Global Mining Investing $69.95, 2 Volume e-Book Set. Buy here. Author, Andrew Sheldon
Global Mining Investing is a reference eBook to teach investors how to think and act as investors with a underlying theme of managing risk. The book touches on a huge amount of content which heavily relies on knowledge that can only be obtained through experience...The text was engaging, as I knew the valuable outcome was to be a better thinker and investor.
While some books (such as Coulson’s An Insider’s Guide to the Mining Sector) focus on one particular commodity this book (Global Mining Investing) attempts (and does well) to cover all types of mining and commodities.
Gold is looking good. Silver is looking even more spectacular. Silver is trading in a different trend pattern to gold, but equally as promising. Using technical analysis we can see that silver has been very volatile. It pulled back to $10.50/oz, but it has since recovered to $12/oz, up 16% overnight. The reason is clearly due to the debasement of the USD and inflation. The chart pattern shows that silver has previously made a succession of new higher highs, whilst basing out around the $10.50 support. The next move of course is for silver to rally to a new high.
------------------------------------------------- Andrew Sheldon www.sheldonthinks.com
Wow, I just picked up on something. I was looking for the gold price to fall back to $700-750/oz levels and is did that, but its since recovered to $US864/oz, thats a 11% increase overnight. Seldom do we see such volatility in the gold market, but its actually more significant than that because its actually preserving a certain chart structure that is very bullish for gold. There appears to be a 'flag' structure developing between $800-1000 levels. The significance of this is that when flags are terminated on the upside, they tend to advance by the same amount as the flag pole. In this case the flag pole is between $400-800 levels, so I am expecting in the next gold rally for gold to break out above $1000/oz and to rally up to around the $1400/oz level. I am expecting it to do that very quickly before pausing. The 11% move I think signals its going to keep going unless we see a pull back overnight. The concern of course is that the USD is being debased at a time when the US will not have the confidence to raise interest rates to fight inflation.
------------------------------------------------ Andrew Sheldon www.sheldonthinks.com
Well we have been told for a long time that there is no oil shortage; that its speculative trading that is driving oil prices higher. The flipside is that given the current weakness on the (economic) demand side, there is very little to hold oil prices up except the promise of a resurging oil price. Crude prices have for a long time been a very volatile commodity. So where are prices going? I point will be reached when traders say - it must be time to buy again. Some wind has been taken out of the market, but oil is still the most important commodity on the earth. So when might we expect oil prices to bottom. Well its still a little time off. Certainly we are not returning to the bad old days of the 1990s when commodities were under-appreciated. Oil will trade in a new, higher range. We will not see oil prices return to $9/barrel when there are large emerging markets like China and India around, and a large number of SUVs with a useful life of 15 years. Oil prices are going back to around $US77.50s, though I would argue traders could take it as low as $70/barrel in volatile intra-day trading. I do however think there will be some resistance on the downside around $97-100/barrel. There are 2 reasons for this: 1. A weaker oil price is likely to give equity markets encouragement 2. People's standard of living expectations will adjust, resulting in an improvement in consumer confidence. Not everyone went out and bought a 2nd house, and speculated on US property. But some people did, and some people did buy at the top, fearing they were going to miss out. 3. Lower oil prices will give consumers more money to go out and spend Nevertheless I don't see the market fully recovering for a while yet, but I do think the next 6 months will yield some stock bargains, particularly with property foreclosures and commodities. I think the nickel market will be the first to recover, followed by gold. The other metals will likely take a bit more convincing. So the target price is $US77 level for a bottom in oil prices. This is a strong support having been resistance, though I have some suspicion that oil might fall to $70/barrel in the short term, so there is some reason to be cautious trading that position in order to get the best entry. ------------------------------------------------ Andrew Sheldon www.sheldonthinks.com
Tin prices have remained one of the stronger commodities in the market. The reason of course are the solid fundamentals for tin. Supplies of tin are relatively tight, and there is evidently some success by the Indonesian government to rein in illegal mines. But as a traded commodity tin is likely benefiting more from a delayed rally in prices. Being one of the most volatile and illiquid markets, it seems destined to have a correction at some point. I don't see tin prices benefiting from a proposed substitution of lead for tin in ammunition on environmental grounds. Realistically, I don't see this as a huge market, since the dispersion of lead in the soil is small. Also the damage tends to be inflicted on other countries, so I don't see a great deal of support for this proposal, least of all when tin prices are 9x higher than lead.
