Gold & Precious Metals

Gold Stocks Nearing the End of the Wall of Worry Stage

“Gold stocks are following a typical bull market which evolves in three stages: the stealth phase, the wall of worry phase, then the bubble or public phase.” “Momentum has subdued for almost two years while the gold stocks have not had a rip roaring breakout to new highs since early 2006!” “We are essentially looking at a potential breakout from a multi-year base.”

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….read more HERE

 

Precious Metals Monitor: Both Gold & Platinum to Break $1900, But One Has More Upside

We offer our latest analysis on the precious metals market.

After two weeks of consolidation, precious metals finally awoke from their slumber over the past few days. Gold, silver and palladium spiked to the top of their recent ranges, while platinum broke out to fresh multi-month highs.

A strike at the world’s largest platinum mine, Rustenburg in South Africa, has led to the loss of more than 80,000 troy ounces of the metal over the past month. The mine’s operator, Impala Platinum, said resumption of full production will take weeks, at least. 

Analysts warn that the situation could get uglier if labor unrest spreads to other companies.

South Africa’s total output was 4,775,000 troy ounces in 2011, which represented 75 percent of global output. 

Prices for platinum have surged in recent sessions, now trading at a five-month high. The metal is quickly closing in on parity with gold prices. 

platinumtechnicalchart20120222

After the recent breakout, prices have a clear path toward the multi-year high above $1900, leaving substantial upside from here.

While gold also has been performing well, the gold/platinum ratio has been quickly falling amid platinum’s outperformance. It was last trading near 1.02 after peaking above 1.15 late last year.

Over the past three decades, the ratio has been significantly below 1. Thus, continued platinum outperformance over gold would not be surprising as the ratio declines further.

goldplatinumratio20120222

Even so, the outlook for gold is bullish as well. The yellow metal moved up to the top of its recent range this past week and looks poised to move toward the next level of resistance at $1800


GOLD


…..read more on Gold, Silver, Palladium, US Dollar and view 25 charts HERE

A Prime Opportunity to Buy Gold Stocks is Imminent

Update: Mark Leibovit’s pre-opening Gold Comment for 02/22/12. GOLD – ACTION ALERT – BUY
Metals took off for the same reason stocks rallied. Platinum saw a new recovery high of 1646 along with Palladium which traded at 717. Silver touched 34.58, just four cents under its February 34.62 peak. Gold fell a tad short too touching 1761.50 versus its February 3 peak at 1764.20. The burden of proof is on the bulls here, but ‘seasonality’ for gold is beginning to run out. I would still like to see silver push back toward my projected 30-31 pullback zone. Afterwards, my target is first 37 on its way to 42-43. Gold targets to the mid 1800s and perhaps back to its record 1922 high, but I was thinking we should first see more of a pullback, perhaps into the 1600s. So far, this market has said it has other plans. Stay tuned.

A Prime Opportunity to Buy Gold Stocks is Imminent

The price action of the past six trading days made it clear that contrary to our previous thinking the XAU did not break out to the upside late last month. A definitive upside breakout and confirmation that the intermediate-term correction ended in late December will require a daily close above 205. (last nights close 198.20)

XAU 170212

By its nature, confirmation of an important low will usually be belated and will therefore usually not coincide with a good short-term buying opportunity. In general, buying should be done in response to pronounced weakness, not strength. For example, it made more sense to buy near the start of trading on Thursday 16th February, with the gold stock indices having just fallen for 9 days in a row and looking like they were about to extend the losing streak to 10 days, than to buy at the end of January with the XAU appearing to have just broken out to the upside.

It’s possible that the gold-stock indices bottomed on the morning of 16th February, but at this stage the price action is non-committal. If a short-term bottom had been put in place last Thursday it would have been normal for there to be some follow-through to the upside on Friday, so the fact that Friday was another down-day leaves open the possibility that the indices will make new multi-week lows this week.

If a break to new multi-week lows occurs this week it will create an opportunity for under-exposed speculators to do some buying. It won’t, in our opinion, signal that major additional weakness lies ahead. There is a realistic possibility that the HUI and the XAU will test their late-December lows before the end of this month, but very little chance that they will do worse than that before commencing their next tradable rallies.

 

The mission of The Speculative Investor (TSI) is to provide our subscribers with information that not only helps them understand and profit from changing financial market trends, but is also interesting and thought-provoking.

