Our forecasts for this past week were right on target. Gold is supported in the $870’s and most mining stocks settled just below last week’s highs. On May 13th, we recommended buying ANO and ROY and they have skyrocketed last week:
- International Royalty Corp (ROY) increased from $4.80 to 5.90 (+23%) on slightly higher 1st quarter results.
- Anooraq Resources (ANO) shot up from $3.10 to 3.90 (+26%) on news of funding for its acquisition of Lebowa Platinum Mines and on analysts opinions and platinum supply concerns (see Reuters article: http://africa.reuters.com/metals/news/usnL16722072.html?rpc=401& 
Tuesday’s full moon ushered in a correction, but its worth mentioning that most mining stocks are stabilizing near recent highs and above key support levels. Such actions imply that precious metals are entering a new cycle which may bring further positive momentum. The determining factor will be if gold can stay above its 50-day moving average (roughly $900) and silver above ($17) by Tuesday June 3. Thereafter, expect excellent buying opportunities for our precious metals stock picks.
The new trend is reversing a previous precious metals downtrend that began near the Ides of March. For those who missed the buying opportunity of late March and early April, you’ll get another chance within the next few weeks.
This new cycle is coming amidst reports about a severe shortage in both rhodium and platinum, the king and queen of precious metals (See articles:
Due to supply concerns, rhodium and platinum prices have already increased in value by 50% and 40% respectively this year, outperforming both gold and silver.
Many people worry that precious metals have already peaked, but we think that they’ve still got a long way to go. So, who’s right? We can forecast the long term direction of precious metals by looking at historical prices of each:
- Rhodium prices peaked in 1978 and reversed from a new low in 1998 (See Rhodium historical data at http://66.38.218.33/charts/historicalrhodium.html)
- Platinum prices peaked a year later in 1979 and reversed a downtrend in 1999 (http://66.38.218.33/scripts/hist_charts/yearly_graphs.plx)
- Gold reached a peak in 1980, ending a positive trend that began in 1960 and lasted for 20 years. It reversed from a downtrend 20 years after its peak in 2000.
- Remember that silver usually follows gold, so it’s no surprise that silver reached $ 50 in 1981 and began its new upwards trend in 2001.
What does this information tell us about precious metals cycles? It’s evident that they trend upwards for 20 years, then downwards for 20 years.
Rhodium is now half way into its 20 year trend and is sending signals about the direction of all precious metals. If there’s a rhodium supply concern, then there’s a supply concern for all precious metals. South Africa is producing less metal and the awakening giants, China, India, Brazil and Russia are adding to that pressure.
