Gold & Precious Metals

Intl Buying & Your Shot at 1,000% Gains

As a gold investor in North America, it sometimes feels like I’m living in some far-off land where everyone believes in fairy tales and unicorns.

Most people around me don’t seem to see anything wrong with the Fed creating $65 billion a month out of thin air—hey, it’s not $85 billion anymore, what a relief! It’s business as usual for the US government to spend billions more than it takes in, and a public debt hovering at $17.2 trillion—up from $7 trillion just 10 years ago—seems no more alarming than a rainbow.

No surprise then that these people don’t feel any need to own assets that might help them in times of crisis. Hard assets like… gold.

I’m reminded of a visit I made to China several years ago. One night, I awoke in the middle of the night—something was crawling under the bed sheet. I shot up like a cannonball, trampolined out of bed, and hit the light switch. I searched and searched for whatever bug had made its way under the sheet, but never did find the little vermin. Still, I was so creeped out, I spent the rest of the night on the couch.

I told the staff the next morning what happened—and they did nothing. They just stared at me. They spoke English, so it wasn’t that they didn’t understand me. It was just that none of them seemed to think it was a big deal. One of them even chuckled. They obviously didn’t appreciate the potential health hazard and had no sense of customer service. I left bemused, wondering how people could accept bedbugs as normal—or even if they did, how they could not care about a customer’s experience. It was like being on another planet.

I have some of those same feelings when I think about mainstream investors today. How can they not appreciate the potential financial hazard inherent in something as obviously dangerous as today’s unprecedented levels of money printing? How can they not care that they have nothing solid, like gold, at the core of their investment portfolios? It’s like these people think they live on Planet Sesame Street.

Most people seem to really believe that today’s heavy-handed government interventions are not only the right course of action, but will have no negative fallout. Massive currency dilution, unstoppable tides of rising debt, and never-ending fiscal imbalances are hardly a way to cure decades of money mismanagement, and certainly aren’t consequence-free. How is it that this is not obvious to all?

I honestly don’t know. Perhaps people are aware at some level, but the truth is just too awful to face, and so people don’t.

Very few of my friends and neighbors own any gold. Rarely am I asked about it anymore, even by those who know what I do for a living. The doctor I saw last month gave me the distinct impression I could be doing better things with my money. Most of the mainstream media ignore gold, while many of the big banks loudly proclaim their latest short position as if they had some sort of divine insight.

I’m starting to feel like the proverbial lone voice in the woods…

But We’re Not Alone!

As deluded as most Americans seem to be, that is definitely not the case for everyone in the world—the Japanese, for example, are much more prudent and levelheaded.

I wonder if my fellow citizens would feel differently if they lived in any of these countries where people have witnessed economic insanity firsthand, and are acting accordingly:

Japan was a net importer of gold in December, the first time in almost four years. Net purchases totaled 1,885 kilograms (60,604 ounces). It was only the tenth time Japan was a net monthly buyer since the end of 2005. There are reports that Japan’s pension funds, which hold the world’s second-largest pool of retirement assets, are buying gold.

Dubai gold jewelers just reported the strongest gold sales in seven years. Pure Gold Jewelers, one of the largest dealers in the country, reported a 25% increase in gold jewelry sales during the Dubai Shopping Festival this year.

The state of Gujarat in India reported that silver bullion imports hit a five-year record from April 2013 to January 2014. Imports were more than 450% higher than the same period a year ago. The Indian government has since hiked the import duty on silver to 15%, the same rate as gold, and official imports in January subsequently fell. Smugglers will surely add silver to all those secret luggage compartments they’ve been using for gold.

Australia’s Perth Mint said gold sales jumped 41% and silver 33% in 2013. In January, gold demand was up 10% and silver 8%.

Mexico’s pension funds are now investing in gold after strict investment regulations were recently lifted. The World Gold Council says it spoke to 10 of the country’s most influential pension fund managers (with over $160 billion in assets) and was told that they began investing in gold and commodities in 2013.

