%2Bdaily%2Bchart%2Bthru%2B2-8-12.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5706983724521575858" /></a><br /><br /><br />A permabull will tell you that any minute now, Gold stocks are going to blast higher and if you don't buy right now (yesterday, in fact), you're going to miss out on a quadrillion dollars. Me, I don't think so. I think this warning signal should be taken seriously. It means that the senior Gold stocks could be headed for something like this over the next few months (2 year daily chart of GDX thru today's close):<br /><br /><br /><a href="http://3.bp.blogspot.com/-OCSvZdARCKs/TzNI0u-TOQI/AAAAAAAACzw/4NvzfCWFKjs/s1600/GDX%2B2%2Byear%2Bdaily%2Bchart%2Bthru%2B2-8-12.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://3.bp.blogspot.com/-OCSvZdARCKs/TzNI0u-TOQI/AAAAAAAACzw/4NvzfCWFKjs/s400/GDX%2B2%2Byear%2Bdaily%2Bchart%2Bthru%2B2-8-12.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5706985223608285442" /></a><br /><br /><br />This is not a prediction, by the way, but if senior Gold stocks don't start outperforming Gold soon, don't be surprised if something like this happens. I trade Gold stocks, I don't own them. I prefer to own physical metal and then speculate in stocks and paper metal (as well as anything else that looks like it might be good for a winning trade). Investing and trading are very different and require a different type of focus and attitude. With physical Gold, I never worry about the price on a day-to-day or week-to-week basis (unless I am looking to buy more). Why? Because I understand the secular bull market in Gold and why it won't be over for some time. I never lose sleep or worry if Gold drops 10 or 20% when priced in my local currency (i.e. US Dollars). Wake me when the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a> gets to 2 (and we may well go below 1 this cycle).<br /><br />The bottom line is that we're going higher in the PM sector. Exactly how we get there, only Mr Market knows for sure. But I believe there are profits to be made speculating in the paper markets. After <a href="http://goldversuspaper.blogspot.com/2011/12/calling-bottom-in-precious-metals.html">calling the exact day of the bottom in the PM patch</a> for my subscribers and I in late December, we sold our long trading positions in senior Gold stocks 2 weeks ago in anticipation of the current correction. We went short senior Gold stocks on February 2nd, catching the high that day. In a week or so, we will be going long again in the PM sector. If you'd care to join us in the dark jungle known as the paper markets, <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">a one month trial subscription is only $15</a>. But please, don't even think about subscribing until you've secured a core investment in actual physical metal held outside the banking system.<br /><br /><br /><br /><a href="http://www.bullionvault.com/#abrochert"><img src="http://www.bullionvault.com/images/adverts/Buy_Gold_Today_Banner.gif" title="Buy gold online - quickly, safely and at low prices" alt="Buy gold online - quickly, safely and at low prices" border="0" width="468" height="60"></a><A HREF="http://www.kitco.com/connecting.html"><IMG SRC="http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif" BORDER="0" ALT="[Most Recent Charts from www.kitco.com]"></A>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-44076196839050460242012-01-29T19:55:00.001-08:002012-01-29T20:48:30.192-08:00The Last Gasp<a href="http://goldmoney.com/index.html?gmrefcode=Goldversuspaper"><img src="http://goldmoney.com/banners/gmy25.gif" width="468" height="60" alt="GoldMoney. The best way to buy gold & silver" /></a><br /><br /><br /><br />I am speaking of the intermediate term move in paper assets versus hard assets, affectionately referred to as "Gold versus paper" around here. <a href="http://goldversuspaper.blogspot.com/2009/10/paperbugs.html">Paperbugs</a> had their moment in the sun these past few months and I hope they enjoyed it. The reversal in fortunes has begun. <br /><br />This reversal of fortunes is on a relative basis of course, as the sea of electronic money created out of thin air in the last few months is enough to make Rudolf von Havenstein blush. When the currency units around the globe are dissolving in front of our collective (and dismayed) eyes, relative wealth becomes a more meaningful concept than to contemplate what a quadrillion means.<br /><br />Bernanke decided to help the US Dollar along last week by extending a monetary policy of insanity, approved by Keynesian clowns everywhere, namely that of further destroying the value of savings and the average person's ability to keep up with the costs of living. In the absence of reason or checks on the power of centralized monetary authorities, debasement of currency can always be achieved in a paper monetary system. And a Gold standard simply means that the Gold standard can be suspended in times of trouble. Easy money, baby. It's almost as old as the concept of money itself.<br /><br />In the later stages of a monetary system, speculation runs rampant as a means to try to keep up with the ravages of inflation. We are there now and I am one of the many pied pipers claiming to have the answers to establish gains in excess of this pernicious and global monetary catastrophe unfolding at an uncomfortably rapid pace. I believe physical Gold (and silver) held outside the banking system are the easiest and most conservative means of preserving wealth in the current secular cycle (which is far from over), but I also like to speculate with a portion of my capital.<br /><br />Currently, the charts to me are unambiguous. It is time for hard assets to trump paper once again. First, the chart nearest and dearest to my heart, the Dow to Gold ratio ($INDU:$GOLD). Here is a 7 year log scale ratio chart of $INDU:$GOLD thru Friday's close:<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://3.bp.blogspot.com/-tQtHWyK2nmA/TyYb8cXV9JI/AAAAAAAACy8/94AHZpa8bqA/s1600/INDU%2Bto%2BGold%2B7%2Byear%2Bweekly%2Bratio%2Bchart%2Bthru%2B1-28-12.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://3.bp.blogspot.com/-tQtHWyK2nmA/TyYb8cXV9JI/AAAAAAAACy8/94AHZpa8bqA/s400/INDU%2Bto%2BGold%2B7%2Byear%2Bweekly%2Bratio%2Bchart%2Bthru%2B1-28-12.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5703276703331513490" /></a><br /><br /><br />And here is a chart of the S&P 500 index divided by the price of commodities using the CCI Commodities Index (i.e., $SPX:$CCI), employing the same 7 year weekly format thru Friday's close:<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://1.bp.blogspot.com/-rOf-tsTUMTk/TyYcZarvQzI/AAAAAAAACzM/hFaEmsY14P8/s1600/SPX%2Bto%2BCCI%2B7%2Byear%2Bweekly%2Bchart%2Bthru%2B1-28-12.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://1.bp.blogspot.com/-rOf-tsTUMTk/TyYcZarvQzI/AAAAAAAACzM/hFaEmsY14P8/s400/SPX%2Bto%2BCCI%2B7%2Byear%2Bweekly%2Bchart%2Bthru%2B1-28-12.