Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Life Sciences Biotech Smaller Cap High Risk Stocks Investing Binge - 24th Jun 21
Central Banks to Keep Buying Gold - 24th Jun 21
Will Gold Survive Hawkish Fed? - 24th Jun 21
The Clean Energy Compound That Could Change The World - 24th Jun 21
Everybody's Getting Rich (and Having Fun) Except Me - 24th Jun 21
WESTERN DIGITAL WDC Stock Trend Analysis - CHIA! - Risk 1 - 23rd Jun 21
AMC Is the Best-Performing Stock in America: Don’t Buy It - 23rd Jun 21
Stock Market Calling the Fed‘s Bluff - 23rd Jun 21
Could Bitcoin Price CRASH Target A Bottom Below $7500? - 23rd Jun 21
Bitcoin and cryptos: Your 'long-term investment'? - 23rd Jun 21
Unlocking The Next Stage Of The Hydrogen Boom - 23rd Jun 21
USDT Ponzi Scheme FINAL WARNING To EXIT Before Tether Collapses Crypto Exchange Markets - 22nd Jun 21
Stock Market Correction Starting - 22nd Jun 21
This Green SuperFuel Could Change Everything For the $14 Trillion Shipping Industry - 22nd Jun 21
Virgin Media Fibre Broadband Installation - What to Expect, Quality of Wiring, Service etc. - 21st Jun 21
Feel the Inflationary Heartbeat - 21st Jun 21
The Green Superfuel That Could Disrupt Global Energy Markers - 21st Jun 21
How Binance SCAMs Crypto Traders with UP DOWN Coins, Futures, Options and Leverage - Don't Get Bogdanoffed! - 20th Jun 21
Smart Money Accumulating Physical Silver Ahead Of New Basel III Regulations And Price Explosion To $44 - 20th Jun 21
Rambling Fed Triggers Gold/Silver Correction: Are Investors Being Duped? - 20th Jun 21
Gold: The Fed Wreaked Havoc on the Precious Metals - 20th Jun 21
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Keep Your Head When Investing In Gold and Silver

Commodities / Gold and Silver 2013 Feb 22, 2013 - 04:57 AM GMT

By: Jeb_Handwerger

Commodities

"If you can keep your head when all about you Are losing theirs and blaming it on you...And--you'll be a Man, my son!" ~ If by Rudyard Kipling

Today a news item from the Wall St. Journal crossed my desk entitled, "A Fearful Time For Gold". Then I read another article entitled, "S&P500 In Longest Winning Streak Since 2004." These articles are an indication of what the majority is thinking and may be a contrarian buy alert for my readers.


The majority of investors are usually wrong at turning points. Many investors are becoming impatient with gold selling into an oversold panic in the miners and looking for the latest fast money scheme in mortgages or real estate. Be careful of following this emotional move where investors take on too much risk in banks and housing and overly fearful and pessimistic in mining equities. We are in the midst of currency and trade wars where countries are competing to devalue their currency.

My readers are well aware that the role of the media is to confuse and misdirect the average investor. Be careful of the media's job which is to sell the popular news of that day for the masses. Many times the cover stories are a reflection of the majority view, which is usually wrong. Behind the scenes the world is in the midst of competitive currency devaluations. The Japanese Yen is in free fall and the West must compete which could put downward pressure on the U.S. dollar and Euro.

However, the news fails to discuss what the implications of trade wars and the impact on currencies can have to investments. Instead they like to publicize pundits who are speaking about if the Canadian Venture exchange can be saved or discussing a complete collapse. In my opinion, this is characteristic bear market talk, capitalism and metals exploration are not ready to run for the hills especially as we have a lack of available supplies in uranium, rare earths and precious metals.

Usually these pessimistic doom and gloom comments signal a contrarian bargain buying opportunity. In fact, I have spoken with many mining executives who have been in this business for 4+ decades and they have commented that they have never seen pessimism in the sector like now. There are several mining companies whose market cap is just a fraction of their Net Present Values from third party independently verified economic assessments. Never have they seen this disconnect.

Just like we had irrational exuberance on the upside with tech and real estate this past decade, we are witnessing illogical fear in the junior mining sector. In due time, investors will look back at this time and be amazed at some of the values.

We feel that it is only a matter of time before the precious metal, rare earth and uranium miners themselves participate in reflecting this bull market in other areas such as banking and real estate which are being manipulated higher by Central Banks. Capital will eventually flow to quality.

Many miners are reporting earning surprises beating analyst estimates and breaking into new highs. The large gold mining companies have taken write downs. The majors are desperate for resource growth at a time when new discoveries are at an all time low. While the large gold miners are testing lows, some of the big industrial miners are outperforming the S&P 500 and hitting new 52 week highs.

The majors are becoming less picky and some of the undervalued juniors sitting on developing mines may attract the hungry giants who may pay exciting premiums. Do not forget many of these majors are sitting on large holdings of U.S. dollars, which is increasingly losing value. They must work speedily to transfer that capital into resource growth. Many of their large and high cost miners are riskier then some assets being held by undervalued juniors.