------------------------------------------------- Andrew Sheldon www.sheldonthinks.com
Zinc prices have fallen from a peak of over $4500/tonne to around $1800/tonne. You might wonder whether they have any further to fall. I believe they will at some point fall back to the $1450/tonne support. This level was an important resistance during the ascension of zince prices. The weaker economic outlook paints an unattractive outlook for zinc, but there will be a recovery in zinc demand with a resumption of building demand in the medium to long term.
Expect demand mainly from developing countries, plus Australia in short term, other Western nations in the long term. Australia will come out of this economic weakness faster than any other Western nation because of strong iron and coal prices, and a recovery in food prices. Of course it will also benefit from stronger base metals and gold in the medium term. Nickel and gold will do the best in the short-medium term. ---------------------------------------------- Andrew Sheldon www.sheldonthinks.com
It will be interesting to see if copper prices hold their current levels in the coming weeks. I have less confidence of that than I do in nickel. Nickel prices have fallen far more, and I think the outlook for building construction and consumer items would have to be more secure than copper use. The dynamics for copper supply are a little tighter though, however I would not be surprised to sell a short term sell off to $5,1oo/tonne. Its a huge fall, so its not a position I would trade. It might well stay above $7,000/tonne. I dont have any empirical evidence to suggest this market will fall, just that its vulnerable. The other reason for caution is the extent of trading in copper as a financial instrument.
Thje nickel market is one of the better commodity exposures you can take, and best of all the market price for nickel has reached low levels. This makes a great period to buy nickel as a commodity exposure, though I would not be surprised if the metal pulls back again to test its support once again, particularly as other metals are still yet to bottom. I would caution that nickel miners will also take some time to shine, even if nickel prices are the first to recover among the base metals.
I don't see downside below the red line on the chart because its a very firm support. There is a number of reasons nickel is good: 1. There are a number of attractive projects to invest in WA 2. The market is set for a good rally 3. Nickel is used in stainless steel, and a recent development is the use of stainless steel in the external and internal facades of most buildings. Buildings being BIG, mean that the intensity of consumption in most countries, but particularly developing countries like China, is really taking off. Of course there is a lot of nickel around as well, but there are supply constraints as well. 4. Its a volatile commodity. Once it falls back to support once more I can see it rallying to $25,000/tonne, previous support acting as resistance. It will reach $33,000/tonne in 2009, and I suggest a few years later it will reach that previous high around $54,500/tonne. I don't see this commodities boom over by any means. ----------------------------------------------- Andrew Sheldon www.sheldonthinks.com
I have taken a rest from commodities reporting of late. Understandable given the falls. That is no obstacle however if you want to play with put options or futures. I prefer to use CFDs, and its otherwise given me an opportunity to focus on my property activities, the focus of which has been my latest report on the Philippines property market. The more I looked at the Philippines property market, the more I like it. Refer to my 300-page report, the free book chapter or check out the foreclosures. Back to commodities! Gold has been weak of lately, having falllen from $980/oz to $780/oz. The market gained some confidence at that point and rallied to $840/oz. I think at this point the market is going back down. Weaker commodity markets are of course due to rising interest rates and weaker demand. Appreciate that commodities are not down for good, nor has there been adequate time for us to see the addition of significant capacity. It will be another 7-10 years before the demand is satisfied for a lot of commodities. This has to auger well for the Australian economy particularly. So why are commodities falling? The reason is (i) rising inflation, prompting higher interest rates, (ii) stronger $US, and (iii) weaker global economic outlook,. This all contributes to a weaker speculative appeal of all metals. Commodities are not going back to their 2000 lows. Rather they will establish support at lower highs. For gold that support is $US720/oz for an entry point, however in a volatile market it could go as low as $694. Its not that I have become bearish about gold, its that I think gold is not going to fly until we see the benefits of the next credit expansion. I have thus deferred my prediction for a $2400/oz gold price. The implication of that is that gold is going far higher. The longer things are delayed will just mean a higher gold price. ----------------------------------------------- Andrew Sheldon www.sheldonthinks.com
Looking at the gold chart its apparent that the gold price is consolidating in the $900-1000/0z range. One can likely expect a base in the next few weeks before moving higher. A move to $1000/oz would suggest a new leg, a convincing break above $1034/oz would confirm it. Regardless its only a matter of time.
