A Good WeekAll in all we had a pretty good week with major US averages slowly breaking out higher and holding so far, but still we're not seeing massive moves and a full scale bull market breakout.
To me it seems we're climbing a wall of worry here as so many remain bearish and are not yet on the long side. It remains to be seen if we're in a bull or bear market at the moment but I think we should do pretty good in 2012 as it's an election year and so many are betting the other way.
As for the precious metals they are looking fabulous here already having hardly rested at all after the paper takedown over the holidays. Gold and silver seem ready to go higher here now or very soon. Let's take a look at the charts and see what I'm seeing.
Gold rose a nice 1.45% this past week and has almost assuredly put in the low for this correction now a hundred buck under today's price at $1,525. It was nice and very constructive to see the price move back above the 200 day and 21 day moving averages on the week.
Now we're building the reverse of the pattern we just broke. We've got a little slanting reverse head and shoulder pattern here that should soon enough see a breakout higher. This may not occur for a week or so as the descending trend-line closes in along with the 50 and 100 day moving averages.
The really super news is that the gold stocks are really picking up off their lows and it's time to go heavy, very heavy.
Several of the major mining indices also have the same slanting reverse head and shoulders pattern which bodes well for the large and mid-cap stocks along with the small caps to a large degree. The HUI, XAU GDX and the GDXJ all exhibit this pattern.
All in all it's great price action and things are shaping up much more quickly than I would have though last week, to my delight.
The GLD ETF volume was pretty lacklustre really as investors are realizing more an more that they must take possession of the metal or they may just not own it if they really want to touch it. My opinion remains that ETF's are great swing trading vehicles but that's it.
The futures volume was steady as she goes with no big surprises one way or the other, just steady accumulation.
Silver rose 3.57% for the week and looks even better than gold here in my view. While silver is well below the 200 day average here as opposed to gold the reverse head and shoulders pattern is pretty nice with a major spike low already fully in place.
We know silver is much more volatile than gold and for it to basically catch back up it should run about $6 to get above or to the 200 day moving average.
Futures volume was solid all week as investors accumulated while the SLV ETF saw about average volume as traders are seeing this opportunity but if we make a breakout here above about $30 then we must see large increasing volume in the SLV ETF in order for the move to have a chance of follow through.
Platinum rose a hefty 6.17% this past week out of a little flat base but was stopped after breaking the downtrend line at the 50 day moving average. It looks like we may trade a few days or more in the $1,450 and $1,500 range before making an assault on the 100 day moving average nearer $1,600.
Heavy futures volume on the move up followed by lower volume on the retracement is perfect action and the PPLT ETF showed the same for the most part.
Palladium rose 3.40% on the week and arguably has the best chart of the precious metals as it's base is large and getting very tight here. A few more weeks in this triangle and we should see a real move one way or the other.
The 100 day moving average is tracking the downtrend line giving it even more significance. The 50 and 21 day moving averages are tracking together here and are the magnet which keep pulling the price towards it for now until this triangle pattern is resolved.
Futures volume was about average which is normal in a large chart pattern as we're in right now and the PALL ETF volume was similar but a little more on the light side.
The biggest news story which is really just a load of bull was the downgrading of France and Austria from AAA to AA+ along with 2 notch downgrades of Italy, Portugal and Spain. The rumours were flying all day Friday before the markets were even open that this was coming and sure enough after the close of trading Friday the official announcement came.
I have to things two say about it.
First of all, this rating agency has been far behind the curve for years and actually gets paid by a company to say they are in good shape. Basically they are a fraudulent lying bunch who would sell their 1st born for the right price, and it wouldn't be much.
Secondly who really cares? We all know that debt issues abound and the only real measure is the rates that investors demand on their bonds. That is the true measure of a countries health, not some "agency" who purports to know all...for a fee!
We still have yet to see a bank fail in the US in 2012.