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5703277201096393522" /></a><br /><br /><br />In the short-term, I believe both the precious metals sector as well as other risk assets like commodities and common stocks are set to decline for a few weeks. After that, however, my subscribers and I will be looking to go long again in the precious metals sector after closing out trading positions on Friday for big gains. I don't advocate speculation, as it is riskier than buying and holding physical precious metals to profit from the further gains that lie ahead in the secular precious metals bull market. <br /><br />However, for those who are interested in speculating with a portion of their savings, I offer a <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">low-cost subscription trading service</a> that focuses on the precious metals sector but also looks for opportunities in common stocks, commodities, currencies and bonds. I believe there is a significant amount of money to be made trading in the PM sector over the next few months (and, of course, beyond). <br /><br /><br /><br /><a href="http://www.bullionvault.com/#abrochert"><img src="http://www.bullionvault.com/images/adverts/Buy_Gold_Today_Banner.gif" title="Buy gold online - quickly, safely and at low prices" alt="Buy gold online - quickly, safely and at low prices" border="0" width="468" height="60"></a><A HREF="http://www.kitco.com/connecting.html"><IMG SRC="http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif" BORDER="0" ALT="[Most Recent Charts from www.kitco.com]"></A>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-88478518476582684742012-01-11T20:09:00.000-08:002012-01-11T20:57:15.392-08:00Has the Central Fund of Canada Given Us Another Silver Buy Signal?<a href="http://goldmoney.com/index.html?gmrefcode=Goldversuspaper"><img src="http://goldmoney.com/banners/gmy25.gif" width="468" height="60" alt="GoldMoney. The best way to buy gold & silver" /></a><br /><br /><br />I stumbled onto this little gem about a year ago and I think it is about to work its magic again. I am speaking of the ratio of the Central Fund of Canada (CEF) to the price of Gold. <a href="http://goldversuspaper.blogspot.com/2010/02/research-on-central-fund-of-canada.html">Please see the original blog post</a> for an explanation of this CEF:Gold ratio.<br /><br />This CEF:Gold ratio barely triggered a buy signal for silver on December 27, 2011. Of course, a "barely triggered" signal may be all we are able to achieve if silver is getting ready to rocket higher after a brutal but fairly typical (for silver) correction from the the spring, 2011 highs. Here's a chart of this ratio thru today's close to show the buy signal for silver (the top plot is the price of silver, while the lower plot is the CEF:$GOLD ratio):<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://2.bp.blogspot.com/-RAa5a-F82kw/Tw5h3vCPC1I/AAAAAAAACyk/OdQ_fXGqmlI/s1600/CEF%2Bto%2BGold%2Bratio%2Bversus%2Bsilver%2Bprice%2B-%2B10%2Byear%2Bchart%2Bthru%2B1-11-12.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://2.bp.blogspot.com/-RAa5a-F82kw/Tw5h3vCPC1I/AAAAAAAACyk/OdQ_fXGqmlI/s400/CEF%2Bto%2BGold%2Bratio%2Bversus%2Bsilver%2Bprice%2B-%2B10%2Byear%2Bchart%2Bthru%2B1-11-12.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5696598188816796498" /></a><br /><br /><br />Coupled with horrible sentiment for the restless metal and rampant fears of a deflationary collapse, I think the low is already in for silver. I give you this chart of money supply growth courtesy of shadowstats.com:<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://2.bp.blogspot.com/-P3xm7nxcj4A/Tw5jP1Cy-3I/AAAAAAAACyw/jG5VTt7VhMU/s1600/shadowstats%2Bmsg%2B-%2B1-7-2012%2Bpublish%2Bdate.PNG"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 256px;" src="http://2.bp.blogspot.com/-P3xm7nxcj4A/Tw5jP1Cy-3I/AAAAAAAACyw/jG5VTt7VhMU/s400/shadowstats%2Bmsg%2B-%2B1-7-2012%2Bpublish%2Bdate.PNG" border="0" alt=""id="BLOGGER_PHOTO_ID_5696599702258252658" /></a><br /><br /><br />This type of monetary madness is what gave rise to silver's last run! We'll have to see what happens, but I think the CEF:Gold ratio will once again prove to be right. I like metal stocks over metal right now and silver over Gold. However, I like anything precious and metal-related at current levels. My subscribers and I are fully invested in order to profit from a further advance in the PM sector, so I am biased. <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">Why don't you join us - a one month trial is only $15</a>.<br /><br /><br /><br /><a href="http://www.bullionvault.com/#abrochert"><img src="http://www.bullionvault.com/images/adverts/Buy_Gold_Today_Banner.gif" title="Buy gold online - quickly, safely and at low prices" alt="Buy gold online - quickly, safely and at low prices" border="0" width="468" height="60"></a><br /><br /><A HREF="http://www.kitco.com/connecting.html"><IMG SRC="http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif" BORDER="0" ALT="[Most Recent Charts from www.kitco.com]"></A>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-28490602865283431342011-12-30T18:45:00.000-08:002011-12-30T20:39:50.060-08:00Calling the Bottom in Precious Metals<a href="http://goldmoney.com/index.html?gmrefcode=Goldversuspaper"><img src="http://goldmoney.com/banners/gmy25.gif" width="468" height="60" alt="GoldMoney. The best way to buy gold & silver" /></a><br /><br /><br /><br />Now that my subscribers and I are fully into bullish positions in the precious metals sector, I hope they won't mind me telling you that I called for the bottom in Gold stocks on Thursday morning (12/29). I believe the bottom is in for silver, Gold and their respective stocks, although the metals may need a re-test of the bottom while I think Gold or silver stocks (as sectors) will only make higher lows on any corrective action.<br /><br />There are some major bells ringing in the sentiment department for the PM sector that should not be ignored. First up, a chart from Guy Lerner (link to article pasted onto the chart), which plots the Market Vane sentiment (i.e. percentage of bulls, bottom of chart) against the price plot of Gold:<br /><br /><br /><a href="http://2.bp.blogspot.com/-WQPW6uRs0MI/Tv55lKX9ziI/AAAAAAAACxo/y58YVnZBxBw/s1600/Guy%2BLerner%2B12-21-11%2BGold%2BMarket%2BVane%2Bsentiment%2Bchart.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 229px;" src="http://2.bp.blogspot.com/-WQPW6uRs0MI/Tv55lKX9ziI/AAAAAAAACxo/y58YVnZBxBw/s400/Guy%2BLerner%2B12-21-11%2BGold%2BMarket%2BVane%2Bsentiment%2Bchart.