Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20
Global "Debt Mountain": Beware of This "New Peak" - 13th Nov 20
Overclocking Zen 3 Ryzen 5600x, 5800x, 5900x and 5950x to 4.7ghz All Cores Cinebench R20 Scores - 13th Nov 20
Is Silver Leading Bitcoin or is Bitcoin Leading Silver? - 13th Nov 20
How Elliott Waves Simplify Your Technical Analysis - 13th Nov 20
How to buy Bitcoins using debit/credit card? - 13th Nov 20
Will COVID Vaccine Kill Gold and Silver? - 12th Nov 20
Access to Critical Market Reports - 12th Nov 20
Stock Market Dow Futures Reach 30,000 on News of COVID-19 Vaccine Trials Success - 12th Nov 20
8 Terms & Conditions You Must Know Before Asking For Life Insurance Policy Quotes - 12th Nov 20
Gold Stocks Post 2020 US Election Outlook - 11th Nov 20
Champions’ League Group Stage Draw: All You Need To Know - 11th Nov 20
Stock Market Secular Trend - 11th Nov 20
Stock Market Correction Curtailed by US Election - 11th Nov 20
What Causes a Financial Bubble? - 11th Nov 20
Ryzen 9 5900X RTX 3080 - Scan.co.uk vs Overclockers.co.uk UK Custom PC System Builder Review - 10th Nov 20
Killing Driveway Weeds FAST with a Pressure Washer - Saving Block Paving from LOTS of WEEDs - 10th Nov 20
Trump Fired, Biden Hired, What Next?  - 10th Nov 20
Looking for a Personal Loan? Here Is What You Have To Know  - 10th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Gold Gains New Friends

Commodities / Gold & Silver 2009 Oct 23, 2009 - 01:26 AM GMT

By: HRA_Advisory

Commodities Best Financial Markets Analysis ArticlePress rumors of planning meetings to shift crude pricing away from the US$, plus a 0.25% increase in Australia’s bank rate, has put some serious bounce in gold and silver prices.  The yellow metal has convincingly moved past its old high, in US$ terms, and we expect that move to continue.  Whether the details of the meetings reported in London’s The Independent are accurate in every detail or not, markets have had no problem accepting the basic point that the greenback cannot expect long term support as the globe’s reserve currency.


Commodity prices, especially gold and silver, are very much currency stories.  The US Dollar continues to lose face for a variety of reasons, with more rapid growth in the creditor and resource producing nations being the latest.  This, not inflation concerns, has been our focus.  Australia’s increase in its bank rate may be duplicated in a number of other economies before Washington gets around to it.  This would continue the downtrend in the Dollar and uptrend in precious metals no matter what inflation looks like.

Lack of high yield alternatives, plenty of frustrated money on the sidelines and the potential for “good” earnings (at least by comparison with the past 12 months) may drive the major bourses higher yet.  This will add more strength to the already outperforming metals sector.

The biggest potential short term risk is that Dollar Distaste reaches the bond market and drives yields higher.  That could turn the Dollar and the stock markets around quickly.  Be happy, but keep an eye on those Treasury yields.

Copper stocks continue to pile up while the red metal sustains price against US$ weakness.  Over half the stockpile taken down earlier in the year has now come back into market.  Some of the stock on offer would likely disappear on a price decline, or if the current Dollar weakness turns into a rout. But that has to happen before we are comfortable with this year’s price gains.  The message since mid July has clearly that users think the price move has been “too far—too fast”.

That remains the case for most commodities.  Traders are playing musical chairs to a tune of weak Dollar fundamentals against a melody of uncertainty for demand sustainability.  Notwithstanding our belief that the greenback’s decline is a longer term phenomenon, we don’t look for anything to trade in one direction permanently and this move will be to a new trading level.  We doubt the guy in the last chair of this round will celebrate for very long before shifting direction with the herd.  

We should note again the continuing calls by the government for closure of Chinese smelters.  This is due to both inefficiency and overcapacity.  Current stockpiles aside, excess smelting capacity is not the same as excess metal producing capacity.  The two roughly equate for some metals, such as  aluminum for which there is a ready supply of input minerals in coastal regions that could use development funding. 

Foundry capacity, or overcapacity, will not govern iron ore supply for the time being.  Most prospective ore regions need infrastructure to coastal shipping ahead of any expansion.  Longer term iron ore supply will come from regions that put that infrastructure, and longer term contracts, in place.  We do still see opportunity in iron ore, partially because of the politics that surrounds it.

Medium and longer term copper capacity will be governed by mine supply, and the long time frames for large copper mines to come on stream.  Smelters can’t process concentrates unless mine supply is sustained. The same holds for zinc and to a lesser extent nickel.  We don’t view China’s push to reduce smelting capacity as a sign the metals bull has run out of steam. It simply makes sense for China to shut in costly, polluting smelters when there is capacity next door in more efficient Korea and Japan. 

