My firm is witnessing the resumption of the long term uptrend in gold and silver bullion, as well as precious metal mining stocks. Along the way there have been many negative voices suggesting a move into the US dollar and long term treasuries. We see no underlying fundamental reasons for this and find that the safe havens of yesteryear are falling by the wayside. I've written that investors are preparing for further accommodative moves by the Federal Reserve Board.
I have firmly rejected these Cassandras. Instead my firm has advised patience and fortitude in precious metals. Truth be told, any retreats are regarded as a healthy event in the long range upward trend.
There is a lack of confidence among many citizens regarding the policies of our economic savants, as is so often the case in the lives of individuals, and in the fortunes of nations. Psychology certainly has a role to play in the marketplace. The apprehensions of the general public is dour indeed. Pessimism and doubts are increasing. It is said that 30 million people are looking for full-time employment.
The average person may be sensing that our guiding elites are impotent in their attempts to invigorate a weak economy. The on again-off again comments by Bernanke to the effect that QE3 is once again on the table has swept the land with the increasingly uncomfortable feeling that our professors and our politicians may not really know what they are doing. These sentiments are reflected in a number of current polls.
Yesterday, the general markets responded to Bernanke’s announcement to turn the printing presses on by keeping interest rates low until 2013. He also indicated that QE3, in whatever guises necessary, will be employed on any equity market weakness. We notice that the general market faded after a strong start. Volume fell and the indexes finished in the lower part of their range. This may have indicated profit taking.
The US dollar is breaking down as Bernanke announces the possibility in some form of renewed quantitative easing. At the same time credit agencies are warning that it may reduce the credit rating of the United States even further. The Euro is breaking down as well, leaving precious metals firmly standing in the center of the ring.
The Safest Haven
The market should not be confounded by the precious metals, which triggered a buy signal as they resumed their upward trend. Gold is leading the way, as everyone and their brother tries to buy some. However, we must not forget the miners, which are extremely undervalued as gold tests $1800. Once again the miners should capture the heights of various industry groups once the panic selling and deleveraging ends.
Where oh where are the safe havens of yesteryear? To use a boxing metaphor, the old champions of the US dollar and the Euro are growing “weak in the pins”. There was a time when dollars and euros were viewed as safe havens. Now they are losing their luster. Precious metals dominate the investment arena as an increasingly safe haven -- the currency of choice.