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5692120658389880354" /></a><br /><br /><br />Since this chart was published, according to Richard Russell <a href="http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/12/31_Richard_Russell_-_We_are_Watching_Market_History_in_Gold.html">via a blog post on King World News</a> (I don't subscribe to Market Vane, so I'll take Sir Richard and King World News at their word), the number has dropped further down to 56%. As the chart above shows, major bottoms in Gold have been formed in the 50s range on this sentiment indicator. We are there.<br /><br />Next up, a chart I created in Excel for the Rydex Precious Metals Mutual Fund using the net asset value of the fund, which measures the flow of money into and out of the fund. When the plot in the chart covering the last 5 years below is low, the herd is bearish (i.e. bullish from a contrarian perspective):<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://2.bp.blogspot.com/-OyH-C7ii3M8/Tv5_vRLoo9I/AAAAAAAACx0/rpxR_apdMmo/s1600/Rydex%2BPM%2BFund%2BNAV%2B-%2B5%2Byear%2Bchart%2Bthru%2B12-30-11.PNG"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 347px; height: 193px;" src="http://2.bp.blogspot.com/-OyH-C7ii3M8/Tv5_vRLoo9I/AAAAAAAACx0/rpxR_apdMmo/s400/Rydex%2BPM%2BFund%2BNAV%2B-%2B5%2Byear%2Bchart%2Bthru%2B12-30-11.PNG" border="0" alt=""id="BLOGGER_PHOTO_ID_5692127429085668306" /></a><br /><br /><br />The persistent multi-month malaise in this sentiment indicator I think is indicative of the lethargy in the Gold stock bull camp. Gold stocks have sucked over the past year or so, let's be honest. "Gold up, Gold stocks down" is not the way to build enthusiasm among Gold stock investors, to be sure. But these sentiment indicators tell us that the time to be bullish on the precious metals sector is at hand.<br /><br />Furthermore, Gold and silver have complete-looking corrections to me using both time and price. The late September swoon in the metals (Gold to low 1500s and silver to low 26 level in USD terms) was enough price damage, but the current re-test satisfies a time dimension that was needed to reset the sentiment in the sector. Now that we have re-tested the lows, all the experts have intelligent and coherent reasons for why the PM sector will continue to decline. I wish them well, but I am betting against them with everything I've got. I am now 100% long Gold stocks in my trading account and my physical metal stash has been improved by some timely holiday gifts of silver from Mrs. Claus.<br /><br />And how about that COT report for silver? It was bullish last week and this week added a sliver of further bullishness to the picture. <a href="http://goldversuspaper.blogspot.com/2011/12/seriously-silver.html">See prior post</a> and here's the current COT report courtesy of <a href="http://www.cotpricecharts.com/commitmentscurrent/">Software North</a>:<br /><br /><br /><a href="http://4.bp.blogspot.com/-plC2My1AxZw/Tv6DQhVRQjI/AAAAAAAACyA/229hWWdzLJU/s1600/Silver%2BCOT%2Bthru%2B12-27-11%2B-%2BSoftware%2BNorth.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 276px;" src="http://4.bp.blogspot.com/-plC2My1AxZw/Tv6DQhVRQjI/AAAAAAAACyA/229hWWdzLJU/s400/Silver%2BCOT%2Bthru%2B12-27-11%2B-%2BSoftware%2BNorth.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5692131298891612722" /></a><br /><br /><br />Meanwhile, the Dow to Gold ratio is stretched to the upside like it has been only a few times in the past decade (14 year log scale chart of $INDU:$GOLD follows), indicating a significant reversal has likely already begun this week:<br /><br /><br /><a href="http://2.bp.blogspot.com/-WLUGCIAxB-s/Tv6FrJeJaPI/AAAAAAAACyM/xCo6TlMu_aM/s1600/Dow%2Bto%2BGold%2Bratio%2B14%2Byear%2Bdaily%2Bchart%2Bthru%2B12-30-11.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://2.bp.blogspot.com/-WLUGCIAxB-s/Tv6FrJeJaPI/AAAAAAAACyM/xCo6TlMu_aM/s400/Dow%2Bto%2BGold%2Bratio%2B14%2Byear%2Bdaily%2Bchart%2Bthru%2B12-30-11.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5692133955366119666" /></a><br /><br /><br />The Gold stocks tend to rise when the Dow to Gold ratio is falling (outside of meltdowns/crashes like in 2008) and who hasn't seen a chart of the Gold stocks to Gold ratio telling us that Gold stocks are cheap on a relative basis (12 year log scale chart of Philadelphia Gold and Silver Mining Index to Gold price ratio [$XAU:$GOLD]):<br /><br /><br /><a href="http://1.bp.blogspot.com/-31sL4cNN-80/Tv6IBOiAM2I/AAAAAAAACyY/8mypU3ej4q0/s1600/XAU%2Bto%2BGold%2B2%2Byear%2Bweekly%2Bratio%2Bchart%2Bthru%2B12-30-11.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://1.bp.blogspot.com/-31sL4cNN-80/Tv6IBOiAM2I/AAAAAAAACyY/8mypU3ej4q0/s400/XAU%2Bto%2BGold%2B2%2Byear%2Bweekly%2Bratio%2Bchart%2Bthru%2B12-30-11.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5692136533704848226" /></a><br /><br /><br />While others are bearish on Gold, silver and Gold and silver stocks, I am staunchly bullish here. And please keep in mind that I have been bearish on Gold stocks since August. <a href="http://goldversuspaper.blogspot.com/2011/08/metal-versus-metal-stocks.html">See my late August post</a> that elicited hate-type email from Gold stock bulls. And now that we reached the low 20s in the GDXJ ETF as predicted in late August, I am very bullish on the GDXJ ETF and all Gold stock indices.<br /><br />In my subscription service, I send out weekly updates as well as interim updates when indicated and email trading alerts when I think it is time to pull the trigger on a trade. Here is the interim update I sent out to subscribers Wednesday night (12/28/11), which was followed up by an email trading alert Thursday morning advising subscribers to buy Gold stocks (as well as metal, although I think the metal stocks will outperform this cycle):<br /><br /><br /><a title="View Gold Versus Paper December 28 2011 - Interim Update on Scribd" href="http://www.scribd.com/doc/76823886/Gold-Versus-Paper-December-28-2011-Interim-Update" style="margin: 12px auto 6px auto; font-family: Helvetica,Arial,Sans-serif; font-style: normal; font-variant: normal; font-weight: normal; font-size: 14px; line-height: normal; font-size-adjust: none; font-stretch: normal; -x-system-font: none; display: block; text-decoration: underline;">Gold Versus Paper December 28 2011 - Interim Update</a><iframe class="scribd_iframe_embed" src="http://www.scribd.com/embeds/76823886/content?start_page=1&view_mode=list&access_key=key-1d1bxfvilpfw0lkadyvh" data-auto-height="true" data-aspect-ratio="0.772727272727273" scrolling="no" id="doc_3429" width="100%" height="600" frameborder="0"></iframe><script type="text/javascript">(function() { var scribd = document.createElement("script"); scribd.type = "text/javascript"; scribd.async = true; scribd.src = "http://www.scribd.com/javascripts/embed_code/inject.js"; var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(scribd, s); })();</script><br /><br /><br />Only time will tell if my call for the bottom Thursday morning was right. If you are interested in analysis like this consider giving <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">my low-cost subscription service</a> a try. I am a secular permabull when it comes to Gold, but I am pragmatic in my paper trading account and will go long or short any sector (including shorting the PM sector) if I think there is opportunity there. Right now, the opportunity is in the precious metals sector from the long side and I think my subscribers and I are going to make lots of money to start 2012.