We think this volatility is done and we are close to the bottom of the downside for now. The Euro-Fedi will bail out everyone in his domain, backed by all the world bankers including Canada. I think the Canadian Fedi is also assisting in providing liquidity to the world bankers, so much for the Loonie being a strong commodities backed currency. The fear in the last month was about a collapse in Euroland and it spread like a virus, even gold trader also got spooked. We are sure the Fedi was on top of this attack, causing it and profiting from it. The Euro bail out fund so fare is about $400 Bil, but they will need much more, about $ 2 Tril should do it for now and when it gets announced in a few weeks it could be gold positive.
The US strength is a sham because once they are done picking on the Euro, they will jump all over the Dollar Short Trade, that will be another lift for Gold. This is my issue with currencies, everyone prices gold in US$, Euro, Yuan, Pound, Cnd$, Rupee... Etc. As Currency was continue around the world, we will see money sloshing in and out of currencies distorting markets. Now we have Euro weakness so everyone moves to the US $ which is fine for the need of liquidity to park itself, but it is no save haven. If we get US $ strength, then Gold Sells of because of flawed thinking that Gold trades opposite the US $ world currency reserve. To create stability in currencies and commodities, we need Gold as a measurement tool and standard. Everything should be priced in GOLD and measured against it, this is the only way to move towards a more transparent and honest system, something the Fedi doesn't want. We as reader, follower and analysts of the gold sector and fundamentals should always be thinking, what is the price of this good in Gold. For example, Gold is the world standard that currencies are measured against, if a country prints too much money, they get less gold for their currency unit. This means that other asset prices are measure against GOLD such as Oil, Silver, Dow, Stocks Commodities, Real Estate, Bonds and almost everything we currently consider an investable asset. This eliminates the need for pricing world trading assets in US $ terms or any other currency. When we price assets it in gold and silver, we can start to develop stability in the financial markets, until then we get what we have now... Chaos.
We started going long on gold and the mining companies this past week and will sell some of our trading position into strength next week. I am leaving my short financials position open but not adding to them just yet, but I am picking away at it, I think financials have more downside than gold does, so the easy money could be short financials with a 6 month time horizon. For Gold, Options dated December and onward is a good buy right now and on any further weakness in the future. I am looking to add to my call options on a couple of majors, which held up nicely during the downturn, but not rushing into it yet. We are close to a bottom and any further weakness should be bought and bidded on the miners, selling volume is dying down and it will be the weak handed speculators selling now, the small guy who doesn't understand the Gold Market and gets scared. Gold and Silver have a good chance to test the highs we made earlier this year on each of the precious metal, so YES we could still see $1900 on gold and $50 on Silver by year end. The December Gold Futures contract has tons of long $2000, in this down turn, and extremely high amounts of puts was bought probably around $1700 and below. There are 2 major forces and bets laid down for December, one side betting gold goes to $2000 and the other betting gold goes down below $1700 but I am not sure how far out. I think we could see gold go to $2000 or close to it, because whatever the price we see now in the paper market will come to an end by the end of the year. I am already hearing about capital controls on physical gold coming out of Euro limiting the amounts that can be purchased, once we see premiums and black market pricing, then we know what the true price for physical is. Keep buying physical Silver while you can, dealers are getting cleared out buy the public we may soon hear of shortages coming out of the mints. Coins are good, but bars are generally cheaper and you can buy them in many different sizes, I think Gold will be the store of wealth (something the Fedi and his buddies control for the moment) but Silver will be MONEY.
I am looking at oil but I can wait on that, HOU looks to be stabile now and is setup for some sideways action, so trade it if you know the support and resistance zones, just make sure you have stop loss orders to limit losses and limit orders to take profits. Even thou the banking sector may get pumped with cash from the Fedi's around the world, the economy is going nowhere fast so I am neutral on all commodities except Gold.
I think we have 2 major opposing factors working for commodities that should keep the prices neutral and in a wide sideways trading range.
