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Metals Review
The GLD ETF saw strong volume all week long with Thursdays move lower
seeing massive volume of over 30 million shares. Friday’s move higher saw 28
million shares trade. I’m not totally sure what to make of the volume here yet,
but on balance volume was much stronger on moves lower for this ETF this past
week, leading me to believe we continue lower once this situation in Egypt is
dealt with.
Silver rose 1.75% for the week as it bounced o" support just under $27
and also saw strong inflows Friday as did Gold. The move up stopped right at
the downtrend line where Gold was halted as well.
So far the correction looks great and this strength is right on cue and
should lead to another leg lower to test the $25 level where we will have to reanalyse our views if that occurs.
The 21 day moving average is fast approaching as well, and could be the
catalyst to push Silver lower once again.
The SLV ETF volume was quite strong for the week, but not extraordinary
although Thursday and Friday saw around 30 million shares traded which is far
from the 150 million traded at the spike high in early November
Platinum dropped 1.70% for the week but snapped back nicely Friday to
close at support. Platinum is trading near the lower end of it’s uptrend channel and also at what appears to be quite solid support at $1,775. It looks like this metal will be heading higher this coming week.
The 21 day average along with a few other simply drawn lines are doing a
great job of giving entry points to those who want them.
The PPLT ETF didn’t see much volume at all really, but the strongest volume did come on down days. It looks like investors are adding heavily on correction days as they know that this is one of the best performing and most stable metals to trade
Palladium rose 0.48% for the week and shot solidly through the $800 barrier on Friday. This metal continues to astound me and pushes higher constantly and predictably. $800 is now a support level and the 21 day moving average is fast approaching there and that level has been bottoms, or excellent entry levels since late August.
The PALL ETF volume is humming along above average, but not extreme by any means. It seems the heavier days this past week were slight down days which tells me investors were worried that the $800 level would not hold and were taking profits, or they are just adding to this incredibly strong position on any sign of weakness at all.
I think the latter scenario is the more likely, but at round number resistance such as $800 I have to also think about the former scenario as a possibility
Fundamental Review
The UN came out recently and said that the US Dollar should be replaced with a global currency. They are the first multinational organization to say this
out loud, although countries have said such words.
In the news release one of the reports authors, Detlef Kotte says;
“Replacing the dollar with an artificial currency would solve some of the
problems related to the potential of countries running large deficits and would
help stability”.
I don’t know what an artificial currency is other than what we have today.
A currency backed by nothing is artificial in my eyes. Although he does go on
to say that exchange rates would have to be managed in order to keep inflation
stable.
Unfortunately this is the exact same system that we have now. We need a
system that does not deteriorate over time and cause currency failures.
I am no fan of a one world currency unless it has strict creation controls
which would mean it would have to be backed by something tangible, that is
not used up.
There has yet to be a fiat currency in all of history that has survived,
excluding the ones still around today, but I assure you they are nearing their
ends now. The same process has repeated over and over throughout history
and will once again.
You only have to do a quick internet search for “financial crisis” or
“hyperinflation” to get a vast amount of information which all say the same
thing in the end. The currency over time was devalued and eventually failed
I don’t know how, when or what is coming exactly down the line but I do
know that my physical Gold and Silver will be worth at least what it is today in
whatever new currency or whatnot emerges.
Most likely the metals will be worth many, many multiples of what their
worth today, measured in terms of purchasing power. And really that’s all that
matters. I care not how many zeros are at the end of my dollar bills, I only care
how much their purchasing power is, and that they are relatively stable over
long periods of time.
I listened to a Jim Rickards interview recently where he said when he
hears the word credit, he replaces it with debt. I’ve tried it every chance I get
these days and it’s astonishing. Try it!
There were four banks added to the 2011 list of biggest losers. The
banks’ failures were announced as usual, after everything was shut down for
the week Friday evening.
One of the two large US credit ratings agencies this past week said the
US’s credit rating is at risk of falling. They say this a few times a year it seems
and I swear they only change the dates and a passage or two before releasing
it.
The other large US ratings agency lowered Japanese debt ratings since
Japan has no plan to deal with their mounting debt. Not many countries do in
all honesty
A Chinese ratings agency is blaming the US’s loose monetary policy for a
coming “world credit war”. I wish I could argue with that strong statement but I
cannot. I’ve said many times that the US should have let failures fail and not
print money to bail them and the US government out.
The Chinese sovereign wealth fund who manages about $300 billion
reiterated the fact that the QE2 program in the US is hurting the value of
money. In Davos, Gao Xiqing said “you know money is gradually becoming not
worth the paper it’s printed on”
Russia announced publicly that they are going to buy 100 tonnes of Gold
every year and that they see the world moving towards using a more sound
currency, which must be Gold in one way shape or firm. They cite the fact that
the worlds reserve currency is not doing it’s job of holding value, thus, it’s all
but useless.
I’ve been talking about it for years, but more over the past few weeks.
We need currencies to be backed by something tangible, finite and which is not used up. It’s possible and will make holders of Gold very happy as Gold would
have to be revalued higher substantially.
Peru reported a drop in Gold production, down from 5.9 million oz in
2009 to 5.25 million oz in 2010. This is a 11.19% drop. Silver production also
fell 7.27% from 128 million oz in 2009 to 116 million oz in 2010.
China reported that in 2010 they broke another production record by
producing 340.88 tonnes of Gold, up 8.57% from 2009. Great growth and
similar to their GDP growth numbers
John Paulson, one of the first large investors to embrace the Gold trade,
has reportedly made $5 billion on his 96 metric tonnes of Gold and Gold
related investments. Just wait until he gets onto the Silver rocket!
The reasons to own physical Gold and Silver have not changed for the
worse in this correction, they’ve only gotten more compelling.
I always say weakness is a time to buy, and we are near that point now.
Until next week take care and thank you for reading.
Warren Bevan
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