Gold & Precious Metals

Gartman: Don’t Buy Gold – But Others Disagree

Posted by Dennis Gartman via Resource Investor

on Thursday, 17 May 2012 7:00

Trader, economist and Gartman Letter publisher Dennis Gartman knows when he is wading into a hostile crowd. He brought up gold in his keynote address to the New York Hard Assets Investment Conference this week and immediately acknowledged his contrarian views:

“What should money be doing?” he asked.“You’ll not like me for this. Don’t put it in gold. It’s not going up any more. It was a great trade for three years. It was a wonderful, ebullient, beautiful, marvelous trade for three years. Ain’t been so good now for the last year and a half. It sucks. There’s a really insightful economic perspective. It’s making new lows, doesn’t make new highs, keeps falling, everybody you know wants to buy some. It’s not a safe harbor. And I object when I hear people – they actually interviewed me on TV today and said, ‘Mr. Gartman, what do you think about gold? Is it a safe harbor?’ I said, ‘It never was.’ Safe harbors don’t move three and four and five and eight and 12 and 15 percent a year up and down. Safe harbors are safe. Gold ain’t safe. It’s a currency. It’s something you trade. Sometimes it goes up, sometimes it goes down. But to get married to it is ludicrous and is wrong. Don’t fall for that. Right now if you look at a chart of gold each low is lower. Each high is lower. It will continue – mark this down – until it stops. But right now anybody who‘s bought gold in the past 15 months feels horrid about it. Don’t buy gold.

Where should you go? Who are the beneficiaries in the modern world. It’s simple: English speaking currencies … Whether you like it or not, people are going to still tell you the United States dollar will cease to be the reserve currency of the world sometime in the future. Yes, it will – 150 years from now. I’ll be long dead. I don’t care, at that point. But who does the reserve currency status always inure to? Who is the reserve currency country through history? No question, always is the same thing: the dominant military power. Period. End of discussion. And we are, we are now, we shall be, and as far as the eye can see we will continue to be the dominant military power.”

Gartman departed after his keynote address to the conference without taking questions while wishing his audience “good luck” with their trading.

But his view came back later when analysts gathered for a “Bulls and Bears Debate” keynote panel.

“It was wonderful to see the anger, angst and depression through the room,” said panel moderator Rick Rule, founder of Global Resource Investments Inc, a unit of the Sprott Group. “I always enjoy a speaker who makes an impact on the audience, irrespective really of the nature that impact. So who of you wants to be the anti-Gartman. I know for sure who’s going to take the Gartman case, so I’ll ask him later but who would like to be the ant-Gartman, any of you?   

Ian McAvity, editor of Deliberations on World Markets: … I’m as bullish as can be, in large part because I’m seeing such extraordinary negativity and I’m also seeing the speculation as having been wrung out of not only gold but also silver and the mining stocks …The only missing ingredient that we’ve had is what I call a diaper change moment in the S&P that lets the margin clerks butcher the stocks down to what I think will be the buying opportunity the likes of which we haven’t seen since the fourth quarter of 2008, 

Rule: I have two questions for you. We’ve just been through our own mini diaper change moment. What would you say about the fact that we’ve experienced ours and they haven’t experienced theirs yet;  

McAvity: By a diaper change moment I’m talking something on the order of a thousand point down day in the Dow. We haven’t seen anything like that volatility yet.and the only question in my mind is whether it’s originating from the potential evaporation of the euro or from somebody dropping some nasty stuff in Iran.

Rule: I take it then – before I turn Paul loose on you – that the part of the thesis that Mr. Gartman propounded which was in some fashion recovery is nigh is not something you have any particular truck with.

McAvity: Well the economic recovery only shows up in two data series I track. That’s the issuance of food stamps and the growth of the national debt. If you look at housing starts and unemployment there is no evidence that Joe Sixpack is experiencing a recovery.

….read page 2 HERE

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The Markets

Posted by Mark Leibovit via VRTrade Platinum Newsletter

on Wednesday, 16 May 2012 20:39

A clip from Mark’s premium service:

The stock market is rallying today on good US economic news and hopes Greece won’t leave the euro after comments from German Chancellor Angela Merkel. Nevertheless, traders are playing it safe and the market has given up most of its gains. The Dow was up as much as 90 points but is now up 47 or 0.4%. The S&P 500 is up 5 or 0.4% and the NASDAQ is up 5 or 0.2%.

Industrials are the biggest winners (XLI +0.5%) after GE (GE +4.1%) said its finance unit will pay a special dividend of $4.5 billion to the parent company this year.

Retailers are trading little changed (XRT +0.5% and RTH +0.1%) after Target (TGT +0.4%) reported better than expected earnings but JC Penney (JCP -17.0%) and Abercrombie & Fitch (ANF -12.9%) reported disappointing results.

Treasuries are down slightly after this morning’s good economic news and as traders shift into equities. Yet, Treasuries are holding up well considering the “good” news, showing that traders are still cautious about the economy and sovereign debt crisis in Europe. The long bond future is down 3/32 to 146 10/32.