We've got a vote on the US debt ceiling increase coming up this week and Obama wants to extended lending limits by $1.2 trillion. We should expect nothing less that the highest order of drama on this one.
The search continues for missing MF Global customer money. I am sure they know where the money is but it's in one of the big US banks who is so well connected politically that chances of it being "found" are slim. This type of saga is one I'm trying to avoid by owning a hefty percentage of physical gold and silver and ensuring any shares I own are not in street name. I do not trade futures.
China's gold imports from Hong Kong surged recently as usual this time of year just before the auspicious Chinese New Year holiday.
News this past week that the Mine Safety and Health Administration closing has closed a major silver miners large mine for effectively a year was a huge blow and saw the stock drop over 16.46% on the week. The company will now see about 25% of they're projected production lost. Yikes!
And get this, they just have to "clean" the 30 year old mile deep shaft. Basically they have to use a power washer to clean sand and concrete that has built up over the years. I mean, come on man! There have been a few incidents and deaths lately but they had to do with construction of a new shaft. It's a mine for crying out loud, not a house. How clean must it really be?
It just goes to show the inherent danger of mining as we are already well aware of but if the government deems something wrong they can just shut you down. Owning miners can be dangerous, but very lucrative as well. I feel you've got to own a basket of them and not have all your eggs in one basket in order to mitigate such risks.
Speaking of miners, so many we hold have already put in their lows for the year it seems with a few having doubled off the lows already! There are a tonne of super chart setups in many more as well.
I'll be going full in with the mining portfolio in the week ahead, at least I hope to.
It's funny, when it comes to the mining portfolio my policy has always been to inform subscribers of my intent to purchase a stock BEFORE I buy it, unlike so many in this business. Sometimes it's fine, other times not so much.
This past Tuesday I told subscribers I'd be adding to a position that afternoon only to see the stock take right off on me and never stop all week. It finished the day up about 18% and finished the week up over 33%.
Needless to say I did not get my position. I do own the stock from higher prices already but I wanted to load the ark, as they say, before a major 2012 increase in many of the miners.
Now I have to wait for a correction or consolidation before adding. It happens with such a policy sometimes, and I'm thinking of changing it to the normal policy of buying beforehand and selling my stocks to subscribers as they rise...just joking. I have great disdain for those individuals who do that and are many.
I don't get or think anyone should get any benefit from the company or their subscriber base in that way. The only honest way to make a buck is to want to own the company and benefit on the back of the performance of the company itself over time.
But hey, that's just me!
A favourite of mine, Rob McEwen sees 2012 as a major year for mergers and acquisitions and I could not agree more after the hammering many takeover targets took in 2011. We have positioned ourselves accordingly in many takeover candidates and some of the stronger more obvious ones have actually held up very, very well for us helping to limit the damage to the mining portfolio in 2011.
Another sign that 2012 will be great one is that the world's largest hedge fund is joining a few other savvy, extremely wealthy investors in investing in gold including Kyle Bass, Jim Rogers Georg Soros, John Paulson, myself (joking, for now) and other notable names in taking a good chunk of gold into their portfolio.
Sometimes it's good to wonder just how good gold is doing. I found this little chart which shows clearly how well gold has done when compared to an investment with a mutual fund.
What else need to be said about the merits of gold and silver investing in this day and age?
I'll leave you today with this revealing article and video on the fact that the Dutch hold most of their gold elsewhere for practical purposes. They say that it's just easier to hold some gold in other locations where major trading occurs in case they want to sell it. This begs the question of if their gold has been leased or swapped unknowingly to them.
Having seen Venezuela recently repatriate their gold is a good sign that the gold may actually be there but then again Venezuela is deemed more an enemy and would squeal loudly if they didn't get their gold. Friends may be more accommodating.
Most countries have their gold allocated in a similar manner and as Jim Richards says, possession is 9/10th the law. This means any country holding another countries gold essentially nearly owns it already.
I suggest and hope that everyone repatriate their gold while they still can, and that includes you. Think of your property as a country.
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