Yes, gold and silver and related mining shares may bounce a bit more. But mark my words: If you’re buying them now on the basis that they’ve bottomed, you’re going to lose your shirt!
So I repeat my warnings: Gold will NOT bottom until it moves below $1,100 an ounce. Silver will not bottom until it moves below $20. Mining shares, in general, will not bottom until they lose another 30 percent to 40 percent of their value.
But I will also go on record that the devastation in the precious metals sector, though not over, will come to an end over the next few months.
So while I maintain my view that you should continue to steer clear of the sector for now, you should also start preparing to move back in to the precious metals sector in a very big way.
So how do you prepare to do that?
First, as I just noted, stay out of precious metals until they bottom. Don’t get caught in false rallies, like we’re seeing now. You’ll end up losing money you will wish you had on tap when the metals do bottom.
Second, if you do hold metals investments from MUCH lower prices, as many Real Wealth Report subscribers do, hold, BUT keep your hedges in place, largely via inverse ETFs.
Third, build up your cash! When gold and silver and related mining shares finally do bottom, the next wave up in the sector will knock your socks off and you will want to maximize your profit potential. That means having the cash to do so.
In the next bull phase for the precious metals, I see gold ultimately reaching well over $5,000 … silver over $125 … and your typical, unhedged mining share tripling and quadrupling in value.
The same applies to the commodity sector in general. Oil has not bottomed, but soon will. Copper is poised to fall much further, but will then bottom and explode higher again. Platinum, palladium, grain markets, soft commodities such as coffee, cocoa, and sugar …
Are all poised to move still lower — but important bottoms should soon arrive, and then, just like I foresee for gold and silver — new legs to the upside will be born.
So I urge you, for the next few months, save and build your cash and let the rookies get skinned alive in the commodity markets.
Then, when they’re screaming for help and dumping their investments like there’s no tomorrow, you’ll pick up the pieces, the bargains, and you’ll buy when there’s blood in the streets …
And be positioned to make more money over the next few years than you ever dreamed possible.
Now, for the rest of today’s column, I want to let you in on some questions and answers from the April issue of my Real Wealth Report. Mind you, my subscribers received my answers several weeks ago. As paying subscribers, they are entitled to my views before non-paying subscribers.
But I consider many of the questions they asked last month, and my answers to them, so important, that I am taking the rare step of publishing them here in my free column. Naturally, specific recommendations I make in my Real Wealth Report have been cut out; they’re reserved for paying subscribers only.
Read on. I’m sure you’ll find you have a lot in common with my Real Wealth Reportsubscribers …
Q: Larry, can you give us your thoughts on the conventional ratio of gold and silver (16-to-1), and today’s ratio (58-to-1)?
A: 16-to-1 comes from when silver was last used as a monetary metal. But in reality, there is NO conventional ratio between gold and silver. Historically, over the last two centuries, it has varied from 16-to-1 to over 120-to-1.
Right now, the gold/silver ratio is widening, and set to widen going forward, favoring gold over silver. That’s because, as I’ve said many times, silver is no longer a monetary metal anywhere in the world. So investors will be seeking out gold over silver, pushing the ratio higher.
Q: I bought gold and silver ETFs before I signed up for Real Wealth Report. I’m losing money now so should I still hold?
A: I can’t render personalized advice. However, Real Wealth’s current position is to refrain from buying precious metals investments, and if you do own any metals, physical or otherwise (via ETFs), to hedge.
Q: You are right as rain on almost all of these markets, from a big picture point of view, and the recent short-term moves in the markets. Bravo! What’s next for silver? It seems to be breaking down, just as you forecast it would.
A: Thanks for the compliments! Silver is set to plunge to $20.47, and then even lower. Silver will likely not bottom until we see it fall below $20.
Q: What’s with all the gold bugs out there who never say sell?
A: It takes guts to say sell, especially in a market where so many investors and analysts seem to be so emotional, as they often are with gold.
Emotion prevents them from seeing the real forces at work right now, which are international in scope: Capital flight and its desperate need to find deep, liquid markets where it can be parked without fears of confiscation and where it can generate a yield.
Q: I understand the importance of storing physical gold in allocated storage. I’d like to know your thoughts on these companies — Bullionvault, Goldmoney, Hard Asset Alliance.
A: I can only vouch for the Hard Asset Alliance at this time, where we have done our due diligence.
Q: You said there would be a pullback in the stock market and that would be the time to buy blue chip stocks, and that you would tell us. Did I go to sleep and miss it?
A: No, you haven’t missed the pullback in the equity markets. Stay alert, the pullback will come fast and it will be brief and shallow. MAJOR support is now at the 13,800 level in the Dow. I doubt we can get below that.