Central banks were once again big buyers last year. Of those that have reported so far…

 

  • Turkey purchased 150.4 tonnes (4.83 million ounces)
  • Vietnam 110 tonnes (3.53 million ounces)
  • Russia 57.3 tonnes (1.84 million ounces)
  • Kazakhstan 24.16 tonnes (776,762 ounces)
  • Azerbaijan 16.02 tonnes (515,054 ounces)
  • Sri Lanka 6.51 tonnes (209,301 ounces)
  • Nepal 6.22 tonnes (199,977 ounces)
  • Ukraine 6.22 tonnes (199,977 ounces)
  • Indonesia 4.04 tonnes (129,889 ounces)
  • Venezuela 1.87 tonnes (60,121 ounces)

 

And of Course, There’s China…

ChineseGoldImportsin2013ARecord1139Tonnes

Last year’s record import number is impressive enough, but it’s the pace that’s mind-blowing. 1,139 tonnes is…

 

  • More than 2011 and 2012 imports combined.
  • Over 42% of global mine production last year.
  • Roughly twice as much as the amount GLD sold in all of 2013.

 

Meanwhile, Back in the Good Ol’ US of A…

Gold coin demand for 2013 jumped 24%. Some headlines have pointed out that January 2014 gold and silver coin sales were down compared to a year ago—but January 2013 was the all-time record for single-month sales. Further, Eagle and Buffalo gold coin sales were more than double December’s sales, and were the highest since last April. Silver coin sales in January were almost four times more than in December.

There, now I feel better.

Even if you sometimes feel like a lone wolf investing in this market, understand that worldwide demand for gold and silver bullion continues unabated. If you live in the US, realize that people in many other countries are seeing more positive headlines about gold, have more friends who own gold, and heck, could even walk into a bank to buy gold.

I don’t think the people in these other countries are stupid. Whatever consequences result from the historic levels of currency dilution across the globe, they seem as sure as I do that they’ll be good for gold.

What should you buy? I first recommend buying gold and silver bullion to establish a financial safety net. And then, to maximize gains on the more speculative end of your portfolio, you should look at Louis James’ just-released “10-bagger List for 2014” in the February issue of International Speculator. A 10-Bagger is a stock with the potential to gain 1,000% or more—that’s not a typo, we really did make 10 times our money on junior gold stocks the last time the sector rebounded, and Louis thinks that’s about to happen again.

For example, one of those prospective 10-Baggers is a junior with a multimillion-ounce gold project that’s run by one of our Explorers League honorees. This company is on the verge of securing the funds needed to build its exceptionally high-margin gold mine, but it’s on sale. Speaking of the potential, Louis said: “If the company delivers, it’d be easy to see these 40-cent shares trading for $4” by 2015.

Investing in these stocks—and there are nine of them on Louis’ list—could quite literally make you a fortune, but the opportunity to get in on the ground floor is fading fast. Click here to learn more aboutLouis’ 10-Bagger List for 2014—or watch the recording of our just-aired one-hour video event “Upturn Millionaires” to learn why the time to act is now.

 

Why is the Fed tapering?

On January 17, 2014, we explained “The Hows and Whys of Gold Price Manipulation.”http://www.paulcraigroberts.org/2014/01/17/hows-whys-gold-price-manipulation/ 
In former times, the rise in the gold price was held down by central banks selling gold or leasing gold to bullion dealers who sold the gold. The supply added in this way to the market absorbed some of the demand, thus holding down the rise in the gold price.

As the supply of physical gold on hand diminished, increasingly recourse was taken to selling gold short in the paper futures market. We illustrated a recent episode in our article. Below we illustrate the uncovered short-selling that took the gold price down today (January 30, 2014).

When the Comex trading floor opened January 30 at 8:20AM NY time, the price of gold inexplicably plunged $17 over the next 30 minutes. The price plunge was triggered when sell orders flooded the Comex trading floor. Over the course of the previous 23 hours of trading, an average of 202 gold contracts per minute had traded. But starting at the 8:20AM Comex, there were four 1-minute windows of trading here’s what happened:

8:21AM: 1766 contracts sold
8:22AM: 5172 contracts sold
8:31AM: 3242 contracts sold
8:47AM: 3515 contracts sold

image

Over those four minutes of trading, an average of 3,424 contracts per minute traded, or 17 times the average per minute volume of the previous 23 hours, including yesterday’s Comex trading session.

