Last week we suggested a post-full moon downtrend in the precious metals markets and it’s now in full swing. The market downturn coincided with the following events:
- Banks such as Credit Suisse reported further losses
- Last week’s major decline in Shanghai
- Record high oil prices (gold and oil often trade inversely, many US companies suffer from high fuel costs);
Gold’s unpopular little cousin, Silver, got some negative attention from a Forbes writer who doesn’t think silver’s fundamentals look good (Forbes Article). According to the writer, since silver’s industrial demand is slowing, there’s reason to expect a long period of decline. Such an outlook fails to realize the reason for the decline. Using silver is simply too expensive for companies. There’s simply not enough of it for industrial use and market forces are showing us that silver is money and not abundant scrap metal.
Hidden in the article is an even more important reason why silver is such a good investment. Its production in relation to gold is 1:8. Silver’s actual price ratio to gold is 50:1. Market forces will correct that gap. Besides, there’s still demand for silver from the ETFs, smart investors, and according to Forbes, “rising incomes from emerging markets such as India and China.”
The article also mentioned the Goldman Sach’s 2008 prediction that silver would be $15.50/oz. and gold $835. Well if you listened to their prediction last year, you would’ve sold your silver and gold positions at $13 and $ 780 respectively (silver and gold currently trade near $17 and $900). Listen to them if you’d like, and you will be left behind.
As aforementioned, the recent downtrend in precious metals and mining stocks have brought prices to support levels. If support tests are confirmed today, then expect a small uptrend between Thursday and the new moon. Today and tomorrow should provide great buying opportunities, especially for our mineral stock plays ANO and RBY.
0 Responses to “Listen to the Markets, Not to Them”