Timing & trends

RISKS ACROSS ALL MARKETS NECESSITATE CAREFUL ASSET ALLOCATION

Posted by DOUGLAS DAVENPORT: COMMODITIES, STOCKS, TECHNICAL ANALYSIS

on Tuesday, 2 April 2013 13:38

First, let me introduce myself. I’m Douglas Davenport, editor of theAll-Weather Investor and Inflation Survival Strategy investment services. If you have already joined one or both of these portfolios, you know that they’re based on an objective, trend-following trading model I developed years ago with my mentor, the legendary investor Sir John Templeton.

This proprietary trading model has helped my clients beat the S&P 500 by a wide margin, quarter after quarter, year after year, in both up and down markets. The model allows me to dispense with forecasting, guessing and wishful thinking, and focus strictly on what the markets are doing right now. In this way, we’re able to catch every major move across a variety of asset classes, and successfully navigate difficult market environments such as the one we’re seeing now.

Of course, I can’t tell you exactly what my trading model is saying at the moment, or which ETFs I’m investing in to take advantage of the market trends. But I can tell you about the risks I’m seeing in each of the major asset classes, and how they’re likely to affect the markets over the next quarter.

Overall, my outlook for global growth is improving, mainly due to the continued flow of money from central banks around the world. The U.S. Federal Reserve, the European Central Bank, the Bank of England, and the Bank of Japan, among others, are still concerned enough about the state of the global economy that they have pledged to keep monetary expansion alive and interest rates low for the foreseeable future.

Screen shot 2013-04-02 at 5.38.59 AMThe ECB in particular is back in the crosshairs following the recent bank panic and bailout in Cyprus. And now there’s talk that Slovenia could be the next domino to fall in the ongoing sovereign debt crisis. Meanwhile, the unemployment numbers across the region, especially in Spain, are unacceptably high, and there is growing social unrest in the PIGS countries (Portugal, Italy, Greece and Spain), not to mention political gridlock in Italy. European central bankers know that their problems are far from solved, and they’ve responded by stepping up their asset purchases.

And what about the emerging markets? The engines of global growth over the past decade or so are also showing troubling signs of weakness, acting as an anchor on economic expansion.

It’s clear that the global debt crisis will take a long time to work out. And while the slowdown in the emerging markets has cut into demand for commodities and kept a lid on inflation, eventually price inflation will have to increase in order to shrink the real value of debt. How this plays out will be very important to sustained growth worldwide.

Are Equities in Line 
for a Pullback?

Despite all these problems, the global equity markets have been doing remarkably well.

Is this another case of “irrational exuberance”?

Or did the market bottom in March 2009, barely four years ago, mark the beginning of a new secular bull market?

I think the answer may be somewhere in between, but it does look like markets are very much overbought. Equity investors have priced in a great deal of good news on growth for 2013. However, earnings forecasts for the S&P 500 have been trimmed by about $9 per share over the past year. Profit margins are also likely to fall.

So in my opinion, the odds of another correction are growing rapidly. But keep in mind that the central banks are still keeping the markets propped up. Their massive quantitative easing programs won’t allow for a major downturn. Instead, I think we’re likely to see a relatively mild event, marked by a drop of 4 percent to 9 percent in the S&P 500, similar to other pullbacks since 2009. When that happens, it should be treated as a buying opportunity.

When Will Bond Yields Start to 
Reflect Inflation Risks?

Meanwhile, despite the recent rally to a record high on the Dow Jones Industrial Average, it appears that investors in the U.S. are still under-allocated to equities and over-allocated to fixed income.

Globally, bond yields reached a multi-decade low last summer and have risen since that time in most countries. But the current U.S. bond real yield is still about zero (after inflation and taxes), and it does not reflect inflation risks.

Inflation is generally tame in most countries considering the massive amount of monetary injections. However, the central banks want and need inflation, and they will eventually get it. If you’re not prepared, you could get caught flat-footed.

When Will Gold’s 
Consolidation Phase End?

Gold and other precious metals are clearly in a corrective phase and have been since topping out in 2011. Why has gold consolidated for this long?

