Monday, March 7, 2011

Gold/Silver - Mixed bag of comments

Most of my blog posts have a fairly specific topic in mind. Tonight I don't have a lot of time, but just thought I'd condense some recent thoughts into a post and add some links. It's probably going to come out a bit disheveled (apologies in advance).

On the third phase...

On the subject of the third phase of the bull market as I began discussing here,  everyday I see signs that point to the beginnings of a mania phase. One of the most prominent that I came across today, was this reecnt front cover to SmartMoney magazine:

As was pointed out on this blog a couple of weeks ago.

Here is a recent A Current Affair video on Gold: Gold Buying Investigation

Granted it's more about selling Gold (and not getting ripped off), than buying, but they do cover the investment side of it briefly at the start of the video.

Gold and especially Silver have been getting an increasing amount of media coverage as they continue to rally out of their early year lows. Especially now that the rest of the market is tracking sideways/down the spotlight is on Gold and Silver as they continue to rise in the unstable conditions that the Middle East/Northern Africa troubles are presenting.

I am still of the opinion that Gold/Silver are on the verge of going truly parabolic within the next couple of years. As I've pointed out previously, in the last 2 years of the last Gold bull market the price Quintupled ($169 to $850) and I suspect this bull market will end with an equally impressive move.

On emails that I receive...

I'm getting quite a few emails (usually several per week) with questions along the lines of:

- Should I still buy?
- Where can I buy?
- How do I buy?

I don't mind answering each of these personally at the moment, but I suspect at some stage replying to each of these emails is going to be too time consuming. Feel free to keep those emails coming and will do my best to reply to each one within a couple of days, but for the time being here is my position currently:

- Should I still buy?

I suspect answering this directly would constitute financial advice. Personally I am not buying at the moment, that's not because I don't think Gold and Silver are going higher, but moreso because I have very heavy exposure to the metals already. If I had no position I would still be a regular buyer at today's prices, but I would be a heavier buyer of Gold than Silver.

Silver's move has been almost parabolic over the last 6 weeks or so. This is not surprising given the multi-year resistance line it broke past as I pointed here a couple of weeks ago (Link). Buying today does mean you run the risk of having to then hold through a correction, not buying and you run the risk of the breakaway move continuing to exceed expectations as it did over the last several months of 2010.

Given that I think Silver is heading to multiples of it's current price by the time this bull market is over I see no problem buying at today's price as long as you:

- Have an exit plan!
- Have the stomach to ride through any severe price corrections.

- Where can I buy?
- How do I buy?

These questions are often best answered by the locals in your city. If you are in Australia I would highly recommend that you sign up on the Silver Stackers forums. There is a lot of information already in threads there and users are from all over Australia are regularly posting, asking and answering questions. For example here is a 3 page thread on where to buy in Sydney. If you want a fast answer to your questions, then signup, post a thread and you'll likely have it answered within minutes rather than days.

Having bought via post before I can recommend the following two Australian based dealers:

Steve at Aurora Et Luna provides a terrific level of personalised service and is probably the best to make your first purchase through. Bullion Bourse offers some great prices on ASEs and other non Australian Silver coins.

I don't have any affiliation with Silver Stackers (other than being a regular poster on the site) or the above two dealers.

On recent USDX price action...

In a couple of recent posts I have briefly mentioned the price action of the USDX which has continued to fall in value.
February 25th

What's interesting is that even with recent unrest in the Middle East/North Africa and spiking Oil prices, the USDX continues to fall.

Has it lost it's status as a "safety trade"? I suspect so for the time being, but I believe that it will be back as a safe haven at some point in the future.

It's nearing support at 76, if it drops below that 74 is next and if that support is broken then LOOK OUT BELOW! The dropping US Dollar is likely to be a key driver in pushing Gold and Silver higher in their current leg up.

On other commentators...

I have mentioned some other commentators I follow on here before, one being Stewart Thompson. Another I follow closely is Gary Savage over at SMT blog. He has predicted quite a few of the twists and turns in this bull market using his cycle/sentiment/money flow analysis. I don't personally have a subscription to his service as most of his comments relate to trading on the US market which isn't of particular use (to me), but I do find his blog an interesting read. His opinion is that we are in and heading toward the peak of a 'C Wave' which means higher prices over the next couple of months (I have seen him suggest targets of US$1600+ for Gold and US$50 for Silver). Here is one of his recent blog posts:
Folks I want to start preparing you  for what’s ahead. Once we get into the final daily cycle up in gold I think we are going to see a parabolic move unlike anything we’ve seen yet. And on the flip side as the dollar starts to drop, or maybe crash is a more appropriate term, into it’s final three year cycle low we are going to see an absolute horror show unfold. That combination is going to drive gains unlike anything any of us have likely ever made before.