The US Dollar Index hit is up for the thirteenth straight session, its longest run since 1985, after the US reported good economic news, in contrast to the troubles being suffered in Europe. The US Dollar Index is up 0.174 to 81.395 and hit a four month high of 81.573 this morning.

The European Central Bank said it will support Greek banks amid rumors that it was considering a freeze in funding.

Greece’s 10-year interest rate slipped 0.48% to 28.92%. Spain’s 10-year rate fell 0.05% to 6.30% and Italy’s by 0.3% to 5.83%.

The Euro is down 0.05% against the Dollar.

Precious metals are trading mostly lower as the Dollar rallies again. Gold is down 2.00 to 1542.30 after hitting a new 4 ½ month low of 1526.20 this morning. Gold is now testing support from the 1521.80 low set on December 29. Silver is down 0.10 to 27.62 after hitting a low of 27.13. Platinum is up 3 to 1430 after dropping to 1418. Palladium hit a 5 ½ month low of 586 this morning and is now down 3 to 588. Copper is down 0.0400 to 3.4775.

Oil is currently down 0.98 to 93.00 after hitting a new six-month low of 91.81 this morning.

The Energy Information Administration said crude inventories rose by 2.1 million barrels in the latest week, above expectations for a 1.5 million barrel increase. Gasoline inventories declined by 2.8 million barrels versus forecasts for a smaller 480,000 decrease. Distillate supplies fell by 1 million barrels versus forecasts for a 120,000 increase. In total, petroleum supplies fell by 1.7 million barrels while analysts expected an increase of 1.1 million barrels.

Housing starts rose 2.6% to a seasonally adjusted 717,000 in April. Economists expected starts of just 690,000.

Industrial production rose 1.1 percent in April, its biggest increase since December 2010 and well above forecasts of a 0.7% gain.

——————————————- 
CANADIAN NEWS:

The Canadian market is trading mixed as equities rise but mining stocks remain under pressure. The TSX is up 35 or 0.3% but the TSX Venture is down 7 or 0.6%.

The Canadian Dollar is falling as traders buy US Dollar. FXC is down 0.36 to 98.39.

Manufacturing sales rose 1.9% in March, the biggest increase in six months.

——————————————- 
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The Mistake You Are Dying To Make…

Posted by Victor Adair via Union Securities

on Wednesday, 16 May 2012 16:07

Back in mid-March when we first talked about The Mistake You Are Dying To Make…specifically the temptation to buy gold shares because they were “cheap” relative to where they had been and “cheap” relative to gold…which somehow meant that buying them was sort of “value investing” for the long term…my advice was, ” Don’t buy a falling market…as Gartman says, when a market is going down you have no idea how far down…down is.” Well the index of gold shares is down ~20% since then, and gold just closed at a new low for the year.

People will have opinions about what a market SHOULD be doing and they will act on those opinions. For instance, they may think that gold SHOULD be going up because the central banks are printing mountains of currency. They think that gold shares are a “steal” because they are “cheap” relative to gold, therefore it makes sense to buy into a market that is falling like a stone. I’ve been short gold since Feb 8 because it seemed to me that the market was going down, not up.

It reminds me of my description of a market strategist: he is a guy who forms an opinion about a market, gives you several reasons why he is right, and will stick with his opinion through hell and high water. When the market goes against him he digs in his heels instead of cutting the trade and says something like, “It’s taking longer than I thought for my view of the market to manifest, but I’m more convinced than ever that I’m right and the market is wrong.”

I look at a market and see where it has been and where it is now. I form opinions about where it might go next, and why…I call that anticipating. But instead of selling a market because I have a bearish opinion I wait for some confirmation that the market is doing what I think it SHOULD be doing before I put on a trade.

I realize that markets often behave differently than I think they SHOULD. That tells me that I didn’t (and couldn’t) know everything about that market when I formed an opinion about where it SHOULD go…something that I hadn’t thought of or wasn’t expecting came along and had a big influence on the price.

As a trader I have market opinions all the time….I’m always looking for an opportunity. But since I’ve seen so many of my opinions (and the opinions of others) turn out to be wrong I don’t want to “bet my life” on any of my market opinions. I’ll wait for a confirmation to put on a trade but if the trade isn’t working I’ll close it out rather than deny the fact that I’m wrong on the trade. I want to clear my mind…be open to seeing what is happening in the market…and find an opportunity to get into a trade that works…rather than wasting time and money on a trade that is not working.

I can’t imagine how much money has been lost by people buying into a falling market thinking that they were getting a bargain because it was cheaper than it used to be…only to watch it fall lower and lower…as they move more and more into denial over their losses. Maybe that’s human nature, but its not a successful trading strategy!

I continue to trade on the expectation that stocks and commodities are headed lower and the USD is headed higher.

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Grandich Market Update:Stocks, Bonds, US Dollar, Oil, Gold & Silver

Posted by Peter Grandich via Grandich.com

on Wednesday, 16 May 2012 15:24

This shall be rather short but directly to the point.