The answer is a combination of factors, including improving confidence in the financial system, weak inflation, a major slowdown in demand from China and India and a much stronger U.S. dollar. In addition, gold is still primarily a hedge, and may not turn around as long as the stock market stays on a roll.

In fact, these trends could all carry on for a while longer. But in the longer term, I believe the fundamentals for precious metals remain positive. It appears gold is just building a new base to launch its next upswing. However, keep an eye on the support level around $1,550 an ounce. If gold breaks down through that price, it could fall even further before the trend turns positive.

How Long Will Commodities 
Weakness Persist?

As I mentioned earlier, China’s weak growth has limited demand for most commodities. And reports of build-ups in copper and aluminum stockpiles imply that weakness could persist for a while.

In the energy markets, crude oil has traded in a very narrow range since 2011 and near-term risks appear to be to the downside. But one asset that has shown marked improvement is North American natural gas. It has started to recover from the lows of 2008, and it has nearly doubled since the low in 2012. Natural gas prices may have more upside due to larger depletion rates that were originally expected from many gas fields.

Will the U.S. Dollar Remain Strong?

The dollar has certainly benefitted from the strong performance of the U.S. stock market, but it may also simply look good compared to its competition.

Expectations for U.S. growth are stronger than other G-7 nations, and the dollar still has the benefit of being the world’s reserve currency.

In addition, the dollar is helped by the continued weakness in the euro zone. The euro has to be weak to pull the region out of its ongoing slump, and in fact, the shared currency has been in a downtrend since 2008. But I think it still remains overvalued versus the dollar.

Risks and Rewards in the Coming Years

In the short term, floods of liquidity from the central banks will continue to support global stock markets. U.S. equities should continue to outperform and emerging markets will underperform in the coming months. Europe should see some boost from additional monetary policy, but progress on structural reforms in southern Europe and political friction make that challenging to say the least. The choppiness in the gold market will continue before its next long-term leg up begins. And we may soon begin to see signs of inflation in the U.S. bond market in the form of higher yields and lower bond prices.

Longer term, it’s an understatement to say that we are facing huge risks. It’s obvious to everyone by now that the global rally has been primarily driven by central bank money printing, creating an artificial financial environment.

The world’s biggest central banks have added an astounding $8.7 trillion of liquidity since 2008, while slashing interest rates well below the rate of inflation. This massive amount of liquidity has found its way into the markets.

At some point, all this quantitative easing will end. The resulting worldwide deleveraging will create massive problems for the equity markets. There’s no telling when this sea change will happen, so it’s imperative that you develop an exit strategy now.

The fact is, most of the world’s economies remain very fragile without central bank intervention, and their markets’ confidence could be easily shaken at the first hint of stimulus withdrawal. Members of my All-Weather Investor and Inflation Survival Strategy services are preparing for just such an eventuality.

Sincerely,

C. Douglas Davenport, J.D.

15430 Endeavour Drive
Jupiter, FL 33478-6400
1-800-291-8545
Overseas: 1-561-627-3300
Fax: 561-625-6685

Investors unsure of which way to turn in this market need only watch the “smart money,” says Jeb Handwerger, the editor and publisher of GoldStockTrades.com.Billionaires like John Paulson and Carlos Slim are plucking up mining investments on the cheap. In this interview with The Gold Report, Handwerger shares his favorite discount buys.

COMPANIES MENTIONED : BARRICK GOLD CORP. :COMSTOCK MINING INC. : EDGEWATER EXPLORATION LTD. : INTERNATIONAL TOWER HILL MINES LTD. : LION ONE METALS LTD. : MAG SILVER CORP. : MIRANDA GOLD CORP. : NEVADA SUNRISE GOLD CORP. : NOVAGOLD : NULEGACY GOLD CORP. : PARAMOUNT GOLD AND SILVER CORP. :PILOT GOLD INC. : PLATINUM GROUP METALS LTD. :PROPHECY PLATINUM CORP.
 

The Gold Report: Gold recently witnessed some upside price support after the Cypriot parliament proposed taking money from private bank accounts to raise the €5.8 billion needed to qualify for an international bailout. What was your first reaction to that news?

