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US Debt Outlook Downgraded: Got Gold?!
On Monday, the S&P ratings agency downgraded the US debt outlook
to negative. The Triple A debt rating was maintained by S&P, but the
outlook downgrade by the agency, which hit the U.S. stock market hard
and also prompted a sell off in U.S. Treasuries.
In the meantime, the U.S. dollar index backed down from its session
high on the negative U.S. debt outlook. The S&P downgrade of the
U.S. prompted fresh safe-haven buying interest in the precious metals
markets, as both gold and silver futures rallied sharply on the news and
are trading at fresh for-their-move highs.
The gold price closed in on major psychological resistance of $1500
per troy ounce, and is therefore set to hit yet another record high. We
believe the $1500 mark may prove to be as important as the $1000 level
hit a few years ago. Meanwhile, gold is still not overbought and does
not look extended by any measure.
Although we do not adhere great importance to rating agencies
anymore, as we believe they have lost most of their credibility during
the credit crisis for not predicting things the market had seen coming
for a while, this downgrade may well prove to be the straw that broke
the camel’s back.
US investors and overseas investors who hold a large portion of their
liquid wealth in USD should seriously consider shifting part of these
assets into bullion, i.e. physical gold. It is the best way to shield
their wealth from USD debasement.
Meanwhile, we strongly believe gold and silver mining equities have a
lot of catching-up to do. In the past few yew years, mining shares have
never been cheaper versus the underlying metal prices than today. Most
of this underperformance comes from hedge funds going long bullion and
short mining shares. If gold and silver continue to perform well, they
might be in for a rude awakening and get burned.
Dan Norcini
put some of these issues into perspective, by comparing the HUI index
(gold & silver mining shares) versus gold and silver prices.
HUI/Gold Ratio still in the gutter
HUI/Silver ratio at levels not seen since 2001!
Strategically, we continue to advise to accumulate gold and related
assets. Tactically, since many of them have risen significantly over the
past 12 to 18 months, it may be wise to recover your principal
investment in some positions and reinvest in underperforming mid and
large caps stocks, which have attractive risk-reward profiles. After
all, do not forget the public is not yet invested in these names.
If our scenario pans out, this may be 1999 all over the place
again within a few years. The only difference will be that the
high-flyers are not named Quallcomm, Cisco or Oracle, but Barrick Gold,
Newmont, Goldcorp and the likes!
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A retreat from Treasuries is a longer-term negative for Gold prices. If the bond market finally comes to its senses and forces US treasury rates higher, much the same qay it has done across Europe, commodity prices will decline across the board. I believe there is room from a near term move up in precious metals, but staying short the now largely unhedged miners is a solid way to play rising rates. Save the armageddon scenario some on ZeroHedge posit, an increasingly negative view of the US Government's finances yielding higher rates will push down metal, and energy prices. I fear that miners seeking to extract as much as possible from the current gold rush have missed a golden opportunity to lock-in wildly profitable prices for years to come. Shorting unhedged offshore miners, alongside long-dated treasuries maybe the best way to play the looming US debt crisis.
That's some powerful shit you're smoking, dude!
Before going into the physical custody of gold and silver may I suggest getting physical custody of dehydrated food, secure your source of water and look for other survival items that will make your life easier should things go bad. A solar generator, solar oven, communication equipment and strategic alliances with neighbors and friends is a good beginning. When those things are secure then by all means, go for physical custody of gold and silver.
"Although we do not adhere great importance to rating agencies anymore"
Of course nobody believes the ratings agencies, but the fact remains that a lot of money is required to use the ratings as input criteria to the investing process. Clients have ratings minimums that they must adhere to, and sometimes they also use the outlook ratings as well. It's not that everyone suddenly realized that the US has fiscal issues, but rather that they have suddenly been required by law to sell due to S&P's move. So, while they do not have great credibility, they certainly have great importance as measured by their ability to influence markets.
Yet another unintended consequence of government intervention into markets...
When gold is low and the miners are losing money the South American countries don't even think about them. As soon as gold goes up and the miners start to get a return on capital the Socialists stand up and demand to nationalize the mines. Nationalization is good if you hold physical metals. Nationalized mines tend to operate at huge losses and eventually fail to produce an ounce of PM.
they print the money, we exchange for physical. end game is known, timing is only question.
dont get caught up with the spot. keep swapping excess dollars for physical.
'COPPER has ignored the recent equity bounce. Daily and weekly are not bullish' ~ March 31, 2011.
'When the sell off does occur, it won’t be pretty. As mentioned earlier, this market behaviour is similar to 2007 / 2008' ~ April 6, 2011.
'DOW/S&P500 is tracking sideways once again suggesting that short covering rally has lost momentum' ~ April 7, 2011.
http://stockmarket618.wordpress.com
I would really like to know if "this is what the S&P intended" when it "issued it's downgrade." It would seem "the bankruptcy that is a long way off" has been enhanced dramatically. The irony of course is that "this is the company that really told you to buy the lie" with MBS. So what's the problem with the lie this time I wonder? It's not like there's any economic recovery to speak of. Needless to say "this is no excuse to sell" as "Fukushima" and "Libya" which are quinetessentially human disasters no matter how man blames God for them are clearly a far bigger deal than anything the clowns at S&P say.
http://apeakunderthehood.blogspot.com/2011/04/prelude.html
Prelude
Check out the latest post on a subject most do not appreciate
This is exactly why I didn't sell all my gold to buy silver. I like diversification. I'm in both.
Yeah, not so much Barrick as for example a Jaguar or Fortuna Silver...
Hear the next president of the USA as current parties will continue to do nothing about the debt:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2663#p31841
What is the name of this so called next president?
gold hiting all time highs yet the miners are selling off. how is this possible ..have the minning shares decoupled from spot gold?
Don't confuse gold with gold diggers. Gold can be buried in hidden locations out of the reach of all. Gold mines are easily seized and subverted by desperate governments.
Nationalizing of mines has commenced in Central and South America. Your mining stocks are worth shit when a government moves in an steals the mine.
Naked shorting of miners is prevelant.When you feel like puking,double down.
Own only producing miners in N.A.
Gold and Oil.....that's all you need to preserve yoru wealth imho. As the dollar is devalued investors head to hard assets.....GLD and USO.
GL!
air: check
water: check
food: hmmm
shelter: ... um....fuck it, can we talk about food again?
Meanwhile Smailes is wrestling with a margin call
@WALLST8MY8BALL
"Meanwhile Smailes is wrestling with a margin call"
And with the piled up feces in his pants.
The statists/government all now scrambling for damage control. One idiot says the S and P Report does not take into account the political will to resolve this. I have to go change my pants.
Whoever said that is an idiot. Seems like S&P is finally taking the state of our political will into account.
You might not want to change pants just yet - I don't think this is finished.
the market apparently sees "the downgrade" as "a threat." i'm still unclear what S&P's purpose was. Clearly neither it nor anyone else on God's green earth can "tell Congress what to do."