Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
INTEL (INTC) Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 18th Jan 20
Gold Stocks Wavering - 18th Jan 20
Best Amazon iPhone Case Fits 6s, 7, 8 by Toovren Review - 18th Jan 20
1. GOOGLE (Alphabet) - Primary AI Tech Stock For Investing 2020 - 17th Jan 20
ERY Energy Bear Continues Basing Setup – Breakout Expected Near January 24th - 17th Jan 20
What Expiring Stock and Commodity Market Bubbles Look Like - 17th Jan 20
Platinum Breaks $1000 On Big Rally - What's Next Forecast - 17th Jan 20
Precious Metals Set to Keep Powering Ahead - 17th Jan 20
Stock Market and the US Presidential Election Cycle  - 16th Jan 20
Shifting Undercurrents In The US Stock Market - 16th Jan 20
America 2020 – YEAR OF LIVING DANGEROUSLY (PART TWO) - 16th Jan 20
Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator - 16th Jan 20
MICROSOFT Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 15th Jan 20
Silver Traders Big Trend Analysis – Part II - 15th Jan 20
Silver Short-Term Pullback Before Acceleration Higher - 15th Jan 20
Gold Overall Outlook Is 'Strongly Bullish' - 15th Jan 20
AMD is Killing Intel - Best CPU's For 2020! Ryzen 3900x, 3950x, 3960x Budget, to High End Systems - 15th Jan 20
The Importance Of Keeping Invoices Up To Date - 15th Jan 20
Stock Market Elliott Wave Analysis 2020 - 14th Jan 20
Walmart Has Made a Genius Move to Beat Amazon - 14th Jan 20
Deep State 2020 – A Year Of Living Dangerously! - 14th Jan 20
The End of College Is Near - 14th Jan 20
AI Stocks Investing 2020 to Profit from the Machine Intelligence Mega-trend - Video - 14th Jan 20
Stock Market Final Thrust - 14th Jan 20
British Pound GBP Trend Forecast Review - 13th Jan 20
Trumpism Stock Market and the crisis in American social equality - 13th Jan 20
Silver Investors Big Trend Analysis for – Part I - 13th Jan 20
Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers - 13th Jan 20
AMAZON Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 11th Jan 20
Gold Price Reacting to Global Flash Points - 11th Jan 20
Land Rover Discovery Sport 2020 - What You Need to Know Before Buying - 11th Jan 20
Gold Buying Precarious - 11th Jan 20
The Crazy Stock Market Train to Bull Eternity - 11th Jan 20
Gold Gann Angle Update - 10th Jan 20
Gold In Rally Mode Suggests Commitment of Traders (COT) Data - 10th Jan 20
Disney Could Mount Its Biggest Rally in 2020 - 10th Jan 20
How on Earth Can Gold Decline During the U.S. – Iran Crisis? - 10th Jan 20
Getting Your HR Budget in Line - 10th Jan 20
The Fed Protects Gamblers at the Expense of the Economy - 9th Jan 20
Last Chance to Get Microsoft Windows 10 for FREE! - 9th Jan 20
The Stock Market is the Opiate of the Masses - 9th Jan 20
Is The Energy Sector Setting Up Another Great Entry? - 9th Jan 20
The Fed Is Creating a Monster Bubble - 9th Jan 20
If History Repeats, Video Game Stocks Could Soar 600%+ - 9th Jan 20
What to Know Before Buying a Land Rover Discovery Sport in 2020 - 8th Jan 20
Stock Market Forecast 2020 Trend Analysis - 8th Jan 20
Gold Price at Resistance - 8th Jan 20
The Fed Has Quietly Started QE4 - 8th Jan 20
NASDAQ Set to Fall 1000pts Early 2020, and What it Means for Gold Price - 8th Jan 20
Gold 2020 - Financial Analysts and Major Financial Institutions Outlook - 8th Jan 20
Stock Market Trend Review - 8th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Ignore Yellen and Buy the Dip in Precious Metals

Commodities / Gold and Silver 2016 Aug 27, 2016 - 04:23 PM GMT

By: Jason_Hamlin

Commodities

Investors worldwide have been on pins and needles in eager anticipation of a speech from our economic overlords. Friday morning FED chair Yellen finally opened her mouth and said a whole lot of nothing.

Markets didn’t know exactly how to react to her nothingness. Stocks were up and then down. Gold was down and then up. The USD index plunged and then rallied nearly 1%. Will the FED raise rates in 2016 or not? The drama continues as Yellen of Oz pulls the levers behind the curtain.


But the central banker has no clothes. She is the woman behind the curtain, largely a mouthpiece for the real powerbrokers behind the scenes. And even they are just buying time with this unsustainable monetary experiment. It ends badly, but good luck guesssing when.

The key sentence from Yellen’s speech that got the most attention was probably this one:

“In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months.”

But the more telling sentence went largely unoticed by the financial media:

“future policymakers may wish to explore the possibility of purchasing a broader range of assets.”

