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.
The big talk these days is of the debt ceiling in the US having to be raised. The US is lucky they can do this unlike other countries such as Spain, Portugal, Greece, Ireland and others who need to be bailed out or pass huge austerity measures.
Unfortunately the perpetually increasing debt of the US is what’s going to be their downfall. It simply cannot last forever and the only way out now is a devaluation of the US dollar which has been and is occurring, but so far it’s been orderly.
It’s impossible to ever pay off the US debt.
If you do any shopping at all you know prices have been going higher and in many cases at an accelerating rate.
Do not be fooled by the snails pace of the devaluation. A cursory look through history will show you that this is always how the fall of a currency occurs. Slowly at first, then it picks up some steam but is still manageable but when the big fall happens, it’s almost an overnight phenomenon.
I can’t say whether this will come next week, next moth, next year or in ten years but it has to happen and you have to have protected your wealth beforehand.
History tells anyone who will listen what is coming up. Do yourself a favour and spend half an hour researching monetary history on Wikipedia or inflationary or hyper-inflationary events.
You’ll quickly realize the horror show that is coming and I won’t have to try and convince you to buy physical precious metals, you’ll know why and feel confident and comfortable in your decision.
As for the markets, they’re holding up quite well in the face of bad economic news and they truly look poised to move higher in the weeks to come.
The fact is the debt ceiling will be increased and the markets know this and are acting well.
Several of our swing trading positions are taking off now out of beautiful bases and they are poised to move up quickly from here again. Mining stocks are doing well, the precious metals are breaking out higher and it’s shaping up to be a great summer all round.
Let the good times roll!
Metals Review
The charts today are back to the bar chart form using spot prices.
Gold slowly and quietly rose 3.15% into new all-time nominal highs. I used to get very excited when we’d hit all-time highs but really it’s no big deal to me. Sure, we increase our wealth as it rises but we’ve go so much further to go. Maybe once we hit closet to $5,000 I’ll begin to get excited but we’re a long ways off from that.
There is no telling where gold can go from here but it’s going to be higher. The base we built since May has been great and it appears my pondering that gold had hit it’s summer lows looks to have been correct last week.
We are seeing good volume on this breakout which means it’s quite likely to continue. It will probably be relatively slow though as gold seems to just meander higher at a leisurely pace so far. We’re far from the top as once we begin seeing huge multi-hundred dollar moves higher for days on end then we will be closer but for now it takes a whole week to move up a paltry 3% or usually less.
Volume in the GLD ETF was huge for the week and it’s signalling this breakout is confirmed.
I wouldn’t be waiting around here if you’re looking to buy physical gold as it is not going to be any cheaper in the future.
Silver rose 6.93% this past week after rocketing out of a nice basing pattern that has refreshed and powered silver back up for much higher levels. I recently made a small bet with a friend that silver will be $300 in five years; it’s a shoe-in!
A beautiful breakout here and silver is now trying to break horizontal support and Fibonacci resistance as well. As you know we saw a massive quick run higher earlier in the year, and then an even faster fall. The speed of both the ascent and descent didn’t allow for any consolidations so there is really no resistance to speak of from $39 back to highs near $50.
I wouldn’t be short this one and it’s actually a good one to trade since it moves so quickly, but it can be very dangerous if you get caught on the wrong side.
We’re not trading it as of yet but I am loaded with a very heavy weighting of physical silver and it’s been my top holding for years and I suggest you consider the benefits of owning physical silver yourself.
I run through many reasons to own physical precious metals here every week.
Volume in the SLV ETF was solid, but not heavy which tells me we have lots of room for traders to come into this tiny market and drive the prices through the roof, literally.
Platinum rose 1.27% last week and is now trading in a nice up-trending channel. The $1,800 area is going to be the next resistance level and once that is breached then we could see some real upside fireworks.
For now the 100 day and 50 day moving averages have slowed platinum’s ascent.
Volume was good on up days in the PPLT ETF and low on the move lower on Friday. All signs point to higher prices on platinum near future.
Palladium rose 0.22 last week as it slowly builds the steam to power through resistance at the $790 level.
It looks like we should be ready to see this white metal move up to the $820 in the near future.
Volume in the PALL ETF was quite light and not telling me anything at all really at this time.
Fundamental Review
We saw Ireland’s debt rating sunk to junk last week, but as usual the ratings agencies are far behind the curve. They are warning of a second bailout being imminent. That’s not very hard to figure out really is it?
Another ratings agency said Thursday that the US credit rating is on watch and at risk of being downgraded if a new debt ceiling isn’t reached. Talk of this ceiling is getting nauseating. We all know a deal will be reached at the last minute so I’m trying my best to ignore it all and markets seem to be doing the same.
In fact the US has to borrow another $5,240 from every single household in the US to get through to only the end of September. I know most households don’t just have that kind of cash lying around and even if they do, I doubt they’d be thrilled to hand it over. Don’t worry though, they’ll just put it on the tab!
Results from the European stress tests were also released Friday and apparently only 8 banks failed the stress tests. To be honest that high number shocks me as none would fail as they’d get bailed out!
The test results say the banks would have only a shortfall of $2.5 billion Euros.
So far in the good old US of A two banks have failed this week alone to join this years list of biggest losers. This while the US is apparently recovering even though we had a horrible jobs numbers and several other
bad economic numbers this past week. The markets are shaking it off though which means they’re very strong at the moment.
It doesn’t matter why they are strong; they are. Just try and ignore the noise and focus on charts and long-term trends. At least that’s how I’ve been making money and it’s still working so I have to stick with it.
China’s GDP rose 9.5% year over year for Q2 and that number continues to astound me.
I’m torn as to where to put this next item. Is it headline-worthy or best saved for the laugh of the week section? I settled on a happy medium, right in the middle.
It’s an absolute must to watch this video several times as Ben Bernanke ponders the question of is gold money before replying, no.
Bernanke knows gold is money, he just can’t admit it. Basic economic principles have never changed at their core but the powers that be are sure trying their best to change it but they will fail although they’re doing a stellar job of postponing the re-emergence of basic economics where a sound currency has to be backed by something rather than being able to be created out of thin air.
Gold has to back money in order to keep it from going worthless. It’s happened every single time an unbacked currency has been used. We’re really no smarter today than in the past we just think we are, as did those past leaders who’ve seen their fiat currencies fail.
You can’t just create wealth, you have to earn it.
The previous week’s news story which was patently a lie regarding Russia selling their gold saw many rebuttals last week as it should be.
It really irks me when a supposedly respected news organization fabricates such lies. We are all human and make mistakes, god knows I make my fair share, but to go out of your way to fabricate such garbage annoys me to no end.
The World Gold Council said last week that the first half of 2011 has seen more gold buying by central banks than all of 2010. Ignore the bearish propaganda. Gold and silver are perhaps the easiest and greatest long term trend trade you’ll ever see. As always I have to admit my bias towards the physical bullion as my preferred method to ride this trend.
Venezuela has limited gold companies to exporting only 50% of their production. So the question is what will happen to the other 50%? While the article didn’t mention it I can assure you the Venezuelan central bank will be buying as much of it as they can afford.
Until next week take care and thank you for reading.
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