Best of the Week
Most Popular
1.SNP Offers Labour Deadly Death Embrace Alliance, Holding England to Ransom, Destroy UK From Within - Nadeem_Walayat
2.Gold And Silver – Most Widely Used Currency In Western World? Stupidity - Michael_Noonan
3.Election Forecast 2015 - Coalition Economic Recovery vs Labour Collapse - Nadeem_Walayat
4.Election Forecast 2015 - Debates Boost Labour Into Opinion Polls Seats Lead - Nadeem_Walayat
5.Why are Interest Rates So Low? Ben Bernanke, Confused as Ever, Starts His Own Blog to Prove It - Mike_Shedlock
6.Leaders Debate Election 2015 - Natalie Bennett Green Party Convincing Anti-Austerity More Debt Argument - Nadeem_Walayat
7.Labour Economic Collapse vs Coalition Recovery - UK Election Forecast 2015 - Video - Nadeem_Walayat
8.China’s Stock Market Mania; How High can Red-chips Fly? - Gary_Dorsch
9.Gold and Misery, Strange Bedfellows - 31st Mar 15 - Dan_Norcini
10.Ed Miliband Debate Election 2015 Analysis - Labour Spending, Debt and Economic Collapse - Nadeem_Walayat
Last 5 days
Inflation, Central Banks, and Business Cycles - 18th Apr 15
Stock Market Correction May be Nearing End - 18th Apr 15
UK Housing Crisis, Immigration, Population Growth, Election Forecast 2015 - Video - 18th Apr 15
Q1 Corporate Earnings Risky for Stocks - 17th Apr 15
US Stock Market Getting Scarier by the Day - 17th Apr 15
Stock Market Watershed Day - 17th Apr 15
Gold Price Has “Hallmarks Of Market That Is Bottoming” - 17th Apr 15
Chinese Stock Market - Men Go Mad in Herds - 17th Apr 15
Two Stocks Offering Investors High Yields and Profits - 17th Apr 15
Gold Price Has “Hallmarks Of Market That Is Bottoming” - 17th Apr 15
Chinese Stock Market - Men Go Mad in Herds - 17th Apr 15
Two Stocks Offering Investors High Yields and Profits - 17th Apr 15
King Dollar Hurting Stock Market Corporate Earnings! - 17th Apr 15
Production Declines Hide Bigger Crude Oil Storage Issues - 17th Apr 15
Top Three Takeaways From Today’s OPEC Crude Oil Report… and How You Can Profit - 17th Apr 15
How to Profit from Australia's Healthiest Biotech Stocks - 17th Apr 15
What Is Really Driving Gold Price? - 17th Apr 15
Will Ever More Boomers Selling Retirement Assets Change Investment Prices For Decades? - 16th Apr 15
Won't Be Contagion with 'Grexit' Greece Euro-zone Exit - 16th Apr 15
Sharp Decline in USD/CAD and Its Consequences - 16th Apr 15
Blackstone is like Apple, Google, Hermes, Boeing - 16th Apr 15
The Most Dangerous Financial Headline I've Seen Since the 2008 Crisis - 16th Apr 15
Is Legal Tax Avoidance Extinct in the UK? - 16th Apr 15
Why Russia Will Send More Troops to Central Asia - 16th Apr 15
More Thoughts on the Current Crude Oil Market - 16th Apr 15
U.S. Treasury Secretary Warns Greek Exit Will Cause Enormous Disruption and Hardship - 16th Apr 15
The Hottest New Place to Find Stock Dividend Income in Q2/2015 - 15th Apr 15
