Precious Metal Market Timing Musings
Ok, here's a summary of the buzz and my current outlook for precious metal prices:
* SEASONAL (bullish): We've made it to the end of July without taking too big a hit on the price of gold (yesterday's low was around 6% off the all time high). Now is seasonally the low-point for the entire year.
* INTERVENTIONAL (bearish very short term): Bernanke Speaks to congress today and tomorrow.
* INTERVENTIONAL (questionable): Gold options expiration is next Tuesday (which ordinarily is quite bearish) while the buzz is that max pain is somewhere above current prices (around $1210). This means options expiration may not have the big hit it usually does.
* SENTIMENT (bullish): The gold message boards are dead running roughly 1/4 their usual number of posts per day as gold new comers are feeling depressed and are not buzzing on the boards.
* SENTIMENT (bullish): Jim Puplava, a dyed-in-the-wool multiyear thru thick and thin gold mining bull revealed last week that he is short gold miners expecting them to get creamed like in 2008. This to me is a clear indication that they won't get creamed like in 2008. They may take a hit, but they won't get creamed because very few people are holding gold miners on margin or with weak hands
* FUNDAMENTALS (bullish gold stocks): Gold miners can make a lot of money at anything near current gold prices. I know of no other industry with as low a price to operating cash flow ratio as gold miners right now.
* FUNDAMENTALS (questionable): The world economy (at least Europe and USA) seems surely to be going into another leg of contraction and yet the mainstream media are still in denial. The urgent fear of immediate collapse (from Euro collpase) has dissipated, but really the situation gets worse (but just not short term).
* FUNDAMENTALS (bullish): Gold buying has resumed in India and East Asia at prices under $1200. This is the real support for the price of gold.
* INTERVENTIONAL (questionable): Everyone is expecting the Fed to announce another round of quantitative easing. This is keeping the general stock market afloat despite the bad economic news.
* EXPERT ADVICE (bearish): My best (and most expensive) news letter expert is bearish short-term on the price of gold. He concluded a blow-off top in gold took place priced in Euros and that (not manipulation) has triggered the recent downturn in gold. He is expecting a further downleg in economic contraction and stock market prices based on the historical pattern of the 1870s, 1930s and other global credit contraction periods. He considers the Fed powerless to change this pattern. This will be hard on gold miners (and even harder on silver and even harder still on silver miners) and it is better to stand-aside right now. I pay this guy a lot because I like is pattern matching message and because he is not a continuous gold cheer leader (which is my natural disposition at this point). I don't buy everything he says.
CONCLUSIONS:
* The fundamental I care most about, when it comes to gold, is whether they are buying in Asia. The price of gold has fallen and they are buying. This means gold is supported and probably at or near a bottom.
* If you want to buy gold, tomorrow (Thursday) after Bernanke speaks seems like a good time to do it. Now is not a good time for opening gold miner positions right now.
* Big issue: When does the next round of general-market (and gold) friendly QE hit? Before the next downturn gets serious or after?
* FWIW: I'm short the general market to the tune of around 90% of my long positions. Having already cut back a bit, I'm staying long and strong with my gold miners. I have some cash and some gold bullion (GTU) and am not ready to deploy it on more gold miners at this point. I will probably put some more cash in bullion (GTU) on Thursday.
MontyHigh, www.worldofwallstreet.us
AI
