Gold & Precious Metals
In January of 2011, I swapped a fair amount of physical silver bullion for physical gold bullion. A couple of weeks ago, I reversed the swap.- When I first did the swap in 2011, silver was trading above $30. I wasn’t trying to call any tops or bottoms. Gold simply offered more relative value to me at that period of time than silver did.
- Likewise, I’m not really interested in predicting that silver has “bottomed” against gold, at this point in time. Silver simply appears to offer more relative value to me now, than gold.
- While silver is a mighty metal, it’s not for all investors, especially when bought with size. It’s much more volatile than gold. It can trade as wildly as sugar or natural gas.
- Most amateur investors should invest in gold first, and buy silver after they have built a “foundation of comfort” with gold.
- Please click here now. That’s the daily silver chart. A rally just up to overhead HSR (horizontal support and resistance) at about $18.70, is quite a sizable move. I’ll be booking some profits in that target area, if it is acquired.
- Note the position of my price stoker (14,7,7 Stochastics), at the bottom of the chart. Rallies tend to begin from a point below 20, which is where the lead line is now. A post-jobs report rally of size is quite likely.
- Gold itself continues to face modest headwinds from the crashing Japanese yen. I’ve predicted that a global fiat crisis is coming, and that it would begin in Japan. By 2016, I expect it to begin enveloping most of the Western world.
- Relatively speaking, Japanese QE is much bigger than American QE ever was, and it’s taking a toll on the yen. Please click here now. That’s the daily chart of the US dollar versus the yen. The price stoker suggests that the dollar’s rally may be peaking, at least for now.
- While the dollar has mauled the yen, gold has only moved marginally lower. That’s because Chinese jewellery buying has increased again. I trade the leading Chinese jewellery stocks on my junior stocks site at www.gracelandjuniors.com. They have been displaying sideways to bullish price movement. Diwali in India is also in play. Demand there has returned to seasonal norms.
- Because the US dollar is the reserve currency of the world, it can take the most amount of “money printing damage”, before it crumbles against gold. The US dollar can be viewed as the lead aircraft carrier, in a fiat carrier strike force. The smaller battleships, like Japan and Europe, are now experiencing significant damage.
- Unfortunately for the fiat carrier strike force, their opponent can be viewed as a gold jewellery bull era starship, with India’s gold-obsessed citizens at the helm. The formation of the gold jewellery era is not an overnight event.
- The ice age of paper currency has begun, but the movement of the ice is not visible, to the naked fiat eye.
- In the meantime, please click here now. That’s the daily gold chart. It’s clear that despite the massacre of European and Japanese fiat, the dollar has barely moved gold lower at all. It’s only marginally below the $1180 area lows. That’s the power of gold jewellery demand growth, a power that is in its infancy.
- Please click here now. That’s the daily oil chart. Profits for Canadian oil producers in the tar sands are shrivelling now, and US “frackers” are entering the pain zone. Canada is America’s largest trading partner.
- A meltdown in the Canadian economy could kill the US economic rally. Please click here now. That’s the daily chart of the US dollar versus the Canadian dollar. With oil prices falling hard, the Canadian dollar is weakening dramatically.
- Worse, I expect the Fed to stun global stock markets in 2015, perhaps as early as January, with rate hikes. All roads lead to gold jewellery and the Western mining stocks that source the gold, but does anyone really understand? I’ll be in my favourite Chinese gold jewellery store tomorrow, celebrating the new era with some quality purchases of 24 carat items. In Canada, gold jewellery can be insured and stored in regular safe deposit boxes, without violating any of the terms of storage. It’s best to check with your bank before proceeding with a transaction.
- Please click here now. That’s the daily natural gas chart. It looks spectacular. To understand why that is, please click here now. That’s a chart from the United States Energy Information Administration. America is entering the winter season with abnormally low natural gas supplies.
- I bought oil into the 2008 lows. When I swapped that oil for natural gas a few years ago, most observers thought I was a lunatic. To make big money in a market, the investor needs to have a lot of patience, a stomach for enormous drawdowns, and have the intestinal fortitude to accumulate positions into the depths of their “personal surprize zone”.
- The natural gas asset is potentially poised to move 100% higher, or more, given the supply issues and the long term weather forecasts for another bitterly cold winter on the East coast of the United States. Higher heating costs could also chop GDP, like they did last year.
- I can’t even imagine being heavily invested in global stock markets in a situation where heating costs are soaring, GDP is tumbling, and the Fed is hiking interest rates, but “to each his own”.
- Please click here now. That’s the GDXJ daily chart. I’m looking for a sizable rally to begin very quickly. Yesterday’s price action was particularly encouraging, with gold trading about five dollars lower, while junior gold stocks marched nicely higher!
- Note the position of the price stoker. Not every signal produces a big rally, but if the Swiss vote “yes” in the upcoming referendum, the GDXJ rally that follows could be record size.
- For 2015, I’m ready for a cold winter, a Fed that electrocutes global stock markets, and the next leg in the gold bull era, featuring higher prices for gold stocks!