Bank bailouts, Iran missile issues, rising inflation will help gold, plus the likely weakness in gold. You might expect some attraction to gold in times of uncertainty, but in this case, I suggest the burden of another 'open-ended' commitment to war in the Middle East might actually shake the USD somewhat.
What will Obama mean to a US conflict with Iran? I dare say that it will mean an extra 1-2 months of appeasement. But Obama will have better fortune getting NATO members on-board. So how far do I think this will go? Iran is engaging in self-righteous chest beating. I think any US action will involve missile attacks on Iran's nuclear infrastructure as well as a takeover of its oil infrastructure. I expect the surprising support for this would come from countries like Japan, which depend on Iran oil, though of course they would never say publicly. The timing for this conflict is interesting. Will Bush commit the US to military action in Iran before a presidential election. I'm not sure of the emergence power provisions in the USA, but I guess the President can suspend any scheduled election in the case of war. One would not expect however Iran to prompt that, but I really don't expect them to be so strategic. But its possible. I think the Democrats would love the Republicans to start the conflict. The US would of course act decisively to gain control of the oil infrastructure. Which means knocking out Iranian air support. I guess Russia has made a lot of money in recent years equipping Iran. Kind of interesting how Russia is no longer the enemy, but its supplies enemies of the USA. Russia gains either way - from weapons supplies or a rebuff to US influence in the region. If the USA were about to invade Iran you would expect them to encourage Saudi, Russia and other OPEC states to increase oil supplies. We have seen this already. The good news is that a conflict would surely decrease consumer confidence, which would reduce global oil demand. That will not happen overnight, but most countries can store a maximum of 90-days of oil supplies.
But what if this is all chest beating? The Iranian president is among the most unpopular presidents in history. He isn't getting much support for his presidency, mostly because of his poor efforts to improve the Iranian economy. Do Iranians want a fight with the USA. Hardly. In fact they are probably looking more favourably on US efforts in neighbouring countries. Iranian intellectuals are likely wondering whether US intervention will deliver democracy to them. Well good luck with that. Democracy is just a tool for delivering control to diplomatic fascists, which is what they have now. Though one must concede the US-style is so much more palitable, and of course consonant with the Western-lead paradigm. What a pity Iran could not mount an intellectual argument for its opposition to the USA. It would be great if there were such a country. Unfortunately there are only rogue collectivist states. Fascists opposing fascists.
I recall when the Iranian president was elected he was labelled a 'pragmatic reformer'. The reality has been quite the contrary. I guess its all relative. One might ask - if he is pragmatic - might he engage in war-mongering to encourage US intervention. There is no question they hate the USA, but its just possible they hate the controls of the Iranian religious clerics more. Iran needs a revolution since the clerics have authority to override the parliament.
------------------------------------------------- Andrew Sheldon www.sheldonthinks.com
The gold price is testing the $910/0z level. Gold punters will be looking to see if it holds its current uptrend, which despite breaking the previous high, might still remain in a channel. The weekly and monthly chart suggest that gold could fall back as low as $900/oz and still remain in its uptrend. On the upside we are looking for gold to break convincingly above $950/oz before we might expect it to rally. These decisions usually hang on the wire...all the more reason before the general market sentiment is poor, so I do expect gold will test that $900/oz level, and tread water for a litlte time before it has another rally.