How to Escape the Pensions Squeeze - 15th Apr 15
Water Crisis Game Changing Water Revolution - 15th Apr 15
The Drying of California - Corporate Farms Control of Water - 15th Apr 15
OPEC Going Broke, Dumping U.S. Dollars. Is That Good Or Bad? - 15th Apr 15
OPEC Just Confirmed It’s Losing the Oil War - 15th Apr 15
Four Uranium Companies Poised to Profit from the Growth of Nuclear Power - 15th Apr 15
Stock Investing Tread Softly… and Carry a Big Risk-Management Calculator - 15th Apr 15
Crude Oil Price Technical Outlook - 15th Apr 15
Important Bitcoin Price Action - 15th Apr 15
UK House Prices, Immigration, Population Growth and Election Forecast 2015 - 15th Apr 15
Peter Schiff on U.S. Dollars, Drachmas and Debt - Video - 14th Apr 15
The Ultimate Middle East Dilemma: Time For Us To Stop Intervening? - 14th Apr 15
Greece Debt Default and Drachma By End of April? - 14th Apr 15
Coming to Terms With the American Empire - 14th Apr 15
The Ball is in the Stock Market Bulls Court - 14th Apr 15
Tech Stocks Bubble: Different this time? - 14th Apr 15
Stock Market Sixth Sense - 14th Apr 15
Separating Gold and Silver Stocks Saints from the Sinners - 14th Apr 15
Conservatives Bribe Labour Voters by Extending Right to Buy to Housing Association Tenants - 14th Apr 15
Stacking Silver = Simple Solution - 13th Apr 15
Why Markets Ignored Weaker Payrolls - 13th Apr 15
Tory Attack on Ed Milliband Backfires as Labour Takes Opinion Polls Lead - 13th Apr 15
A "Digitalized" Stock Profit Play Mr. Spock Would Love - 13th Apr 15
New Credit Crunch Underway: Can Recession Be Far Behind? - 13th Apr 15
Western Interest in Gold Continues to Decline - 13th Apr 15
Stock Markets Breaking Out Worldwide - Buy the Dips Ride the Trend - 13th Apr 15
Silver Price set up to get Whacked Again - 13th Apr 15
Gold Price Dome Cap, Fall Below $1000 Likely - 13th Apr 15
Stock Market Accumulation or Distribution - 13th Apr 15
BLS Economic Propaganda, Truth – The Cure for Cognitive Dissonance - 12th Apr 15
A Case for Monetary Independence - 12th Apr 15
Drought and the Failure of Big Government in California - 12th Apr 15
Stocks Bull Market Continues - 11th Apr 15
Why the American Consumer Will Never Be Back - 11th Apr 15
End Of Islam, Hinduism And Christianity And Rise Of The Age Of Humanism, Spirituality And The Universal God - Sanadhana Dharma - 11th Apr 15
Gold And Silver Nothing Of Substance Going On. Fiat “Dollar” Controlling? - 11th Apr 15
The Most Dangerous Financial Headline I’ve Seen Since 2008 - 11th Apr 15
Alibaba Pggybank Investment Will Make You a Millionaire - 11th Apr 15
Ghosts In The Machine - Population Growth vs Food Production - 11th Apr 15
Gold-Futures Short Covering Rally - 11th Apr 15
Is Bitcoin Price Going down Some More? - 11th Apr 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Historic Bubble