<br /><br /><br /><br /><a href="http://www.bullionvault.com/#abrochert"><img src="http://www.bullionvault.com/images/adverts/Buy_Gold_Today_Banner.gif" title="Buy gold online - quickly, safely and at low prices" alt="Buy gold online - quickly, safely and at low prices" border="0" width="468" height="60"></a><A HREF="http://www.kitco.com/connecting.html"><IMG SRC="http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif" BORDER="0" ALT="[Most Recent Charts from www.kitco.com]"></A>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-68703635613882062572011-12-24T13:03:00.001-08:002011-12-24T13:38:08.074-08:00Seriously Silver<a href="http://goldmoney.com/index.html?gmrefcode=Goldversuspaper"><img src="http://goldmoney.com/banners/gmy25.gif" width="468" height="60" alt="GoldMoney. The best way to buy gold & silver" /></a><br /><br /><br /><br />The latest COT report on silver is sure to be the talk of the town among precious metals bulls. It is, in short, amazingly bullish. Without any further rambling, here is the latest COT report for silver courtesy of <a href="http://www.cotpricecharts.com/commitmentscurrent/">Software North</a>:<br /><br /><br /><a href="http://3.bp.blogspot.com/-qr54NUY4bXo/TvY_jhQYylI/AAAAAAAACxQ/b-6ZY54vuuA/s1600/Silver%2BCOT%2Breport%2B12-20-11%2B-%2BSoftware%2BNorth.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 276px;" src="http://3.bp.blogspot.com/-qr54NUY4bXo/TvY_jhQYylI/AAAAAAAACxQ/b-6ZY54vuuA/s400/Silver%2BCOT%2Breport%2B12-20-11%2B-%2BSoftware%2BNorth.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5689805058684275282" /></a><br /><br /><br />To see the commercials at 42% bullish on silver is mind blowing for those silver bulls that follow these reports. To put the current set-up in perspective, here's a 4 year chart of the weekly COT data in a different format, courtesy of <a href="http://timingcharts.com/charts">timingcharts.com</a>:<br /><br /><br /><a href="http://1.bp.blogspot.com/-usGFvhh-wJs/TvZBIffvCaI/AAAAAAAACxc/tdqMOq0nQ54/s1600/Silver%2BCOT%2B4%2Byear%2Bchart%2Bthru%2B12-20-11%2B-%2Btimingchartsdotcom.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 286px;" src="http://1.bp.blogspot.com/-usGFvhh-wJs/TvZBIffvCaI/AAAAAAAACxc/tdqMOq0nQ54/s400/Silver%2BCOT%2B4%2Byear%2Bchart%2Bthru%2B12-20-11%2B-%2Btimingchartsdotcom.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5689806793378564514" /></a><br /><br /><br />What does this set up mean? Well, it means you should be buying silver! Specific trading recommendations <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">reserved for subscribers</a>.<br /><br /><br /><br /><a href="http://www.bullionvault.com/#abrochert"><img src="http://www.bullionvault.com/images/adverts/Buy_Gold_Today_Banner.gif" title="Buy gold online - quickly, safely and at low prices" alt="Buy gold online - quickly, safely and at low prices" border="0" width="468" height="60"></a><A HREF="http://www.kitco.com/connecting.html"><IMG SRC="http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif" BORDER="0" ALT="[Most Recent Charts from www.kitco.com]"></A>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-60330467521666932032011-12-21T18:57:00.000-08:002011-12-21T19:26:30.871-08:00Chinese and Indian Tails Wagging the Global Equity Dog?<a href="http://goldmoney.com/index.html?gmrefcode=Goldversuspaper"><img src="http://goldmoney.com/banners/gmy25.gif" width="468" height="60" alt="GoldMoney. The best way to buy gold & silver" /></a><br /><br /><br /><br /><br />There is no significant decoupling in our current global economy. As I am typing this, the Chinese stock market (Shanghai Index or $SSEC) is making new lows (intraday basis) for the current decline it has been undergoing. Is the Chinese market signaling what comes next for developed stock markets like the US and Germany? Is the tail predicting what the dog will do? I think it is.<br /><br />Here's a 2.5 year daily chart of the $SSEC with a daily plot of the S&P 500 ($SPX) below the $SSEC plot thru today's US market close:<br /><br /><br /><a href="http://3.bp.blogspot.com/-Hr4jof7zkBA/TvKdtC3W7pI/AAAAAAAACwg/m18NGUa_rU4/s1600/SSEC%2Bvs%2BSPX%2B30%2Bmonth%2Bdaily%2Bchart%2Bthru%2B12-21-11.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://3.bp.blogspot.com/-Hr4jof7zkBA/TvKdtC3W7pI/AAAAAAAACwg/m18NGUa_rU4/s400/SSEC%2Bvs%2BSPX%2B30%2Bmonth%2Bdaily%2Bchart%2Bthru%2B12-21-11.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5688782676511092370" /></a><br /><br /><br />I think another decent decline is imminent in "advanced" economy stock markets that haven't already experienced it. Japan is already in the midst and another BRIC economy market, that of India, looks very weak here. Here's a 6 month daily chart of the $BSE Bombay Index thru the close on 12-21-2011:<br /><br /><br /><a href="http://3.bp.blogspot.com/-hJ3a7i0dHJM/TvKfKQQplbI/AAAAAAAACws/AenDHjIFT44/s1600/BSE%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B12-21-11.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://3.bp.blogspot.com/-hJ3a7i0dHJM/TvKfKQQplbI/AAAAAAAACws/AenDHjIFT44/s400/BSE%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B12-21-11.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5688784277834667442" /></a><br /><br /><br />The Volatility Index ($VIX) is also screaming for equity bears to come out of hibernation. Here's a 6.5 year daily chart of the $VIX thru today's close:<br /><br /><br /><a href="http://4.bp.blogspot.com/-T-KTLm2bgsM/TvKfbIHDwRI/AAAAAAAACw4/_5NPXSijJPc/s1600/VIX%2Bdaily%2B6%2Byear%2B6%2Bmonth%2Bchart%2Bthru%2B12-21-11.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://4.bp.blogspot.com/-T-KTLm2bgsM/TvKfbIHDwRI/AAAAAAAACw4/_5NPXSijJPc/s400/VIX%2Bdaily%2B6%2Byear%2B6%2Bmonth%2Bchart%2Bthru%2B12-21-11.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5688784567704731922" /></a><br /><br /><br />Meanwhile, the "Gold versus paper" ratio is settling in and trying to find a bottom here. There is now an ETF that allows traders to bet on this ratio, a double leveraged ETF with ticker FSG. It represents a double-leveraged way to bet that the Gold to S&P 500 ratio (i.e. $Gold:$SPX) is going to go higher. Here is a 6.5 year daily log scale chart of this ratio thru today's close, using the GLD:$SPX ratio as a proxy:<br /><br /><br /><a href="http://4.bp.blogspot.com/-0G56QOIfe9M/TvKgMrFByeI/AAAAAAAACxE/wRhTBrkK2Pc/s1600/Gold%2Bto%2BSPX%2Bdaily%2B6%2Byear%2B6%2Bmonth%2Bratio%2Bchart%2Bthru%2B12-21-11.