----------------------------------------------- Andrew Sheldon www.sheldonthinks.com
People might be interested in my thoughts on oil. Some time ago I forecast that oil would go to $140-150/barrel. Well, now that we are there I am thinking abour what is install now for markets. There are some compelling facts about oil: 1. OPEC member states control more than 50% of supply 2. Russia is actually the largest producer, but it consumes more than Saudi Arabia so it exports less 3. Iraq has the largest 2nd largest oil reserves after Saudi Arabia 4. There is considerable controversy over whether Arab oil reserves are really as large as stated since OPEC discloses very little. 5. Among the fastest growing users of oils are countries like China and India which actually subsidise supplies. I understand that China recently reduces subsidies causing oil prices to rise 10%(?), but this is still far from market pricing 6. Some prospective oil provinces are locked up, preventing oil exploration, eg. Alaska
When I made my forecast of oil I was using a very simple financial model to determine its price outlook. At this point, I want to perform some more detailed analysis. I will offer some advice about where I think the world is going: 1. China and India will be forced to reduce their subsidies, though the slow pace at which they do it will push oil prices higher. The cost to the country is likely to be the compelling reason for lowering them.
2. The United States and other countries will increase their tax on petroleum. The rationale will be 'resource security' and 'environmental', but more than that it will be a compelling taxation scheme. The US government will need a new tax to replace the 'hole' left by Bush as the economy slows. He has adopted 2 tax cuts to stimulate the economy. There is no fat left on the carcass, so rather than raise income taxes again, I think Obama will adopt higher fuel taxes. We must remember that fuel in the USA is relatively cheap. I expect this will stimulate more use of trains, sale of SUVs, but importantly it will be a discretionary tax to some extent, and the gun-totting SUV user is more likely to be a Republican anyway :)
It goes without saying that oil prices are going a lot higher and that the government will want a piece of the price action. There is no question that the price incentives are already there for oil exploration, so I think the US and other governments will take the opportunity to carve a share out of the oil pie. The proceeds will in many countries be used for nuclear, solar, wind, geothermal (hot rocks), fuel cells, battery (load shaving) power schemes, energy saving subsidies /initiatives, and electric train-based transport systems.
More on my oil price forecast later. ------------------------------------------------ Andrew Sheldon www.sheldonthinks.com
I guess if you were launching a gold fund you would want to drum up some excitement about gold right? Well Schroder Investment Management has launched its Schroder Alternative Solutions Gold and Metals Fund, and therefore it feels inclined to forecast prices going to $5000/oz. I wonder which decision came first. :). Read the story here.
----------------------------------------------- Andrew Sheldon www.sheldonthinks.com
Gold, silver and base metal prices fell significantly overnight in the US. The fall in base metals was anticipated because the inflationary outlook inevitably was going to result in a tightening in interest rates, crimping global economic activity. The Fed is behind the rest of the world in that respect.
Gold and silver fell too, but less significantly, just losing their gains from the past week. I actually expect gold & silver to hold these levels. Gold can be expected to hold around $US875/oz, with some scope for weakness to $850, but thats likely to be temporary. Silver is well supported around $16.80/oz, though its industrial applications might similarly see a fall in this metal back to $15.00/oz, its just I dont see this happening. I think silver's spec appeal will see it hold with gold. During a period of speculative demand, the industrial side of supply/demand loses all significance. So basically I see gold and silver holding these levels.
