At the present time, especially with the volatility of the markets (and today has been a doozy!) and gold climbing day after day, now is not time to buy anything and DO NOT BUY GOLD OR SILVER STOCKS.
If the readers of TBP could put sufficient pressure on ADMIN to allow posting of illustrations from non-web based sources, I would periodically post charts on TBP that would show everyone why my recommendations are to stay away from gold and silver stocks at the present time and when that changes, I’d post charts showing that as well.
Right now I have no way to do either one, so verbal explanation will have to do.
There is a big divergence between gold and silver the metals and gold and silver, the stocks. Gold goes up most every day, silver waffles and goes up some days and down others. XAU, GDX, GDXJ and other precious metal stock indices waffle and drop lower. XAU has been in a trading range since October of 2010 and currently under a SELL. GDX has been in a trading range since October 2010 and is currently on a SELL. SLV is neutral short term and a SELL on long term.
There is not a SINGLE gold or silver stock on a BUY at the present time – this week’s crazy action and higher gold record prices not withstanding.
Now, I hate to be a party pooper since the MSM is now quoting some “experts” that now is the time commit money to gold and silver stocks since they are leveraged more than the metals and you stand to make more more money when gold rises.
There is only one small problem. The gold and silver stocks are merely backing a filling and going no where except sideways to down.
They did this back in the late 1970′s when gold went parabolic and peaked at $850 in January, 1980. They started waffling and dropping at $600-$650 gold and never went higher. The commodity pits drove gold to a parabolic high of $850 and then CRASH.. I sold out my stocks at $600 going up and never fretted the last few hundred bucks.
I have no idea if the current situation will repeat what happened in early 1980. I doubt it because the economics and debt and our lacking of ability to borrow without printing are much worse now than they were then. Our debt is magnitudes higher, our ability to solve the debt and credit crises (ok, call it a crash) is much deminished.
So what gold and silver (silver being the lagging metal here) will do is anyone’s guess. But the gold stocks and silver stock are saying “careful”.. Maybe because of higher operating costs are starting to squeeze profits, although profit margins at the mines have never been higher. Perhaps some of them like that $1700 figure and they have sold out future production on a forward basis, thereby limiting their profits even if gold continues to go to $2500. I simply don’t know.
But I do know this.. Those who put their money with gold and silver stocks right now are taking a risk they needn’t take. It may take a week, a month or a year before the stocks start to believe in the price of gold continuing to rise (if it does at all). When it does, we will see it and post the info here (assuming I’m still alive and kicking!).
In the meantime, hold the metals you have and gather cash around you like a security blanket. Europe is falling apart (NOT an insignificant occurrence), Japan is steering a course between a rock and a hard place, Germany is pissed at everyone for making them liable for PIIGS problems (I expect to see the EU disintegrate within months with everyone going back to their own currencies coupled with great upheaval and gnashing of teeth and much more market damage!) and between the ECB, the IMF and God, paper may become in short supply as it is all used up to print SDRs, EUROs or whatever they pretend can solve the problem there.
Summary: We are beyond the entry of highly unstable and miserable times. The Fourth Turning is ticking along, bringing with it, day by day, week by week and month by month, more chaos, black swans to surprise us and political idiocy that won’t surprise us but does significant damage. It’s speeding up as we speak and if you have not prepared for the unrest and monetary destruction that is to come, you’re time is getting shorter and shorter.
End
jmarz says:
The market still views gold as falling in price in the future instead of rising. Once investors realize we are going to have higher gold prices not lower gold prices, the mining stocks will be revalued to much higher prices. Some of these mining stocks are so undervalued beacause they are being valued at a low gold price. Even with gold at 1760/ounce, investors still don’t really care about this metal. This is very bullish. For an investor, if they buy quality mining stocks on the dips and ride the trend, they will make serious money as this bull market continues. The mining equities have been given no respect and this will change one day.
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10th August 2011 at 8:55 am
Muck About says:
As of yesterday (8/9), the miner stocks and indices (XAU) are still sucking wind. XAU long term chart is very bearish and even on a daily short term chart is going in the tank!
That means one thing to me. The price of gold is not going to keep going to the sky. There will be a large pause or a crash or a large reaction in it somewhere down the line, probably sooner than later. It may not correct until it beats $2500 or so (the inflation adjusted all time high hit in 1980) but I think sooner than that.
The stocks have a capitalization far exceeding the value of the gold above ground. There are an awful lot of people trading the miners compared to those who buy and hold gold (even now!). so when the miners stutter, waffle and skid on a rising gold price, I see a great big YELLOW caution light start blinking.
I’d hold the physical PMs (forever), trade things like GLD and hold off the miners for a while..
MA
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10th August 2011 at 1:21 pm