The yellow arrow indicates when the Comex floor opened for gold futures trading. There was not any news events or related market events that would have triggered a sell-off like this in gold. If an entity holding many contracts wanted to sell down its position, it would accomplish this by slowly feeding its position to the market over the course of the entire trading day in order to avoid disturbing the price or “telegraphing” its intent to sell to the market.

Instead, today’s selling was designed to flood the Comex trading floor with a high volume of sell orders in rapid succession in order to drive the price of gold as low as possible before buyers stepped in.

The reason for this is two-fold: Driving down the price of gold assists the Fed in its efforts to support the dollar, and the Comex is running out of physical gold available to be delivered to those who decide to take delivery of gold instead of cash settlement.

The February gold contract is subject to delivery starting on January 31st. As of January 29th, 2 days before the delivery period starts, there were 2,223,000 ounces of gold futures open against 375,000 ounces of gold available to be delivered. The primary banks who trade Comex gold (JP Morgan, HSBC, Bank Nova Scotia) are the primary entities who are short those Comex contracts. Typically toward the end of a delivery month, these banks drive the price of gold lower for the purpose of coercing holders of the contracts to sell. This avoids the problem of having a shortage of gold available to deliver to the entities who decide to take delivery. With an enormous amount of physical gold moving from the western bank vaults to the large Asian buyers of gold, the Comex ultimately does not have enough gold to honor delivery obligations should the day arrive when a fifth or a fourth of the contracts are presented for delivery. Prior to a delivery period or due date on the contracts, manipulation is used to drive the Comex price of gold as low as possible in order to induce enough selling to avoid a possible default on gold delivery.

Following the taper announcement on January 29, the gold price rose $14 to $1270, and the Dow Jones Index dropped 100 points, closing down 74 points from its trading level at the time the tapering was announced. These reactions might have surprised the Fed, leading to the stock market support and gold price suppression on January 30.

Manipulation of the gold price is a foregone conclusion. The question is: why is the Fed tapering? The official reason is that the recovery is now strong enough not to need the stimulus. There are two problems with the official explanation. One is that the purpose of QE has always been to support the prices of the debt-related derivatives on the balance sheets of the banks too big to fail. The other is that the Fed has enough economists and statisticians to know that the recovery is a statistical artifact of deflating GDP with an understated measure of inflation. No other indicator–employment, labor force participation, real median family income, real retail sales, or new construction–indicates economic recovery. Moreover, if in fact the economy has been in recovery since June 2009, after 4.5 years of recovery it is time for a new recession.

One possible explanation for the tapering is that the Fed has created enough new dollars with which to purchase the worst part of the banks’ balance sheet problems and transfer them to the Fed’s balance sheet, while in other ways enhancing the banks’ profits. With the job done, the Fed can slowly back off.

The problem with this explanation is that the liquidity that the Fed has created found its way into the stock and bond markets and into emerging economies. Curtailing the flow of liquidity crashes the markets, bringing on a new financial crisis.

We offer two explanations for the tapering. One is technical, and one is strategic.

….read the two explanations HERE

Using the Sentiment Stockscore

In this week’s issue:

 

WEEKLY COMMENTARY

 

Stockscores Market Minutes Video
This week, I highlight the Sentiment Stockscore indicator and why it is so important for the position trader. Plus, my regular weekly analysisView the video by clicking here.

The Stockscores
I developed the Stockscores indicators as a way to take the six important elements of chart patterns and put them into a pair of indicators. These indicators are available at Stockscores.com for almost all North American stocks and are very helpful for doing an assessment of whether a stock is worth considering.

Here’s how the Stockscores indicators are calculated. Every stock, index or ETF that Stockscores covers is given 50 points to start. Points are added for positive chart characteristics and deducted for negatives.

For example, a break through price resistance is an indication that buyers are stronger than sellers, so the algorithm awards points when this happens. A downward-sloping moving average is a sign that the sellers are in control, so points are deducted when this happens.

I created the algorithm with about 15 different metrics that can be measured from market activity, each awarding or deducting points based on whether that metric was a positive or negative signal of future price direction.

