Interview w/Jay Taylor and David Morgan

Both Gold and Silver were hit by heavy profit taking this morning/afternoon.  The end of the month and some want to close out positions and maybe play a little defense going forward...?  In any case, both PM's should end higher for the month of March based on the upwards trend that started in January.

Below is a basic interview with Jay Taylor and David Morgan.

HUI Index,Gold and Silver, what else?

Here is a weekly chart of the Amex Gold Bugs Index (HUI) since late 2002

Based on the historical performance of the HUI, you can see that it has 6-12 month rallies followed by consolidation periods of up to 2 years.  The financial crises a few years ago is clearly seen near the end of 2008, but a quick recovery is seen shortly after the selloff.

The HUI has been in a ~1.5 year consolidation pattern which may be ready for the next 'leg' up. Fundamentally, miner earnings are up with Gold trading over $1550 an ounce over the past year and Silver over $30. So why isn't there speculators with the Gold and Silver stocks?  

* If your in the camp where Gold is in a bubble, why would you or your company invest in a mining stock?

* If Gold and Silver bullion is in a rally, why not buy the bullion ETF's and take out the miner risk?

* There are many other areas to invest in and get solid returns, other commodities like Oil, Corn, Sugar. Certain stocks in the S&P 500, etc.  There is also less risk compared to mining stocks.

But, when solid earnings and announcements of increased dividends are paid out, more speculators will enter this market and push the HUI higher. Technically, it needs to break the downtrend line near ~565.

Then break above the last high produced last September of around ~638.  I have a projected target of ~735 once the breakout occurs.  The projection is based on the 2003 fibonacci high and low points for that year seen in the weekly chart above.  You can also see that the 261.8 fib level is support right at ~500 which the HUI has touched and bounced off of quite a few times over the last 1.5 years.

Can you profit from knowing this?  IMO, yes.  I am personally invested in various Mid tier and Junior mining stocks, all of them are in production and have earnings.  I believe that this will have the best returns.  Swing traders should have a really good year if and when this index starts to rally.  We may see it before Man/June and another rally in late August/Sept.  That is contingent upon the entire financial markets staying afloat...

For those that want less risk exposure to the miners and still want to get into this sector, the GDX and GDXJ are a good start.  Silver miners only ETF is SIL. There is even a 3x leveraged mining ETF for those hard core bulls: NUGT.  (This is one that you may need to keep a finger on the mouse button)

Disclosure:  As of this writing, I do not own GDX, GDXJ or NUGT.

Bullion breakout

The PM markets are finally breaking out of their base at the end of January.  Silver was up to $35.56 which broke above the major lower trend-line.

One of the next resistance levels will be around the $36.75 area, the orange downtrend line.  The bullion banks may be loading up on the long side as well as the hedge funds that spot upwards and downwards trends quickly.

Most of the junior, mid tier and senior miners are also following Gold and Silver's uptrend.

Year to date returns:

GLD (Gold) 13.83%
SLV (Silver) 27.69%
SIL (Silver miners index) 20.25%
GDX (Gold miners index) 11.33%
GDXJ (Junior Gold miners index) 19.71%

The senior miners are slightly under-performing Gold at 11.33%.  Speculators seem to be placing their bets on the undervalued Junior miners at this time.  The Silver miners index is under-performing the bullion YTD, but that may change with increasing bullion prices and good earnings reports.

Swing trading the bullion and mining ETF's to the long side should be profitable for the next few weeks.

Gold Silver miners lagging, for how long?

Here is a snapshot of the fundamentals for the Van Eck Gold Miners ETF GDX which indicates the historical earnings growth of 33.40%.

Here is a 1 year daily chart of the GDX which has a return of -8.19%

In general, the Gold and Silver miners are undervalued and not recognized as a 'good' investment by Wall Street at this time.  Investments go from undervalued to fair valued to overvalued.  The GDX and the miners in general are undervalued at this time and a rally with the shares may be realized sometime this year.  Trailing price/earnings are 16.85 for the GDX which should continue to drop with solid earnings. 

The million dollar question is when will the shares start a breakout run?  It's anyone's guess... If the analysts on Wall Street believe that Gold is in a bubble, why would they invest in a Gold miner?  Especially if they think it's going to crash?

Gold may need to get back above the $1800 level before interest returns to the mining shares.  I'm looking for a rally some time before May in the shares. We shall see...

David Morgan at the California Resource Investment Conference

David makes a good case for investing in Silver going forward in his presentation at the California Resource Investment Conference.

Another interview of David at the show:

Year to date returns for bullion and mining indexes

With Gold and Silver selling off in December 2011, the bullion as well as the miners are up so far in 2012. Even with the nice percentage gains since the start of the year, some people may still be holding onto miners with a loss.  Those that purchased any Silver over $35 or Gold over $1750 are in the red...

Year to date percentage gains are as follows:

Gold:   10.11%
Silver:  19.69%
GDX Van Eck Gold miners index:  5.29%
GDXJ Van Eck Junior Gold miners index:  12.71%
SIL  Global X Silver miners index:   14.17%

Silver is leading the way so far in 2012, followed by the Silver miners index.  Then the GDXJ, Gold and bringing up last place is the GDX.  Will this be the year that the mining stocks out perform the bullion?  Will there be more speculators in the junior mining sector?