The world will be in an utter panic to get rid of dollars. And the stock market is not going to provide protection from this kind of inflationary storm so a lot of those dollars are going to end up in the commodity markets, and especially in the precious metals. When that kind of money hits a thin market like gold, and especially silver, it will drive gigantic gains.

There is going to be extreme temptation to jump off early simply because one can’t believe they could possibly make that much money that fast. Let me warn you now don’t give in to that temptation. We know what to look for at a three year cycle low and we know what to look for at a C-wave top. Until we see those signs sit tight. Trust me it’s going to be one of the hardest things you’ll do all year.

Folks, fortunes are going to be made in the next two months.
Today he has also posted an interesting piece on volumes in SLV and Silver stocks and how it's pointing to bull market recognition. He recently opened up the old reports on his blog so you can read through previous predictions, you can view them here. Where I do clash on views with Gary is that he believes the Gold bull market still has 5+ years to run. I believe it likely it will be all over within 3 years maximum, potentially much sooner.

Some advice...

If I had any advice for those buying into the Gold and Silver market today it would be to make sure you are buying in for the right reasons and to make sure you have an exit plan (even if it's somewhat conditional).

Here are some of the wrong reasons to be buying:

Wanting to blow up JP Morgan

Let's face it, JP Morgan is a huge company that is too big to fail. I suspect their Silver short positions are actually hedges for legitimate long positions they have in the Gold and Silver market through shares and other avenues. I've seen many Australian (Gold/Silver) stocks where JP Morgan and HSBC have significant positions, I suspect this pattern is obvious on other exchanges as well. If JP Morgan were really burning from shorting this bull market then surely we would have seen this on their balance sheet... they continue to make huge profits.

Wanting to blow up the Comex

The Comex has a similar Silver inventory level to 2006, yes it has fallen from highs over recent years, but there is still plenty of metal  (unless you believe their inventory is fraudulent!) I see no real reason to believe the rubbish circulating the internet about 80% premiums being paid for longs to take cash settlement and this Wynter/Benton/Blythe nonsense.

The price is manipulated

It may be so, but there are enough REAL reasons to be buying Gold and Silver without having to rely on the possibility that the price is under a long term suppression scheme. Don't get me wrong, I think shorter term 'take downs' are likely to be occurring, price is often driven below key support to flush out stops, etc but I do not believe there is any ongoing long term manipulation of the prices occurring. Short term manipulation via program/algorithmic trading seems likely, but is a part of most markets, not just the metals.

The Salesman told me so

What do Mike Maloney, James Turk and David Morgan all have in common? They are all salesman! Don't get me wrong, I agree with some of the views they put forward, however buy because you've checked into the facts they present, not because they told you now was a good time to buy. At the end of the day they are all peddling books, reports or a product of some sort. To be fair I also have an interest in the stocks I write up and Silver/Gold, so you should always check everything I post for the facts and then come to your own conclusions.

Enough rambling...

I had a feeling this post would end as randomly as it started, so here it is!


Disclosure: Positions held in Gold/Silver. Not investment advice. Do your own research.


  1. Hey BB. Were you aware you had a stalker on MacroBusiness called the Prince. Close to plagiarism but I guess it also brings you attention if he links to you. You have superior analysis anyway.

  2. Hey Mike, thanks for the heads up, but The Prince has checked that it's ok to quote the articles and I'm fine with it (providing credited/linked which is the case on MB). I'm all about sharing the information :)

    I've done my fair share of quoting other commentators on here also!



  3. Hey Mike, if someone posts something that is clearly a cut and paste and doesn't link back to the original - that's pretty clear case of stalking!

    But I and the other bloggers on MacroBusiness always put the original author - including link and credit before any quotes and we blockquote it (i.e its in a different frame) as well.

    BB is definitely the bullion/PM man - so I will "lean" on him from time to time for better analysis, that's for sure!