This algorithm defines the Signal Stockscore, which tends to bounce around quite a bit. To smooth out the line, the system then calculates a seven-day exponential moving average of the Signal Stockscore to produce the Sentiment Stockscore. This is the important number to watch.

A Sentiment Stockscore above 60 indicates that investors are generally optimistic about the stock, index or ETF. A score below 40 indicates the market is pessimistic. The sweet spot is to find Sentiment Stockscore lines, which can be seen on any Stockscores.com chart, sloping upward and crossing through 60. You should then look at the price chart to see a confirming price pattern where the stock price is moving up through resistance from low price volatility.

I don’t recommend buying a stock just because its Sentiment Stockscore is 60 or higher, but I do find that strong, market-beating stocks tend to have good Sentiment Stockscores early in their trend. The Stockscores indicators are a great way to provide a quick reference for the strength or weakness of a stock.

You can check the Stockscore for most North American stocks, ETFs and indexes by entering the symbol in the upper right corner of the Stockscores.com website. The Stockscore algorithm requires 200 days of data to calculate the Stockscores indicators, so newly listed companies will only display a chart and not the indicators.

You can review the charts of any North American stock and see the Sentiment Stockscore for free. Just enter the symbol in the box at the upper right of the site. Canadian symbols require a prefix: “T.” for the TSX and “V.” for the Venture. Members can use the Sector Watch to see what areas of the market are strong and the Market Scan to screen the market for stocks with good Sentiment Stockscores or perhaps those that are just crossing above 60 today.

It’s important to remember that the Stockscores indicators are applied to daily chart data and are not useful for a shorter time frame. A stock may give a good entry signal on the intraday chart suitable for day or swing trading despite having a weak Sentiment Stockscore.

What’s powerful about the Stockscores is that they allow you to use a computer to filter the market, seeking out stocks with optimistic chart patterns. Stockscores.com has a Market Scan tool for filtering a large universe of stocks in search of stocks that meet the filter criteria you establish. It’s hard for a computer to look for chart patterns the way a human can, but the Stockscore is helpful because it attaches points to the different elements of chart patterns.

STRATEGY OF THE WEEK

This week, I ran a simple Market Scan that looked for Canadian stocks with a Sentiment Stockscore of 60 or higher and which has risen at least 5% in the last 10 trading days. To focus in on stocks that are actively traded, I set a minimum number of trades of 500.

Based on Monday’s trading, the Market Scan found 73 candidates. I inspected their charts looking for stocks that have seen a recent move from below to above 60 for the Sentiment Stockscore and a predictive chart pattern. Here are a few stocks that stand out and are worth considering:

STOCKS THAT MEET THE FEATURED STRATEGY

1. T.BLD
T.BLD is breaking from a pull back after a strong run higher to start 2014. This is a good continuation pattern which should allow the stock to move up to new 52 week highs in the near term. Support at $2.20.

Screen Shot 2014-02-10 at 6.42.31 PM

2. T.KGI
T.KGI is one of many gold mining stocks that are showing good signs of a turnaround after a lengthy bear market. The stock is breaking higher from a rising bottom and appears to be reversing the downward trend. Support at $3.20.

Screen Shot 2014-02-10 at 6.43.09 PM

3. T.AUQ
T.AUQ is breaking the two year downward trend on the long term chart and through resistance from a cup and handle pattern on the daily chart. Support at $4.95.

Screen Shot 2014-02-10 at 6.43.29 PM

References

 

See which sectors are leading the market, and their components.

Disclaimer
This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don’t consider buying or selling any stock without conducting your own due diligence.

 

 

Treasury futures traded near a three-month high before Federal Reserve Chairman Janet Yellen testifies to lawmakers today amid signs inflation is struggling to pick up in the world’s largest economy. … full article

The severe shock of the 2007–08 financial crisis prompted the Federal Reserve to quickly lower its target for its primary policy rate, the overnight federal funds rate, near to zero, where it has remained since. Despite this highly stimulatory stance of conventional monetary policy, the economic recovery has been sluggish and inflation has been low. For that reason, the Federal Open Market Committee (FOMC), the Fed’s policy body, has provided additional monetary stimulus by using unconventional measures to push down longer-term interest rates. One element of this unconventional policy has been large-scale asset purchases (LSAPs). Another has … full article

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