1. Choose eBooks from SheldonThinks Online Store. 2. Click on Checkout - Ecrater Store. 3. Enter customer details. 4. Choose "Paypal" as Payment Option. Paypal gateway allows credit card payments directly, even without a paypal account. 5. Once you enter the paypal gateway (see photo on the left), click on CONTINUE on the left side of the screen, near the images of major credit cards. ------------------------------------ Andrew Sheldon www.sheldonthinks.com
You might be asking yourself how high is the gold price going to go. I recall years ago (around the year 2000) people saying that gold would never recover from $290/oz, that there was just no use for the metal. Since the gold standard had been abandoned, what were all the central banks to do with gold. I think there are a number of problems with this argument: 1. Gold has been a monetary unit for 5000 years 2. Just because governments have abandoned gold, it does not mean people have. In fact I would suggest any attempt by the central banks to abandon gold just makes it more valuable. 3. No other commodity shares gold's characteristics - silver comes close, but gold 'shines' because any years production or consumption is a fraction of total inventories, making pricing of the metal more stable. The speculative demand for gold today is really just because central bankers dont play homage to gold. I produced this report to provide an analysis of where I think gold prices are heading, and the timetable for the gold boom. I have used several indicators to outline where I think gold is heading. Further details here. ----------------------------------------------- Andrew Sheldon www.sheldonthinks.com
While I remain bullish on gold, I would not be surprised to see it to it drift back to $850/oz before advancing. Looking at the candles shows some trepidation, so it might pull back to make a new base before advancing. I would be watching the price action over the rest of the week. Anything less than a significant move up is a negative. After $885, the next significant resistance level is $950/oz.
If you are interested trading silver then there are few suitable silver stocks in Australia. Macmin is one candidate, but the lack of resource upside makes them a poor candidate. Others tend to be explorers with alot of work to do. It makes more sense to look at US or Canadian stocks. Alternatively you can invest in silver through a CFD trading platform such as www.cmc-markets.com. As we speak gold has fallen to $850/oz and silver has fallen with it back to $16.00/oz. This is not a support level, and since the US market has yet to close, I would not be surprised to see further weakness and a close either today or tomorrow around $15.50/oz. This is a strong support, and I dont see silver falling back to the $14.70 level. I expect silver prices to recover quickly, so $15.50 is a good entry level.
----------------------------------------------- Andrew Sheldon www.sheldonthinks.com
Checking Kitco, I see that gold has fallen $25/oz in the USA, that brings it back to $US850/oz, an important support level. There is of course no assurance it wont fall further, but I will be looking for consolidation, if not a rally off this support level. This level was the historic peak for gold reached in Jan 1981 and it was also a resistance level before on gold's recent move up to $1030, so it should be firm. Of course it will be supported by the Fed's rate cut and growing inflation. ----------------------------------------------- Andrew Sheldon www.sheldonthinks.com
Gold is expected to fall back to a significant support level of $US850/0z in the next few days as the Federal Reserve considers ending its recent cuts. Gold has seldom been so cheap judging by an important historical gold value - the gold oil ratio. The ratio has fallen to just 7.5, suggesting the precious metal is oversold, though it has some downside yet according to my analysis, suggesting my target of $US850/oz remains good. I think we are looking for a significant rally in gold from that point.
----------------------------------------------- Andrew Sheldon www.sheldonthinks.com
As expected gold is off, going back to $US850/oz support I suggest, at which point ity should go higher. Copper will stay flat I believe, supported by a weak $US, but I dont see it breaking $4-4.14/lb area. ---------------------------------------------- Andrew Sheldon www.sheldonthinks.com
Looking at the Gold-Oil ratio you might wonder if we are close to the stop. Far from it. The gold-oil ratio has not moved much over the last 6 months. This is because the oil and gold price have been moving up together. Looking back in time, in fact, the fall of the gold-oil ratio occurs mostly because the rise in 'cost of living' inflation raises interest rates to an extent where economic activity is curtailed. Of course that hurts oil, and not gold since there is comparatively less industrial demand for gold whilst paper money is being debased. I suspect gold & oil prices will continue to rise until oil prices start crimping economic activity, then I suspect the oil prices & gold-oil ratio will fall, but gold prices will remain strong.
