Tuesday, May 31, 2011

Miners to rally with metals?

IF there is a counter seasonal precious metals rally this summer, will the miners participate?  They haven't been moving up with the prices of both Gold and Silver... why?

When Silver was moving up over $37 an ounce, the Silver miners ETF, SIL (which will be used as the representative for Silver miners) was not moving up.
Silver will be represented by SLV and is the Blue line, SIL is the Red line.  You can see a fairly similar trend between SIL and Silver up until the first week of March 2011.  The Silver miners (SIL) did not rally with Silver may have been because the 'street' did not accept the Silver price when it started rising above $37 an ounce.  It was starting to get overbought and continued to $49.82 before crashing down to ~32.

The street knew the Silver price was going to drop quickly at some point, so why invest in the miners when they will not be selling their Silver to the refiners at $45+?

Silver has consolidated briefly in the low 30's and now has rallied over the past week.  This is a 'true' Silver price and the Silver miners should start moving up with Silver. It is also possible for SIL to crossover Silver and may outperform for the year.

Sunday, May 29, 2011

Summer rally for PM's, Gold?

World Gold Index daily chart from the lows in late Feb.

Gold touched the fibonacci 61.8 retracement which provided support around the 1475 area. 
Gold is trading above the short, medium and long term moving averages. They are also in sequence from short, mid, long. Bullish
There is a MACD histogram crossover to the upside. Bullish
Stochastics are overbought.  Neutral

Both Gold and Silver may have a counter seasonal trend this year as the metals are trending higher in this last week of May. Seasonal trends are just the averages over the last 10, 15, 25, 30 years, etc...  The precious metals markets do not always follow past history.  With various European countries in bad fiscal shape, it may be the catalyst for more individuals, hedge funds and savvy wall street traders to get into Gold/Silver this summer....?

Here is another daily chart of Gold on the Think or Swim platform with a few 'study's' applied.  The TTM_Squeeze histogram has trended up towards the 0 line and now has a red dot indicating a neutral area. The TTM_Wave is above 0, so a breakout to the upside may be the trend for the next week.  Gold miners are also rallying, so swing traders may have a exciting week ahead...

To verify that the Gold and Silver miners are rallying with the PM prices, check out the GDX (Gold Miners Index), GDXJ (Junior Gold Miners) and SIL (Silver Miners).  HUI and XAU also have most of the major Gold and Silver miners.

Wednesday, May 25, 2011

Gold & Silver heading up for the summer?

The World Silver Index on May 25th, 2010.  A fibonacci retracement is drawn from the start of the fall rally in 2010 (late August) to the recent high of $49.82.

Silver pulled back about 50% of the rally to a low of $32 and based for a week.  It is now on a trend up and may hit the $40 level.  Fundamentals are still the same for Silver, there is still high demand around the world with central banks and the federal reserve increasing the money supply / debasing the fiat currency.  The manipulators can only do so much when they have to fight the worldwide market and investors.  There may be a day when both Gold and Silver may be scarce because there will not be any sellers, only hoarders due to the devaluation of the fiat currency system.

The 'street' seems to believe that the Silver price is 'real' this time around as the Silver miners are rallying with the Silver price.  (Check SIL, the Silver miners index)  This was NOT the case when Silver ran from $40 to $49 a few weeks ago.  The market knew Silver was overbought and would eventually break to the downside, so no major money went into the Silver miners.  (In general, the savvy Hedge funds and money managers know what they are doing).

Rob McEwen the former CEO of Goldcorp mentioned that he will be rolling out of his Gold position when the Dow / Gold ratio is between 2:1 and 1:1.  He mentioned that he will take the money and invest in undervalued assets at the time which may be Real Estate.

I think we are a few years away from the Dow / Gold ratio of 1:1, maybe by 2015... ?   Here is a long term Dow/Gold ratio chart from Fred's Intelligent Bear site:

Tuesday, May 24, 2011

Silver rebound?