Jeb Handwerger: Any confiscation of bank accounts would just highlight what I have been saying for a long time—savers are losing money in their banks. Bank deposits are supposed to be a safe haven. Investors are going to seek out alternative hedges against the deterioration of currency and financial repression worldwide. This isn’t just happening in Cyprus, but all over the world where there are citizens losing money in their banks and are experiencing negative real rates. Investors need to look for the assets that will protect and grow their wealth in case public policies continue to destroy wealth and savings.

TGR: How does this differ from what happened in Greece?

JH: This takes bailouts to a new level. The debt crisis still continues. The Swiss said they are devaluing the franc to keep pace with the euro. The Japanese are printing yen like crazy. Savings are already being stolen to bail out the banks. It has happened in the U.S. since 2008.

Precious metals are ripe to breakout. This is the environment where investors can get in ahead of the storms. We’re seeing little waves, but they’ll build up. It’s like a coiling spring. There could be a breakout, panic move into precious metals and the mining equities as investors rotate from the overbought equity market into the undervalued precious metals and the even cheaper gold and silver miners.

TGR: If that is the case, why didn’t we see a bigger run on gold when the news of Cyprus broke?

JH: In Cyprus there is panic because it tried to confiscate money outright, but the U.S. and Europe have been subtler about it.

What’s going on with precious metals is also hidden. Right now, precious metals are out of favor and mining equities are oversold. Investors believe dividend-paying stocks are a safe haven.

This also happened in the 1990s before precious metals and mining stocks broke out. They pushed the dividend stocks up to a premium, and dividends became smaller and smaller. Eventually, investors realized that dividends weren’t such a safe haven because they weren’t able to beat inflation.

From 2000 to 2007, there was a massive move into the mining equities and commodities that was set up in the 1990s when dividend stocks were a craze.

Capital will eventually seek out the traditional safe havens, which are precious metals and mining equities, as it has done in the past. Because this sector has been hit hard in 2011–2013, the subsequent rally should be quite impressive.

TGR: Can other citizens of the world expect treatment similar to Cyprus when their governments are short on cash?

JH: They should not only expect it—they’re experiencing it right now. Inflation is greater than what governments are saving. There’s disruption of capital and wealth as we speak in many countries, including the U.S., most of Europe, Japan and in the Swiss franc. It might not be front and center, but people better start wising up to it and preparing themselves. Once the public realizes this, once inflation starts rearing its ugly head, it will be too late to get in.

To paraphrase Gerald Loeb, who wrote “The Battle for Investment Survival,” the worst way to fight inflation is to buy assets at an inflated price. Mine equities are at historic discounted valuations compared to the overall equity markets. The long-term trend for inflation is that it will move higher. This is a significant discount for investors who want to prepare and be hedged against inflation with assets that are trading at deflated prices.

TRG: Is the euro doomed?

JH: What currency isn’t? What currency will still be in use in several hundred years? None. The only thing that lasts is gold, silver and precious metals.

TGR: The S&P/TSX Global Gold Index has lost about one-third of its value in the past two years. Things are far from rosy.

JH: Investors must realize that a poor performer last year might be the best performer this year. I believe gold is undervalued. It could definitely breakout this year and going into 2014.

TGR: In a recent commentary on GoldStockTrades.com you wrote, “Stick to the long term and don’t get shaken out of core positions as the smart money will turn around and buy these junior assets graciously from you.” I think everyone wants to believe that, but give us a reason why we should.

JH: Major billionaires are taking positions. Billionaire Carlos Slim recently bought AuRico Gold Inc.’s (AUQ:TSX; AUQ:NYSE) gold assets in Mexico; John Paulson has large gold holdings. The smart money has a long-term approach and understands how to protect wealth by buying undervalued assets that have the ability to provide leverage to a rising gold price and inflation. The smart money is positioning and protecting itself ahead of the storm.

TGR: The smart money is looking to undervalued junior miners that should survive this downturn?

JH: Investors don’t think that the junior mining companies are going to survive. But they can pick up assets and create value during these difficult economic times if they start paying attention to the companies that can actually grow. Investors have already thrown out some advanced assets, some that are already permitted—that’s worth a lot! Yet investors have this attitude that the junior miners are going to go bankrupt. Some of these companies are priced at liquidation levels, but are quality assets, with good management teams in friendly jurisdictions. With strong shareholder support, they are going to survive. They are going to retain value.