5 Powerful Reasons why there is still BIg Money to be Made in Gold

For those that view gold as a poor investment or hedge against currency devaluation need to consider the charts illustrated below. The first chart was produced by Thomas Gresham of Gresham’s Law. “When a government compulsorily overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation.”[1] It is commonly stated as: “Bad money drives out good”, but is more accurately stated: “Bad money drives out good if their exchange rate is set by law.”

The Long-Term Fundamental Case for Gold

“No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.”

~ United States Constitution, Excerpt from Article 1, Section 10 ~

A quick glance at most of the headlines over the weekend and the primary focus seemed to be either calling a near term top in domestic equity indices or a focus on the Greek debt situation. Why is anyone even paying attention to what is going on over there? Until the ISDA declares a default where the underlying Credit Default Swaps (CDS) are triggered, it is all just noise.

The ECB has broken the rule of law by placing itself as the senior creditor ahead of private creditors, the Greek government is trying to pass retroactive legislation to trap private sector creditors holding out of the PSI, and the leader of Greece was not even elected by the people of Greece – how much more manipulation and insanity do we need to monitor?

Similar to the price action since 2008, central banks around the world control everything from financial markets to the ascent of political leaders. These same political leaders help central bankers and planners control policy and decision making at the highest government levels in Europe and around the world. It would seem that the United States should change the motto from “We the People” to “We the Bankers.”

However, there is one particular asset class that even the central bankers have a hard time controlling. While they can impact short term price action through direct currency manipulation initiatives, in the longer-term gold is likely to move in only one direction – higher.

The price action on Tuesday reminded market participants that actions such as the Greek bailout come at a cost. Quantitative easing and/or printing money (depending on what one wishes to call the practice of producing fiat currency out of thin air) has a direct impact on the price of gold.

Many financial pundits argue that gold has no utility, but what they fail to recognize is that gold is the senior currency to all other fiat currencies. Silver is also a form of currency and is senior to all other fiat currencies as well. While one can draw the utility of gold into question, the idea that gold is the senior most currency to all other fiat currencies is not new.

The Constitution of the United States of America, which is over 200 years old, refers to gold and silver as forms of payment.  Looking back thousands of years the Romans used gold coins as a form of currency. The idea that gold and silver are currencies is certainly not a grandiose thought or a stretch of historical concept. Trying to depict gold as a worthless asset depends on your view and consideration of fiat currency.

There are those that would argue that the Federal Reserve of the United States is not actively manipulating economic conditions domestically or abroad. For those that view gold as a poor investment or hedge against currency devaluation need to consider the charts illustrated below. The chart below was produced by Thomas Gresham of Gresham’s Law.

Total Asset Growth of the Federal Reserve System – 1915 – 2012

Chart1

It is rather obvious by looking at this chart that the Federal Reserve has actively sought to enter domestic and foreign financial markets. The surge in balance sheet assets serves to prove how far the Federal Reserve Bank is willing to go to maintain markets which seemingly are only allowed to move higher over time.

This chart is bearish for nearly any form of paper backed assets. The above referenced chart is long-term bearish for the Dollar and Treasuries and long-term bullish for physical gold and silver. As the Federal Reserve continues to debase the U.S. Dollar in concert with other central banks’ monetary easing programs, gold and silver prices over time are destined to move higher in virtually every form of fiat currency.

During the same time frame that the Federal Reserve has seen its balance sheet grow exponentially, the rapid rise of M2 money supply is staggering. The long term chart of M2 is compared to gold futures in the charts presented below.

M2 Money Stock

Chart2

Gold Futures Monthly Chart

Chart3

It is rather obvious what has happened to the price of gold as the M2 money supply has grown. The idea that the Federal Reserve has not already destroyed a significant amount of the purchasing power of the Dollar can easily be refuted by the two charts shown above.

In the short-term, gold and silver could suffer from a pullback, but in the intermediate to longer term it is unlikely that we have seen the highs of this bull market for either metal. As long as central banks around the world continue to print money and expand their balance sheets gold and silver will remain in a long-term bull market. The daily chart of gold futures is presented below.

