Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Finally, a new all time high for gold prices. Gold prices are being well supported by both its 50dma and its 200dma as the chart above shows. The RSI is now over the ‘70′ level, sitting at 72.33 suggesting that it is overbought, but don’t count on it, the world is a very volatile place at the moment.
Unrest across throughout the Middle East has spread to North Africa, with the leaders of Tunisia and Egypt having to step down. The social problems have been highlighted by higher commodity prices leading to higher food prices in areas where the people just cannot afford them. Bahrain, Libya, Yemen and Iran are quickly realizing just how their people feel and it isn’t good. Throw in Brent crude which is commanding $116.03 today and inflation looks set to soar.
On June 19th, 2006 we posted an article entitled; Reasons to invest in gold, one of the reasons that we saw as very important was the Internet and we wrote:
· Internet: information travels around the world in a nano-second, reactions to news, true or false, will add to the volatility of the gold price.
The internet and the advent of social networking via twitter, YouTube, face book, email have all come together to provide a truly worldwide method of communication. The ability to organize the masses has never been so readily available. Individual governments have tried to shut down the web in order to prevent various groups communicating and thus limit their effectiveness. It raises the question of just how long will it be before our own governments consider such options should unruliness breakout in the western world.
Another point that we listed in the same article was web based trading when we wrote:
· Web trading: increasing everyday, resulting in the trends being more exaggerated than ever before.
There are now so many investors using web based trading platforms that an uncorroborated rumor can go viral causing a deluge of orders to flood the market creating wild swings in either direction. You can be sure that this wont abate any time soon, so prepare yourself for volatile to be the old order of the day and violent to be the new order when it comes to price swings. This is not 1980 when a confirmation of an order to your trusty stockbroker took three days, this really is the new millennium with orders being placed at the ‘tap’ of a key.
The USD once again is struggling to find friends as it tries to hold the ‘77′ level as we can see on the chart above. With gold and silver in a rampant mood we suspect more and more investors will divest themselves from the USD adding to the downward pressure on its true worth.
The technical indicators are in the oversold zone so we may see some sideways movement in the short term, however, we find it difficult to come up with a good reason to hold dollars at the moment. Also note that both the 50dma and the 200dma have turned negative and are heading south which is not a good sign.
Silver prices are absolutely sparkling just now and are leading the charge upwards having almost doubled in six months and made a multi-decade high. Note the gap between silver prices and the 200mda which suggests that silver is getting a tad ahead of itself. The technical indicators are on the ceiling, however, supply is very tight and backwardation appears to be getting worse.
In conclusion we believe that another major up leg is upon us, so, as per our usual mantra do not part with your physical metal or your core holdings of associated producers, you might just be offering someone a real bargain – me!
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