----------------------------------------------- Andrew Sheldon www.sheldonthinks.com
The price of copper in New York and London rallied overnight as speculation of further aggressive US rate cuts favoured commodities as a good hedge against inflation and USD weakness. At least that is the rhetoric. The reality is that at some point economic activity will be undermined by rising inflation. Only gold, silver and food commodities can be expected to buck the downtrend in commodities because they are least exposed to weakness in industrial demand. LME copper futures for 3mths delivery settled at $US8,730 per tonne, up US$190 from Tuesday's close. On the COMEX exchange copper for May delivery ended up 10.95 cents (2.8%) at $US4.00/lb. Despite a 2.8% rise in copper, the metal still failed to close above $4.00/lb. I think that is a telling sign that industrial metals will fall, though they might consolidate at these high levels as the USD falls. But gold and silver can be expected to perform well.
Other base metals followed copper with three-months aluminium rising by $US112 to $US3,100 and nickel up $US475 to $US29,350.Lead rose $US63 to $US2,958 and tin was at $US20,650/20,700 versus $US20,400/20,450. Zinc rose $US22 to $2,372. NYMEX May crude closed at a record $US110.87, a gain of $US2.37 (2.18%), after trading betweeen $US107.95 to $US112.21. This is the highest level since NYMEX launched crude oil trading in 1983. The previous record was $US110.33 set on March 13 while the prior intraday high was $US111.80 hit on March 17.
Gold prices rallied 2% higher, reaching a high of $932.60 an ounce. Trading volumes are low in anticipation of a central bank and G7 meetings later in the week, which could offer guidance as to future policy on currencies and bullion sales. The IMF has announced plans to sell some of its gold reserves, but this would have little impact on prices since its likely to proceed in a gradual manner. The IMF is the world's third-largest gold holder after the USA and Germany, with 3,217.3 tonnes in reserves. It plans to sell 403.3 tonnes and use the proceeds to invest in government and corporate bonds, and possibly equities. Its possible that these events will bring gold back to the $850/oz support for gold that I have discussed already. ---------------------------------------------- Andrew Sheldon www.sheldonthinks.com
I remain convinced that gold is going to fall back to the $850/oz support. Recent levels have been weak ones, and I dont think a basis for a new rally. The gold price would have to rally above $US950/oz before I would concede. Regardless it is apparent that gold is revising its upward trend, with 3 plausible new trends in-play. I have indicated my preference for the more gradual trend line which sees gold falling back to $850/oz.
I am expecting silver to consolidate within the $16.25-18.50/oz trading range for the near term. This will create some very good buying support off $16.25. Support is needed after the big fall in silver from $21.25/oz during March. The justification for the weakness is likely to be concerns over weaker economic outlook, which I suspect will drive all commodities lower.
The price of copper is looking peakish at current levels. That is evident enough based on copper prices and the rise in copper stockpiles. LME stockpiles rose for the first time several months. The copper price is currently $3.97/lb, slightly down on its recent high of $4.00/lb, an important technical resistance. This is the 6th time copper prices have reached such levels before being sold off. Its important to recognise that this volatility is being driven by copper supply shortages (due to strikes & project bottlenecking) and USD movements. These factors are responsible for the volatile technical trading between the $3.00 to $4.00/lb price levels. I dare say this will be the last time that copper prices fall. I would suggest the next rally in 2nd half of 2008 will see copper break the $4.00 resistance.
In coming weeks there will likely be more rallies tied to USD weakness, but the technicals are likely to see copper fall back on softer demand issues. The net long, or bullish positions held by non-commercial investors in the US copper futures market rose 27% to 9,581 lots in the week to April 1, compared with 7,555 contracts a week earlier. I suspect they will be unloaded this week. The price of copper is up more than 30% this year.
There are traders suggesting that strong demand from world No. 1 consumer China will outweigh any slackening in consumption caused by a recession in the USA, but this market talk neglects the significant part US consumption plays in Chinese demand. It will take time for US sluggishness to feed through to Chinese demand.