U.S. Stock Market – I’m neither a major bull nor bear but believe by this time next year, I would want to be virtually out of all non-metals related U.S. equities. The secular bear market that began in late 2007 and was correctly perceived to be interrupted by the single greatest bear market rally of all-time, is anticipated to resume no matter who wins in November. Only a Romney win can delay by only a matter of months the inevitable Greece-like scenario to unfold here in America (Read may 9th commentary).

U.S. Bonds – My patience to await a 10-yr T-Bond yield under 1.75% to short into may finally be rewarded. Stay tuned.

U.S. Dollar – I’ve spoken about shorting the U.S. Dollar Index if it can get to 83-84 and despite most seemingly thinking a major dollar rally is upon us, I’m not certain it can even get to that level barring a total collapse in Europe. But if and when it does, I shall again remind you of the scenario I painted in my May 9th commentary and the rest shall be up to you.

Oil and Natural Gas – If we should get so fortunate to see oil pull back to the mid $80s, I would think that’s a gift for getting long. Natural gas remains an avoid.

gold

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Gold and Silver – As you can see from the charts, both gold and silver have entered not only key support areas, but are recording some of the most oversold readings in quite some time. This is without a doubt the most bearish overall mood I felt since gold bottomed at the start of the millennium. While there shall be no quick fix and the pain can linger awhile longer, the “mother’ of all bull markets is far from over. I think my views have been cleared in all my recent interviews and commentaries. The boat of real and no-hedge gold bulls has only a few passengers left (and I’m glad to see Captain Jim Sinclair still at the helm) while the gold bear boat is filled up and sailing under the S.S. Titanic 2012 model.

Mining and Exploration Shares – Having loss more money on paper then I ever imagined I could have possessed in my lifetime, I stood in front of the mirror last night and asked myself was I committing two of the worse investment strategies I’ve told people for years not to:

1-     The ultimate crime in investing is not being wrong but staying wrong.

2-     Hope is a wonderful spiritual strategy but the worse investment strategy one can employ.

The response I got back (besides you could lose 30lbs) was to remain strong in my convictions and to know for the most part, my holdings should withstand this incredible onslaught of towels being thrown in everywhere.

For those who choose like I have for myself, we must also realize at best, we shall get an “L” shape recovery in the juniors for many months if and when we actually bottom. Numerous companies won’t survive in their present form but that shall also make the ones thrown out with the bathwater that much more attractive when people actually grab buy tickets again in our lifetime (Yesterday, the TSX looked very much like it was in a final capitulation frame of mind).

I’ve upgraded many companies on my “Tracking list” and also for the first time in years, suggested more ownership now going forward of mining and exploration shares versus the metals themselves.

I remind the few, the proud, the metals and mining bulls of our theme song and to rememberthis battle when it seems the odds are overwhelming against us and the perma bears chant throughout the media the bull market os over and they’re going in for the kill..

This entry was posted on May 16, 2012 at 10:07 AM. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

 

  1. Gold stock investors have been experiencing a type of “2008 again” decline in the price of their gold stocks, yet many other assets have barely declined at all. The question on everyone’s minds is, “Will this pain end soon, or is it just the beginning of something much bigger?”
  2. Please click here now. There are some good reasons to believe the Dow could be making an important top. “Sell in May and go away” is a respected market adage that is based on seasonality, and it is in play now.
  3. Aggressive speculators likely have a lot of sell orders just below the 12,700 area. I’m more interested in buying the Dow if it falls than trying to guess if it is making a top. It may be simply consolidating for a move towards 14,000, but if it does fall hard, I want to start buying it very lightly.
  4. The Dow has risen almost seven thousand points from the 2008 lows near 6500,so I would not commit very much capital to a price sale of only one thousand points.
  5. The 12,200 price zone is very light support. Please click here now. You can see more substantial support near 11,200. Buying the Dow very lightly about every 1000 points down is prudent, but investing huge amounts of capital after a few thousand points of price weakness is definitely not a good idea.
  6. If the Dow starts a severe price decline, could that cause an acceleration of the decline in gold and gold stocks? Yes it could, and you need to be prepared for such an event.
  7. A lesson for gold stock investors who think a bottom is in can be had from the price action of natural gas recently. A lot of investors became interested in natural gas at about $6.
  8. Instead of bottoming, it went to $2, and investors who thought that such a decline could never happen found themselves in a fair amount of trouble.
  9. I bought all the way down, and if natural gas goes much lower, I’ll continue to accumulate it. Most investors allocated too much capital in price areas where they thought gas had to stop falling, so their cash reserves are now low or non-existent. Your buy orders should always be “smaller than you know is rational”. This is because the market itself is not rational.
  10. Let’s not see a repeat of that natural gas situation with gold stocks now. Many investors and analysts are sure that gold stocks must bottom soon. Perhaps, but are you prepared to deal with much lower prices if they don’t? Prepare now, rather than assume that much lower prices are impossible.

…..read points 11-24 HERE

 

Stewart Thomson
Graceland Updates
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Tuesday May 15, 2012
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