Negative Factors - Weakening Economy, Debt issues and Banking Crisis
Positive Factors - Weak currencies lead to higher commodities eventually, especially precious metals, expectations for a HUGE stimulus package and demand from growth economies
A lot of the time the market trades based on perception and what the expectations are priced in at the moment, that's when we hear terms like "It's baked into the Cake". Once a general consensus is made on direction, the vampires on wall street get to work and position themselves to profit. Then they can easily change the market's perception with Media Control and swing price movements in their favour and usually do, all in the name of keeping shareholders happy by creating a profit and lining their pockets at the same time. Last weeks perception was bad, this week it's choppy and maybe next week everything is fine in the banking world and the economy is stabilizing. Soon the financial media will be talking about recovery, how everything is fine and we should go out there and Spend Spend Spend because we are going to have a Christmas rally. Or it finally comes to push and shove as the markets continue to crater because of out right criminal fraud and theft. Just make sure that you Buy Buy Buy Physical Silver from any profits, because you never know when the Fedi will attack again.
On Thursday, Jeff Berwick from The Dollar Vigilante sent me an email commenting on the gold markets being ugly again and why some gold stocks are down on good drill results. Here are some of my thoughts and comments:
Jeff, I think Goldman Sacs GS and his financial buddies knows the markets are cooked.
I wrote a piece on how GS was creating a dark pool to enter Canada’s markets.
I think he helped create this sell off in gold which started a wave of forced liquidations in the market, the Fedi loaded him up with cash and GS is now on attack.
I wouldn’t doubt if it was him and his buddies stealing all of the shares in the gold mining sector by forcing weak handed funds out. Once the market sell-off is done and the Fedi’s buddies are loaded up with shares, then he will make gold the next boom after he’s had his fill.
Look at everything that is going on around us and how quickly its happening, I posted in my blog about the US legal system & SEC is going to attack the China companies listed in the US and Yes probably in Canada too. I would consider getting out of everything China related that is listed in North America. Maybe even look for a weak link or the Next China story they are going to pick on and jump on the short side. I am no longer focusing on long side trades at the moment except for gold, I am going to focus on shorting if the collapse starts, it’s probably going to be the only way to make money. Look at the 10 year financials chart, it is ready to drop like a rock and probably will in the next 6 months. But I can’t even recommend that trade right now, if the temp bail out of euro comes, financials may go up short term.
This is going to be a feeding Frenzy, fund managers will be attacking each other just to make a buck... Did you see what happened to Paulson’s fund?
I think the Fedi and his buddies are forcing liquidation in the gold sector by attacking the hedge funds they knows are long and weak, remember they are probably on the other side of the trade and are desperate. I have a feeling that this Attack by the Fedi is only about helping his buddies (especially JP Morg) out of his shorts. Once JP is unofficially bailed out or in a good position going long so that he is hedged his shorts, the GOLD bull market could and will resume, unless they are just going to allow a total system collapse. Maybe a collapse is a good thing, this way all debt is gone which is not a bad thing, but they will TWIST it in their favour and probably blame China for manipulating the Currency...something like that. Maybe this justifies a War with China... Who really knows, but this is it and this is now.....the market is not wanting to push this can down the road anymore. Something has to give and soon, if they are successful in the Euro bail out even if it is temporary, Gold and Gold stocks could go Ballistic.
I think it’s time to go back to the basics, if you have any doubts about what you are invested in, re-evaluate and sell if there is any potential of risk or exposure. Know the companies you own and who the biggest shareholder are, if you hear of any news that a major fund is in trouble, be assured the stocks that he owns in his fund will also feel the pain. Survival could mean weeding your portfolio down in size and the number of companies in your portfolio, keep only the good ones, get rid of dogs. I suggest staying away from gold at the moment its sideways for now, but take a look at the companies you are invested in. If there is any hint of political risk, get out of the stock on any uptick. I fear Geo-politics is going to play a much bigger role in the Financials than most people expect. Many gold stocks were flat to up on the day and the index was in positive territory most of the day, I am still neutral and not ready to dump shares just yet but definitely pick away at them, raise cash if you need to. This is the best suggestions I have for anyone right now and will repost some of this on the my blog later.