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.
It was another wild week as silver roared and gold held its own as well. The US markets were even wilder as they bucked and jumped after news of a US receiving a forecast downgraded from a prominent ratings agency.
I don’t see this forecast revision as anything but words as we all know the US’s actual credit rating should have been downgraded already. The good news is markets are shrugging this negative news off and look poised to run higher. Unfortunately the metric they are measured in, the US dollar, remains under severe pressure.
The good news is that gold and silver also remain very strong, actually, incredibly strong. I’ve been extremely bullish both gold and silver for nearly a decade now and still am, but I’ve been expecting some kind of correction over the short-term which just hasn’t come.
In silver I thought $40 would pose some problem. Now we are ready to attack $50. There has to be a correction at that level, doesn’t there?
Last year when silver broke the $18.50 shackles it became a different animal altogether and has gone straight up, for all intents and purposes.
Back in the last bull market in the late 1970’s gold rose 24 fold. So far gold has only risen 6 fold in this bull market. Both gold and silver have a long way to go.
If you’re new to this space it’s hard to buy right now after the moves we’ve been having, but who’s to say they will stop?
I always like to buy on weakness but in all honesty we just haven’t seen much lately. Perhaps you just have to step in and buy regardless. After all the bull market will come back and save you if prices do drop. That’s the beauty of bull markets. Even if you don’t time your buy points perfectly, it will roar back and go higher eventually.
Gold only rose 1.22% for the week but we did see it surpass and more importantly close the week above $1,500. It’s going to continue higher now until it doesn’t. Generally round numbers pose resistance and $1,500 is a major round number.
We should see some stalling out here but then again the gold market is so small that it’s not hard to move it around. If there are another few large investors or funds buying gold here then there should be no stopping.
As for the GLD ETF the volume has been strong and steady tapering off near the end of the week. There is no sign of a top yet, but that can change in a day.
Silver rose 8.40% this past week making two weeks in a row of gains above 8%. While this may seem excessive, one of our swing trading positions rose over 8% two days in a row this past week. We took our large profits at that point and subsequently the stock fell over 10% a couple days later. There has yet to be a blow off top like that in silver.
Chances are good that we will continue this move to the $50 area now. I’d expect some profit taking and a correction at $50, but I did at $40 as well and that little bump in the road is hardly what I would call a correction.
Looking over at the SLV ETF the volume was extremely heavy for the week with volume hitting almost 90 million shares traded on both Wednesday and Thursday. This is the type of volume we see at tops. Investors piled in before the long weekend which is hard to fathom. I would have though selling would be the case.
Be very careful trading silver here, but as I said above, if you buy some physical silver here don’t worry about it. Even if we correct back to $40 the pain won’t last long. The bull market will come back to save you.
Remember, the 1980 high adjusted to inflation is about $140. We have much further to go.
A neat piece came out stating that Russian’s central bank increased their gold holdings by 280 tonnes over the past two years. They are said to continue buying at least 100 tonnes of gold a year for the foreseeable future. The Russians are employing a much similar strategy to China by buying up domestic supply rather than exporting it, or importing the metals. This in a sense leaves no paper trail, and helps not drive the prices too high too quickly.
They are not the only ones buying gold. More and more central banks, large funds and you, the individual investor, are coming into the gold and silver markets.
I know I say it nearly every week, but it’s been true. We are far from a top. Just buy it!
Sprott put out an excellent piece which analysis silver much the same way as I do. By using simple supply and demand, as that’s all that really matters in my opinion. They also talk about gold and silvers role as currencies as the worlds paper, or fiat currencies, drop in value. Gold and silver ARE money, the paper we use each day is only a currency and not a store of wealth.
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