They may indeed, if they wish to keep the entire market from collapsing on their watch. And that seems to be the goal for the time being… extend and pretend.

What Does It Mean for Gold Investors?

I think the best thing investors can do is to ignore Yellen and her ramblings. She is not going to be able to raise interest rates by more than 25 basis points in 2016, if at all. This isn’t enough to stop a new bull market cycle in precious metals. In fact, there isn’t much reason to believe that rising rates will be bearish for gold anyway. There is a fairly strong historical trend of gold prices rising along with interest rates, as we documented here.

But you don’t have to go too far back in history to understand how gold might react to a hike in interest rates. The last time the FED made a move, in December of 2015, it was followed by one of the strongest rallies the precious metals market has ever experienced. Mining stocks in particular enjoyed a huge run, with the Gold Miners ETF (GDX) doubling in roughly 3 months. Several mining stocks that we have highlighted went up 1,000% or more in a very short time period.

After a few very minor dips, gold and silver have finally experienced a more substantial correction over the past few weeks. The Gold Miners ETF is down roughly 15%, but still up 98% year to date.

Picking the bottoms of these corrections is largely guesswork, but let’s see what the charts suggest.

The gold chart shows a pullback of roughly $50 from around $1,375 to a low of $1,321. This is still well above techincal resistance at $1,305 and the 100-day moving average at $1,295. The RSI is still not oversold, so there could be a bit more downside ahead.

The silver chart shows a drop of around 13% from $21.23 to $18.50. As with gold, silver is also above key technical support on the chart and the uptrend remains intact. The RSI dipped towards oversold levels just above 30, the lowest reading since late 2015. A bit more downside is possible, but it seems that the correction in silver has largely run its course.

The Gold Miners ETF (GDX) chart also signals what could be the end of this multi-week correction. The share price of GDX has dipped towards the 100-day moving average and the RSI bounced off oversold levels. I believe mining stocks are likely to come roaring back in September, so this appears to be a good buying opportunity. I don’t think it makes sense to go “all in” quite yet, but I am slowly edging into new positions.

Summary

The media loves to mock gold investors and parade ‘expert’ gold bears on television with every minor pullback. They come up with all sorts of reasons why the advance is over and gold will fall back below $1,000 now. Even Harry Dent has found his voice again.

Of course, nobody knows for sure what happens next. But we added a new junior silver miner to the Gold Stock Bull portfolio on Friday and I utilize these opportunities to buy quality mining stocks at a discount.

Misguided investors panic sell when they are convinced that the FED will start raising rates aggressively. But this broken record keeps on spinning. Fool me once, shame on you. Fool me twice…

Even assuming the FED decides to raise rates, which is not likely before the election, the gold bears have their logic all wrong. Interest rates climbing from zero to just above zero will have a muted impact on gold and silver. It is mostly anticipation of the hike and fear of uncertainty, not the actual rate increase that causes gold prices to decline. And as long as we remain above prior resistance and it turns into suppport, there is no invalidation of the uptrend.

So go ahead and hike, or don’t, either way I expect much higher gold and silver prices over the next few years. If you missed your opportunity to buy the first time around, you might want to consider using this dip to your advantage. If you want my ramblings on a more frequent basis, plus intant access to our model portfolio of 15 stocks, trade alerts whenever we buy/sell and our top-rated contrarian newsletter, click here to become a Gold Stock Bull Premium Member.

We all know how this story ends and those sure look like gold bars to me.

In a 1964 article, educator and historian Henry Littlefield outlined an allegory in the book of the late 19th-century debate regarding monetary policy. According to this view, for instance, the “Yellow Brick Road” represents the gold standard, and the silver slippers (ruby in the 1939 film version) represent the Silverite sixteen to one silver ratio (dancing down the road).

Moreover, following the road of gold leads eventually only to the Emerald City, which may symbolize the fraudulent world of greenback paper money that only pretends to have value. It is ruled by a scheming politician/central banker (the Wizard/FED Chair) who uses publicity devices and tricks to fool the people (and even the Good Investors) into believing she is benevolent, wise, and powerful when really she is a selfish, evil humbug.

We work hard at uncovering undervalued silver stocks with the potential to generate huge returns for investors. Below is a picture of me touring a silver mine in Mexico that I ended up recommending to subscribers after meeting with management. You can benefit from our hard work and research, simply by subscribing here for less than $1 per day.

By Jason Hamlin

http://www.goldstockbull.com/

Jason Hamlin is the founder of Gold Stock Bull and publishes a monthly contrarian newsletter that contains in-depth research into the markets with a focus on finding undervalued gold and silver mining companies. The Premium Membership includes the newsletter, real-time access to the model portfolio and email trade alerts whenever Jason is buying or selling. Click here for instant access!

Copyright © 2016 Gold Stock Bull - All Rights Reserved

All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. The information on this site has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. Accordingly, investors should not act on any information on this site without obtaining specific advice from their financial advisor. Past performance is no guarantee of future results.


© 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