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://4.bp.blogspot.com/-0G56QOIfe9M/TvKgMrFByeI/AAAAAAAACxE/wRhTBrkK2Pc/s400/Gold%2Bto%2BSPX%2Bdaily%2B6%2Byear%2B6%2Bmonth%2Bratio%2Bchart%2Bthru%2B12-21-11.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5688785418905045474" /></a><br /><br /><br />Of course, the easiest way to play the "Gold versus paper" trade, which is the secular trade of the past decade (and it is not close to ending), is to buy physical Gold and avoid paper financial assets like stocks altogether. For those who like to trade with a portion of their capital, however, we are very close to the re-entry point for this ratio trade in my opinion.<br /><br />Until the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a> hits 2 (and we may well go below 1 this cycle), Gold will continue to outperform paper. It's really that simple. The twists and turns give commentators like me a chance to hear ourselves talk and traders a chance to try to juice the gains of a "buy and hold" strategy, but they are simply noise for conservative investors who understand the current secular trend. If you are crazy enough to try and trade in this environment, consider giving my <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">low-cost subscription service</a> a try. My subscribers and I have recently been and are still short emerging markets and are waiting for a good entry point to go long Gold stocks as our next trade.<br /><br /><br /><br /><br /><a href="http://www.bullionvault.com/#abrochert"><img src="http://www.bullionvault.com/images/adverts/Buy_Gold_Today_Banner.gif" title="Buy gold online - quickly, safely and at low prices" alt="Buy gold online - quickly, safely and at low prices" border="0" width="468" height="60"></a><A HREF="http://www.kitco.com/connecting.html"><IMG SRC="http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif" BORDER="0" ALT="[Most Recent Charts from www.kitco.com]"></A>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-58096487732924156962011-12-12T17:54:00.000-08:002011-12-12T18:27:00.834-08:00Lower Lows For More Important Items<a href="http://goldmoney.com/index.html?gmrefcode=Goldversuspaper"><img src="http://goldmoney.com/banners/gmy25.gif" width="468" height="60" alt="GoldMoney. The best way to buy gold & silver" /></a><br /><br /><br /><br />As someone in the USA who tends to read more US-centric commentary, I continue to see analysts look almost exclusively at the US markets. Because US stock markets have been relatively strong recently, a frequently read conclusion is that the US economy is holding up well and terms like "de-coupling" are making their way back into the financial lingo. This is a ridiculous concept in the current global economy, but people want to believe good times are just ahead just like when "green shoots" and "goldilocks" were bandied about in prior cycles.<br /><br />The US is not decoupling, it is lagging. Just as emerging (and other) markets topped later than the USA in the 2007-2009 bear market, so the US is the laggard this time. It doesn't mean the USA will avoid the pain or another nasty bear market (one has already begun in my opinion, but the "slope of hope" is alive and well). I am continuing to document the signs of this bear market for those interested in preserving their wealth through what promises to be turbulent times, indeed.<br /><br />I previously pointed out markets making lower lows below their October lows <a href="http://goldversuspaper.blogspot.com/2011/11/making-lower-lows.html">in a previous post</a>. Continuing along that theme are some very important additions to the list. First up, China, using the Shanghai Index ($SSEC). Here's a 6 month daily chart thru today's close:<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://4.bp.blogspot.com/-1dZmwptZYS8/Tuax_7446pI/AAAAAAAACv8/ng0CghDjNhQ/s1600/SSEC%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B12-12-11.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://4.bp.blogspot.com/-1dZmwptZYS8/Tuax_7446pI/AAAAAAAACv8/ng0CghDjNhQ/s400/SSEC%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B12-12-11.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5685427291568007826" /></a><br /><br /><br />Next up, India ($BSE):<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://1.bp.blogspot.com/-eyr48Jl8aZA/TuayojxaRdI/AAAAAAAACwI/i3kO7QQFSpU/s1600/BSE%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B12-12-11.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://1.bp.blogspot.com/-eyr48Jl8aZA/TuayojxaRdI/AAAAAAAACwI/i3kO7QQFSpU/s400/BSE%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B12-12-11.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5685427989468825042" /></a><br /><br /><br />For commodity bulls, are you paying attention to the CCI Commodity Index ($CCI), which is more balanced and less oil-weighted than the $CRB Index?<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://4.bp.blogspot.com/-nd6pHLMTz90/Tuay7E9rZeI/AAAAAAAACwU/KdrPTNKyUH4/s1600/CCI%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B12-12-11.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://4.bp.blogspot.com/-nd6pHLMTz90/Tuay7E9rZeI/AAAAAAAACwU/KdrPTNKyUH4/s400/CCI%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B12-12-11.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5685428307616294370" /></a><br /><br /><br />Here are the so-called BRIC nation returns since their cyclical bull market peaks thru today's close:<br /><br />Brazil: Down 21.6% since Nov. 2010 peak<br />Russia: Down 36.5% since April 2011 peak<br />India: Down 24.6% since Nov. 2010 peak<br />China: Down 34% since Aug. 2009 peak<br /><br />The engine of global growth has been gummed up with bad debtor paper and declining demand. The global recession has already begun and the exact timing of each market making its biggest declines is the only game worth playing in my opinion. Meanwhile, the precious metals (PM) and PM stocks continue to decline. A very important buying opportunity is approaching in my opinion in the PM sector, but I don't think we're there yet. <br /><br />My subscribers and I are currently short emerging markets while waiting to go long in the PM sector. If you're crazy enough to try trading in these markets, consider my low cost subscription service. Otherwise, just keep buying physical Gold on price dips and sleep well at night knowing you own the world's oldest and most reliable currency.