Gold & Silver Still in Correction Phase

Quick post:

Gold Price

Silver Price

Thanks to stockcharts free charting software, I was able to come up with the two charts above.

As we can see, gold and silver are still in correction phase with no intention of lightening up. Williams %R, RSI, Stochastics and even the MACD and OBV (which I wasn't able to plot as the software only allows 3 indicators at a time) are all down and do not look to be turning up soon. Expect more selling in the coming days (maybe another week or two), possibly driving prices past its next support at US$1320 for gold, US$25 for silver. Gold could see price drop to its 200 day moving average if this occurs, with silver maybe heading to its next support at $23.50 thereabouts.

There is a lot of fear in the market as with any massive selldowns. However, the fundamentals has not changed. Printing money is still occurring, debts have not been resolved, inflation is kicking in, currency wars, yadayadayada. The list goes on. Anyone looking to be invested, would be wise to wait for the indicators to turn up proper. Catching a falling knife is no fun at all. In the event that prices do turn up, I expect silver to perform a lot better than gold as silver still has a long way to go to break its all-time high.

Best of luck,

~K

Inflation Kicking In

A report on the Edge caught my attention today. Inflation seems to be starting to hit after all the money printing. 

Singapore CPI rise beats expectations, economists flag: Update
Monday, 24 January 2011

© 2011 - The Edge Singapore

Despite the measures expected to curb inflation here in sunny, maybe too sunny, Singapore, it's apt to be mindful that some countries don't seem to be curbing inflation anytime soon, primarily U.S.. As precious metals, oil, and other commodities are traded in U.S. dollars, with rising prices due to rising inflation, perhaps investing in these may turn this "trend" into a friend.

The precious metals for example, have had a rather sharp fall last week and seem to be correcting still. However, to anyone thinking it's the end of the metals bull market, that's not true. Not yet at least. The major trend is still up. At a seminar I attended this evening, a professional trader who trades the silver markets as well, gave his opinion that prices were only correcting. Also, in the latest copy of the Edge, Jim Rogers comments that gold is long overdue for a correction. But we're still looking at a likely rise in prices in the coming decade. If we look at the charts for both gold and silver, I totally agree about the correction being long overdue. However, this correction may provide the ideal opportunity to finally get exposed to the precious metal.

Other ways would be to invest in either a precious metal ETF that tracks a basket of metals or to invest in  precious metal-specific ETFs, like copper ETF, platinum ETF, or silver ETFs, or even the mining company ETFs, or the mining company shares directly. A final way to profit is to trade the metal futures itself.

Aside from precious metals, other commodities like rice, cotton, corn and any other agricultural produce will also rise if and when inflation kicks in. As such, one may profit by either looking into ETFs that track a basket of commodities and agricultural products, ETFs that are agricultural-specific, owning shares of agricultural companies or as mentioned above, trading agricultural futures. 

Do note that like all investments, there are risks involved so I would ask you to seek more comprehensive advice from your brokers. Personally, I prefer investing in silver at UOB bank. However, on the downside, I do wish they sold physical silver instead of paper but I'll make do with what they have. It's just a nice feeling holding physical silver coins in your hand.

Cheers and have a great night,

~K

Robin Griffiths on U.S. Dollar Printing, Commodities, Gold, Silver and His 2011 Outlook

Quote of the Week:
"The downward trend in the dollar is awesomely powerful. It's vital to get yourself out of the dollar long-term on any significant rally. Continuing to own a currency that is going to be printed virtually into oblivion ... is crazy."

"I think not owning gold is a form of insanity, it may even show unhealthy masochistic tendencies, which might need medical attention."

~ Robin Griffiths

Background:

Robin Griffiths is Cazanove Capital Management Private Wealth's Technical Strategist. He has 44 years of investment experience and is considered one of the top strategists in the world. Cazenove as a group now manages £15 billion on behalf of their client base and is one of the oldest and most respected names in the financial community, tracing its origins back to the 17th century. Robin developed his own system, analyzing stocks and market trends. Robin is followed globally because of his groundbreaking work on world stock markets, bonds, currencies and commodities.

Here's the complete video to hear his take on the dollar printing and his view on the highs commodities have been making recently that led to the quotes above.

