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Graham Summers’ Free Weekly Market Forecast (Gold and Silver: Buy With Both Hands Edition)
Rather than
discussing every asset class under the sun, this week I want to focus on a
MAJOR buying opportunity that is developing in the precious metals space.
With that in
mind, this week’s edition of my Free Weekly Market Forecast is titled Buy
With Both Hands.
Gold has
formed very ugly technical patterns both in the long-term and the short-term. In
the short-term we have what looks like a dome top forming.
This is one
of the cleanest dome top patterns I’ve ever seen. The downside target for it is
around $1,250… which coincidentally lines up the Gold’s long-term chart pattern
target as well.
In the
long-term we have a rising bearish wedge forming since the 2008 Crash. As I write
this, Gold is right on the lower trendline of this massive pattern. A break
here would likely see the precious metal falling to $1,250 before putting in a
base for another leg up.
Silver is
posted similarly bearish looking patterns.
As you can
see, Silver has broken the trendline that supported it during this latest
rally. It has since failed to reclaim this line AND broken through initial
support at $28. The next real line of support is $26 or so, though we could
easily go as low as the $24-25 range if things pick up steam to the downside.
Given the steepness of Silver rally from August to December, this is quite
possible.
Let me be blunt here. If Gold falls to
$1,250 per ounce and Silver falls $25 per ounce it’s time to BUY WITH BOTH
HANDS.
I want to be
clear here. I am SUPER bullish on both precious metals in the long-term. But
right now, both are posting extremely ugly, bearish technical patterns.
However, rather than seeing this as something to worry about, I view it as
phenomenal buying opportunity for both assets.
One of the
oddest things about investment psychology is that people only want to load up
on an asset class when it’s soaring. Rarely do they view a collapse as a good
thing. In some cases, this mentality is beneficial (buying Tech stocks in 2001
when they began to collapse after soaring would have been a HORRENDOUS move).
However, in
the case of Gold and Silver today, a collapse right now would be absolutely
FANTASTIC for investors.
For one
thing it would shake out some of the hot money that recently flowed into the
sector. And it would also give both precious metals a chance to form a sound
base before beginning their next leg up.
Indeed, I
expect both assets to be MUCH higher from where they are today this time next
year. Why? Because the Fed and the world’s central banks have pumped trillions
of Dollars into the financial system and have no means of getting back out
again.
So, in the
near-term, deflation remains the primary risk. In fact, I would venture that
Ben Bernanke would LOVE another round of deflation to occur as it would serve
as support for his money printing policies and his goal of pumping even more
money into the system.
When this
happens, Gold and Silver will begin the REAL explosion upward. So with that in
mind, let Gold and Silver drop now and then BUY WITH BOTH HANDS. After all, the
first wave of inflation has already hit the US (the initial stage of rising
prices pushed by speculation).
After this
comes the REAL stage of inflation: the
CURRENCY COLLAPSE.
Remember,
the US's Federal debt is now at $13+ trillion. And if you include unfunded
liabilities like social security and medicare, you're talking about $70+
TRILLION in total debt on the US's balance sheet.
Let's be blunt here: the US will NEVER pay these debts and liabilities off. And
once the financial world finishes pummeling the Euro, we're going to see the US
Dollar and Federal debt markets implode.
I cannot tell you when this will happen. All I can say is that it will
happen. And when it does, inflation hedges across the board will EXPLODE
higher.
Good Investing!
Graham
Summers
PS. If
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I'm not a serious investor, but I have always gone on the idea of, 'If you like it, then buy it. Damn the fundamentals.'. I happen to love precious metals, they are fun, pretty, and generally look good over a 50-year span of time. So I'm on board, let it fall a few more percent then 'buy with both hands.'. I'm going to wait till right before the second quarter begins.
BOOYAA!!!!
I agree. INdia food prices up 18%...China real estate still soaring...hot money flwoing the globe coating the earth with paper.....the Chinese gov seems to be one of the few who have their heads on straight and has been "buying with both hands" every commodity, gold mine, copper mine, silver mine, etc in sight.
Hard assets are wealth protection in this wild world of imminent paper collpase.
+1 Great post. China is buying up everything of real value. I agree with another poster that bonds - especially munis will be binfire paper to keep warm.
Anyone ever see this "dome" patten he is mentioning in the article?
I'm not sure what chart analysis has to do with the current situation with pms. We all know they are extensively manipulated to keep the illusion of low inflation. The dome top is false, nothing has improved, i'm buying with both hands.
One thing I fail to understand is that why most analysts are recommending the purchase of Gold or Silver as a safe investment? The problem today is that the price of precious commodities is not derived by it's physical demand or supply but more by the speculative positions standing long or short on the commodity exchange like any other traded commodity, stock or currency.