<br /><br /><br /><br /><a href="http://www.bullionvault.com/#abrochert"><img src="http://www.bullionvault.com/images/adverts/Buy_Gold_Today_Banner.gif" title="Buy gold online - quickly, safely and at low prices" alt="Buy gold online - quickly, safely and at low prices" border="0" width="468" height="60"></a><A HREF="http://www.kitco.com/connecting.html"><IMG SRC="http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif" BORDER="0" ALT="[Most Recent Charts from www.kitco.com]"></A>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-9189939501642429832011-12-08T19:02:00.001-08:002011-12-08T19:56:45.523-08:00Gold - The Simple Secular Thesis<a href="http://goldmoney.com/index.html?gmrefcode=Goldversuspaper"><img src="http://goldmoney.com/banners/gmy25.gif" width="468" height="60" alt="GoldMoney. The best way to buy gold & silver" /></a><br /><br /><br /><br />It's more subtle and sophisticated than "buy Gold and get rich." But in the end, not much. Traders and speculators are always looking for the edge - much like the hares racing the tortoise. But the tortoise method of investing for this secular cycle is important and should comprise a significant portion of one's portfolio regardless of your preferred time horizon when investing and/or speculating/trading. After all, when MF Global can happen in one of the so-called safe haven countries (i.e. the USA), then isn't a component of safety without counter party risk important? Holding paper fiat currency and stuffing it under the mattress requires infinite faith that the apparatchiks and central bankstaz pulling the strings will not fall into the trap of human nature that has plagued every currency, including those backed by Gold, since currencies were first invented. I am speaking of debasement and debauchery.<br /><br />And understand that currency under the mattress and certificates of confiscation (i.e. government bonds) may outperform equities and real estate as general investment sectors over the remainder of the cycle. I am not sure and I don't care, as this is a game I am not willing to play with my hard-earned capital.<br /><br />The bottom line is this: the charts and secular trends scream that we are in a secular private sector credit contraction, also known as a depression in impolite company. For uttering the word "depression" is an admission of failure and we all know that confidence must be maintained, regardless of reality. Close your eyes, stamp your feet and repeat after the apparatchik: "Remain calm. All is well."<br /><br />Here is the skinny on the secular trend for at least the next few years and potentially a decade or more: it's actually pretty easy. Hard assets, using general commodities as a proxy, have been and will continue to outperform financial assets such as common stocks, corporate bonds and real estate (individual specific opportunities and travesties aside, as I am speaking in broad sector-type terms). Additionally, Gold will continue to outperform general commodities and will continue to rise relative to all major paper currencies (i.e. outperform paper cash, as "hard" cash is preferred to paper promises in our current secular environment).<br /><br />Don't believe me? Look at the charts! First up, the ratio of commodities, using the CCI Commodities Index (i.e. $CCI, which is more balanced than the oil-heavy CRB Index) relative to the Global Dow Jones Stock Index (i.e. $DJW, a less-than-perfect proxy for global equities). Here is a 20 year monthly chart of the $CCI:$DJW thru today's close:<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://3.bp.blogspot.com/-f0E1SXbaI0c/TuF-MCIzGkI/AAAAAAAACvk/bvW5pVXdxFc/s1600/CCI%2Bto%2BDJW%2Bmonth%2Bratio%2B20%2Byear%2Bchart%2Bthru%2B12-8-11.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://3.bp.blogspot.com/-f0E1SXbaI0c/TuF-MCIzGkI/AAAAAAAACvk/bvW5pVXdxFc/s400/CCI%2Bto%2BDJW%2Bmonth%2Bratio%2B20%2Byear%2Bchart%2Bthru%2B12-8-11.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5683962949915580994" /></a><br /><br /><br /><br />Next up, the Gold ($GOLD) to commodities ratio chart (i.e. $GOLD:$CCI) over the same period of time using the same monthly log-scale format thru today's close:<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://1.bp.blogspot.com/-hZUsaP27xdA/TuF_GUvYHmI/AAAAAAAACvw/kM9z104EQBI/s1600/Gold%2Bto%2BCCI%2B20%2Byear%2Bmonthly%2Bratio%2Bchart%2Bthru%2B12-8-11.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://1.bp.blogspot.com/-hZUsaP27xdA/TuF_GUvYHmI/AAAAAAAACvw/kM9z104EQBI/s400/Gold%2Bto%2BCCI%2B20%2Byear%2Bmonthly%2Bratio%2Bchart%2Bthru%2B12-8-11.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5683963951341641314" /></a><br /><br /><br /><br />That's it. The only subtlety comes in because of the issue of "nominal" versus "relative" return. In other words, if Gold goes to $700 US/oz from here and general commodities and the global stock market indices go to zero or near zero, you may show a "loss" on paper, but will gain immensely in relative wealth and won't have to pay capital gains tax. This is the scenario Robert Prechter of Elliott Wave fame envisions. In this scenario, just hold paper US cash and do better than everyone else. I think Gold is the perfect hedge, as it has already proven that it can hold its value this cycle even in severe deflation. Remember 2008? Everyone talks about how Gold dropped from $1000 US/oz down to $700/oz but they always fail to mention that by February of 2009 Gold was back at $1000/oz while the stock market continued to fall! In other words, Gold was flat, just like US Dollar cash was flat. To say that the US Dollar index rose more than Gold is only relevant to traders playing in the currency markets. Holding paper cash and physical Gold netted the exact same return during the worst deflationary wave of this generation: 0%.<br /><br />And then what happened after the dust settled in March of 2009? Did physical Gold double in value or did paper cash under the mattress? 'Nuff said. Those who say 2008 can't happen again are wrong, but they usually miss the point. Gold hedges against this outcome while providing upside potential if a repeat of 2008 doesn't occur, while paper US Dollars hedge against a repeat 2008 outcome with no upside potential on the other side of the deflationary wave and further loss of purchasing power if 2008 doesn't repeat. <a href="http://goldversuspaper.blogspot.com/2009/10/paperbugs.html">Paperbugs</a>, wake up!<br /><br />Bottom line: ask the Greek people. Their stock market ($ATG) is now down about 90% from the 2000 peak, which is slightly worse than the 89% loss in the Dow Jones from 1929-1932. A deflationary-type stock market collapse by any reasonable standard applied. Did people in Greece earn a better return holding paper Euro notes or paper US Dollars (or short-term government debt denominated in these currencies) since 2000 or better holding Gold? Again, 'nuff said.<br /><br />Gold stocks are a hybrid. Gold they are not, despite what bulls say (and what I used to believe before I took the time to investigate the actual facts market history provides for those interested). Gold plus counter party, business and political risk is not the same as unencumbered physical Gold held outside the banking system However, the potential speculative gains in Gold stocks are significant. This is one of the areas I focus on in my <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">subscription service</a>. Once a core position of physical metal is secured, then speculation with a portion of one's capital may be appropriate for those seeking higher returns.