Japan’s new government has referenced abandoning the weak Yen policies of its predecessor several times now.  Given it is supposed to be part of the talks cited by The Independent and that the Yen (along with gold and the Yuan) are supposed to be part of a new “basket” for oil settlement, that stance is making more sense. 

More importantly, Japan’s new leadership has stated it favors stimulating domestic spending in order to end a deflationary malaise the country has lived with for most of the past two decades.  Cheaper inputs for its resource poor citizens are therefore more important to it than cheapening the exports market of its high end producers by devaluing its currency.
 
These pronouncements have aided the cause of price support for Dollar denominated global goods.  But, markets are and will continue to have a tough time with deflation’s poster child righting itself in the current environment.  That is entirely reasonable given deflation’s shadow slowly creeps over the western landscape.  However, PM Hatoyama is quite deliberately shifting sentiment away from a western focus of the past half century.   

At worst this is pragmatic recognition that the customer base for Japan’s goods has ended its buying spree.  The real message is that Japan is wealthy and able to chart its own course, once it has detoxified its bureaucracy from spinning funds into their retirement companies. There will be no quick fix from this policy shift, but it makes more sense than a failed policy requiring western sales points for its goods. 

We can’t overstate the potential importance of these moves in Japan.  This is the second largest economy on the planet in nominal terms, and yet one for which concern that a lack of raw materials supply could hamper its growth spurt is very much a living memory.  It has also seen a massive growth in ore processing to meet this concern overtaken in large measure by neighboring South Korea.  We believe a shift is building in Japan to a much greater emphasis on its domestic economy, and equally to more focus on its regional economy.  That should mark a major shift in the geography of country risk, and a greater acceptance that “Asia rising” is the global boon we perceive it to be.   

So, how does that impact the current gold boom?  It should simply give it a greater head of steam.  Missing from the weakening Dollar equation was how the other side of that equation shapes up.  Much of Europe was happy to jump on the cheap debt = housing boom bandwagon, and so is in no better shape than the US.  So the Euro can sustain only so much upward pressure.  Currencies in the less weakened industrialized “west” — AUS, CDN, NZ— simply don’t have the scale for the job.  There has been only one sensible answer.

We have said in the past that the only equation that made sense was Yen strength as a proxy for Asian growth economies.  Most wrote off the notion because of Japan’s export model.  Now that Japan has a government that is willing to play that card, the pieces are truly in place for quick shifts in the FX market.  Gold and silver will benefit smartly from that, and no the world is going to end as part of the process.

Right how we are seeing a major catch up going for undervalued asset based companies in the precious metals space.  This part of the up tick could surprise even rabid bulls.  Some more speculative companies that had been strong gainers appear to be flagging because of this, but that won’t be permanent.  Speculative gains should be moved to companies with more solid outlines, but as the asset based companies get closer to full price funds will flow back to specs.

If you are a trader, the shift from one play to the next could get dizzying.  If you aren’t, then view this as a “stay the course” moment for precious metals.  Expect some significant pull backs as traders take gains, but these will be in the context of a rising market for some while yet. 

Ω

Gain access to potential gains of hundreds or even thousands of percent! From March to June, HRA introduced four new gold explorers to subscribers. Those four companies have generated an average gain of 205%, to date! SPECIAL HRA OFFER: For a limited time only, HRA is offering free reports and a subscription savings. Click here for more information: http://www.hraadvisory.com/sh2009.html

David Coffin and Eric Coffin produce the Hard Rock Analyst publications, newsletters that focus on metals explorers, developers and producers as well as metals and equity markets in general. If you would like to be learn more about HRA publications, please visit us HERE to view our track record, see sample publications and other articles of interest. You can also add yourself to the HRA FREE MAILING LIST to get notifications about articles like this and other free analyses and reports.

By David Coffin and Eric Coffin
http://www.hraadvisory.com

    David Coffin and Eric Coffin are the editors of the HRA Journal, HRA Dispatch and HRA Special Delivery; a family of publications that are focused on metals exploration, development and production companies. Combined mining industry and market experience of over 50 years has made them among the most trusted independent analysts in the sector since they began publication of The Hard Rock Analyst in 1995. They were among the first to draw attention to the current commodities super cycle and the disastrous effects of massive forward gold hedging backed up by low grade mining in the 1990's. They have generated one of the best track records in the business thanks to decades of experience and contacts throughout the industry that help them get the story to their readers first. Please visit their website at www.hraadvisory.com for more information.

    © 2009 Copyright HRA Advisory - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

    HRA Advisory Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules