Gold & Precious Metals
Goldman Sachs reverses and turns positive on gold hitting $1,825 this year
Readers of Arabian Money may recall the wise words of gold market veteran Jim Sinclair late last year warning that the bullion banks were pulling the gold price down but only to reposition their own holdings ready for the next spike up (click here).
Goldman Sachs warned its clients that the bull market in gold ‘might be over’ at the time. This week the same bank is pressing its clients to buy gold again because it sees a pop in the gold price to at least $1,825 this year before another set back.
Silver too?
…..more HERE
Value matters. It seems simple but the market is far from convinced of the concept right now. The market is enthralled by stocks that are beating estimates and has no patience for companies facing any type of turbulence. The market is being pushed, pulled, and generally bullied by the forces of fear, greed and liquidity.
The current combination of greed, fear and liquidity, however, has meant certain assets such as government bonds, high quality corporate bonds and “quality” stocks are hitting multi-year highs, while other assets are hitting multi-year lows. This bifurcation of asset values is evidenced by certain areas of the market defying gravity (Treasuries) and being priced for perfection (U.S. Mega Caps) whereas other market segments are declining precipitously (natural resource related companies) and are priced to never recover (U.S. coal companies). Market participants exacerbate this volatility by focusing on day-to-day news, such as macro headlines, political news and quarterly earnings announcements, rather than long- term fundamentals.
In these uncertain times Tradewinds knows the importance for investors to keep calm and carry on! Investors must remain objective, 1) recognize the massive amount of liquidity being pumped into the system, 2) avoid overvalued areas of the market where there is either an abundance of greed or a lack of fear and 3) take advantage of opportunities where others are fearful due to temporary challenges. These currently “unpopular” investments could protect wealth by providing exposure to scarce assets and sustainable franchises that will retain value.
LIQUIDITY
…..read pages 2-7 HERE
Well, the folks in Washington D.C. certainly did another number on investment markets with a slightly- later-than-eleventh-hour “fiscal cliff fluff deal” that does nothing to address a life-threatening spending addiction by the US federal government. And now we get to listen to endless yammering about raising the debt ceiling.
Over the next six weeks this debate will escalate, with the predictable grandstanding, digging in of heels, standing on principle, then caving in at the last minute to prevent both a shutdown of the US Federal Government and any kind of default on outstanding US debt obligations. It will likely become the primary hot button topic for everyone, cause a significant rise in market anxiety and serve as a wonderful distraction from everything else that is happening. In a democracy, a nation gets the government it deserves.
John Boehner was humiliated in the fiscal cliff fiasco and the NRA-funded Republicans are looking increasingly dogmatic in reference to gun violence issues. Obama is riding yet another wave of popular support, enhanced by the mainstream media’s intellect-numbing love affair with him. From my seat in the Crows Nest, the Republicans simply don’t have the political might to force permanent and necessary spending cuts in exchange for raising their “line of credit” so their debt/death spiral will continue to accelerate.
In our current environment we appear to have a struggle between some slightly-improving macro-economic metrics and somewhat negative corporate earnings news. To be brutally frank, the data are not clear. When in doubt I always recommend simply looking at price patterns for clues. Ultimately, price action is what determines portfolio returns, so why not make price Rule #1?
In the past 6 or 7 trading days we appear to have shifted from a healthy consolidation phase (following the upward spike in the first few trading days of 2013) to an anaemic upside breakthrough of resistance on the S&P 500 and the Russell 2000. The Dow and NASDAQ have not yet broken to the upside. The TSX may have just broken through resistance on Friday January 18th.
Next week should be very interesting. If we can manage to hold the gains of late this week, there is scope for the S&P 500 to rally into the 1510-1515 range, possibly higher. While we’ve had a nice rally recently, equity indices are not yet really overbought, and valuation levels are still reasonable. Long US Treasuries have been creeping up gradually, indicating that not everyone is convinced that equities are the safer bet right now. Ultimately, it is wisest to ride the tide while it rises, but remain vigilant for early signs of major pullbacks.
Regardless of how much one may have currently allocated in non-cash positions, my personal opinion is that one should always have a “trailing stop” in place to protect from massive downside risk. Markets don’t make public announcements warning of pending downturns, so one must take personal responsibility for managing risk. Trailing stops are not a perfect solution but they are very helpful in allowing even nervous investors to hold upward trending positions, especially in an “irrational rally.”
Gold and silver are extremely interesting here. Over the last week we’ve seen a grind higher in gold while silver has done a little better. The charts for both include rising bottoms and declining tops resistance, so price patterns will have an increasingly difficult time staying within these formations. While I remain long term bullish on Precious Metals, I’m getting increasingly concerned that we might have a downside scare before getting back to the secular trend. If gold manages to break through resistance at $1693 then there is scope for another rally toward strong resistance at $1800 again. Just remember that regardless of how logical or inevitable a long term outcome may seem, there is no guarantee it will unfold as we picture it. See Rule #1.
Click here to listen to my Talk to the Experts radio program from January 12th on QR77 radio.
I’m looking forward to speaking at the World Outlook Financial Conference in Vancouver on February 1st and 2nd. Michael Campbell’s annual conference is always chock-full of excellent big picture thinking and specific investment ideas, all of which I incorporate into our wealth management and portfolio management processes for clients. After that, Larry Berman of ETF Capital Management and I will be speaking here in Calgary on Wednesday February 20th.