<br /><br />So, knowing these secular trends have existed is one thing, but when will they end? Well, the usual sign posts are not archaic relics to be laughed at and degraded as CNBC likes to do. When the dividend yield on general common stocks reaches greater than 6% on average, then perhaps it will be time to start looking to trade some metal for some paper. And when my favorite secular ratio, the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a>, hits 2 (and we may well go below 1 this cycle) then it may be time to start trading Gold for paper. <br /><br />Until then, I'll stick with the secular theme that has worked wonders so far. History is repeating right in front of our eyes. This time won't be any different. My advice is to buy physical Gold, hold it outside the banking system, and enjoy the fireworks with your wealth intact (and likely increased) and your purchasing power enhanced.<br /><br />For those crazy enough to speculate in this environment, consider my <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">low cost subscription service</a>. My subscribers and I are currently short emerging markets and waiting for a bottom in the precious metals sector to start speculating in Gold stocks from the bull side.<br /><br /><br /><br /><a href="http://www.bullionvault.com/#abrochert"><img src="http://www.bullionvault.com/images/adverts/Buy_Gold_Today_Banner.gif" title="Buy gold online - quickly, safely and at low prices" alt="Buy gold online - quickly, safely and at low prices" border="0" width="468" height="60"></a><A HREF="http://www.kitco.com/connecting.html"><IMG SRC="http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif" BORDER="0" ALT="[Most Recent Charts from www.kitco.com]"></A>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-48708730644343451992011-11-25T18:44:00.001-08:002011-11-25T19:10:07.609-08:00Last Comment On Japan (for now)<a href="http://goldmoney.com/index.html?gmrefcode=Goldversuspaper"><img src="http://goldmoney.com/banners/gmy25.gif" width="468" height="60" alt="GoldMoney. The best way to buy gold & silver" /></a><br /><br /><br /><br />I promise that for now, this is the last time I will comment on the Japanese stock market. I only feel the need to scream from the rooftops on this one because I am not seeing anyone else commenting on it, and I believe it is HUGELY important. The third (?) largest economy in the world is demonstrating conditions ripe for a stock market meltdown.<br /><br />Here is my Elliott wave count on the Nikkei Japanese stock market ($NIKK), with all its bearish implications. Following is a 37.5 month weekly candlestick chart thru Friday's close with my thoughts:<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://3.bp.blogspot.com/-KgOcYKP7X7c/TtBWeqiScVI/AAAAAAAACvY/L-ipoLzIepo/s1600/NIKK%2B3%2Byear%2Bweekly%2Bchart%2Bthru%2B11-25-11.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://3.bp.blogspot.com/-KgOcYKP7X7c/TtBWeqiScVI/AAAAAAAACvY/L-ipoLzIepo/s400/NIKK%2B3%2Byear%2Bweekly%2Bchart%2Bthru%2B11-25-11.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5679134214928363858" /></a><br /><br /><br />We're not just below the recent October fall lows, we're looking at a crash-type scenario in the Japanese stock market. How this happens in a globally interconnected market without a strong move to the downside in Europe and the USA is beyond me. My subscribers and I have been short emerging markets and remain so for now. Soon, we will be looking to buy into the precious metals sector for a bull trade, but for now it is "batten down the hatches" time. <br /><br />If you're interested in trying to trade these dangerous markets, consider my <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">low cost subscription service</a>. If not, my advice is to buy physical Gold and sleep soundly.<br /><br /><br /><br /><a href="http://www.bullionvault.com/#abrochert"><img src="http://www.bullionvault.com/images/adverts/Buy_Gold_Today_Banner.gif" title="Buy gold online - quickly, safely and at low prices" alt="Buy gold online - quickly, safely and at low prices" border="0" width="468" height="60"></a><A HREF="http://www.kitco.com/connecting.html"><IMG SRC="http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif" BORDER="0" ALT="[Most Recent Charts from www.kitco.com]"></A>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-76714891195646055672011-11-22T16:44:00.000-08:002011-11-22T17:01:14.085-08:00Making Lower Lows<a href="http://goldmoney.com/index.html?gmrefcode=Goldversuspaper"><img src="http://goldmoney.com/banners/gmy25.gif" width="468" height="60" alt="GoldMoney. The best way to buy gold & silver" /></a><br /><br /><br />There are a few global stock market indices that have broken below the recent early October fall lows. This is not a good sign. The most important of these is Japan, which I <a href="http://goldversuspaper.blogspot.com/2011/11/japan-sleepily-triggers-while-everyone.html">wrote about a few days ago</a>. Here is a 6 month daily candlestick chart of the $NIKK Japanese stock market index thru today's close:<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://2.bp.blogspot.com/-rw6QDvFuX-Q/TsxDIZc6w0I/AAAAAAAACuo/3pYpunyFEBk/s1600/NIKK%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B11-22-11.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://2.bp.blogspot.com/-rw6QDvFuX-Q/TsxDIZc6w0I/AAAAAAAACuo/3pYpunyFEBk/s400/NIKK%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B11-22-11.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5677987041757545282" /></a><br /><br /><br />And here's Austria ($ATX), Europe's latest entry into the crisis competition, using the same chart format:<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://1.bp.blogspot.com/-bZ3kVApmYOE/TsxDXtgE8jI/AAAAAAAACu0/nmNlcjF-8AI/s1600/Austria%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B11-22-11.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://1.bp.blogspot.com/-bZ3kVApmYOE/TsxDXtgE8jI/AAAAAAAACu0/nmNlcjF-8AI/s400/Austria%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B11-22-11.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5677987304837542450" /></a><br /><br /><br />Next up, Portugal ($PSI):<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://3.bp.blogspot.com/-AgGgUEFmVQ8/TsxDhvbaYrI/AAAAAAAACvA/cpfMEfL01cc/s1600/Portugal%2B6%2Bmonth%2Bchart%2Bthru%2B11-22-11.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://3.bp.blogspot.com/-AgGgUEFmVQ8/TsxDhvbaYrI/AAAAAAAACvA/cpfMEfL01cc/s400/Portugal%2B6%2Bmonth%2Bchart%2Bthru%2B11-22-11.