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Saturday
Aug032019

The Feds Rate Cut Sends The US Dollar Higher and Gold Lower

Preamble

Monetary policy has long been influential in gold's fortunes. In recent times, the Fed has used bond buying and reductions to interest rates as the economy faltered. This action serves the purpose of providing more and cheaper funds for the markets to function. We have been through a sustained period of monetary easing which has resulted in the S&P 500 climbing to record highs. The Fed then decided to "normalize" rates in that it wanted to raise rates to around 6% in order to provide the wriggle room needed to offset a downturn in economic activity. A series of rate hikes was then implemented, but the Fed failed to get anywhere near its stated aim.

The Federal Reserve Reduces Rates

This week,

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Tuesday
Jul302019

Its Time To Rotate Out Of The S&P 500 And Into Precious Metals

Preamble

Rotation in the stock market isn’t new investors have been switching from sector to another since the markets were formed. The S&P500 has been in the ascendancy for approximately ten years and is due for a correction. The question for those involved is where to go next and there are many opportunities available to them. To name just a few there is land, property, art, antiques, autos, jewelry, gold and silver, etc. Some of these alternative investments are already considered to be in a bubble apart from gold and silver which is a sector that has taken a beaten over the last few years.

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Thursday
Jul252019

Gold And Silver Stocks: Buy As Monetary Policy Is Relaxed

Preamble

Gold and silver stocks had been out of favor for years and as a result they have had to cut costs dramatically in order to avoid bankruptcy. The largely unhedged stocks as represented by the Gold Bugs Index, the HUI, fell from an all-time high of 630 down to 100 registering a loss of 84% reduction in their market capitalization.  

In June 2019 the HUI stood at 145 and since then as managed to regain some of its value by rallying to 210 for a gain of 45% in less than 2 months.

Why the sudden interest

The main reason for this sudden change is the anticipated demise of the US Dollar as the Federal Open Market Committee (FOMC) meet on the 30th and 31st of July and it is a given that they will cut interest rates by twenty-five or possibly fifty basis points. This action by the FOMC signals to the market that all is not well, and they are trying to get ahead of the curve as the economy falters. This relaxation in monetary policy will weaken the US dollar and gold which has an inverse relationship with the US dollar will cost more in US Dollar terms as the US Dollar declines in value.

Central bankers will take a similar course of action in order to support the world economy as it begins to sputter. For instance,

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Thursday
Jul252019

Precious Metal Stocks Are Not An Investment They Are A Speculation 

Preamble

Let’s start by defining investment and speculation and for this purpose I have used Investopedia:

An investment is an asset or item acquired with the goal of generating income or appreciation.

Speculation refers to the act of conducting a financial transaction that has substantial risk of losing value but also holds the expectation of a significant gain or other major value

Precious metals such as physical gold and physical silver are an investment and can be acquired and held for long periods of time.

Precious metals mining sector

The precious metals mining sector is not an investment for the simple reason that mines are being depleted of their treasure on a daily basis. Mining companies must either explore for new veins to mine, merge with other miners or acquire new assets in order to keep their pipelines topped up. Otherwise production drops and investors flee. Indeed, we can all name a few mines that have been around for some time, but they are in the minority

Ask yourself the question, why it is that

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Saturday
Jul202019

Is The Future For Silver Shiny Or Not? (Part Two)

Background

In January 2019 we penned an article entitled: Is The Future For Silver Shiny Or Not? In which we said:

1. Every picture tells a story, so we will take a quick look at the chart of silver's progress, and it is not a pretty sight

2. There have been a number of rallies which have added some cheer for silver bugs to celebrate, but these rallies didn't have the legs to mount a serious challenge to previous all-time highs and in hindsight turned out to be head fakes.

We are now seven months further down the line and the ugly face of silver appears to be undergoing a face lift.

Ten-year silver chart  

  

The last eight years have been dismal for silver miners

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Tuesday
Jul022019

Gold: Driven By The US Dollar And Hampered By The S&P 500 

Preamble

We recently penned an article entitled: Gold To Obliterate The $1350/Oz Resistance Level and this has certainly happened as gold recently traded as high as $1425/Oz. We also said the following:

This resistance level needs to be obliterated with some gusto and gold needs to find the traction to take out the next resistance level before making new highs. 

A lot depends now on monetary policy easing by the Federal Reserve which would weaken the dollar and due to its inverse relationship with gold, strengthen gold. 

After six years in the doldrums gold has suddenly come to life however the two main influencers are the US dollar and the S&P 500. If both of them

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Wednesday
Jun262019

Silver Prices rise but not in a convincing fashion

 

 

As the chart above shows silver prices have finally broken their downward trend. Silver had been performing poorly and had formed a number of lower highs which is never a good sign. However,

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Wednesday
May222019

European Politics And Its Indirect Effect On Gold Prices

Preamble

The European elections take place this Thursday in the UK and the polling suggests a win by a large majority by the Brexit Party which was formed just 5 weeks ago. Some bookmakers have the Brexit Party at 1:20 with the second place going to the Labour Party at 20:1, in their eyes the Brexit Party will win the most seats by a large majority. As I have said before the last thing that the EU wants is the return of Nigel Farage as his stance for independence and democracy causes restlessness within other nation states.

If the EU can throw the British PM a bone and she in turn can persuade a few of the opposition MPs to vote for the three times rejected EU treaty, then it might pass. Theresa May intends to ask her cabinet to sign off a package of Brexit concessions this week, as she ramps up for one last bid to win over MPs and salvage her version of Brexit.

If that happens then the UK will be out of the EU in terms of having representation but tied in via the new treaty and as a result that would be unpalatable for many in the UK. The fight for democracy in the UK will not stop regardless of parliamentary decisions so I expect that this issue is not going to be put to bed for some time.

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Thursday
May162019

Silver Prices Continue To Slide


Todays drop was pretty bad for silver prices. The recent high of $16.25 now looks like a distant memory as the summer doldrums are upon us. There two main reasons for this fall in my humble opinion and they are the US Dollar and the S&P 500.

The US Dollar has managed to retain a position

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Tuesday
May142019

The Precious Metals Stocks Suppressed Due The Recovery Of The S&P500

Preamble

In today’s modern world of investment opportunities there are a myriad of attractions for an investors hard earned funds. There are pros and cons for each one of them and sooner or later they all have their day in the sun. Investments on offer include but are not limited to; currencies, real estate, land, art, antiques, bonds, stocks, coins, various funds, crypto currencies, etc.

Our particular interest is the precious metals mining sector which unfortunately has been battered over the last five or six years and remains very much in the unwanted category. However, we could argue that "the time to buy is when there's blood in the streets." A saying that is attributed to Baron Rothschild, a member of the Rothschild banking family. He made a fortune by investing in the uncertainty that followed the Battle of Waterloo against France, when his peers where disposing of their holdings. Is the precious metals sector bleeding at the moment? we don’t think so, but this sector is most certainly close to it and worthy of further consideration.

The Gold Bugs Index (HUI) Chart

The chart below shows that there is strong resistance at the 180 level and despite a number of attempts to breakout the precious metals mining stocks have failed to do so. The technical indicators such as the MACD and the STO are in the oversold zone with the RSI sitting just above the 30 level which is regarded by some technicians as a buy signal should the stocks drop below this level.

 

The recent sell-off from 180 to 150 wiped 16% of the value of this index......... READ MORE

 

The sudden drop in the S&P 500 had an immediate impact on gold as it jumped $12.00 or so. The trade war between China and the US has made the markets nervous..

If you would like to know which stocks we are buying and selling please join us atStock Trader our premium investment service.

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