Avoiding the Cheerleaders for Gold

There’s nothing that gets us more riled in this business than the incessant drone of market cheerleaders stuck on their favorite stock or asset class, even after it becomes clear that the investment has turned into a roaring loser and is heading to THE BOTTOM OF THE OCEAN! Yes, we get emotional, and with good cause. First, we can’t stand the sight or sound of anyone so lacking in self-respect, yammering on about whatever it is they ‘love’ and ‘adore’ and ‘just you wait’ and ‘we’ll show them’ and yadayadayada… It’s painful. The other, obvious, reason is that it can become contagious. There’s something altogether catchy about stupidity, and if you’re paying attention, you’ll see that it finds its followers all too easily. Call us masochists, but we feel a benighted – call it perverse – duty to stamp out the lunacy wherever we find it. For your sake! Because we don’t want you, our dear readers, to suffer for it. That said, the magnetic nature of stupidity has a way of drawing even otherwise savvy investors to itself, despite our best, most strenuous efforts to reveal it for what it is. So we’ll throw caution to the wind once…

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Gold Wins, and Gold Loses

The most dramatic moves in the market last week belonged to the precious metals and their associates, which jumped like a shocked rodeo steer as the dollar lost ground. The question now facing gold (and dollar) addicts is whether those moves were for real. Has the dollar’s relentless drive skyward now stalled? And will that trigger a sustained bull move for the precious metals, finally, after a four-year run through the investment world’s alley of septic horror? Nothing’s certain, but our take is like this… In the first place, there’s nothing that says the dollar and gold have to maintain a perfect inverse relationship at all times and through all markets. They won’t. There will be factors that either add to or detract from the general relationship, and that has to be kept in mind as we advance the discussion. The Dollar Remains Potent Second, both the fundamentals and technicals for the dollar remain bullish, despite the nearly month long decline we’ve just been through. The rest of the world’s major currencies are in the midst of substantial QE initiatives, all of which conspire toward dollar strength, and precious metals weakness. Three, the charts show a potential bottom now in…

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Nothing in the Hole – Gold Miners Surface Empty handed! (GDX, GLD, SLV)

We’re witnessing some very contradictory developments on the precious metals front, which we believe it important to highlight today. But before we do, a word from a man for whom we have a great deal of regard. Not our loyal reader, Jimmie Rodgers, but rather many-time billionaire and former Soros attaché, sinophile and renowned gold bug – a man whose calls on the commodities market have been as good as any – Jim Rogers believes the time to begin buying gold again has not yet arrived. In a recent interview, he claims he’s still waiting on a buying opportunity and that the metal has a mind of its own: “sometimes it moves with the dollar, and sometimes it doesn’t.” As far as we’re concerned, the story on gold hasn’t changed. It’s a question of investor inflows and nothing more. It was investor inflows that drove the price toward $2000, and a lack of those same inflows that drove it lower these last four years to its $1140 bottom last November. Until investors get excited again about the metal, there simply ain’t nothing doing. We should be quick to add that a great deal of gold’s recent weakness has come at…

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What Silver (SLV) And Oil’s Rebound Means For Global Trade

In today’s letter we offer some updated thoughts on the commodities. We’ll start with the precious metals, whose charts are starting to look surprisingly strong. For a Change… The best of them all, without question, is silver, which some four years back led gold to its bull market high, and could very well turn higher now after putting in a bottom. Nothing’s for certain, of course, and we have lingering doubts about whether the bottom is actually in, but we have to acknowledge what we see. And that is – silver is starting to look good. Take a peek – This is the daily chart of the iShares Silver Trust (NYSE:SLV), a good proxy for the metal and, with over $100 million dollars turning over in the stock every day, an equally good place to check for mainstreet investor interest in the metal. And what’s the chart tell us? In the first place, SLV’s climb above both her short term and 137 day moving averages some two weeks ago is an indication that we’re now headed for additional gains (red circle). The next immediate line of resistance is the 274 day moving average, seen in orange on the chart, a…

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Investment Philosophy Explained (UUP, GLD)

Ethical Investing

Dollar (UUP) Headaches? Gold (GLD) Fever?   There are two approaches to dealing with the flu. Some folks load up on the Tylenol and attempt to weather the worst of the symptoms by dulling their effect on the body. Nausea? Stuffed up ears, nose and throat? Can’t feel ‘em. Let’s get to work. The other approach is to leave the malady run its course without taking medication. For those who deal in this manner, the thinking is equally simple. As they claim – at least they know if they’re sick or not, and if it’s worth their while to jump back into the fray. Finance Mirrors Life So it is with life in general, and certainly with that slice of life that we specialize in – the investment markets. Some folks are happier to see the financial medicine rendered on a regular basis when the economy looks sickly – the QE, the fiscal interventions, the coercive interest rate settings. Do whatever it takes, they say, to keep the damn thing rolling. We call these folks ‘Keynesians’. The others are called ‘Austrians’ or the ‘Austrian School’ after the writings of Ludwig von Mises, an Austrian economist of a century ago, and…

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The Impending Gold (GDX) Consolidation – How do we play it?

There are a few things you can count on as GDX plumbs new depths, the bugs bug-out, and, in an extraordinarily marginal business environment, the corporate gold movers look for new ways to maintain profitability. One of those things to look for is additional forward selling. There’s little wisdom from a corporate point of view in holding on to your bullion store while the metals are sinking. Look for the majors to continue adding to their hedge books. What’s that mean for GDX? The result will be a whole lot of downward pressure on silver and gold going forward, in the same way that it has for the last three years. While the commercials essentially shorted their future production in the hope of squeezing every last buck out of their operations as possible, little investors followed suit, and gold lost 40% of its value. But now it’s a bit different, because with the price of gold approaching its drop dead extraction cost, there’s little left to be squeezed from productivity initiatives and only pocket change to be seized from selling more ore further out the futures curve. As the gold price reaches the cost of production, it simply means more…

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Gold Tech Wreck in the Making (GLD)

We’ve been very excited about gold (GLD) in the last couple of weeks – excited about her impending fall, excited about warning you of the same, and excited that we might make a little scratch off the move. And what do ya know? Last Friday the bottom began to fall out. We’re going to address gold’s latest moves in just a moment, and offer you a trade on the old lass. But first, we want to continue down the road of higher options education with another brief lesson on technical tools, their use, function, and effectiveness. Here’s The Recap In last weeks article, An Intro to Options, MACD and RSI, we introduced the role of the MACD and RSI indicators.  We then talked about how we employ them to assist us in determining market turns and smart entry points. Today, we’re going to move on to examine volume and moving averages, again with an eye to discover the most effective means of using these important technical tools. Technical Analysis 101: The Need for Volume Any time stocks move up or down with increasing volume it’s a sign there’s conviction behind the move. You can generally trust that the trend will continue, and all…

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Clean Shaven Legs Review

Well, we did it. We arrived at the end of the year with our limbs intact, our pocketbooks bursting with newly won cash, and our minds… well… sort of. Anyway, we thank the Great One (not Gretzky) for his help, despite the fact that our mid-year predictions for most markets were weaker than usual. And we take a moment now to review those calls and, of course, to reward those of our readers with the keenest prognosticating acumen with the used Q-Tips that we promised them. Congrats to all who participated!   Before we announce this year’s victor, let’s look back at our own efforts. We’ll rhyme ‘em off, and you write in to comment on our performance. Gold – We wrote – “Expect GLD to be at her former lows of $114 when the bells of New Year come haunting.” In fact, December 31st brought a closing price of $113.58 for the metal’s stock proxy. Normandy calls that an A+ performance. Silver – Our words – “Stepsister silver will not likely see as gruesome a future as gold. We’ll throw out an $18 figure for year end.” Not as good with silver. We give ourselves a C. SLV closed…

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The Ghost of GLD Ghosts Past

GLD

A happy New Year to all. Let’s get straight to business. We’ll start with the golden delicious – what appears to be a bounce in the precious metals that has many people wondering if we’ve seen the bear’s bottom. On the bullish side, the chart shows the SPDR Gold Trust (NYSE:GLD), a decent proxy for the metal, moving higher over the last few sessions, and her Relative Strength Index (black circle, at bottom) ascending above its midway waterline. But beyond that, there’s little on offer that’s positive. We still have all the moving averages unfurled and trending lower, including the no-nonsense 137 DMA, which has proven itself an indomitable line of resistance for the last twelve months (in red). So even if the move has another five percent upside from here, we believe it will meet with a freight train’s worth of selling when it encounters the 137 DMA. Moreover, there’s absolutely nothing in the volume figures that would indicate we’ve seen a bottom (in blue). For the last six months we’ve seen declining volumes for GLD, precisely the opposite of what’s expected at a major market turn. MACD (at bottom, in black) has also yet to confirm RSI’s bump…

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