If you invest in mining stocks, you may want to keep an eye on the market cap that is performing the best.  Juniors?  Mid tier?  Seniors?  Gold?  Silver?  Combination?   How about individual stocks compared to the ETF indexes?  Which one will outperform the index?  (If I had a crystal ball, I wouldn't be writing this and if you had one, you wouldn't be reading this)    =) 

Fibonacci level resistance for Silver

Just to add a quick chart of Silver as a follow up to yesterdays resistance points, I added a Fib retracement from the low created just before the massive run up of $17.84 to the high created in April 2011 of $49.82.  This placed the 50% retracement at $33.83, right where the major resistance has been over the past few weeks.

I know that there are a lot of investors that are tired of waiting for the mining shares to appreciate in value and I'm also in that camp.  Many gurus will say that we will need to hold onto these shares for a few more years before they really start to take off.  I also know that many investors are discouraged as they may have some losses in this sector while other stocks like Apple and the indexes have really appreciated over the past few years.

Some may want to start swing trading the mining stocks, so you will not have to hold onto them for long periods of consolidation and some even on a technical downtrend.  There should be a decent sized rally before May of this year, that would be the best time to exit some positions. The re-entry may be in the late summer months when both Gold and Silver are flat to down.

Rodger Weigand forecasts Gold & Silver

From Kitco video at the Investment conference in Palm Springs, Rodger Weigand mentions that he sees both Gold and Silver to move higher in the coming months and onto potential new highs towards the end of this year.  I'm not sure how he obtains the numbers and the specific months for them to rise, but I'm sure a lot of people would like the PM's to go back to their old highs and pretty soon...

Silver - 2 major resistance points

Weekly World Silver Index with upper and lower major trendlines drawn. These trend lines cuts off the parabolic moves up and the selloff in 2008.

Silver dropped below the lower trendline in the sell off in September 2011 and bounced along it until the sell off in December. Also note that the chart formation has a triple bottom in the low $26 area.

1 year Daily Silver chart gives a closer view of the resistance areas:

Silver has hit the lower trendline which has been a major resistance point.  Once it pierces the lower trendline, the 2nd major resistance area will be the orange trendline from the $49 high to the peak made in late August 2011. This is roughly around the $35 area which is also the area of resistance in October/November 2011.

With all of the 'money printing', Silver should probably be trading north of $75 at this time.  When you have corrupt entities like the CME, CFTC, LBMA, Goldman Sachs, JPM, HSBC that can push these and other commodity markets around to their favor, this is what you have.  A suppressed market.  Get used to it and if you are a trader, try to be on their side of the trade.  I know it's hard to short a market that is long term bullish, but that is how good traders make $$$.

Andy Hoffman Interview (Miles Franklin)

Here is an interview with Andy Hoffman from YT.  He mentions that the $1750 level in Gold is a key resistance point and will eventually become support.  Once that occurs, it may be off to new highs for the Gold market.  Silver _should_ follow along for the ride.

1 year daily chart of Gold

Since the sell off in December, Gold has pierced the fibonacci levels of 38.2, 50* and found resistance at the 61.8 level which is right around the $1750 level.  It may bounce between the 50% and 61.8% area to consolidate before a potential move up towards the old highs.  This may take place before May of this year......  

Sell in May and come back after Labor Day ???  Wonder if there is any truth to that this year for the Gold and Silver markets?

Gold consolidation before........?

Daily chart of the World Gold Index from March 2011.

Gold has been in rally mode since the start of the year as all of the selling for tax purposes was done in December.  It has pierced through the fibonacci retracements of 23.6, 38.2, *50 and has stopped at the 61.8 resistance level.
It is trading above the moving averages which are in bullish formation with the 20 day over the 50 and the 50 over the 100.  Stochastics are moving lower which may indicate a pullback.

Gold should consolidate here before a potential move up towards the all time high which was hit in August / Sept last year.  Once this move is achieved, the Gold and Silver stocks should follow and may present some nice areas for profit taking before the seasonal summer downturn / consolidation.

Weekly Silver, bullish trend

Weekly chart of the World Silver Index going back to mid 2002.

Major upper and lower trend lines have been drawn with the parabolic peaks shown with the month and year.  David Morgan has mentioned that the short and mid term price can be 'manipulated', but not the long term trend. 

You can see the overbought peaks and the oversold areas/periods.  Each time the price has come back to trade between the upwards major trend lines.  If the current rally brings the price to the midpoint between the upper and lower lines, it should be around the $42-$45 area.

Weekly Stochastics K and D lines are heading back towards the 80 level and based on past history, it has a little more to run before a pullback.

There was a triple bottom at the $26 area which may be the last time it dips that far going forward.

Silver is still a great value as Gold has breached it's 1980 price of ~$850 in 2008 and is currently trading around the $1750 area.   Silver is still UNDER the 1980 price of ~$50 and is trading around $34.27.