While I try to keep
things positive and always give everyone a chance, it seems as if the new
president is not changing anything in regard to spending. The freshly
passed stimulus and TARP II are no better than what was passed during the
Bush administration and in many ways even worse. Transparency is all
but impossible to find since they can’t even tell us a basic plan on
the new TARP spending. Rest assured more stimulus is coming and as I
alluded to last week we haven't seen anything yet. You must protect
your wealth otherwise lose it.
Physical
gold, silver, platinum and palladium are ways to protect that wealth and that
must be your first goal. I am sure you are sick and tired of hearing me
rant on about this and many of you have protected yourself on the good advice
of many. The relatively small group who are into metals and read these
sites and articles are the visionaries. How may people do you know who
are invested in precious metals yet? I would bet most people feel
uncomfortable bringing up the subject at a social gathering even amongst
family and friends. This will change. The very small precious
metals markets are going to be overrun, more like trampled.
It
will only take a minute amount of interest to shoot this market so much
higher.
The
tale of the tape saw the Dow fall 5.20% closing for the long weekend at
7850.41. Look out below! The S&P fell 4.81% and the NASDAQ
lost 3.60%. Up north in resource country the TSX dropped 3.66% and the
Venture exchange popped up 1.79%. Once a solid portfolio is built the
venture exchange is where the icing on the cake will be found. There
are several excellent companies there selling for less than cash on the books
still.
Metals review
This
longer term chart shows the recent resistance line broken and now acting as
strong support. $925 has been and remains significant. This chart
shows clearly the $965 region as the most important next hurdle followed by
the band of strong resistance from $990 to $1,000.
Gold
gained 3.05% percent in the week and came perilously close to breaking out of
the up-trend channel. The price action moved above the $925 area with
conviction and should be able to hold that as support for many reasons one of
which is the continued unchecked spending by the US government. Open interest in the futures market
remains at very low levels meaning many more investors can come into this
market to drive prices up. Also the big days this week didn’t see
much of an open interest change so shorts were covering and well they should
with the recent strength gold has been exhibiting.
RSI
is turning down and still can’t muster a close above the 70 line.
The moving averages are solidly trending up and in order. MACD is
bullish but has flattened out at a high level. Slow STO is also flat
but bullish above 80. It looks like we may get a test of $925 and then
it is likely we will be moving higher in step and eventually back into all
time territory. Once $1,000 is broken $1,200 at a minimum is inevitable.
Silver
gained 3.53% on the week and is staying within the steep up-trend channel but
looks to be coming into a strong resistance area just below $14. RSI is
poking above 70 which is great to see but may stall since overhead resistance
is strong. The moving averages are heading higher and the 50 day is
about to make a bullish cross of the 100 day. MACD is bullish and
steady but momentum is flat and above zero. Slow STO is moving slightly
higher and well above 80 into overbought territory.
I
took a quick look at the 1 1/2 year chart and there is no major resistance
between $13.90 or so and $16. I think we will see a stall here before
building up the steam to beat the quite significant resistance at $13.90 on
the 1 1/2 year chart not shown, but the green line represents that resistance
level and links to the most recent test of that line.
Platinum
rocketed 5.67% last week to above $1,000, then $1,050. That is classic
bullish action and now the price is testing support at $1,050. The
price is approaching the top of the trading channel. I think platinum
needs to take a breather here for a few days before heading higher
again. I would love to see it hold above $1,050 and make that line even
more significant.
RSI
is heading slightly lower but well above 50 which tells me the general trend
is up. All three MA’s are heading higher and bullish. The
20 day may very well cross the 100 day MA this week. MACD is bullish
and Slow STO just flashed a buy signal on Friday. Quite impressive
moves up from the late 2008 bottoms.
Palladium
gained a respectable 1.48% last week and is trying it’s best to get
above the 100 day MA. Investor demand is increasing especially in Japan as precious metals investments become more
scares. The RSI is hanging around just below 70 and is still showing
strength but would need move above the recent peak at 70 to confirm the next
leg up. The 20 day MA moved above the 50 this week and will be close to
reaching the 100 day MA next week.
$225
is the next resistance line and is quite significant but not as much as the
100 day MA. MACD is still strong and above 0 but the momentum
oscillator is flat. Slow STO is in overbought territory but very
bullish at the moment.
Fundametals Review
On the face this past
week’s trade deficit climbing to only $39.9 billion, the
lowest in six years, is a great sign. But exports fell nearly in tandem
with imports meaning we are producing less which is a dire warning to the
economic outlook for jobs in the future. Also a major reason imports
fell was due to the drop in oil not necessarily from a proportionate drop in
spending.
The
federal budget deficit grew by $83.8 last month alone. As
hard as it is to believe in 2008 the US treasury ran a surplus of $89 billion over the first
four fiscal months. So far this fiscal year individual income taxes are
down 70% and corporate taxes down 95% compared to last year.
While
this next suggestion will do nothing but put the US in depth further I suggest they spring for the phone call to our good
friends down in New Zealand. They should talk and learn about how when
the economy was bad there they lowered taxes several times, in turn
increasing the inflows to government with astounding efficiency and
size. Eventually in a news conference officials were asked when they
were going to lower taxes again, they replied proudly that it will not be
soon since they can hardly spend the dollars coming in as it is.
Four
banks failed this Friday after all markets closed for the long weekend in the
US. Please see here for this week’s biggest losers!
Mervyn
King is telling those who still don’t get it
that the UK is in a deep recession. This will cause them to
create money and pump it into the economy as well as cut interest
rates. We all know this is happening already there and in many other
countries around the world. The problem is you can’t create
money. You can create currency. Money has to be something
tangible whether it be seashells or gold and silver, but a piece of paper
with a number stamped on it is as far from money as you can get. As I
glance down at a few gold and silver coins on my desk I imagine the sweat and
work involved in extracting, refining and processing these beautiful
pieces. They are real wealth.