Gold Futures Daily Chart

Chart4

As can be seen above, it is not out of the question that we could see gold pullback to test one of the key moving averages in coming days/weeks. However, I expect the key support area to hold in the event of a sharp selloff. Ultimately, I expect to see a breakout over the resistance zone in the days/weeks ahead. However, I would not be surprised to see gold consolidate or work marginally lower from current prices before breaking out to the upside. Right now the primary threat in this fledgling gold rally is a short-term spike higher in the U.S. Dollar. The primary catalyst which could drive a flight to the Dollar involves the sovereign debt situation in Greece and the Eurozone as a whole.

While the short-term price action may be bearish, the intermediate to longer term time frames are quite bullish for metals as central banks will continue to race to debase their currencies. Quantitative easing in the U.S. and around the world will become pervasive and gold prices could potentially soar in value. The data from the Federal Reserve Bank itself suggests that they are indeed increasing the money supply. As time has passed, the money supply and gold have seemingly grown in lockstep with one another. Surely inquiring minds do not consider this mutual relationship between gold and the money supply to be purely coincidental.

As further evidence that the Federal Reserve continues to use quantitative easing to manipulate asset prices through direct entry into financial markets, a chart of the velocity of M2 clearly depicts that the velocity of money is declining. I am not an expert regarding macroeconomic data, but if the velocity of money is declining to 1960’s levels would it be a stretch to say that we may be going through a period of stagflation? The chart below illustrates the Velocity of M2 Money Stock courtesy of the St. Louis Federal Reserve Bank.

Velocity of M2 Money Stock

Chart5

For those unfamiliar with the term velocity of money, it is simply the rate of turnover in the overall money supply. The velocity of M2 is expressed as the number of times that a Dollar is used to purchase final goods or services which are included in the total gross domestic product.

Conclusion

The short term technical picture in gold is a bit suspect due to overhead resistance and recent U.S. Dollar strength. However, the longer term macro factors that impact the value of the U.S. Dollar and precious metals are all telling us the same thing.

As time wears on and central banks do even more to prop up the broader economy and failing financial institutions, it is without question in my mind that gold and silver will both benefit handsomely from these decisions being made by central bankers from around the world.

Ultimately, I am very bullish of gold and silver in the intermediate to longer-term, but in the immediate short-term frame gold could consolidate or pullback before breaking out to the upside.

By: Chris Vermeulen – Free Weekly ETF Reports & Analysis: www.GoldAndOilGuy.com
Co-Author: JW Jones – Free Weekly Options Reports & Analysis: www.Optionnacci.com

 

This material should not be considered investment advice. J.W. Jones is not a registered investment advisor. Under no circumstances should any content from this article or the OptionsTradingSignals.com website be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.


 


Mining Juniors – Massive Gains – A MUST READ

Junior Detour Gold Corp up eightfold since late 2008, Ventana Gold Corp up nearly hundredfold before a takeover. 

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Detour Gold Corp chart above

 

Peter Grandich: On January 2, in my “2012 Outlook”  I posted this commentary on what I know and believe about the junior resources industry. I thought it was so important, it is now a permanent link (on Peter’s navigation bar) called MUST READ.

Here is another article I consider a “must read” about junior resource stocks by Martin Mittelstaedt

Junior miners: The big score – and the big risk 

Detour Gold Corp. has risen eightfold since late 2008, buoyed by exploration success at an Ontario property. Ventana Gold Corp. rallied nearly hundredfold on the strength of a Columbian mineral find, before it was snapped up in a takeover last year.

With these kinds of outsized gains, investors can be forgiven for wondering where they might find the next Detours or Ventanas, companies able to turn a small grubstake into some very serious money.

The trouble is, junior explorers, while offering dramatic gains, pose a bewildering problem: The extreme difficulty of stock selection. Small mining outfits are the most common type of security listed on Canada’s two equity markets. There are about 2,100 junior mining companies in the country, outnumbering bigger mining companies with actual producing mines by nearly 10 to one.

To help investors along, here are some stock-picking tips from the pros – mining analysts whose job is to steer their clients into the most promising of the juniors.

 

….read the tips HERE

 

 

 

 

This collection of charts/scenarios is so impressive Michael Campbell invited Dr. Martin Murenbeeld on Money Talks this weekend to discuss them. You can view all 42 charts/scenarios HERE. To listen to the interview go to the 20.30 minute mark of the player titled “MoneyTalks radio show” you can see directly above this article’s title centre page. Three examples are below: Screen shot 2012-02-21 at 12.22.37 PM

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….view all 42 Charts HERE