Tuesday, August 12, 2008
Gold made a bottom at $651 on August 16th 2007 before rallying to over $1025 by March 2008. The anniversary of that low is less than a week away and we suspect history is going to repeat itself as gold prepares for anther tremendous rally.
Technically, gold looks to be a good buy at these levels for the following reasons:
Buying gold close to the 200 day moving average is a good strategy, buying below is even better. The RSI for gold is near 30, a classic BUY signal that rarely presents itself and should be taken advantage of.
We see gold holding at $850 on its support line, before building a base and moving much higher in the coming months.
STO is oversold, along with many other technical indicators.
And if gold is oversold, then silver is severely oversold as the chart below shows:
With silver just 33 cents from a support area which starts at $15 and goes through to $14, we view these prices as great chance to load up on silver and silver stocks. The technical situation for silver is similar to the yellow metal, except in this case poor man’s gold appears to be more oversold and is perhaps a better buy. Remember that the silver market is more volatile than gold, and tends to have sharper corrections (one of which we have just witnessed), but at the same time it can bounce back higher, and faster than gold, which makes it an excellent trading vehicle for those with the stomach to speculate on the oscillations.
This sell off in precious metals (and oil) has primarily been caused by a strengthening US dollar. Why has the greenback been making gains? Hot air. The USD has been moving up as the Fed has been talking about inflation and the possibility of raising interest rates. We must keep in mind that the Fed hasn’t actually raised rates yet, and even if they do, how far will they go? We expect any rise in interest rates to be minimal. And even if they do embark on a rate raising policy, will this stop golds accent to $2000+? Absolutely not. The most it will do is delay gold making an inflation adjusted all time high. Remember that in 1980 gold ran to $850 in the face of double digit interest rates. So even if the Fed takes rates up to over 10%, which represent a quintupling in interest rates, this will not be enough to stop gold and silver marching onwards and upwards.
We have been heavy buyers of gold, silver and the associated mining stocks on this dip. We have signalled multiple BUY signals, including some signals on gold call options and options on mining stocks, as we firmly believe that the downside is limited right now, whilst the upside has fantastic potential.
Our message for this week is simple: BUY gold and silver then hold on for the ride!
Sunday, August 10, 2008
These numbers below are the real fundamentals of the silver and gold markets. Silver and gold are money.
In physics, there is kinetic energy, and there is potential energy. Kinetic energy is movement. Potential energy is not moving, but is potential movement. Likewise, the annual supply and demand of the gold market is like the kinetic energy--measuring the current movement of gold. But it is probably more important to focus on the potential energy of the gold market, which is the measure of all the paper money and wealth that will one day be sold to buy gold and silver.
The potential demand for real money, is the total of paper money, or other wealth, that exists that could, one day, show up as demand for real money: gold and silver.
With that introduction, I present to you some ongoing research I do that I call, "The Money Chart". Study it well. The sources for most of the figures are linked, so you can validate this research. When I first published a few of these figures in December 2003, they were quoted by Richard Russell, one of the most well respected financial advisors in the world.
1,000,000,000,000: 1 Trillion dollars
1,000,000,000: 1 Billion dollars
1,000,000: 1 Million dollars
$400,000,000,000,000: Estimated total derivative exposure of all banks in the entire world. (20 x U.S. GDP) (up to $400 Trillion?)
$118,000,000,000,000: World Global Capital Markets (Stocks, Bonds, &?) Feb 2005 McKinsey Global Inst.
$75,000,000,000,000: U.S. Govt. unfunded liabilities; social security, etc.
$49,000,000,000,000: World bond market, Fall 2004 PWL Capital Inc.