LME inventories rose 1,000 tonnes to 116,150 tonnes - their first weekly rise since mid-February, though stocks still remain tight at just 2 days of global consumption. Citigroup regards copper as the most positive of the base metals. It has lifted its 2008 price forecast by 14.7% to $3.556/lb ($7,840/tonne) and $3.50/lb for 2009 ($7,716/t). Citigroup said prices in 2007 were supported by 800,000 tonnes of production losses compared to expectations.As a result of these supply shortages, there is likely to be a market balance in 2008. In the long run there is every chance that we will see $10,000/tonne copper, but it will not be until emerging market demand recovers.
We are quickly gathering evidence that gold is going to $850/oz support. Apart from the fact that was an import resistance back in 1981 adds to the likelihood that it will be an important support today. More current evidence is the fact that we are seeing gold pause between $900-915/oz. A break above $US935/oz would give evidence to the contrary, supporting a move higher by gold. That would need to be a convincing move to buy at that point.
Markets often rally back to a supporting trendline, only to disappoint, and I think gold will do it on this occasion, so I am inclined to see $850/oz a more realistic outlook before returning to $1000/oz, and beyond.
Overnight gold fell to a support at $880/oz. This is a significant support because it broke an important trendline, having tested it several weeks ago. Based on this news, its likely that gold will fall at least to $US850/oz support level. I believe it will find support at this level. Why? Well for starters $850 was the resistance level back in 1981 when gold last peaked, so it seems probable that gold will find support their.
I dont see much compelling evidence for a fall to $680-690/oz. Inflation is picking up around the world, despite not having reached a critical point. More importantly oil is getting to levels where it has historically caused a slowdown in the global economy. I will address this issue more in Market Commentary blog.
The recent sell-off of gold highlights the volatility of the commodities sector. Investors should keep this in mind when they trade leverage investment types. They should also not avoid such risks, rather they should manage them. Out of such calamity comes great opportunities. Such falls tend to leave trepidation in the minds of investors, but actually these are often the best entry points, particularly for your leveraged investments. Of course we need to look for support indicators.
There is no question in my mind that this was a profit-taking sell-off. I have seen arguments made that the gold sell-off was caused by the liquidation of the gold position of Bear Stearns. I think that is a pack of nonsense. An attempt by some analyst to have a 'profound thought' to get published. Why? Because the smoke has yet settle on the Bear Stearns case. You could argue that the sell off was precipitated by a market awareness that Bear Stearns had long exposure to gold. Regardless I dont think JP MorganChase would be in a hurry to liquidate this holding. Its one of the best asset classes to hold.
The gold price has fallen through the $950/oz support that I saw as support, so it now looks like holding a lower support. Regardless that just makes this a better buying opportunity. I retain my belief that gold is going over $US2,000/oz. In the coming week I will update my model for the gold price outlook. You might ask what could actually cause the gold price to fall back to the next support at $US850/oz. I suggest talk of central banks selling off their gold reserves. I dont think that is likely since the international monetary system is likely to come under scrutiny in future years and central banks will not want to be holding an empty draw. Another factor might be a decision by the Fed to aggressively raise interest rates based on an inflationary outlook. Again I think recent action and statements by the Fed dont support that possibility. It is my belief in fact that if a bank like Bear Stearns is going to fail, gold is more likely to go up because monetary assets are going up, and the bank fails because they are short on gold, not long. One would have to conclude that Bear Stearns failed inspite of their gold holdings, not because of them.
As expected gold is finding support at $1000 level, having fallen to that level during early Monday US training, then recovered to $1009/oz. Oil prices were off $4/barrel, bringing them back to $106/barrel. Any relief there can be expected to support a rally in equities.
For the rest of the week I think we will see some consolidation above $1000/oz. But I imagine there will be a lot of fund buying in gold thereafter. But I look forward to even greater interest in equities from this point forward.
