Best of the Week
Most Popular
1.War on Cash, Bank of England Planning Hyper QE, Scrapping Cash for Digital Currency - Nadeem_Walayat
2.Stock Market End Run Smash Crash Looks Imminent... - Clive_Maund
3.Europe Refugee Crisis, UK to Repatriate 120,000 Hungarian Economic Migrants Back to Hungary - Nadeem_Walayat
4.The Great Deflation Will Destroy All Bubbles – These Too - Harry_Dent
5.Deflation Signals Abound for U.S. Dollar, Forex Markets and Commodities - Rambus_Chartology
6.U.S. Housing Market Two Outs in The Bottom of The Ninth - James_Quinn
7.Poland, Czech, Slovakia and Hungary Refugee Hypocrisy After Flooding UK with 4 Million Economic Migrants - Nadeem_Walayat
8.The Two Real Reasons Crude Oil Prices Are Currently Slipping - Dr. Kent Moors
9.R.I.P. Interest Rates - Andrew Snyder
10.Steps from a Deep October Stock Market Selloff - Bob_Loukas
Last 5 days
Putin’s Blitz Leaves Washington Rankled and Confused - 4th Oct 15
More Selling for Stock Market, Gold? - 4th Oct 15
Gold And Silver – A Reality Check - 3rd Oct 15
Stock Market Primary IV Still, or Primary V Underway? - 3rd Oct 15
The Oil Industry’s Day of Reckoning - 3rd Oct 15
U.S. Interest Rate Hikes Keep On Slippin' Into the Future; Treasury Yields Sink Again - 3rd Oct 15
China's Stock Market Crashing; Time for Panic or Restraint - 3rd Oct 15
SPX Stocks Bulls Struggle to Regain the Upper hand... - 2nd Oct 15
The Two Faces of Stock Market Volatility - 2nd Oct 15
Money Supply and the Fed’s Serious Inflation Risks - 2nd Oct 15
Stock Market How Bad Can This Get, And How Fast? - 2nd Oct 15
A Worrying Set Of Recession Signals - 2nd Oct 15
Negative Jobs Report Sents SPX, TNX Lower - 2nd Oct 15
Don't be Fooled by the Recent Equity market Rallies. Its a Bear Market, Stupid! - 2nd Oct 15
US Bond Market - How to Fix This - 2nd Oct 15
Survival Secrets from Colorado Resource Investing Front Lines - 2nd Oct 15
What Two Risks From Rising Interest-Rates Could Each Trigger A New Global Crisis? - 1st Oct 15
Stock Market S&P 500 Volatility-Based Price Probability Range - 1st Oct 15
Dow Stock Market About To Crash Like October 1929? Get Your Physical Silver - 1st Oct 15
Stock Market Negative Expectations Once Again - Will It Break Down? - 1st Oct 15
Advice for Biotech Investors: 'Hold Your Powder' 'til Winter - 1st Oct 15
Best Short-Term Commodity Market Opportunities - Video - 1st Oct 15
The Coming Corporate "Crime Wave" - 30th Sept 15
Stock Market Retracement May Have Run Its Course - 30th Sept 15
A Stocks Bear Market Is Now More Likely Than Not - 30th Sept 15
The Killer Ape, Human Evolution, Artificial Intelligence and Extinction End Game - 30th Sept 15
Junk Bond Market Imminent Collapse Threatens (Unwelcome) BIG Rate Rises - 30th Sept 15
Stocks: Why Following the Crowd is Usually a Big Mistake - 29th Sept 15
This Stocks Bear is Just Waking from Hibernation - 29th Sept 15
Interest Rates All Bad at 0%? - 29th Sept 15
If Stocks Can't Hold These Levels, We'll Have a Bear Market - 29th Sept 15
7 Bullish Gold Price Indicators - 29th Sept 15
Crude Oil Price Is Going to Fall by 50%… Again - 29th Sept 15
SPX Triggers a Amall Head & Shoulders Formation - 28th Sept 15
Stock Market Bubble Balloons in Search of Needles - 28th Sept 15
Gold and Silver, Precious Metals Complex Getting Interesting - 28th Sept 15
Economic Channels of Distress - Fourth Turning Crisis of Trust - 28th Sept 15
Stock Market Testing Important Levels - 28th Sept 15
Stock Market Going Down, Gold Chop Continues - 27th Sept 15
Stock Market Primary Wave IV Inflection Point - 27th Sept 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

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


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.


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.


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.

© 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 - 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

Biggest Debt Bomb in History