TGR: Juniors need cash to survive. What’s the minimum they need to survive the limited financing environment that exists right now?

JH: It depends on the company and the burn rate. Every asset is different. If a company doesn’t have cash, is its asset worth something? It could be a candidate for an acquisition. There’s very limited downside risk if there’s an asset or cash backing the company. The investor just has to hold on and wait until the markets turn.

TRG: Let’s talk about some of those companies. What companies fit those criteria?

JH: International Tower Hill Mines Ltd. (ITH:TSX; THM:NYSE.MKT) has a dream team of miners and executives. A vice president helped build the Fort Knox mine, which has been a huge moneymaker for Kinross Gold Corp. (KGC:NYSE) for years in Alaska. The company is progressing the Livengood gold deposit, a very large deposit of more than 20 million ounces (20 Moz) located in a mining-friendly area near Fairbanks, Alaska, to bankable feasibility this year.

These are the types of assets that can produce more than 500,000 ounces (500 Koz) gold and provide impressive leverage, profits and earnings for investors. That’s especially true if the gold price rises, which we think will happen later in 2013.

TGR: Other promising gold projects in Alaska have faced some opposition. Does this project have to overcome that hurdle?

JH: It’s in a mining-friendly area near the Fort Knox mine. It has personnel experienced in Alaska who have permitted the Pogo and other major mines. Infrastructure is also very accessible. It’s off the highway, the Trans-Alaska Pipeline System is nearby and the topography is relatively flat. If there were a checklist of attributes for the next major gold producing deposit in Alaska, International Tower would have all the boxes checked.

TGR: Is there another company that you’re interested in?

JH: Pilot Gold Inc. (PLG:TSX) is well cashed up. I am particularly excited about the company’s work at Kinsley Mountain where it is partnered with Nevada Sunrise Gold Corp. (NEV:TSX.V). The companies are exploring the Kinsley Mountain deposit in Nevada, which is a very exciting discovery south of the Long Canyon property. It looks as if there’s some potential for Kinsley Mountain to be the next major Nevada discovery, similar to Long Canyon.

I also like Comstock Mining Inc. (LODE:NYSE.MKT), which is a new Nevada producer that is expected to mine 20 Koz gold this year. Very few miners have the cash flow from production to sustain low-cost growth. Comstock Mining may have that ability to continue to grow resources at a low cost with cash flow from producing properties.

TGR: The Pilot Gold project that’s getting the most attention right now is TV Tower in Turkey. The company just finished its first drill program on the KCD zone. It seems to be yielding consistent, solid grades in continuity.

JH: Pilot is having a lot of success in Turkey. On top of that success, I believe it will also advance its Nevada Kinsley Mountain project as well. TV Tower has been the main driver, but I keep a close eye on Kinsley Mountain because I like Nevada Sunrise and the Pilot technical team there.

TGR: What else should investors be paying attention to in the gold space?

JH: We really like Nevada and the Cortez Trend, where Barrick Gold Corp. (ABX:TSX; ABX:NYSE) has made a huge discovery at its Goldstrike deposit. Miranda Gold Corp. (MAD:TSX.V) and NuLegacy Gold Corp. (NUG:TSX.V) are right next to Barrick’s discovery. NuLegacy is working with Renaissance Gold Inc. (REN:TSX.V) on the Wood Hills project, which is near the Long Canyon discovery.

TGR: Not many people have heard of NuLegacy. What’s the narrative there?

JH: Dr. Roger Steininger, the chief operating officer of NuLegacy, has more than 40 years of experience exploring Nevada. He’s credited with the 21 Moz Barrick Pipeline mine in the Cortez Trend. NuLegacy has a partnership with Barrick to explore Red Hill in one of the most exciting areas in the Cortez Trend.

There’s been more than 52 Moz gold discovered in the Cortez. Barrick’s major property, Goldrush, has expanded from 2 Moz to 14 Moz in four years. People are concerned, “Oh, will NuLegacy be able to raise capital?” Being partnered with Barrick and being next door to Goldrush on the Cortez Trend could be very attractive in an environment where Barrick is desperately looking for resource growth in a mining-friendly jurisdiction and speculation returns to the junior market.