The
bank expects a 0% interest rate policy by March followed by quantitative
easing, or in English, money printing. To see today’s results of
this policy stance see Zimbabwe, and pray the policies change.
Following
up on Mervyn King’s thoughts was a close advisor and confidant to
Gordon Brown who admitted that this economic crisis is the
worst in over 100 years. Slowly what we already know is becoming
publicly known and accepted. Next thing you know these people will be
telling you they predicted it. A key sentence from the article has Mr.
Balls say this is “becoming” the most serious global
recession. In many eyes this is already on the verge of
depression. We have a ways to go and he eludes to the fact that this
will still be felt in fifteen years. Events are moving fast and
accelerating, banks are losing cash faster and faster. It’s like
they are treating flesh eating disease with a band-aid instead of removing a
limb. Soon it will be too late and the patients core will be infected
causing death.
Tony, a dear reader
and former emergency physician sent me this. He mentioned his learned
quick reactions to situations and ability to recognize and diagnose pattern
and symptoms quickly. I am sure he has saved many lives because of this
skill. In last weeks newsletter I posted a chart which prompted him to
send me these slides in which he compares the mentioned chart to medical
charts.
Is
this the prelude to the death of the American patient having a heart
attack? Or will all the new stimulus spending shock the patient back to
life for a while?
I’ve
mentioned several times the fact that the US may not keep its AAA ratings forever and once that rating is lost every
company within the US cannot exceed the rating of the country
as a whole. This story further reinforces my views on
this and must be considered seriously. The downhill slope is getting
steeper, fast.
Last
week I pondered the question of where the ETF’s get their bullion.
Good luck finding out. This week the living legendary prophet Jim
Sinclair posted this. He is initiating some research
into the matter. It’s simply unfeasible to believe the
ETF’s hold physical gold that is nobody else's liability. But if
you believe they are legit, call me I have a bridge for sale.
This
past week alone the SPDR gold shares (notice they are called shares) added
118.69 tonnes of apparently physical gold. Just to put that massive
number in perspective, and also show how small the gold sector really is, the
118 tonne figure is higher than the yearly production of all countries but South Africa, US and Australia. Now, we could add China to that list and last years numbers are not all in
but the trend has been a general decrease in production with few exceptions.
Do
you understand what I just said? In one week the US ETF alone added
more than all but four countries yearly production total! Demand is
HUGE supply is not. Please make sure in all your power that you own
physical bullion, not a paper structured product likely actually on loan from
another entity. Remember gold and silver are finite. Dollars are
infinite.
Russia’s largest
lender doubled their precious metals accounts in
2008. A ten kilo gold coin only spent two days in their vaults!
Not sure if this was the coin but it sure is pretty and would make a great
valentine’s day gift. The one bank sold 55 tonnes of precious
metals throughout the year. In the Ruble you would have seen a 58% in
gold since just October 2008! Even in the USD it’s around
30%. The shares have by in large done even better and
are a must after a solid weighting of physical bullion.
Indians
are calling for government intervention to bring
the price of gold down. The high prices are making gold all but
unavailable to a vast majority of India’s population. Maybe they should buy some
silver instead.
Black
Economic Empowerment (BEE) deals in South Africa are under threat since the economic crisis is hurting
everyone including potential BEE investors. South African mining
companies are required to be owned by BEE partners by 15% in 2009 and 26% in
2014. The rules may have to change to allow more time for BEE groups to
recover and raise capital to invest with.
We
knew the South African gold output number for 2008 would be lower but it fell
a whopping 17.6% while total mineral
production fell 10.7%. Eskom, the power generation company is still
rationing power to between 90% and 95%.
Some
good news from South Africa for once in that the new royalty regime
will be postponed by a year to help companies
through this tough time. Hopefully fewer jobs will be lost and
mine expansion and development can continue. This is mainly affecting
the platinum group metals sector since the platinum and palladium prices have
been the hardest hit.
This article talks about the incredible
shortage of platinum reported by dealers in Japan. The economic downturn and lack of faith in
the government are reasons cited for the demand. Palladium coins are
also being sought after platinum coins cannot be acquired. The largest
Japanese bullion dealer reports a sales increase up 430% over the past 12
months.
The
300 man strong strike affecting the massive refiner Penoles
is ongoing. Only the silver portions of the refinery is being affected
as 900 other workers agreed to wage negotiations. Stockpiles are
sufficient to meet customer need for and undetermined amount of time since during
this economic time demand is uncertain.
The
Documentary “House of Cards” aired Thursday and was a great and
must watch look into the housing turmoil which was the spark that set off the
fire we are now engulfed in. You may be able to find the video on the
internet or you can see http://www.msnbc.msn.com/id/29163182/ for
some scheduling details. It is two hours with commercials but a must
see to get the blood boiling. Speaking of hot blooded this http://crooksandliars.com/susie-madrak/bush-sec-holdovers-cite-executive-pri
video is also a must see and very short. I can’t believe these
types of people can attain such a high position and gives me no faith in the US government.
Maybe
if we got some of what Joaquin Phoenix was on when interviewed on Letterman
we could let all this stuff slip. Sometimes it seems I live my life on
the internet and inevitably I stumble across some pretty weird stuff.
This clip is one of them but is really quite funny watching Dave Letterman
make the best out of an uncomfortable situation. http://www.youtube.com/watch?v=ExCg3eLA5gU
In
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Until next week take care, enjoy
the long weekend and thank you for reading.
Warren Bevan
www.preciousmetalstockreview.com
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