I have learned through experience that following the majority or the mass media is dangerous. How soon we forget the tech collapse where many of our colleagues who became day traders and web entrepreneurs were wiped out. The housing crash is almost completely forgotten by the mainstream media or the average investor.

Many of my contemporaries who became mortgage agents or real estate brokers are getting back into the real estate business as the Fed has been throwing tons of fiat dollars into those markets. Be careful of a double dip in the housing market as there is still a huge inventory of homes and condos which have not hit the market.

Despite these two major bubbles just in the past 15 years, some pundits claim we are in a gold bubble despite the miners being at record low valuations. Most of my friends in the mining industry are 60-90 years old and they are concerned that there may be an entire generation that is not well equipped with the ability to explore and develop mining operations. There is a huge generation gap and a lack of technical skill with few discoveries being made despite record exploration budgets.

Just like the .com bubble or the real estate bubble, there will come a time when all your friends will be discussing mining stocks or going into the mining industry. We are far away from that time as the majors trade at a record discount P-E Ratio compared to the S&P500. When your taxi driver starts talking gold stocks with you that is the signal to take profits and that we may be near a bubble.

Recently, sellers predominantly large hedge funds who have been highly leveraged to the price of gold are rushing to the exits as margin calls and fund redemptions increase. This is a shakeout of the weak hands before a potential breakout move which may be completion of basing process. While many are discussing the death cross on gold, they fail to speak about the death cross in long term treasuries. This may be indicating increased risk appetite and a rotation into equities.

Many times bottoms come with capitulation or panics as investors rush to get out at any prices. Usually after capitulation great bargains are available. Remember we are witnessing increased margin calls and commodity fund redemptions that is causing forced selling.

After these volatile periods, major reversals tend to occur, which I will be monitoring for in my newsletter.

Many precious metals investors are scared and beginning to panic. We are witnessing a selloff in precious metals and miners as the general equity market continues to move parabolically higher. More specifically the mortgage, bank and homebuilders are leading the overbought rally.

Investors are confused as these are the sectors which almost caused the entire capital system to almost collapse. Massive bailouts, mark to market and refinancing debt at artificially low interest rates have been tools to manipulate these sectors higher. For a few weeks, I have been warning my readers about the extremely overbought conditions in the general equity market despite a weak economy and the risk of hyper-inflation.

On October 4th of 2011, I called for a major risk-on rally. See the video analysis from back then by clicking here . At that time I wrote, "The S&P 500 had a powerful reversal and showed the first major day of buying since the August Crash. Chart patterns indicate that a potential low could have been placed this week."

That in fact was the major bottom as easy money from the Fed stealthily boosted the toxic housing and financial stocks, while hiding inflation. In fact, since that time the best performing industries have been mortgage finance, home improvement retailers, real estate investments and U.S. Banks. These are the same toxic sectors that caused the crash and has trillions of dollars thrown at it to prevent a depression.

Last year I spoke at PDAC in March of 2012 and was quoted in Bull Market Run as saying, ""The risk-on rally began in early October due to record breaking stimulative measures, actions from the ECB, China, the U.S. and Japan...it's very hard to fight the Federal Reserve which is constantly pushing money into the system...this run into cash and treasuries, this irrational run in 2011, was really a very dangerous move and there are a lot of investors still on the sidelines, a lot of capital that's going to come back into the market..."

Now we are witnessing the capital come back into the market but it has not trickled down to the junior miners. The housing etf (XHB) is up over 110% while the major gold miners are down 25%. This divergence may only last so long. Investors will one day realize that the Central Banks actions over the past 5 years could have long term hyper-inflationary consequences which could be devastating to the next generation.

This is why I encourage you to be cautious as the Dow breaks above 14,000. The general equity market is overbought and may soon be reaching a top. The U.S. dollar may soon break 52 week lows and continue downward in its secular bear market following the Yen lower. The underlying economic foundation is shaky as unemployment and government debts continues to soar.

First we had the bonds rally in 2011, then the equities for close to 15 months and a major move may soon be coming in the commodities and junior miners possibly even greater than 2009-2010 after the 2008 decline.

Usually when bonds and stocks rally together and commodities consolidate like they did in 2011-2012 it forecasts a hyper-inflationary rally. We may be on the verge of that great rotation into the junior miners in 2013, so hold tight and keep your head even when all around you are selling and losing theirs.

Do not forget the discounted junior miners who are searching for real wealth in the earth. It may happen sooner rather than later that the large amounts of capital being put into the housing and financials will rotate into commodities.

Disclosure: No stocks or etf's owned in article by author.

I will be speaking at the PDAC Conference in Toronto, Ontario Conference at the Metro Toronto Convention Center on Sunday, March 3rd, 2013 at 12PM. I hope to see some of my readers there.

PDAC Conference is the leading investment show dedicated solely to the mineral industry.

Letter Writer Presentations for Investors provides investors with information to assist them with their investment decisions. Other top newsletter writers will also be presenting their charts, thoughts and ideas on how to select good investments in the resource sector.

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

© 2005-2019 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