Daily Silver chart from late Feb 2011 from the 'Think or Swim' trading platform.
Silver has been trending slightly upwards and may start a rebound to the upper $30's / low $40 area.  Is this a counter trend seasonal rally?
The 'TTM' histogram has bottomed out in RED and started an uptrend in YELLOW 4 days ago.
The price momentum has indicated the start of an uptrend with the shift from RED to BLUE.
At $36, the price is now slightly above the 15 day moving average, but still below the 50.

Fundamentally, Silver is still in high investment demand as both China, India and the US purchasing to diversify out of fiat currencies. 

The matrix above from goldprice.org depicts various currencies vs Gold since 2002.  Gold's average gain against the currency is at the bottom, indicating that most of the worldwide currencies are dropping against Gold. With worldwide governments in fiscal trouble due to their spending, corruption and association with central banks, it's inevitable that both Gold and Silver will be higher going forward. Manipulation of the precious metals and fiat currency can only go so far, the worldwide free markets will eventually prevail, it's just a matter of time. 
Between 2013 and 2015 should be very interesting times for the metals market and for the financial world in general.

Friday, May 20, 2011

Silver & Oil

Below is a one year chart of 'Light Crude' which is the dotted line and Silver which is the solid black line

Since September of 2010, they have traded fairly close to one another, especially the first week of May when they both crashed down almost the exact same percentage...  It goes to show you that whenever a commodities price is determined by the paper market, just about anything can happen.  Especially if the Comex determines that too much speculation has occurred with the commodity.

I am a believer that this administration would like to put a cap on Oil so the public does not get monetarily 'squeezed'. It's already bad enough with unemployment at 9% and you tack on $4+ gas and rising food costs. If this continues, our president may not look so good going into the fall of 2012.  The republican party will have a 'field day' with the economy in dire straights, high energy and food costs. The bottom line is that they will ask 'are you better off now or before Obama took office?'   Obama can state that the stock market is back up.....but that does not help everyone.  It does help the too big to fail banks...

If Silver and Oil continue to trade close to one another, we will most likely see a flat summer / trading range. Especially if there is pressure to keep the Oil market down to keep gas prices lower.  I personally think that it is a temporary trend and that Silver will break to the upside in the fall months after trading flat through the summer. 

Tuesday, May 17, 2011

Gold Silver heading into summer doldrums....

World Gold Index with a fibonacci drawn from the low in late January 11 to the high that was produced on May 2nd. 

Gold is heading in the summer months which it typically trades within a range, see historical seasonal charts for monthly average returns.  The 1577 high may be

It is currently trading below the 15 day moving average, stochastics are trading near the oversold, RSI is trending down, MACD Histogram is trading near the bottom of the range -  Bearish.
You can see the fibonacci retracement levels on the chart with the current support at the 61.8 level.
Short term - bearish
Medium term - Netural
Long term - Bullish

World Silver Index with a fibonacce drawn from the low in late January to the high produced in late April.
Silver seems to be producing a base in the low 30's, but is trading below all 3 moving averages, 15, 50 and 100.
RSI, Stochastics and MACD histogram are all in the oversold area.  One can never tell what the precious metals markets are going to do these days especially when the Comex can increase the margin requirements on a whim.  The US Government can also spur a demand for the US Dollar Index as well which tends to put a stop to most commodities.
Short term - Bearish
Medium term - Bearish
Long term - Bullish

The 32 ounce Gold Futures Contract will start trading in the Hong Kong market starting Wednesday. We will find out how much demand they have for Gold at that time and going forward.

Friday, May 13, 2011

This 'May' be interesting...(Pun Intended)