Nov 4, 2014
Stewart Thomson
Graceland Updates
website: www.gracelandupdates.com
email for questions: stewart@gracelandupdates.com
email to request the free reports: freereports@gracelandupdates.com
Tuesday Nov 4, 2014
Special Offer for Money Talks readers: Send an email to freereports@gracelandupdates.comand I’ll send you my free “Surf The Golden E Wave!” report. My lead Elliot Wave man, who has been shorting gold for more than a year, is in the process of covering his short positions and going long now, with a price objective that is vastly higher. I’ll show you what he thinks about key gold stocks, and the ones he’s buying right now!
One of the greatest fears this October–possibly the most volatile month of the year–has been the correlation between the S&P 500 Index’s ascent in the first three quarters of the year and the possible ramifications of the end of quantitative easing (QE).
It’s well known that Japan and Singapore have been buying their countries’ blue chip stocks with their excessive money printing. Today, about 1.8 percent of the Japanese market is owned by the Bank of Japan. American investors fear the Federal Reserve might do the same and take away the punch bowl, so to speak.
As you can see, the S&P 500 Index has been rising in tandem with government securities, and it’s uncertain what will happen when QE ends.
The Ebola epidemic has also contributed toward moving the needle to the fear side of the spectrum and driven investors to seek shelter not in gold necessarily but in so-called “Ebola stocks.” For every negative, as tragic as they often are, there is a positive. When a major hurricane hits Florida, for instance, insurance stocks fall while real estate stocks rise. The deadly Ebola virus, on top of an aging demographic, has helped make health care and biotechnology pop this year. The Daily Reckoning’s Paul Mampilly, in fact, calls this rally “the biggest biotech market ever.”
Possibly. Before we get too excited, let’s look at the numbers. Over the last 10 years, the S&P 500 Biotechnology Index has had a rolling 12-month percentage change of ±23. As of this writing, the index is up 32 percent, meaning it’s up by only 1.3 standard deviation. In other words, biotech is behaving approximately within its expected range.
Gold bullion, over the same period, has had a percentage change of ±19–not so dramatically different from biotech–and is down by 1.3 standard deviation. Again, this is “normal” behavior.
As you can see, biotech corrected and then rallied firmly into the sell zone. Seventy percent of the time, it’s normal for the asset class to rise and fall one standard deviation. Each asset class has had its own DNA of volatility over the last 10 years. Knowing this helps you manage your expectationsof how they perform.
Even health care and biotech companies not actively working toward finding treatments and vaccines for the virus seem to have incidentally benefited from the rally. California-based Gilead Sciences and New Jersey-based Celgene, for instance–both of which we own in our All American Equity Fund (GBTFX) and Holmes Macro Trends Fund (MEGAX) and were named by Motley Fool as two of the four most important stocks of the last 16 years–have hit all-time highs. Gilead Sciences concentrates mostly on drug therapies for HIV and hepatitis B, while Celgene conducts similar work for cancer and inflammatory disorders.
And it’s not just American health care stocks that are doing well. We’ve been impressed lately with the performance of the Stock Exchange of Thailand Health Care Index and Bangkok Dusit Medical Services, Thailand’s largest private hospital operator, which we hold in our China Region Fund (USCOX). Both the index and the equity have excelled year-to-date, delivering 57 percent.
Bullion and Gold Stocks
As for gold, between mid-August and October 3, the precious metal completely ignored the fact that September is historically its best-performing month, tumbling 9 percent from $1,310 to $1,190. It soon rebounded in the days leading up to Diwali.
Gold stocks, on the other hand, have yet to recover. Since the end of August, the NYSE Arca Gold BUGS Index has plunged 25 percent to lows we haven’t seen since April 2005. The Market Vectors Junior Gold Miners ETF has lost nearly 30 percent; the Philadelphia Gold and Silver Index (XAU), 25 percent.
On a few occasions I’ve pointed out that in the last 30 years, the XAU has never experienced a losing streak of more than three years. As of this writing, it’s lost close to 17 percent, with only two months left. The cards are definitely stacked against the XAU, but I remain optimistic it can continue the trend.
Many investors are understandably concerned that mining companies in West Africa will suffer because of Ebola. Several companies operating in the three hardest-hit countries have indeed been hurt by the virus, some of them being forced to halt production. However, none of our funds has any direct exposure to them. Three companies that we own in our Gold and Precious Metals Fund (USERX) and World Precious Minerals Fund (UNWPX)–IAMGOLD, Newmont Mining and Randgold Resources–continue to operate normally in the region.
Here I must remind investors that we recommend 10-percent holding in gold: 5 percent in bullion, 5 percent in stocks. Rebalance every year.
Looking Past Ebola
One of our most important tenets at U.S. Global is to always stay curious. That includes being familiar with world events and determining how they might affect our funds. Ebola certainly falls into this category, but that doesn’t necessarily mean our funds will undergo any significant changes based on this unfortunate event. Again, other factors have contributed, including the so-called October effect. We remain committed to our fundaments and pick stocks because they’ve been well-screened and fit in our results-oriented models.