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5677987477153538738" /></a><br /><br /><br />Finally, everyone's favorite basket case, Greece ($ATG):<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://3.bp.blogspot.com/-Thu42ge-klk/TsxDsdL3WvI/AAAAAAAACvM/jXdo63-ij40/s1600/Greece%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B11-22-11.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://3.bp.blogspot.com/-Thu42ge-klk/TsxDsdL3WvI/AAAAAAAACvM/jXdo63-ij40/s400/Greece%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B11-22-11.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5677987661235051250" /></a><br /><br /><br />Will the rest of the world's stock markets, which are above their recent fall lows, hold up or will they follow these countries to new lower lows? Only Mr. Market knows for sure, but I am not optimistic on common equities here. When sovereigns are falling/failing, it is best to get out of the way and stay liquid. Gold is the best form of cash to hold through an international monetary crisis, as it has no counterparty risk and cannot have its value successfully inflated away by desperate governments and bankstaz (unlike paper currencies). Until the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a> hits 2 (and we may well go below 1 this cycle), Gold will continue to outperform stocks, bonds, real estate, other commodities and cash on a secular basis.<br /><br />If you are crazy enough to try and trade in this environment, consider giving my <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">low cost subscription service</a> a try.<br /><br /><br /><br /><a href="http://www.bullionvault.com/#abrochert"><img src="http://www.bullionvault.com/images/adverts/Buy_Gold_Today_Banner.gif" title="Buy gold online - quickly, safely and at low prices" alt="Buy gold online - quickly, safely and at low prices" border="0" width="468" height="60"></a><A HREF="http://www.kitco.com/connecting.html"><IMG SRC="http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif" BORDER="0" ALT="[Most Recent Charts from www.kitco.com]"></A>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.comtag:blogger.com,1999:blog-2357491164584129038.post-87041017605677298292011-11-18T20:49:00.000-08:002011-11-18T21:29:46.675-08:00Japan Sleepily Triggers While Everyone Is Watching Europe<a href="http://goldmoney.com/index.html?gmrefcode=Goldversuspaper"><img src="http://goldmoney.com/banners/gmy25.gif" width="468" height="60" alt="GoldMoney. The best way to buy gold & silver" /></a><br /><br /><br /><br />I have been closely following the Japanese Nikkei Stock Market Index ($NIKK) lately waiting for it to break down below the neckline of a big "head and shoulder-y"-type topping pattern that has been going on for over 2 years now. Well, this week it finally broke on a weekly basis. Ignoring other important global markets is a mistake for American and European traders. The fact that Japan broke down this week means there should be very little weight given to the bullish case for common equities in my opinion (unless this break down quickly reverses course, which seems unlikely at this point).<br /><br />Here is a 3 year weekly candlestick chart of $NIKK thru today's close with my thoughts:<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://2.bp.blogspot.com/-zxC3U0Ow7cg/Tsc2Y4a91wI/AAAAAAAACuc/Drtuxf8EYYU/s1600/Nikkei%2B3%2Byear%2Blog%2Bscale%2Bchart%2Bthru%2B11-18-11.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 400px;" src="http://2.bp.blogspot.com/-zxC3U0Ow7cg/Tsc2Y4a91wI/AAAAAAAACuc/Drtuxf8EYYU/s400/Nikkei%2B3%2Byear%2Blog%2Bscale%2Bchart%2Bthru%2B11-18-11.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5676565656414050050" /></a><br /><br /><br />The target for this breakdown is below the March, 2009 lows regardless of which drawn neckline is used! A general rule for technical analysis is that the bigger and longer the formation is, the more significant it is when it finally breaks one way or the other. A second weekly close below the neckline next week would pretty much seal the deal and it may turn into a waterfall-type decline quickly if this happens. We could drop 2000 points in 2 months or less.<br /><br />Japanese traders have been through almost 22 years of a secular bear market with no end in sight. They are going to sell first and ask questions later and so are the international traders and investors that have ridden through the seemingly endless Japanese market storm. This breakdown, if confirmed next week, is bearish for all of the global equity markets and would cement the case for a new, potentially big leg down in the current cyclical global equity bear market in my opinion. <br /><br />Meanwhile, the USA gets ready to come back into the global news flow focus with its "debt committee." It should prove to be just as embarrassing as the summer debt "discussion" debacle. Don't expect any solutions, but there should be lots of finger pointing and chest thumping from the bozos driving the federal fiscal short bus. <br /><br />In the end, the markets should decline once again in a fairly scary fashion, just enough to get everyone panicking. That's when helicopter Ben will ride to the rescue with some new twist on printing money out of thin air (hopefully with a fancy and misleading name to boot). Until then, Gold and silver stocks as well as silver are unlikely to be safe places to hide and the Gold price may well get smacked down a little more, too. However, the next leg up in the secular Gold bull market should be rather glorious and Gold stocks should finally start to participate. In the mean time, though, buckle up for some volatility. I continue to maintain that this isn't 2008, but that's only because it's worse.<br /><br />If you're crazy enough to trade in this environment, consider giving my <a href="http://goldversuspaper.blogspot.com/2011/06/new-subscription-trading-service.html">low cost subscription service</a> a try. If you're actually sane, then just buy physical Gold (and a little silver) on every dip, store it outside the banking system and sleep well. Once the <a href="http://goldversuspaper.blogspot.com/2008/10/dow-to-gold-ratio-aha-moment.html">Dow to Gold ratio</a> hits 2 (and we may well go below 1 this secular cycle), then it may be time to consider selling or trading your shiny metal for something else. <br /><br /><br /><br /><a href="http://www.bullionvault.com/#abrochert"><img src="http://www.bullionvault.com/images/adverts/Buy_Gold_Today_Banner.gif" title="Buy gold online - quickly, safely and at low prices" alt="Buy gold online - quickly, safely and at low prices" border="0" width="468" height="60"></a><A HREF="http://www.kitco.com/connecting.html"><IMG SRC="http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif" BORDER="0" ALT="[Most Recent Charts from www.kitco.com]"></A>Adamhttp://www.blogger.com/profile/06211744365333009028noreply@blogger.com