In another interview too, Mr. Griffiths was extremely bearish on the outlook of 2011.

Here's the article:

Cazenove's Robin Griffiths: The October Dip Will Be Nothing Compared To The 2011 Crash

Source: The Business Insider -- Click here for link
Date: Oct 2010

Cazenova Capital Management's Robin Griffith sounded incredibly bearish on a radio interview with King World News. 

He even thinks the September Effect will be validated -- because the real negative historical trend lasts from mid-September to mid-October.

The collapse in the next few weeks will be similar to the collapse from April to July, Griffith says, putting his target for the S&P500 at 940.

If you think that's low, wait till the Alt-A mortgage rate reset in March. "The dip this year is modest. The dip that occurs next year is the one that risks taking major indices right back to where they were in March '09," Griffith says.

The Cazenove strategist has a bearish election prediction too. The market-friendly Republicans will win, but the loss will be so "catastrophic" for the Democrats, it will make Obama an immediate lame duck, hurting the economy.

Oh yeah, and he thinks the plunge protection team was the only thing keeping the rally going in September. 

Broadcast at King World News

Related to the article above, listen to this broadcast of his interview at King World News, dated 02nd Oct 2010, for the complete interview.

The line that caught my ears, "Silver might even be a 10-bagger from here." aka ~$200 per ounce. 

Current price/oz: US$29.25.

UOB current price/oz: S$37.37

Although that may be an exaggerated amount, even a 5-, 4-, or 3-bagger would be a huge delight.

Question of the Day: What are you waiting for?

Cheers,
~K

Just for Laughs - Why Silver is More Valuable Than Gold

Since I've been posting articles and little commentaries on the precious metals these last couple of days, I thought I'd slip this little light-hearted fable in as well which I stumbled across at this site.

Hope you enjoy it.

Cheers,

~K

Why Silver Is More Valuable Than Gold

There once lived a great mathematician in a village outside Ujjain. He was often called by the local king to advice on matters related to the economy. His reputation had spread as far as Taxila in the North and Kanchi in the South. So it hurt him very much when the village headman told him, "You may be a great mathematician who advises the king on economic matters but your son does not know the value of gold or silver."

The mathematician called his son and asked, "What is more valuable – gold or silver?" 

"Gold," said the son. 

"That is correct. Why is it then that the village headman makes fun of you, claims you do not know the value of gold or silver? He teases me every day. He mocks me before other village elders as a father who neglects his son. This hurts me. I feel everyone in the village is laughing behind my back because you do not know which is more valuable, gold or silver. Explain this to me, son."

So the son of the mathematician told his father the reason why the village headman carried this impression. 

He said, "Every day on my way to school, the village headman calls me to his house. There, in front of all village elders, he holds out a silver coin in one hand and a gold coin in other. He asks me to pick up the more valuable coin. I pick the silver coin. He laughs, the elders jeer, everyone makes fun of me. And then I go to school. This happens every day. That is why they tell you I do not know the value of gold or silver." 

The father was confused. His son knew the value of gold and silver, and yet when asked to choose between a gold coin and silver coin always picked the silver coin. 

"Why don't you pick up the gold coin?" he asked. 

In response, the son took the father to his room and showed him a box. In the box were at least a hundred silver coins. 

Turning to his father, the mathematician's son said, "The day I pick up the gold coin the game will stop. They will stop having fun and I will stop making money."

The bottom line is: Sometimes in life, we have to play the fool because our seniors and our peers, and sometimes even our juniors like it. That does not mean we lose in the game of life. It just means allowing others to win in one arena of the game, while we win in the other arena of the game. We have to choose which arena matters to us and which  arenas do not.

Jim Rogers on His Silver Preference

Jim Rogers: I Would Rather Own Silver Than Gold
by Forrest Jones
Tues 4th Jan 2011 09:23AM

Silver is becoming a better investment than the one of the hottest commodities of the past few years, gold, says investment guru Jim Rogers.

Rogers, a commodities champion, says silver prices have more room to grow than do gold prices.

“I would rather own silver than gold," Rogers tells India's ET Now.

“Silver is still 40 percent below its all-time high. So silver has not been any sort of great bubble compared to perhaps some other assets we know."

