Best of the Week
Most Popular
1.U.S. Inner City Turmoil and Other Crises: Ron Pauls Predictions for 2015 - Dr_Ron_Paul
2. What’s In Store For Gold Price in 2015? - Ben Kramer-Miller
3.Crude Oil Price Ten Year Forecast to 2025: Importers Set to Receive a $600 Billion Refund - Andrew_Butter
4.Je ne suis pas Charlie - I am not Charlie - Nadeem_Walayat
5.The New Normal for Oil? - Marin_Katusa
6.Will Collapse in Oil Price Cause a Stock Market Crash? - OilPrice.com
7.UK CPI Inflation Smoke and Mirrors Deflation Warning, Inflation Mega-trend is Exponential - Nadeem_Walayat
8.Winter Storms Snow and Wind Tree Damage Dangers, DIY Pruning - Nadeem_Walayat
9.Oil Price Crash and SNP Independent Scotland Economic Collapse Bankruptcy - Nadeem_Walayat
10.U.S. Housing Market Bubble 2.0 Meet the Pin - James_Quinn
Last 5 days
U.S. Escalation in Ukraine Is Illegitimate and Will Make Matters Worse - 1st Feb 15
The German 10 Year Bund Effectively a Call Option at 30 Basis Points - 1st Feb 15
Australian Stock Market Index ASX200 Technical Analysis  - 1st Feb 15
Stock Market Major 4 or Primary IV Wave - 31st Jan 15
Gold And Silver Price Probability for A Lower Low Has Increased - 31st Jan 15
U.S. Bond Market Has Reached Tulip Bubble Proportions - 31st Jan 15
The 3 Big Reasons My Apple Stock Price Prediction Is Still Coming True - 31st Jan 15
199 Days of Hell - Unintended consequences: Oil and the Worst Battle in History - 31st Jan 15
Kaminak Yukon Gold - 30th Jan 15
U.S. Asset Price Deflation Coming Up? Food Prices Drop? CPI Negative? Credit Deflation? - 30th Jan 15
An Often Overlooked Predator: State Governments and Income Taxes - 30th Jan 15
Bullard Says Rates at Zero Interest Rates Not Right for U.S. Economy - 30th Jan 15
Why the European Central Bank's Massive Economic Experiment Will Fail - 30th Jan 15
Gold Price Short-Term Bottom Due, Higher into February - 30th Jan 15
Silver and Other Precious Metals To Manipulate - 30th Jan 15
Socialism Is Like a Nude Beach - Sounds Like a Great Idea Until You Get There - 30th Jan 15
To Create Unlimited Market Liquidity or Not; That Is the Question - 30th Jan 15
Seen the Energy Downturn Movie Before, and Not Worried - 30th Jan 15
It’s Not Time to Sell Everything – Yet - 30th Jan 15
13 Investment Themes for 2015 - 29th Jan 15
The Raging Currency Wars Across Europe - 29th Jan 15
The End of Currency 'Safe-Havens' - 29th Jan 15
Ron Paul on U.S. Fed, Central Bankers Monetary Psychopaths - 29th Jan 15
Why Microsoft Stock Will Provide Major Investing Returns - 29th Jan 15
Exploring the Clash Within Civilizations - Mind the Gap - 29th Jan 15
Saudi Arabia Changes Kings, But Not its Oil Policy - 29th Jan 15
Crude Oil Price Bulls vs. Resistance Zone - 28th Jan 15
Acceleration Of Events With Rising Chaos – US Dollar Death Foretold - 28th Jan 15
The Fed and ECB Take the West back to when the Rich Owned Everything - 28th Jan 15
Washington's War on Russia - 28th Jan 15
Cyber War Poses Risks To Banks and Deposits - 28th Jan 15
Lies And Deception In Ukraine's Energy Sector - 28th Jan 15
EUR, AUD, GBP USD – Invalidation of Breakdown - 28th Jan 15
“Backup-Camera Envy” Is Driving This Unstoppaple Investment Trend - 28th Jan 15
The Great "inflated" Expectations for Gold, Oil, Commodities -- and Now Stocks - 28th Jan 15
How to Find the Best Offshore Banks - 28th Jan 15
There’s More to the Gold Price Rally Than European Market Fears - 28th Jan 15
Bitcoin Price Tense Days Ahead - 27th Jan 15
The Most Overlooked “Buy” Signal in the Stock Market - 27th Jan 15
Gold's Time Has Come - 27th Jan 15
France America And Religious Terror War - 27th Jan 15
The New Drivers of Europe's Geopolitics - 27th Jan 15
Gold And Silver - Around The FX World In Charts - 27th Jan 15
It’s Not The Greeks Who Failed, It’s The EU - 27th Jan 15
Gold and Silver Stocks Investing Basics - 27th Jan 15
Stock Market Test of Strength - 26th Jan 15
Is the Gold Price Rally Over? - 26th Jan 15
ECB QE Action - Canary’s Alive & Well - 26th Jan 15
Possible Stock Market Pop-n-drop in Store For SPX - 26th Jan 15
Risk of New Debt Crisis After Syriza Victory In Greece - 26th Jan 15
How Eurozone QE Works: A Guide to Draghi's News - 26th Jan 15
Comprehensive Silver Price Chart Analysis - 26th Jan 15
Stock Market More Retracement Expected - 26th Jan 15
Decoding the Gold COTs: Myth vs Reality - 26th Jan 15
Greece Votes for Syriza Hyperinflation - Threatening Euro-zone Collapse or Perpetual Free Lunch - 26th Jan 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Learn to Trade

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