Stock Market Inflationary Rally May Spark Breakout In Gold and The Undervalued Junior Miners

Commodities / Gold and Silver Stocks 2013 Jan 13, 2013 - 10:22 AM GMT

By: Jeb_Handwerger

Commodities

The equity markets are soaring to new highs following the Fiscal Cliff deal reached recently in Washington which continues to raise the debt and kick the can down the road. It is just what we expected a few months ago...a conciliatory deal that will delay the inevitable for the time being.

Immediately, after the bill was passed by the House, Obama went back on his multi-million vacation to Hawaii after signing an executive order to increase pay for Washington politicians.


The U.S. government is broke, yet the politicians are living "la dolce vita" on the tab of the minority of Americans who actually work and pay taxes.

One of the highlights of the new deal is an extension of the costly unemployment benefits. Maybe if the extensions were done away with more Americans would actually get back to work?

The World will begin to wise up and realize that the gold (GDXJ), silver(SIL), uranium (URA) and critical metal (REMX) miners may be the safest place to be as the U.S. is rapidly losing its status as an economic juggernaut.

The dollar (UUP) and treasuries (TLT) are reversing lower and may hit critical new lows. Investors are selling the dollar and U.S. bonds for risk on assets such as commodities and equities.

TLT

The long term bond etf (TLT) is breaking below the 200 day moving average. We called the top this summer. See article predicting top in treasuries titled, "A Major Turning Point For Gold, Silver and U.S. Treasuries".

We may be in the beginning of a hyper-inflationary rally where interest rates could begin soaring and the dollar could hit new lows. This could cause another decline in the housing market and put pressure on banks. There is plenty of cash on the sidelines who may be seeking alternatives in the form of the undervalued commodities (DBC) and miners (GDX) especially as the dollar is forming a bearish head and shoulders formation and the Canadian Venture is breaking out above the 50 day moving average.

US Dollar

The bill to avert the Fiscal Cliff did not include any meaningful cuts to entitlements, while taxes went up significantly. This does not sound like ingredients for an economic recovery. Do not be surprised with rising interest rates if the inflated housing and financial market turn down with further credit downgrades.

Instead, we would use this rally to sell overvalued U.S. equities especially U.S. banks (XLF) and housing (XHB) and diversify into the undervalued miners who appear to be bottoming and making positive technical reversals.

Gold, silver and the undervalued miners may be on the verge of a major turnaround higher. The Venture looks like it may be on the verge of a breakout as it crosses above the 50 day moving average.

CDNX

China appears to be in much stronger economic shape as easy fiat money is flowing into these growing economies. The Chinese Yuan (CYB) and Equities are soaring these past six months since QE3 to infinity was announced at Jackson Hole. Chinese exports are strong despite a strong yuan which means China may be in the early stages of a powerful rally.

Admittedly the resource sectors have not performed up to par with gold, silver and general equities for the past two years. Investors have chosen assets such as U.S. bonds, housing and financials as purported safe havens while precious metals, commodities and miners have been beaten down.

We believe this is a counter trend corrective move in a commodity 20 year uptrend supercycle artificially manipulated to shakeout investors from hard assets to enter toxic instruments such as the U.S. dollar, housing and debt.

We may be emerging from a 22 month base. Long term corrections last about 18 months so we are way overdue for a reversal. This is bargain time for mining investors with long term horizons such as the Asians.

The time now should be used to accumulate some of the greatest natural resource assets on discount. Expect large institutions and funds to continue to enter this small sector as the dollar turns lower.

Governments all around the world are flooding the markets with cheap fiat currency to artificially boost moribund economies. They are not cutting entitlements like they should be doing. Instead, they are raising taxes and inflating their way out of debt which may hurt any meaningful long term economic growth.

Precious metals will continue to grow increasingly valuable over the next few years as Asia has already begun to diversify away from treasuries and U.S. dollars and increase purchases of gold.

Central Banks in Asia have been buying gold and large sovereign funds, billionaires and mining companies are looking to acquire undervalued mining assets. Stick with the smart money, rather than following the herd chasing after the latest fads.

Gold and silver may be on the verge of breaking above the 200 day moving average and starting its next leg higher. Stay tuned.

Despite current weakness in gold around the $1650 area we expect a turnaround in gold with a new leg up to $1800 area and eventual breakout at $2000 in 2013. Despite noises heard in the Fed minutes of a purported exit from quantitative easing, Central Banks around the world have flooded the markets with fiat currency.

Around the world gold has outstripped every competitive currency for the past ten years, yet the mainstream fail to understand the importance of owning gold and the gold miners. Recently we have been in a sideways basing period in gold where the price has bounced between $1800 and $1550. Gold may now be forming the base for a major breakout at $1800.

10-Year Gold Chart

For the past ten years gold has been the place to be yet the masses have still not yet participated. The recent consolidation like 2008 may prove to be a great discount opportunity.

Subscribe to my free newsletter to get up to the minute updates on rare earths, uranium, gold and silver.

By Jeb Handwerger

Disclosure: I am long GLD, SLV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

http://goldstocktrades.com

© 2013 Copyright Jeb Handwerger - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Jeb Handwerger Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014