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In the day and age
of technical analysis, the precious metals markets have been dealt a serious
blow, catalyzed by the relentless April decline in the silver futures market.
There is unquestionable technical damage to the metals and the stocks. From
this perspective, it is obvious what is needed: a period of rebuilding and
successful tests of the recent downtrend after rallies. The lack of any
substantial rebounds in the stocks over the past seven weeks, attests to the
fact that these markets are still dominated by trend followers-technical
players, rather than fundamentalists that desire exposure to the precious
metals for the protection that they offer to one’s overall portfolio.
At the other end of
the spectrum, fundamentally, if we could write the script for the perfect
backdrop to a true bull market environment for precious metals let’s
see where we stand. IF ONLY:
1. Government
spending were out of control with little regard for bringing budget deficits
into balance;
2. Trade deficits
were to mount toward new records despite a more than 30% decline in the value
of the dollar;
3. Inflation rates
were actually much worse than the Government’s reported figures;
4. Real interest
rates were to remain negative for an extended period of time, not only
destroying the purchasing power of savings, but also encouraging the
misallocation of capital to assets with artificial demand;
5. Government sales
of gold and silver were to subside or diminish;
6. Production of
gold and silver were declining;
7. Demand for gold
and silver were rising;
8. There were huge
short positions in gold and silver that could not be delivered;
9. Loose regulations
on the CFTC to encourage dangerous short positions existed;
10. A major
lawsuit were underway to uncover the manipulation of gold and silver prices
from attaining true market prices, (allowing us the gift to purchase almost
unlimited amounts of gold and silver now at what is surely below market
prices);
11. The masses,
particularly in the US, were so uneducated in the histories of fiat money
systems and historical prices of gold and silver, allowing for the buying
opportunity of the millennium;
12. The true meaning
of the word inflation was widely understood;
13. The size of the
gold and silver markets compared with all of the existing asset bubbles could
be considered;
14. Gold and silver
stocks had a negative beta, making for the perfect fit in a diversified
portfolio or fund-of-fund to increase risk-adjusted returns;
15. Foreign
governments would get in the spirit and competitively devalue their
currencies against the US dollar, where gobs of paper have recently been
printed;
16. The idea of once
again backing currencies with precious metals got underway;
17. Armed conflicts
were underway with their never-ending budget busting calls for more
inflationary spending to achieve their military objectives at any cost;
18. There existed
incomprehensible leverage in the financial system, largely in the form of
financial derivatives, (last estimated by the BIS at $234 Trillion notional);
19. The biggest
savers in the world, Asians, believed in gold and silver;
20. Other commodity
prices such as gas and oil were soaring;
21. Gold and silver
were at attractive long-term buying points.
(see for yourself)
http://www.goldinfo.net/silver600.html
http://www.gold-eagle.com/images2/realgold.gif
Relax precious
metals investors. While there are many things to worry about in this world,
including many of the things listed above, your choice to invest in precious
metals is hardly at risk. Most of the things on this list have already
occurred or are in the process of happening. These are the very reasons you
would want to invest in precious metals in the first place. In the past few
months, there are undoubtedly investors of precious metals fleeing the
market; prices have come down. Many do not understand why they were there in
the first place and are selling because they stopped going up, technical chart
patterns have broken, etc. etc., but the fundamentals have NEVER been better
and are getting better every single day. Just look at their selling as your
opportunity to buy at a generous discount to true value. You are among the
few who are buying true value in the markets today.
Richard J. Greene
Managing Partner, Portfolio
Manager
Thunder Capital Management
More articles by the author can be accessed by the
"Research Articles" choice at: www.thundercapital.com
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