If the markets seem too volatile for you right now, we’re proud to offer investors a “no-drama” alternative. Check out our Near-Term Tax Free Fund (NEARX), which has delivered positive returns for the past 13 years.
Happy investing, and stay safe!
The small cap stocks are getting better, at least those outside of the commodity sectors but they still have some more work to do until they start to show good chart patterns. Right now, the area of the market that has recovered the best from the correction are the stocks that suffered the least – the higher priced stocks with stronger liquidity. Here are a few Position Trade candidates for your consideration. I found these using the Stockscores Simple Weekly Market Scan.
1. IBKR
IBKR started its show of strength a couple of months ago but that upward surge was tempered by the correction, which took prices back down to support. Support was never broken and with the recovery in the overall stock market, the stock is now moving to multi-year highs again.
2. PVTB
PVTB has been a strong performer over the past couple of years but has trended sideways for most of 2014. It is now breaking through resistance and looks like it can continue the long term upward trend toward the $45 all-time high range.
3. RDN
RDN has sat below $15 resistance for seven years but last week it finally broke through that price threshold and looks like it is ready to start a market beating trend.
….for the Weekly Commentary continue reading HERE
Michael interviewed cross border insurance expert David Macfarlane on the surprising, and often unknown, liabilities that Canadian snowbirds face with their home, medical, travel and auto protections. Hear some shocking stories and some ideas on how to enjoy your winter sojourns to the US with greater security. CLICK BELOW to listen to the full interview.
{mp3}grant/daveinterview{/mp3}
Managing Director of Business Development, Dave works with HUB International’s Western Canada operations specializing in real estate, executive risk, senior care facilities, hotels and hospitality, manufacturing, and commercial marine insurance.
And if you would like some help determining if you have the protection you need please call HUB’s toll free line 1-844-SNO-BIRD that’s 1-844-766-2473 or email them at snobird@hubinternational.com. Please include your phone # and hometown.
Investors Intelligence has been publishing their survey of investment advisors and newsletter writers since 1963. The initial presumption was that when all of the smart guys started leaning one way, then that was the way to lean. But they quickly found that when even the smart guys are all convinced one way or the other, the market was more likely to move the other way. Since then, the Investors Intelligence spread between %Bulls and %Bears has become a favorite contrarian sentiment indicator for a lot of people.
The chart above shows that bull bear spread. Investors Intelligence surveys approximately 200 newsletter writers and investment advisors, and classifies them as either (1) Bullish, (2) Bearish, or (3) “Correction”. The chart above portrays the spread between the percentage of bulls and that of the bears. You may notice that all of the readings for the past 2 years have been positive, meaning that there have been more bulls than bears. We have to go all the way back to 2011 (not shown) to find an instance when the bears outnumbered the bulls, and that was right after a post-QE2 19% decline in the SP500.
[You May Also Like: Technician Craig Johnson: S&P 2100 by Year End]
Added to that chart above are a set of 50-1 Bollinger Bands. That’s shorthand for saying that the upper and lower bands are each set 1 standard deviation above and below a 50-day simple moving average. One quick and easy way to make use of the Investors Intelligence data is to observe when it goes above the upper band or below the lower band. But excursions outside the bands are not the same going up or going down. Very deep excursions below the lower band tend to mark nice bottoms. But excursions above the upper band often appear early in a price up move. The moment of dropping back down below the upper band is a better sign of a price top.
Investors Intelligence publishes their survey data weekly. There are two separate lags involved. The first is that it takes the subjects of this survey some amount of time to change their opinions on the market based on price action. The second lag comes from the reporting of those changes in opinion to their subscribers, and thus to Investors Intelligence (II), plus II’s own lag in tabulating and publishing their results. So it should be understood that that the II data will lag price movements by some period.
One other point you might notice is that sometimes the weekly change is very small, and other times it is a really big change. To help see that better, this next chart looks at the weekly change in the Bull-Bear spread.
Very low readings usually mark important price lows, like the one we just saw in mid-October, when the Bull-Bear spread fell from 31.4 percentage points to 17.1 in just 2 weeks. But very high readings have a different meaning, or at least that is the case when the market is in an uptrend. The sudden surges toward the bullish side are a sign of strong upward initiation, or at least that is the case when the market is an uptrend. So here is the buried lede: The recent flip back to bullish is a sign of the initiation of a strong new uptrend.
But this interpretation really only works during uptrends. When the stock market is in a downtrend, the data work in a different way. Here is the same weekly change in the Bull-Bear spread, shown from 2007-2011.
During downtrends, the rapid countertrend rallies tend to climax at the point when the II data shows a big shift back to bullish. High weekly change readings that appear when the SP500 is below its 200-day moving average have a different meaning from the same type of reading seen during an uptrend.
The current market is still arguably in an uptrend, having recovered from a very brief dip below the 200MA. And so the most recent big positive spike in this weekly change indicator should more appropriately be interpreted as a sign of new upward initiation, as opposed to a failing effort during a countertrend rally. That’s a useful piece of information right there.
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