For weeks I have been predicting that precious metals and the junior gold
miners would bottom and outperform in January. Now gold is breathtakingly breaking
above the key 200 day moving average and breaking four month highs as the World
looks to gold as a safe haven. The intermediate to long term trend may be turning
positive and unfortunately the amateur investor has already panicked out or
may be covering their shorts.
This breakout in gold could end the lower high pattern or downtrend. Sentiment
is changing from negative to positive. Already
for weeks, I highlighted the positive momentum in the junior gold miners
despite the new low in December. This divergence usually signals an interim
bottom and turning point. A few weeks ago precious metals and the shares were
hitting new lows. The amateur investor panicked out. I told my subscribers
to hang on and buy more at the bottom. Now the Junior Gold Miners are up over
14% since the beginning of the year outperforming the S&P500 and US dollar.
Despite oil and copper collapsing along with equities, precious metals and
mining stocks appear to be bottoming and showing great relative strength. Right
now, gold as a safe haven may be where the action is greatest. The US dollar
may peak as investors realize that the US economy is still far from recovered.
The oil and copper collapse is giving a loud shout to investors that the global
economy is nowhere near recovery and looks more like the 2008 Financial Armageddon.
One of the few things that can maintain its purchasing power in this sort of
market is gold. Believe it or not another yellow metal which has held up well
despite the 50% correction in oil is uranium.
I told my subscribers at the end of 2014 that smart investors should be defensive
against the overbought equities with inverse S&P500 etf's such as Proshares
Short S&P 500 (SH) or a short financial fund (SEF) and go long gold (GLD)
and junior gold miners (GDXJ) in this sort of chaotic environment. The banks
are sitting on major energy losses, while the S&P500 is made up largely
of energy stocks and companies who profit off of emerging economies. It is
way overbought and we could witness a powerful crash in equities that mirror
the oil crash.
I believe mining assets with real potential could come back into favor. I
am accumulating hoping that within the next decade we could see a major run
higher in this sector. Eventually, the trillions of debt will be paid back
with devalued US dollars. Rising interest rates and inflation could pick up
in 2015 especially in the US benefitting our beaten down wealth in the earth
sector.
Real gold mining assets in stable jurisdictions will go up in value. I especially
like the junior gold miners especially the explorers now in Nevada and Quebec.
Governments can print another trillion dollars by pressing a button at the
printing press. This can't be done in the gold exploration business. It takes
years and a lot of divine blessing to find a million ounces of gold. Investors
may now be able to believe this as gold breaks above the 200 day moving average.