The basic mechanism of price discovery (based on demand and supply for actual use) of anything traded on an exchange has been terminally infected by speculators having access to unlimited funds and super fast computers for trading leading to volatile price swings. This has been made worse by the launch of ETFs for anything and everything under the sun by the financial community.
The price of everything including Gold and Silver is likely to suffer when the speculators unwind their positions due to some event that they have not anticipated or foreseen.
http://www.marketoracle.co.uk/Article24581.html
Hey ak_ ever see those pictures of the lady burning Reichsmarks in her stove to keep warm? I foresee a gigantic bonfire of not just all fiat currency, but bonds of all kind. Gold an Silver are suffering because the central banks and governments around the globe are doing everything in their power to hang on to their priviledge of printing and issuing at will.
Place your bets, the wheel is about to grind to a halt, and the ball is headed towards the red.
(d)
BTFD!
what do you know, Utah thinks gold and silver are money... possible legislation.
In light of the U.S. dollar’s continual loss of purchasing power and the historical stability of precious metals as a store of value, a new bill set to be considered in the Utah legislature would require the state government to accept taxes and pay its obligations in gold or silver upon demand.
http://www.thenewamerican.com/index.php/economy/economics-mainmenu-44/5972-utah-could-use-gold-silver-under-sound-money-act
Rep. Ron Paul (R-Texas), the new chairman of the domestic monetary policy subcommittee in Congress, also praised the Utah proposal and its author.
wow, somebody gets it in .gov...
bucket and spoon Hookers!
The bucket is your assets(in this case shiny) the spoon is your paper short of the assets. when your assets go down in value your spoon gets extra value
When your spoon starts to overflow, buying more assets with the inflated spoon value is cheaper and gives you more of the asset you want.
In this way the up and down motion will create more assets for you and reduce total volatility. And you never have to pick tops or bottom. When you asset is up buy a spoon. when your asset is down sell the spoon and buy the asset.
http://www.proactiveinvestors.com/companies/news/11710/extorre-gold-mine...
Extorre Gold Mines Limited
The Toronto Stock Exchange: ca:XG
These guys got hit with 2, maybe 3, flash crashes today. (down 50% with full recover) You read that article and think maybe they are being supressed for a big buy???
no affiliation and I don't own, just a read...
Yeh yeh, keep your powder dry shipmates
If you equate greenbacks with powder, then just like powder, greenbacks do have a tendency to go bad, especially the phoney kind..
I like the approach of allocating capital in small amounts on pullbacks. The greater the pullback, the greater the allocation. Whatever asset.
As you probably know, mate: Good things come to those who wait, but not to those who wait too late! Hah!
A bearish wedge. Johnny Bravo liked that term a lot.
I am not saying you are wrong, actually you are probably right, certainly longer term. Although I am not a fan of technical analysis, gold does have an ominous triple top there underneath your curving dome.
It took me a while to take you seriously when you admitted disappointment with The O some months ago, but I have gotten over that by now. I think anyone should have 5% - 10% in gold / precious metals, physical only and in your possession.
I mentioned earlier in another thread that I will be "done" buying gold soon, as I am on the verge of reaching my goals (8% in gold, 2% other PMs). So, I am going to have to stop preaching about buying gold, lest I find myself a hypocrite. But, I can think of it as having done what the Central Banks (ex. England) have done:
Front-run everyone in getting their gold cheap.
...
Graham Summers, if you want a very different and interesting take on gold, visit:
fofoa.blogspot.com
Once you understand his take, you will take comfort that you do NOT need to be "all in" in gold. A little will go a long way.
And, seriously, it matters little if you BTFDs or not. All that matters is the ounces. I have told everyone "ad nauseum" to buy when they have some money coming in. It has worked for me since the 1980s.
...
If the future is as dire as many of us think it could be, then you are doing a service to ZH readership Mr. Summers, even if at a late stage.
/preach off
Those are my thoughts exactly. This appears to be a one way trip by the Fed.
The only question is how much turbulence there will be and the arrival time.
The destination is being negotiated amongst countries and the Western banks.
"There's no place for fiat to go but gold" -- Alan Greenspan.
I see so much confusion like this everyday it makes me chuckle.
Long term going much higher. If it pulls back a few more percent then buy. Why wait for a few percent if its going way higher?
Speaking of only wanting to buy when its soaring - geez ten years into it are we not?
Garbled timeframes are one of the most dangerous investment approaches and create disingenuous advice.
I enjoy your presentations, but this kind of thing: its going way higher, but its a bit heated right now (or faltering) so wait for a pull back, is patty cake.
$100/oz lower in not trivial, so the message is WAIT and maximize your purchase.
Get it?