Q: If a full-blown war breaks out between North Korea and South Korea/the U.S. — what will be the impact to U.S. stock markets and gold?
A: If anything it will be bullish for U.S. equities, as they experience more capital inflows and gain even more of a safe haven status. For gold, I suspect there would be a short-term rally. But unless gold takes out overhead resistance at the $1,760 level on a Friday closing basis, which is doubtful, then gold would resume its interim bear market shortly thereafter.
Q: Will platinum and palladium be good bets in the future?
A: Yes, once they bottom, which will likely coincide with a gold bottom.
Q: Grain markets took a big hit last month, just as you predicted in your March online event. Do you see the prices of corn, soybeans and wheat falling further? And if so, what does that mean for agricultural companies?
A: Grain markets should definitely head lower. We are in temporary disinflation. Ag companies right now remain vulnerable to a pullback in the broad equity markets. My strategy here will be to get aggressive once I see the pullback in the Dow.
Q: You haven’t written much lately about Asian currencies. What do you see happening there?
A: They should remain strong against the dollar, and even stronger against the euro. The one exception of course, being the Japanese yen, which is being aggressively devalued.
The best currency bets in Asia are the Chinese yuan, the Singapore dollar, and the Thai baht.
Q: You’ve said that the dollar will not be the world’s reserve currency in the not-too-distant future. Let’s say you own 100 shares of XYZ company that you bought for $10 (total investment $1,000). This investment is in current dollars so what happens to it when the dollar is worthless, or it loses its reserve status?
A: All asset prices float. So when the dollar loses more value, or loses its status as the world’s reserve currency, stock prices will naturally have to adjust higher to compensate.
Q: What’s your latest view on crude oil?
A: All of my models are still bearish for oil prices, pointing to an eventual plunge down to below $70 a barrel, and probably lower, to below $60.
Q: Since your publisher has moved your free weekly column to Money and Markets, are you still going to continue with your every other week video podcast as you had before?
A: I have let my publisher know that those market videos need to be reinstated on theMoney and Market’s side, so I hope to re-introduce them soon. I’ll keep you posted.
Q: Would a government-debt-induced Black Swan event take a toll on the newly forming housing bubble, even temporarily?
A: I don’t believe that housing or property prices are in a new bubble. So the answer is no. To the contrary, I think a new bull market in property prices is just getting started. U.S. property prices are very cheap from an international point of view, and U.S. property is also becoming a safe haven for capital from Europe and Japan.
Q: Is it accurate to say that the bubbles being formed by the Fed in the stock market and housing markets are parallel … as one goes, so will the other?
A: Yes and no. Yes in the sense that the two asset classes should move higher together. No in the sense that they are not “bubbles” — they are a long way from becoming bubbles.
Q: With the Fed buying nearly all U.S. debt, why would interest rates rise?
A: Because, very simply, in the end, the Federal Reserve does not control bond prices or interest rates. The markets do.
Q: Could governments/central banks be forced to stop their quantitative easing because of its inflationary side-effects?
A: Yes, they could, the markets could force them to. Once the free markets gain back control, and they will, bond prices would plunge, sending interest rates higher — and a direct message to the Fed that inflating the money supply will not work.
But it’s hard to say whether it will come sooner rather than later, choking off inflation, or come later rather than sooner. It does appear that the bond market bubble is starting to already implode, which means the bond market is well aware of the risks in current Fed policy.
Q: When it looks like gold will bottom, would it be better to invest in mining stocks or gold bullion in storage?
A: A good combination of diversified precious metals investments will be best.
Q: I’m also a member of your Power Portfolio. And I noticed that when you gave another sell signal in gold at the $1,551 level last month, Goldman Sachs also came out and said sell gold. Is Goldman following your work? It sure seems like they are.
A: Not that I know of. But it sure seems like the firm has been somehow getting my signals! However, Goldman’s sell signal is a bit late, as I turned bearish quite some time ago.
Q: Is the bull market in gold and silver over?
A: No, not by a long shot. It’s merely correcting now.
Q: Do you think the euro will survive?
A: No, not in its present form. At best, it will survive but only with Germany and perhaps a few other northern European countries that will use it.
I don’t see Greece, Spain, Cyprus, or many other European countries staying in. They will ultimately have to pull out and go back to their own currencies and devalue them to get out of the mess they’re in. My hope is that they can do so without bloodshed.
Best wishes and stay tuned,
Larry
P.S. There’s so much more my subscribers receive with my Real Wealth Report. Webinars, recommendations to maximize profits, money management tips, diversification, and more. Why not join them? For a mere $89 a year, it’s a bargain. Pure and simple. Join now by clicking here.