Other commodities make for good investments as well, including agriculture.

“Likewise for the rice, if rice goes down, I will buy more rice. So both the silver and rice have a great future for the next few years,” Rogers says.

Precious metals tend to rally when the world's reserve currency, the dollar, weakens.

The U.S. Federal Reserve has been printing money in an effort to spur economic recovery, sending the value of the greenback down in the process.

While the dollar has erased some losses in recent trading, concerns over expansionary monetary policy on top of deficit spending in Washington are fueling inflationary fears, which has investors rosy on the outlook for precious metals, gold especially.

"The majority of factors for gold are very positive," Credit Suisse precious metals analyst Tom Kendall tells Reuters.

"If you were looking for negatives, you would have to say the lack of any sizable de-hedging program this year from the miners would be one that you could pick up on, but from the investment community, sentiment is still very much bullish towards gold."

Source: Moneynews.com at Jim Rogers: I Would Rather Own Silver Than Gold.

Quick Post: Where's Gold & Silver Headed?

Quick Post:

A quick post to contrast the two metals to chart their paths and where they may head next.

With gold on an uptrend, prices are currently challenging resistance at $139 for the third time. However price is above the 14 day moving average and 50dma which has been providing it with support. As such, I expect prices to drop in the short term, possibly back to the 50dma. As support has been making higher lows, I also expect a break out is in the making. Any pullback would provide a terrific buying opportunity though. 

Silver price on the other hand, has soared past resistance bulling its way upwards. However, like gold, price is above the 14 dma which has been providing it with support. Despite the uptrend also intact, I expect prices to dip and take a breather as the RSI turns down, possibly back to the 14dma. With its strong run up, a correction to the 50dma would be possible as well. Again a terrific buying opportunity for anyone looking to be invested before prices head up further.

Cheers,

~K

Precious Metals Outlook 1H2011

James Turk is a very prominent precious metal figure. As the founder and chairman of Goldmoney, here's what he had to say about them going into 2011.

Note that his predictions are only for the first half of 2011.

1) Gold will reach $2000 per ounce ($64.30 per goldgram) in the first half of 2011.  Look for gold to exceed $1,800 by the end of Q1.  The low for the year will be made in January, probably in the first week.  Thereafter, look for gold to continue the hyperbolic uptrend it is already tracking. 

2) Silver will reach $50 per ounce, probably in Q1 2011.  It will then take a breather by moving sideways, trading in a range between $50-$38.  It will do so in order to consolidate its tremendous gains, which if my $50 target is reached will be a more than three-fold increase in price from the year’s low of $14.82 in 2010.

3) The gold/silver ratio will continue its downtrend.  It will break below 40 during Q1 as silver soars in a massive short squeeze.  The ratio is likely to reach 30 during 2011, and I do not expect it to climb back above 52.

4) This year will be a great one for the mining stocks, which have been out of favor all decade long.  The bear market in mining stocks began with the collapse in Bre-X back in 1997, and it ended with the collapse of Lehman Brothers, when the juniors were totally decimated and even the best mining stocks were selling at unbelievable values.  Consequently, I expect the XAU Index will exceed 300, and I expect most of that gain to occur in the first half of 2011.

5) I expect another “Lehman Brothers” event in the first half of 2011.  It might be a bank, but it could just as easily be a government.  However, if another Lehman-like event occurs, the response by gold and the mining stocks will be completely different than 2008; this time they will rise, not fall.  The event this time will be a ‘failure’, not a ‘collapse’ like Lehman.  The Lehman collapse resulted in a rush by countless overleveraged debtors to get liquid.  The failure I expect in 2011 will have a different result.  There will be a rush to safety, meaning the avoidance of counterparty risk.  The best way to avoid counterparty risk is to own gold and silver.  The second best way is to own the shares of top quality commodity producers.

How to Profit? What to Avoid?

So my recommendation for 2011 is the same as it was for this past year, and in fact is the same as it has been all decade.  Continue accumulating the precious metals, and if you are so inclined to take the investment risk, the mining stocks as well.  Focus on owning tangible assets that make sense – gold, silver, useful commodities and the shares of well-run companies that produce these things.  Avoid the dollar and other currencies.  Avoid all government paper, and if you own a corporate bond, make sure it is convertible into equity. 