From CNBC web:  HK Mercantile Exchange to launch gold futures

The Hong Kong Mercantile Exchange will open for business on May 18 after a wait of nearly two years. The exchange will offer investors 15 hours of trading starting at 8 am Hong Kong time and spilling over into European and U.S. business hours.
The exchange debuts with a deliverable gold futures contract setting it apart from the non-deliverable contract offered on the Hong Kong stock exchange.
Barry Cheung, Chairman of the Hong Kong Mercantile Exchange, said it was a long time coming, given the rise in the consumption of commodities in Asia and China. He said there is a "need for a platform to provide customers with tailor made futures products to allow them to manage their risks more effectively."
The first product is a one kilogram gold contract denominated in US dollars. That will be followed by a silver contract, and then another gold contract quoted in yuan, as the exchange tries to cash in on appetite for Chinese assets and interest from Chinese investors.
Mainland demand is key to the success of the exchange given that similar vehicles in Asia have failed due to the lack of volumes.
Last month, the Hong Kong exchange traded only 128 gold contracts, valued at a total of USD 20 million, while the Singapore Mercantile exchange traded one contract worth USD 50,000. In comparison three million gold futures contracts worth USD 480 billion were traded last month on New York's Comex Exchange.
Cheung said the best way to boost volume is to "make sure the contract is targeted at people in the trade and designed to meet their needs." He sees the bulk of interest coming from China. Cheung said, "Given the appetite of mainland traders to trade various kinds of contracts, we feel we will be able to offer them a platform they can trade on."
Cheung told CNBC that the Hong Kong Mercantile Exchange offered one of the most advanced trading platforms in the world and the fees were also extremely low. "They're very, very competitive."

Will this 'level' the playing field with Gold and Silver trading and release it's fair value worldwide?  It may be harder to 'manipulate' the market with margin increases whenever a commodity is in the overbought area.  We'll see, keep your eye on the precious metals on the 18th.

Monday, May 9, 2011

Mike Maloney talks about the massive pullback in Silver

A good overview of the decline and what to do...(Not much, just sit tight and stay long...) Take advantage of the lower prices and accumulate/add to your positions...

Saturday, May 7, 2011

Metals & Miners Year to date returns

Here are the year to date returns for the 4 precious metals and 3 mining indexes:

Silver will be represented by SLV, Gold will be represented by GLD.  Even with Silver's massive pull back last week, it is still leading the other precious metals as well as the Gold and Silver mining ETF's.

SLV:  14.25%
GLD:   4.74%
PPLT (Platinum):   .31%
GDXJ (Gold Junior Miners):   -7.59%
GDX (Gold Miners):   -8.75%
SIL (Silver Miners):    -8.81%
PALL (Palladium):     -11.36%

Heading into the summer doldrums where both Gold and Silver are in a trading range. Long term holders can forget about watching the spot price until late August.  Traders should have some opportunities to swing trade the metals as well as selective mining stocks. 

This administration will want the US Dollar to rally so OIL prices drop which will keep gas under $4 a gallon.  We'll see going forward...  In general, Gold trades inverse of the US Dollar so those waiting for a rally may have to wait until September......?  

Look for volatile markets after QE2 ends in June which may bring some opportunities to short the financial markets for those that are out of the miners. SDS is a double short (inverse) of the S&P500 Index which is a top choice amount swing traders.

Thursday, May 5, 2011

Let's crash Silver and Oil

Looks like the US Government doesn't want commodities to continue on the upside and place additional stress on the already struggling middle and lower class, not to mention the unemployed.  The US Dollar rallied today sending all commodities to the downside, with Oil and Silver leading the way.

With added margin requirements, the Silver sell-off continued presenting a potential buying opportunity for those that want to get into the market.  From $48 to $34 in 4 days, nice work...  George Soro's started selling his GLD and metal positions last Sunday sending the sell signal to the remaining institutions and hedge funds....  Take huge profits, create a huge pull back and set yourself up to buy at lower prices,,,,, good job George, Goldman, JP Morgan + others...

Obama knows that the likelihood of him getting re-elected in 2012 with gas at $6 a gallon is probably at 1% because no one likes to give a $100 bill to the cashier at the gas station to fill up their tank.  What better way to curtail OIL prices than to get a US Dollar rally... a phony one at that. Who wants to invest in the US Dollar when the fed is debasing it with TARP and QE2?  Add 2 wars to the mix as well...

The other thing that Obama needs to do is keep the financial market from crashing. If we get another 2008/2009, people will look at their 401k's and feel like crap as they just lost 50%+ AGAIN...  If that happens before November 2012, Obama doesn't get re-elected...

So what's going to happen?  QE2 ends in June, the markets start retracting (hopefully the high frequency trading doesn't set off a early crash), Bernanke eventually steps in and states that the economy is still 'fragile' and mentions another monetary easing program.  (Just like in August 2010) This time they may call it something other than QE2.....they will think up something I'm sure.