Gold has convincingly broken $US1000/oz, in fact it ran up to $1030/oz before being sold back to $1010/oz at the time of this post. Based on the current market circumstances, having broken $1000 there seems no 'fundamental' reason why it should not hold the $1000/oz support. It was a firm breach of the psychologically important $1000/oz level, so I am expecting it to hold. I was actually expecting some short term weakness in gold because its rallied recently, and I expected the USD to hold the important JPY100-101 support for at least a week or two. The failure of the 4th largest US investment bank Bear Stearns on Friday changed that. That saw the Fed aggressively lift support, which greatly changed the risk perceptions in favour of gold, and made the prospect of lower interest rates more likely....all to no avail mind you.
I note the greater interest shown in spec gold stocks today (Monday), and I expect that will continue for the remainder of the week. I do believe we have seen the bottom. As indicated previously, I see base metals trading south, though they will hold their long term uptrend. I expect uptrends will be tied to weaknesses in the USD and I believe these industrial-based commodities will be sold off during times of USD strength. I can't see copper breaking $4.00/lb in the current environment, though I guess since I think the USD is going to 85Yen, that is not out of the question. It is my firm belief that whilst USD weakness works for base metals too, these metals will come under pressure due to subdued economic demand. There are stock-specific factors to consider here though, such as the 60% increase in production by Matrix Metals and similar expansion for CBH Resources. See my stock blogs for those stories. But my focus herein would be on gold-related stocks - if not producers then stocks which are as close as you can be. Since its difficult financing conditions it should be a good project, and hopefullu already have the equity component of the issue since its a poor market for making equity contributions to project finance. ----------------------------------------- Andrew Sheldon www.sheldonthinks.com
Global Mining Investing $69.95, 2 Volume e-Book Set. Author, Andrew Sheldon
Global Mining Investing is a reference eBook to teach investors how to think and act as investors with a underlying theme of managing risk. The book touches on a huge amount of content which heavily relies on knowledge that can only be obtained through experience...The text was engaging, as I knew the valuable outcome was to be a better thinker and investor.
While some books (such as Coulson’s An Insider’s Guide to the Mining Sector) focus on one particular commodity this book (Global Mining Investing) attempts (and does well) to cover all types of mining and commodities.
Over the years, this ebook has been enhanced with additional research to offer a comprehensive appraisal of the Japanese foreclosed property market, as well as offering economic and industry analysis. The author travels to Japan regularly to keep abreast of the local market conditions, and has purchased several foreclosed properties, as well as bidding on others. Japan is one of the few markets offering high-yielding property investment opportunities. Contrary to the 'rural depopulation' scepticism, the urban centres are growing, and they have always been a magnet for expatriates in Asia. Japan is a place where expats, investors (big or small) can make highly profitable real estate investments. Japan is a large market, with a plethora of cheap properties up for tender by the courts. Few other Western nations offer such cheap property so close to major infrastructure. Japan is unique in this respect, and it offers such a different life experience, which also makes it special. There is a plethora of property is depopulating rural areas, however there are fortnightly tenders offering plenty of property in Japan's cities as well. I bought a dormitory 1hr from Tokyo for just $US30,000. You can view foreclosed properties listed for as little as $US10,000 in Japan thanks to depopulation and a culture that is geared towards working for the state. I bought foreclosed properties in Japan and now I reveal all in our expanded 350+page report. The information you need to know, strategies to apply, where to get help, and the tools to use. We even help you avoid the tsunami and nuclear risks since I was a geologist/mining finance analyst in a past life. Check out the "feedback" in our blog for stories of success by customers of our previous reports.
Gold is looking good. Silver is looking even more spectacular. Silver is trading in a different trend pattern to gold, but equally as promising. Using technical analysis we can see that silver has been very volatile. It pulled back to $10.50/oz, but it has since recovered to $12/oz, up 16% overnight. The reason is clearly due to the debasement of the USD and inflation.
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