Best of the Week
Most Popular
1.The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - Doug_Wakefieldth
2.Tesco Meltdown Debt Default Risk Could Trigger a Financial Crisis in Early 2015 - Nadeem_Walayat
3.The Trend Every Nation on Earth Is Pouring Money Into - Keith Fitz-Gerald
4.Do Tumbling Buybacks Signal Another Stock Market Crash? - 26Mike_Whitney
5.Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - Nadeem_Walayat
6.Gold And Silver Price - Respect The Trend But Prepare For A Reversal - Michael_Noonan
7.U.S. Economy Faltering Momentum, Debt and Asset Bubbles - Lacy Hunt
8.Bullish Silver Stealth Buying - Zeal_LLC
9.Euro, USD, Gold and Stocks According to Chartology - Rambus_Chartology
10.Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - EWI
Last 5 days
U.S. Midterm Elections: Would a Republican Win Be Bullish for the Stock Market? - 30th Oct 14
Stock Market S&P Index MAP Wave Analysis Forecast - 30th Oct 14
Gold Price Declines Once Again As Expected - 30th Oct 14
Depression and the Economy of a Country - 30th Oct 14
Fed Ends QE? Greenspan Says Gold “Measurably” “Higher” In 5 Years - 30th Oct 14
Apocalypse Now Or Nirvana Next Week? - 30th Oct 14
Understanding Gold's Massive Impact on Fed Maneuvering - 30th Oct 14
Europe: Building a Banking Union - 30th Oct 14
The Colder War: How the Global Energy Trade Slipped From America's Grasp - 30th Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VIII) - 29th Oct 14
Flock of Black Swans Points to Imminent Stock Market Crash - 29th Oct 14
Bank of America's Mortgage Headaches - 29th Oct 14
Risk Management - Why I Run “Ultimate Trailing Stops” on All My Investments - 29th Oct 14
As the Eurozone Economy Stalls, China Cuts the Red Tape - 29th Oct 14
Stock Market Bubble Goes Pop - 29th Oct 14
Gold's Obituary - 29th Oct 14
A Medical Breakthrough Creating Stock Profits - 29th Oct 14
Greenspan: Gold Price Will Rise - 29th Oct 14
The Most Important Stock Market Chart on the Planet - 29th Oct 14
Mysterious Death od CEO Who Went Against the Petrodollar - 29th Oct 14
Hillary Clinton Could Be One of the Best U.S. Presidents Ever - 29th Oct 14
The Worst Advice Wall Street Ever Gave - 29th Oct 14
Bitcoin Price Narrow Range, Might Not Be for Long - 29th Oct 14
UKIP South Yorkshire PCC Election Win is Just Not Going to Happen - 29th Oct 14
Evidence of New U.S. Housing Market Real Estate Bust Starting to Appear - 28th Oct 14
Principle, Rigor and Execution Matter in U.S. Foreign Policy - 28th Oct 14
This Little Piggy Bent The Market - 28th Oct 14
Global Housing Markets - Don’t Buy A Home, You’ll Get Burned! - 28th Oct 14
U.S. Economic Snapshot - Strong Dollar Eating into corporate Profits - 28th Oct 14
Oliver Gross Says Peak Gold Is Here to Stay - 28th Oct 14
The Hedge Fund Rich List Infographic - 28th Oct 14
Does Gold Price Always Respond to Real Interest Rates? - 28th Oct 14
When Will Central Bank Morons Ever Learn? asks Albert Edwards at Societe General - 28th Oct 14
Functional Economics - Getting Your House in Order - 28th Oct 14
Humanity Accelerating to What Exactly? - 27th Oct 14
A Scary Story for Emerging Markets - 27th Oct 14
Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - 27th Oct 14
Europe Redefines Bank Stress Tests - 27th Oct 14
Stock Market Intermediate Correction Underway - 27th Oct 14
Why Do Banks Want Our Deposits? Hint: It’s Not to Make Loans - 26th Oct 14
Obamacare Is Not a Revolution, It Is Mere Evolution - 26th Oct 14
Do Tumbling Buybacks Signal Another Stock Market Crash? - 26th Oct 14
Has the FTSE Stock Market Index Put in a Major Top? - 26th Oct 14
Christmas In October – Desperate Measures - 26th Oct 14
Stock Market Primary IV Continues - 26th Oct 14
Gold And Silver Price - Respect The Trend But Prepare For A Reversal - 25th Oct 14
Ebola Has Nothing To Do With The Stock Market - 25th Oct 14
The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - 25th Oct 14
Japanese Style Deflation Coming? Where? Fed Falling Behind the Curve? Which Way? - 25th Oct 14
Gold Price Rebounds but Gold Miners Struggle - 25th Oct 14
Stock Market Buy the Dip or Sell the Rally - 25th Oct 14
Get Ready for “Stupid Cheap” Stock Prices - 25th Oct 14
The Trend Every Nation on Earth Is Pouring Money Into - 25th Oct 14 - Keith Fitz-Gerald
Bitcoin Price Decline Stopped, Possibly Temporarily - 25th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

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

© 2005-2014 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