TGR: Are there any companies that have cash?

JH: Miranda Gold raised $5 million ($5M) late last year because it was astute enough to realize that financial markets would be tough. It has more than $8M in the bank. With its experienced geological team, it could gobble up undervalued and financially strapped miners with assets. Miranda just signed a strategic alliance with Eagle Nickel Ltd. (ENL:ASX) to explore Colombia that has been completely ignored by the marketplace.

TGR: What others in Nevada are you following?

JH: Keep a close eye on Paramount Gold and Silver Corp. (PZG:NYSE.MKT; PZG:TSX). It is really undervalued and a takeover target. Paramount owns the Sleeper project in Nevada. The company announced a positive preliminary economic assessment (PEA) in July 2012 on Sleeper and it could be a major gold and silver producer in Nevada.

Also look at Paramount’s San Miguel project in Mexico surrounding Coeur d’Alene Mines Corp.’s (CDM:TSX; CDE:NYSE) Palmarejo mine. This area is hot with six new operating mines. The Palmarejo district in Mexico is gaining a lot of investor interest especially after the recent $750M acquisition of AuRico Gold Inc. by billionaire Carlos Slim.

Paramount recently released an excellent PEA on its San Miguel project, which showed impressive economics with relatively low startup costs. Because of the overall weak market, the PEA on San Miguel was ignored by investors. Paramount just announced a warrant exercise of over $8M, which should help 2013 programs to advance these projects. This company has a strong shareholder base and the financing to survive this downturn.

TGR: Are there others outside of Nevada that you’re following?

JH: Edgewater Exploration Ltd. (EDW:TSX.V) has operations in Spain. This has been a very significant year for Edgewater as the company advances the Corcoesto gold project in Spain. Its environmental impact statement was approved last year by the Spanish government. One of the reasons it is receiving so much support with permitting from the government is that the local regions are dealing with high unemployment. This could have major economic benefits for the region.

The first half of 2013 could be very significant for Edgewater as it moves closer to publishing its bankable feasibility study. It is also preparing an updated resource estimate and continues to show in-fill drilling results with higher than expected grades and longer widths.

There are very few advanced and permitted junior miners trading at a discount valuation at the bankable feasibility stage.

TGR: A November 2011 PEA on Corcoesto indicated a pre-tax internal rate of return of 34%, with a payback of about two and a half years. Do you expect the feasibility study numbers to be more or less than that?

JH: There’s always a margin for error between feasibility and PEA, but it has some very strong backing and an excellent technical team led by COO John Thomas. Edgewater also has some great financiers involved and have been able to raise capital in an extremely tight market. This testifies to the quality of the management team and project. The company has already had some tentative financial agreements with some of the banks that have been looking at it. Once it has that feasibility study and the permit, it should be on its way to production.

TGR: You were at the Prospectors and Developers Association of Canada (PDAC) conference recently and discussed platinum at length.

JH: Unlike gold, platinum is consumed in the auto industry and in other industrial applications for its properties as a catalyst. Platinum is trading at a significant discount to gold. Historically, platinum trades double to gold. It is three times rarer than gold and its supply is very unstable—more than 90% comes from South Africa, Zimbabwe and Russia. There’s been talk of resource nationalism in Zimbabwe. There’s going to be a search for new supply in stable political jurisdictions.

A platinum company I’ve been watching is Prophecy Platinum Corp. (NKL:TSX.V; PNIKF:OTCPK; P94P:FSE), which is developing the Wellgreen deposit in the Yukon. The company could be a potential supplier of platinum group metals (PGM) to North America.

TGR: Prophecy has been raising cash for a prefeasibility study. Was that accomplished?

JH: It is still in the process of completing that. However, there’s been an increased financial interest in the PGM space. Platinum miner Platinum Group Metals Ltd. (PTM:TSX; PLG:NYSE.MKT) recently raised more than $180M. Institutions are looking to invest capital into this space.

Prophecy has a proven management team that has raised hundreds of millions of dollars during difficult junior markets. The company’s recent impressive exploration success should create increased interest.

TGR: Because most PGM mines are in risky jurisdictions, how much of an advantage is it to be in the Yukon?

JH: It is very important. The Yukon government is supportive of mining, there’s infrastructure there, and there’s no geopolitical fears.