Become self-reliant, and most importantly, do not rely on any government.  Learn from those who were not prepared for Katrina.  Even though they lived in a hurricane zone, they thought they could rely on the government to help them, but everyone who ended up in the Superdome looking for help suffered as a result.  A financial Katrina is coming, and I think it will hit in the first half of 2011.  It will be an unprecedented crisis because the US government is tapped out and the serial bailouts of governments and banks worldwide are coming to a head.

As a result, government policies that have led to monetary debasement for decades are going to accelerate in 2011.  Be ready for it.  If governments continue to follow the wrong policies and make the wrong decisions when confronting some critical moments in the months immediately ahead, then the sky is the limit for gold and silver as national currencies hyperinflate and approach a total collapse.  Consequently, everyone needs physical gold and physical silver now more than ever. 

To read the complete report, which is rather lengthy, refer to The Outlook for 2011.

Just for laughs, I found a cartoon that illustrates the imminent disaster Mr. Turk is talking about.

Now that you're all cheered up, check out these recent videos/radio interviews for more views by James Turk.

On the US economy and gold

Posted on 6th of Dec 2010

On the looming hyperinflation

Posted on 13th of Nov 2010

On the gold/silver ratio with David Morgan

Posted on 11th of Nov 2010

On Silver Heading to $50 by 2012

Posted on 27th of Jun 2010

Going back to the predictions and as a last point related to the highlighted sentence in red, this is something to really think about. Should the financial disaster occur, this may provide another fantastic buying opportunity. As such, it may be time to start hoarding and accumulating cash again. Else when the chance arrives, you may find yourself sitting on the sides lamenting another missed opportunity.

Food for thought,
~K

Gold Double Top in Sight, Silver Uptrend Intact?

Gold and silver are mingled with dirt, till avarice parted them.

~ Proverb

In a previous post, I talked about the correction of gold & silver being quite short and that the rebound was only a lame one, and that I was expecting a further correction to occur. (See Gold a Better Buy for the Short Term, Silver for the Long Haul for further discussion.) As you can see, the correction did indeed last a little longer but from the charts, the correction is over and the new move is underway.

From the chart below, you can clearly see that a double top looks to be in the making for gold. Resistance is at $139, support at the rising 14dma (also a previous resistance), then 50dma and next at $132, in that order. A break below $130.30 may signal a start of a downtrend.

Silver on the other hand, seems to have a clear uptrend intact with the metal making higher highs and lower lows. However, as gold and silver normally rise and fall in tandem, should gold drop, silver will most likely be taken for the ride so it's important to keep an eye on both precious metals. Silver also may have a more volatile reaction as is characteristic of the metal, dropping or rising suddenly and drastically. 

Resistance for silver is at $29.47, while support is at 14dma, then $27.16 (a previous resistance) and next at $25.87. A break below this may signal a break in the uptrend and that prices may turn southwards. 

Would I buy? 

Well RSI has dipped down for both metals but is not low enough to consider adding to my holdings. However, if you feel strongly that the 14dma will hold support, perhaps nibbling is an option. Just my two cents. 

Cheers,

~K

Ways to Buy Silver

Silver is my preferred metal of investment. I'll elaborate more on the reasons in future posts. This post is just an introduction into the ways one can own silver as a way to diversify their investments.

There are quite a number of ways to start buying silver if one is interested.

Here's a quick list of them.

1) iShares Silver ETF (SLV)

Pros:
Very liquid; trades like a stock
Buy & Sell online
No storage cost & maintenance fee

Cons:
May not be backed by physical silver
Dependent on US timezone to buy or sell as the SLV is traded on the NYSE
Traded in US$

2) UOB Silver Savings Account

Pros:
Liquid
Bought & sold in S$
Singapore timing

Cons:
Must head to the bank to buy or sell
Bank does not store physical silver. It's all paper silver.

3) Physical Silver

Pros:
Security that you own the "real thing".

Cons:
Storage cost unless you store it at home
Illiquid
Risk of scams depending where and who you bought it from especially if 1) you can't sell it back or 2) are not holding and storing the physical metal yourself

4) Mining Companies

Pros:

Magnified price increase compared to the above 3 when price of silver increases.