Patience and Discipline are accretive to your wealth, health and happiness; Fear and Greed are destructive.
Andrew Ruhland is the founder of Integrated Wealth Management Inc. an independent holistic wealth management boutique. In partnership with ETF Capital Management Andrew and his team serve affluent clients from their Calgary offices.
Market Psychology has had a VERY BIG swing from bearish to bullish since the Key Turn Date in mid-November 2012 as it became clear that Abe was going to win the Japanese elections and begin implementing VERY aggressive reflationary measures to end two decades of deflation in Japan. The inter-connectedness of global financial markets insured that the BIG changes in Japan would contribute to BIG changes in markets around the world.
Since mid-November 2012:
1) the Yen has fallen ~15% Vs. the US$…now down 10 weeks in a row to a 2 ½ year low,
2) The Yen has fallen ~20% Vs. the Euro,
3) Gold has risen to All Time Highs Vs. the Yen,
4) Global stock markets have risen with the major US Indices at 5 year highs (VIX at 5 year lows,)
5) The Nikkei stock index has risen ~26%,
6) European peripheral bond yields have fallen sharply,
7) It has been “Risk-On” in global financial markets in a BIG way!
…..read more HERE
Over the last couple of weeks there hasn’t been a lot of action in the markets. We continue to see very tight trading ranges that are likely due to the low volume.
But more importantly the markets are now dealing with the background noise of the second half of the fiscal cliff negotiations — the debt ceiling.
Let’s go to the charts .
Bonds Trending Lower
Bonds remain in a downtrend from their record high in price late last year and the record low in yields. And the cycles in the bond market are telling me that bond prices could plunge quite sharply in the weeks ahead.
Prices are rallying a tad, but overall the action is very weak. I expect this downtrend to continue because the bond bubble is imploding. The next stop for the 30-year Treasury bond will be at approximately the 135, 136 level. And I have almost no doubt whatsoever that we will see bonds fall and rates rise as we enter into the serious eleventh-hour negotiations on the debt ceiling.
There’s even a chance based on some of the cycles I’m looking at that Washington may not reach an agreement. And the government may have to temporarily shut down!
Gold Still Has
Room to Fall
There’s not much happening there — just a little bounce higher. You can see that we remain below an important channel resistance and below an important cyclical trend channel. We may move a little higher to just back above $1,700 to test that resistance. But look at all the air down below here!
I maintain my view that the next great buying opportunity coming in gold will be at much lower prices, most likely during the first quarter of this year.
Same Story for Silver
Silver is really just sort of climbing along this lower support level. It’s trying to rally, but the rally is very meager. Once we break the support level down around $31.25, which I fully expect, there is a steep plunge coming. So my view has not changed one bit at all.
U.S. Dollar Could Rally
The Dollar Index is acting just as I expected it to. The long-term weakness is still present in the dollar because of its inability to stage a significant rally. It’s climbing along this uptrend line. And it’s hugging it right here. We may see the dollar start to rally even as the fiscal cliff negotiations on the debt ceiling fall apart.
Now logically you might think that if we hit the debt ceiling, the government shuts down, the dollar should plunge. I don’t think that’s necessarily the case.
If you think it through, if the government shuts down, or if the budget negotiations get really nasty, a lot of investors will seek out the sidelines. They’ll get out of the markets and go to cash to wait and see what happens, which would give the dollar some strength. So it’s not a sure bet that the dollar would fall on bad news about the debt ceiling. That remains to be seen.
Short-term, the cycles still point higher for the dollar as well. Long-term, we all know the dollar is in trouble. There’s no question about it. But I don’t believe the next disastrous bear market move for the dollar will come until later this year.
Dow Industrials Holding
Up Amazingly Well
Like the dollar, the strength you’re seeing in the Dow is an indication of its long-term strength. We are, at some point in the not-too-distant future, going to enter a new bull market in equities that will see the Dow and the S&P 500 go to new record highs over the next few years.
In the short- and intermediate-term it’s a coin toss. We could see the Dow move up to just over 14,000 or we could see that long-awaited pullback that I’ve been looking for.
Fundamentally, anything could crop up that could drive the market higher or take it lower. Cyclically, on the short-term models, I’m still expecting a pullback.
So I am not willing to go all-in on the stock market yet by any means. Nor am I willing on the other side to go aggressively short at this time.
So keep your eyes on these markets. They are indeed the most frustrating I’ve seen in a long time. But I also know that when you go through periods like this, as long as you keep your ammo intact and stay defensive with your savings, when the markets start to move they are loaded with opportunities where you can make a ton of money.
Best wishes,
Larry
P.S. Did you catch Sean Brodrick’s emergency Global Energy Summit last week? It’s chock-full of expertise from industry heavyweights with “no-holds-barred” insights you won’t get anywhere else.
You won’t want to miss the surprising new trends they are seeing right now in the world’s resource markets. Get instant access to the year’s biggest energy profits and pitfalls, from the pump to your portfolio. Just click here to start watching right away!
Larry Edelson has over 34 years of investing experience with a focus in the precious metals and natural resources markets. His Real Wealth Report (a monthly publication) and Power Portfolio provide a continuing education on natural resource investments, with recommendations aiming for both profit and risk management.
For more information on Real Wealth Report, click here.
For more information on Power Portfolio, click here.
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