The problem with their plan to control the Gold and Silver prices with the US Dollar is that the market is worldwide, not secluded to the US and England like in the 1970's and 80's.  Worldwide demand for the metals will eventually win over the fiat currency that the Central Banks and Fed is printing up, just wait and see...

Tuesday, May 3, 2011

ZSL Silver QE2 401k

Many speculators were piling into ZSL, the double short Silver ETF as the run up was unsustainable. It really does not matter how much Silver pulls back if you are long physical, it will just present an oppurtunity to buy at a lower price.

ZSL closed above the 15 day moving average, the MACD and Stochastics are on the rise...

Will this slogan be correct this year? "Sell in May and go away, come back after Labor day".  It typically applies to the stock market, but it can be applied to both the Gold and Silver markets as well.  The summer months are typically slow for the metals based on historical data.  Will this year be different?  Possibly due to the dropping US Dollar index.

For those that invest in the miners and other metals related ETF's.  Keep your eye on the markets going forward as QE2 ENDs in JUNE.  Many believe that this program has propped up the financial markets and when it ends, there will be less speculative money to go into the market. 

After the TARP program ended in May 2010, the markets started pulling back until our Federal Reserve chairman Bernanke mentioned QE2 in August last year.  Look at any chart of the financial indexes or just about any commodity since August 2010 and you'll see a bullish chart.

If the S&P Index starts breaking towards the downside, I'm in the camp where the Gold and Silver shares will go down with it, even if Gold and Silver go up.  When people get margin calls, they will dump everything speculative that that includes the miners, especially the juniors and explorers.

I'll end with one other note, if you have a 401k, it would be best to keep an eye on the investments that you have. I have never heard of any 401k accounts with a short fund, so everyone is LONG in their 401k's.  That is a problem if the markets crash just like in 2008/2009.

Monday, May 2, 2011

Another margin increase at the CME

Silver dropped in early Sunday trading from ~$48 to $42.20 in about 10 minutes!  I read later that the CME raised it's margin requirements, but isn't that for US trading?  The drop was when Silver opened for Asian trading...?

Anyway, here is a daily graph of Sunday/Monday Comex price action:

In any case, if your long the physical Silver, it's nothing to worry about... stay long wait for $100 then start thinking about your exit strategy...(that is, if your going to exit the Silver trade)  A lot depends upon what the US Government is going to do with it's fiscal policies...

Here is a CNBC article from Lori Spechler regarding the increase in Silver margins at the CME

Silver margins are going up—again. As the CME tries to keep pace with the explosive silver rally, the exchange has now hiked margin requirements eight times in the past twelve months.
While increased margins are more of a reaction to price and volume than a meaningful intent to control prices, market watchers say that increasing margins has sometimes caused investors to reduce positions and deleverage in order to meet those higher margin requirements.
Despite today's sell-off, it seems unlikely that rising margins are capping or, impacting this particular silver rally in any meaningful way. One market analyst calls for a 30 percent hike in CME's margin requirements to cool the market. But, raising margins at the CME has become a smaller part of the global picture.
As of Friday, April 21st, 2011, open interest in silver futures was 149,899 contract, or less than half of what it was in 1976. According to a CME spokesperson, in December of that year open interest in COMEX Silver futures contract with the same basic specs as today's contract was 427,749 contracts.
Where has all the open interest gone? In the globalized financial system there is more competition for over-the counter business as well as futures business from India to Japan to Dubai. And Silver ETFs including the iShares Silver Trust [SLV  42.83    -4.05  (-8.64%)   ] have commanded a significant market share.
Carlos Sanchez, CPM Group Director of Commodites Management agrees that the CME is a smaller percentage of the open interest globally. And, he says investment style has changed. Sanchez attributes some of the decrease in open interest at the CME today versus 1976 to the nature of market, "Investors were longer term back then, now, investors trade for hours or seconds." Sanchez sees the rally continuing in the near term with a push above $50 an ounce. "I don't think it will stop", he says "because there are so many factors supporting silver prices."
Increased margin requirements effective after the close of business on Tuesday, April 26, 2011.