Liquid

Cons:

Magnified price drops when price of silver drops.
Must research what percentage of revenue does silver make up

5) Silver Futures

Pros:
Liquid
Leverage - chance of making more money than the previously mentioned methods

Cons:
Leverage - Risk of losing more money than you have

For Singapore citizens, my suggestion would be to start a UOB Silver Savings Account. Though a little inconvenient to get to the banks, before 4pm (weekdays) or 12pm (weekends), and waiting in the queue to buy silver, this method eliminates the currency spread and brokerage fees per transaction. Especially useful if you're planning to do a monthly dollar-cost averaging investment for the long term and if you are investing in small amounts. Each transaction is subject to the minimum of 10oz, which at the current price is a total of S$361. (The daily price of gold and silver at UOB can be found here. This link can also be found at the bottom right of this blog under the Precious Metal section)

I also like the idea of owning physical silver. It's nice to admire a collection. =) But unfortunately, owning physical objects here seem to result in unbelievable premium prices above spot price. Also, there are a lack of sellers of physical silver. The only one I know of is Silver Bullion, which gets its silver from the Perth Mint, which also results in seriously huge price differences. GST also doesn't help, I'm sure you all would agree.

However, for non-Singapore citizens, my choice would be either the ETF or owning the physical. Your banks too, may have their own silver programs/products that you could invest in. But of course, I wouldn't know what other options are available in your country. Therefore, doing more research would be needed as the information here is probably incomplete.

Till next post,
~K

Gold a Better Buy in the Short Term, Silver for the Long Haul

Prepost outburst: See how the Fates are. They never give you what you want!

So I took a look at the chart for gold today and realized that gold dropped and then bounced off its 50day moving average twice. This is definitely a bigger drop than the fall silver did. Check out Gold & Silver Correction Over? for a brief discussion on last week's silver price movement.

Furthermore Stochastics has fallen to oversold regions and now show a buy signal, with the signal line cutting the red line upwards. These two indicators lend weight that the correction is indeed over and that buying will resume and that prices will go up. However that remains to be seen.

This video from Zen Trader, entitled Why Gold Could Fall to $900, provides more insight into the recent run up that gold has had, pointing out strong negative divergence between RSI and Price which could indicate a correction of about 35% or more, bringing down the price of gold to $900 thereabouts. This video is cluttered with other charts so if you want to listen to the brief discussion on gold, you gotta scroll to about 8mins 30secs.

Anyway, I'm not buying gold for now despite the recent dip to the 50day ma. I've put enough of my funds into this metal and am rather satisfied with the allocation. That's not to say I won't buy if it does drop to $900/oz though.

Personally, I believe silver is still a better buy in the long run and am holding onto my funds while I wait for an attractive buying price.

Wish me luck! =)

~K

Gold & Silver Correction Over?

Correction does much, but encouragement does more. ~ Johann Wolfgang von Goethe

I've been eyeing to increase my silver holdings for awhile now but I've been waiting patiently for the price of silver to drop. Alas, when it finally did start to correct on the 12th of Nov, I didn't have the spare funds to inject. On the 16th of Nov, a rather bullish doji appeared, appearing to signal a change to the selloff and the start of the rebound. Again I didn't have the funds to inject into my silver account. Today, when the price has rebounded strongly upwards, supported by the 14 day moving average, back to where it was before the correction, my funds to inject are finally available.

What a waste of an opportunity! *lament lament* Or is it?

The demand for silver is still there with the uptrend clearly intact. What's uncertain though is that most of the previous corrections last for at least 2-3 weeks, some more than a month. This recent upturn happened after only after 1 short week. So there's a chance that the correction hasn't played out fully. If this is the whole correction however, and not just a lame rebound, it's a rather short correction, proving that there's still ample demand for the shiny metal.

Lets see what happens tomorrow and next week.

Hopefully we'll get our chance!

~K

Note:
Not vested in iShares Silver ETF. I'm using the iShares Silver ETF as a reference as there isn't any chart plotting silver price in S$ in ChartNexus software. Nonetheless, this is accurate enough for me.