Prophecy’s deposits are world class, one of the top five in the world. Very few companies have these sorts of advanced deposits. Prophecy has a triple discount: The company is trading at a significant discount to platinun, platinum is trading at a significant discount to gold and platinum miners are trading at a significant discount to platinum. Every action has an approximate equal and opposite reaction. When the space starts heating up and capital starts flowing into this market, the platinum sector can have a very powerful turnaround and should regain its premium to gold.

TGR: Why hasn’t this story received more attention?

JH: Prophecy has a new management team, the platinum price has been underperforming, it’s not as popular an area and this sort of environment is just beginning. Investors are just beginning to realize the fragile supply and demand here.

Prophecy has a new chief executive officer, Greg Johnson, who founded NOVAGOLD (NG:TSX; NG:NYSE.MKT) and raised more than $650M in his career. It has John Sagman, who is the cold-weather mining expert. The people who have come on board believe in the asset and believe this is going to get to production.

TGR: Is there another name where management is key?

JH: Lion One Metals Ltd. (LIO:TSX.V; LOMLF:OTCQX; LY1:FSE) came down to visit in South Florida a few weeks ago. President George Young and Vice President Hamish Greig presented its story. What impressed me so much in their presentation was the experienced management team.

Lion One has the high-grade Tuvatu gold project in Fiji. There is a lot of exploration upside potential there. It’s a well-funded company. It just took over Avocet Resources Ltd. (AYE:ASX), which should bring more money into the bank and diversify it into uranium and iron ore. It is also going to bring in a very strong technical team that can help accelerate Tuvatu closer to production.

TGR: What were the key takeaways from their presentation?

JH: The management team is very strong. Young is the founder of MAG Silver Corp. (MAG:TSX; MVG:NYSE). Walter Berukoff made several companies that were acquired, including Miramar Mining Corp. Lion One has $15M. The deposit shows it has the potential to rival some of the largest in the world. This is a company that’s going to survive and thrive in a difficult market environment.

TGR: What are some parting thoughts on the “smart money”?

JH: After being in this market for some time, it still amazes me that investors get caught up with the day-to-day and lose their long-term vision. Patience is more important now than ever. There’s a season for excitement when speculation is great and investors are euphoric, and there is a season for discontent when investors are abandoning the sector and companies are thrown out.

The great investors that I’ve studied have made their money from mispriced assets. Gold miners are trading at historic low valuations. Eventually the sectors will turn. Jesse Livermore said that money is not made in the buying and selling, but in the waiting.

The opportunities I’ve seen haven’t been observed for many decades. This level of disconnect between market cap and value has never been seen. This is a great opportunity for investors who want to get in before the panic of inflation and wealth deterioration.

Jeb Handwerger, publisher and editor of GoldStockTrades.com, is syndicated internationally and known throughout the financial industry for his accurate and timely analysis of the equities markets—particularly the precious metals sector.

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DISCLOSURE:
1) Brian Sylvester conducted this interview for The Gold Report and provides services to The Gold Reportas an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: International Tower Hill Mines Ltd., Pilot Gold Inc., Prophecy Platinum Corp., Paramount Gold and Silver Corp., Comstock Mining Inc., NOVAGOLD, Lion One Metals Ltd. and MAG Silver Corp. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment. 
3) Jeb Handwerger: I or my family own shares of the following companies mentioned in this interview: International Tower Hill Mines Ltd., Edgewater Exploration Ltd., Miranda Gold Corp. and NuLegacy Gold Corp. I personally or my family am paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: International Tower Hill Mines Ltd., Nevada Sunrise Gold Corp., Comstock Mining Inc., Prophecy Platinum Corp., NuLegacy Gold Corp., Paramount Gold and Silver Corp., Edgewater Exploration Ltd. and Lion One Metals Ltd. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview. 
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent. 
5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. 
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

 

 

The Bottom Line: “When to take profits”

Posted by Don Vialoux: Timing the Market

on Monday, 1 April 2013 15:35

Upside potential by North American equity markets into April remains, but many seasonal trades also expire around mid-April. Retention of existing seasonal trades makes sense. However, new seasonal opportunities coming into April are relatively sparse (An exception is the Technology sector). In most cases with seasonal trades, the question is “When to take profits”?