$46,000,000,000,000: Total World Paper Money supply 2004; from M2 & GDP of EU, USA, Japan, & China (see SSR #56)
$45,153,000,000,000: U.S. Household wealth, as of first quarter, 2004. (Includes Real Estate, and investments)
$37,000,000,000,000: Total global equity market capitalization June 2001 UN.ORG
$21,700,000,000,000: Total global market capitalization of NYSE stocks, Dec '05 http://nyse.com
$21,000,000,000,000: U.S. bond market, Sept, '03: IAPF treas.gov
$12,605,000,000,000: U.S. GDP, 2005 (3Q) http://www.bea.doc.gov/bea/dn/home/gdp.htm
$10,261,000,000,000: M3 (money in U.S. banks) Jan '06 http://tinyurl.com/vra0
$8,249,000,000,000: US debt, 2-23-2006 http://www.publicdebt.treas.gov/opd/opdpenny.htm
$4,000,000,000,000: Total global market capitalization of Tokyo stocks, Dec '05 http://nyse.com
$3,600,000,000,000: Total global market capitalization of Nasdaq stocks, Dec '05 http://nyse.com
$3,000,000,000,000: Total global market capitalization of London stocks, Dec '05 http://nyse.com
$2,622,000,000,000: Total gold mined in all of history, 150,000 T (4.6 bil oz.) @ $570/oz. http://tinyurl.com/vrcc
$2,500,000,000,000: Total global market capitalization of Euronext stocks, Dec '05 http://nyse.com
$2,400,000,000,000: U.S. annual budget 2005
$1,200,000,000,000: Total global market capitalization of Deutsche Boerse stocks, Dec '05 http://nyse.com
$754,000,000,000: Total U.S. paper currency & coin in circulation, March 2005 http://www.fms.treas.gov/bulletin/index.html
$753,000,000,000: Annual U.S. current account deficit (trade deficit) for 2005, (annualized from 1 Q 2005).
$596,000,000,000: U.S. debt increase (true deficit) (Fiscal year '03-'04). http://www.publicdebt.treas.gov/opd/opdpenny.htm
$400,000,000,000: Total silver mined in all of history: 40 billion oz. @ $10/oz. http://snipurl.com/93j1
$376,000,000,000: Market Cap of Exxon Mobil (biggest U.S. Corp.) (8-05) http://finance.yahoo.com/q?s=XOM
$286,000,000,000: Debt of General Motors (biggest U.S. car company) Jan 2006
$149,000,000,000: US gold, 261 mil oz., @ $570/oz. http://tinyurl.com/vsr9
$110,000,000,000: all the world's gold stocks/equities (Sept. 25, 2005, Denver Gold Conference)
$75,000,000,000: Money flowed into Equity funds in the first quarter, 2004
$26,000,000,000: Market Cap of Newmont July '05 (biggest gold company in the world)
$8,226,000,000: all the world's "primary" silver stocks (80 of them on this list, as of June 25, 2004) --my own data.
$7,000,000,000: annual flow of money "lost" in Las Vegas while gambling.
$4,000,000,000: Total annual ATM penalty fees http://redtape.msnbc.com/2005/10/now_even_atm_de.html $13/year per household
$3,500,000,000: 350 mil oz. of "identifiable" silver bullion left in the entire world, according to GFMS @ $10/oz.
$1,300,000,000: 130 million oz. of silver needed by the Barclays Silver ETF: feared to cause a silver shortage by the SUA.
$720,000,000: 72 mil oz. of "registered" NYMEX silver bullion (1-05-05) @ $10/oz. http://www.nymex.com/sil_fut_wareho.aspx
$266,000,000: 40 million oz. of silver purchased for investment, in 2004 at $6.66/oz.
$75,000,000: Limit 7.5 mil oz. of silver @ $10/oz. (limit of 1500 contracts per trader) at NYMEX
$15,000,000: Limit 1.5 mil oz. of silver @ $10/oz. (potential 1 month delivery limit) at NYMEX
$7,500,000: Limit .75 mil oz. of silver @ $10/oz. (over 150 contracts and you must reveal who you are) at NYMEX
$100,000: Limit of FDIC insurance per bank account.
$5,000: Limit of average cash withdrawl from small town banks, without ordering cash in advance.
$300: Limit of average ATM daily withdrawl
$10: Approximate amount of silver available per person in the U.S. at $10/oz., given 300 million oz., if that is available.
Therefore, when you hear that billions and billions of dollars are going to be invested in gold and silver stocks, just know that's an understatement.
I believe in 1980, the total market cap of all gold stocks was $1 trillion, and the total market cap of all NYSE stocks was $1 trillion.
Today, the figures are about $110 billion for gold stocks, and $21 trillion for NYSE stocks.
It's going to be a great decade for gold, and especially silver investors.
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With Gas prices rising through the roof; Americans and Europeans are looking for all sorts of ways to increase mileage and save a few bucks. I rented a car and drove to Jersey the other day from Manhattan to go to a holistic Dentist. The endeavour cost me $50 in Gas! I saw on the pumps that debit card charges will be limited to $100. Wow, I am now looking for a dentist closer to home. If you think we have problems, just look at what the English are paying for Gas today, this is equal to $10 per gallon!
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