Silver fell $0.38 per ounce (1.32%) last week. Intermediate trend remains down. Support is at $27.92 and Resistance is at $29.35. Silver remains below its 20, 50 and 200 day moving averages. Strength relative to Gold remains negative. Short term momentum indicators are neutral.

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Gold slipped $10.40 per ounce (0.65%) last week. Intermediate trend is down. Resistance is at $1,619.70. Gold remains above its 20 day moving average and below its 50 and 200 day moving averages. Strength relative to the S&P 500 Index remains negative, but shows early signs of change. Short term momentum indicators are neutral.

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The AMEX Gold Bug Index slipped 2.71 points (0.75%) last week. Short term trend is up. The Index remains above its 20 day moving averages. Strength relative to Gold remains neutral. Short term momentum indicators are neutral.

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The S&P 500 Index gained 12.30 points (0.79%) last week to close at an all-time closing high. Intermediate trend remains up. The Index remains above its 20, 50 and 200 day moving averages. Short term momentum indicators remain overbought.

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The TSX Composite Index eased 7.46 points (0.06%) last week. Intermediate trend remains up. Support is at 12,602.54 and resistance is at 12,904.71. The Index remains below its 20 day moving average and fell below its 50 day moving average. Strength relative to the S&P 500 Index remains negative. Short term momentum indicators are trending down.

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Crude Oil gained $3.52 per barrel (3.77%) last week. Intermediate trend remains down, but will change to up on a move above $98.24. Crude remains above 20 and 200 day moving averages and moved above its 50 day moving average. Strength relative to the S&P 500 Index changed from neutral to positive. Short term momentum indicators continue to trend up.

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….much more commentary and 40 more Charts HERE

Silver’s Coming of Age

Posted by Richard (Rick) Mills - Ahead of the Herd

on Friday, 29 March 2013 19:30

Silver is winning market share from gold buyers.

“As a general rule, the most successful man in life is the man who has the best information”

2008 – In March 2008, sales increased nine times over the month before – 200,000 to 1,855,000.

In April 2008, the United States Mint had to start an allocation program, effectively rationing Silver Eagle bullion coins to authorized dealers on a weekly basis due to “unprecedented demand.”

On June 6, 2008, the Mint announced that all incoming silver planchets were being used to produce only bullion issues of the Silver Eagle and not proof or uncirculated collectible issues.

The 2008 Proof Silver Eagle became unavailable for purchase from the United States Mint in August 2008. The US Mint suspended sales of the silver bullion coins to its network of authorized purchasers twice during the year.

20,583,000 Bullion American Silver Eagles were sold in 2008. Silver averaged $14.99 an ounce and almost 80 percent more American Silver Eagles were sold then in any previous year.

“During 2008 there was a record inflow of over 93.1 million ounces (Moz) into the three main silver ETFs.Coins and medals fabrication jumped by an astonishing 63% to a record of 64.9 Moz. The main reason for this was a surge in investment-related purchases of bullion coins, both in the United States and Europe. Notably, fabrication of the U.S. Silver Eagle bullion coin achieved a record 19.6 Moz, approximately double the 2007 figure, and would have been higher if the U.S. Mint had sufficient blanks to produce coins to meet demand.”silverinstitute.org

2009 – 30,459,000 Bullion American Silver Eagles were sold.

On March 5, 2009, the United States Mint announced that the proof and uncirculated versions of the Silver Eagle coin for that year were temporarily suspended due to continuing high demand for the bullion version.

On October 6, 2009, the Mint announced that the collectible versions of the Silver Eagle coin would not be produced for 2009.

The sale of 2009 Silver Eagle bullion coins was suspended from November 24 to December 6 and the allocation program was re-instituted on December 7.

Total ETF holdings rose by 132.5 Moz and ended the year at 397.8 Moz. Coins and medals fabrication rose 21 percent to post a new record of 78.7 Moz.

Silver Eagle bullion coins sold out on January 12, 2010.

The average cost of an ounce of silver in 2009 was $14.67

image0022010 – No proof Silver Eagles were released through the first ten months of the year, and there was a complete cancellation of the uncirculated Silver Eagles.

Production of the 2010 Silver Eagle bullion coins began in January instead of December as usual. The coins were distributed to authorized dealers under an allocation program until September 3.

Silver posted an average price of $20.19 in 2010. World investment rose by an 40 percent in 2010 to 279.3 million troy ounces (Moz).

“Exchange traded funds (ETFs) registered another sterling performance in 2010, with global ETF holdings reaching an impressive 582.6 Moz, representing an increase of 114.9 Moz over the total in 2009. A significant boost in retail silver investment demand paved the way for higher investment in both physical bullion bars and in coins and medals in 2010. Physical bullion bars accounted for 55.6 Moz of the world investment in 2010. Coins and medals fabrication rose by 28% to post a new record of 101.3 Moz. In the United States, over 34.6 million U.S. Silver Eagle coins were minted, smashing the previous record set in 2009 at almost 29 million.” silverinstitute.org

2011 – Silver posted an annual average price of $35.12 in 2011, more than double the $14.67 average price for 2009.

Global investment in silver bars and coins & medals produced yet another historic high of 282.2 million ounces – the equivalent of $10 billion, itself a record high.

Physical silver bar investment grew by 67 percent in 2011 to 95.7 million ounces, global coins & medals fabrication rose by roughly 19 percent to an all-time high of 118.2 million ounces.

The US imported 6,600,000 oz of silver for consumption in 2011 – up from 2007’s imports of 4,830,000 oz.

In 2011 the US Mint sold 40,020,000 Bullion American Silver Eagle Coins.

….read & view more charts on pages 2, 3 & 4 HERE

 

Are we Headed into a Mad Max Scenario? – Goldbug Hyperbole

Posted by Martin Armstrong - Armstrong Economics

on Thursday, 28 March 2013 14:34

Are we Headed into a Mad Max Scenario?

mad-maxThe 1981 film Mad Max with Mel Gibson has been the subject of many emails asking what to do, should they store some food, silver coins, etc. As a trader, you always plan for ALLoptions so when they emerge, you know where to turn and what to do. I am diligently working to get four books out this year. We have the staff now working on these projects trying to pick up speed.

….read & view more HERE

 

Goldbuy Hyperbole

No matter what the news, the goldbugs find a way to constantly talk a market up detached from all reality. One reader wrote:

“Now they way they’re spinning this is that the confiscation of deposits is all being done to encourage people to take their money out of banks and thus increase the velocity of money to then create inflation…

Ok so what they’re saying is, they want to collapse the banking system so people spend their money… And this solves what exactly?!

And the argument doesn’t even make sense! People can just take their money and hide it under a mattress and besides, hello?! Did they miss the part where they are imposing CAPITAL CONTROLS?

And apparently this is all a good thing because all these bank runs will make gold skyrocket. It’d be funny if it wasn’t downright sad I tell ya…”

If the Euro cracks, we have to realize that the first response is go to the dollar. The open interest of ALL contracts on COMEX is less than $75 billion. This is less than 1/2 of 1% of the outstanding bond market just for the USA. Gold pays no interest so it is not a place for big money. Gold in bullion form remains a private hedge against government. Gold stocks, however, have been unable to match the precious metal in performance over the past couple of years. The miners have faced rising costs, tiny dividends and the acquisitions have been too costly resulting in driving the institutional investors away. Gold shares have done poorly in recent weeks in the face of the equities surge in the US marketplace.

The Goldbugs have desperately turned up the heat as always claiming we face a “inflationary holocaust” as the banks are moving to “enslave humanity”. They have misconstrued the entire Cyprus debacle and only see bull markets as they did for the 19 year decline. The hyperbole as always in trying to suck in more people to buy yet at the same time they blame the decline on huge short positions by banks ignoring that they are hedges.

We are in a Sovereign Debt Crisis. We face a economic meltdown that no amount of gold will save if we see the infrastructure collapse. How can you claim gold is suppress by the big banks, but they advocate buying every high, and somehow the losses are acceptable because it was really just a manipulation. We have to see the dollar rally first, then there will be the gold rally. The dollar peaked into 1932. The devaluation of the dollar was proposed by George Warren who nobody knew.

….more from Martin: