Do not be in anyway daunted by this recent correction and volatility in gold, silver and the miners. The upward ascent in the precious metals drama requires not only patience, but the awareness that 20-30% pullbacks in bullion are characteristic and frequent. One should’ve been prepared for short term downward moves in precious metals, which we have recently witnessed as gold exceeded overhead resistance in early August.
We are on the verge of The Fed implementing some form of stimulus in order to revive an economy which is undergoing cardiac arrest. It matters not how the Central Banks disguises this shibboleth. The important instrument is the application of a kind of defibrillator to jumpstart a moribund economy, which will serve to revive patients on both sides of the Atlantic...for the time being. This will not be a permanent thing, there will be more stimulus down the road.
The sharp downward move in gold and silver bullion should only be interim. There will still be market uncertainty, the travails of the PIIGS, possible credit downgrades and the influx of mad money into the irrationally, uncertain havens of long term treasuries and the U.S. dollar in a purported flight to safety. The benighted lemmings jumping into the supposed safety net of treasuries are buying still more treasuries as they go over the cliff!
What do all these gyrations mean for GST subscribers? The implications will be tough on a beleaguered middle class upon whose tired soldiers will fall the need for payment for all of this. We are talking increased taxes and the entire Keynesian rulebook. Eventually, default of the United States becomes an increasing possibility. The hard working investor is finding few places to hide. Now we may see what we have said all along that the large and junior miners may increasingly become a valid safe haven away from fiat money.
We may see a rotation from overhyped treasuries into the neglected, beaten down miners and bullion. This event should come sooner rather than later. We attempt to direct rational investors to miners which represent the parent source of bullion in an insane, irrational and hysterical fear driven market. Remember the market will do whatever it can to confuse, misdirect and obfuscate the intelligent investor.
Hedge funds and banks do not enjoy the advantage held by the individual speculator who can ride through the attempts of the bucking bronco of chart patterns as they attempt to unseat us. They are less flexible than individuals as they can not keep positions in volatile markets. That is why it is said that the individual investor has the advantage over the big guy in being able to hold on to a potential winning position.
What does this all mean? Avoid margin, stay the course no matter how difficult. The markets are rebounding, whether this is a technical bounce or the inception of the long move upward remains to be seen. When the market regains its footing and as the panic recedes, we expect the miners and precious metals to continue outperforming the general market.
Silver is slowly overcoming the punitive COMEX margin increases that occurred over five months ago. Gold Stock Trades is confident that gold and silver will fill the downside gaps due to increased margin rate hikes and the surprise twist instead of QE3.
Again we reiterate that we have been prepared for QE3 in whatever guises necessary. There is an increasing chorus of investors who are pleading for constructive moves by Bernanke and The Fed to stop the pain and bleeding. We await “Helicopter Ben’s” to give us some indication that our prognostications are going to be fulfilled. He still has ammunition and will do whatever he can to battle deflationary forces through the printing press. Stick to the long term trends despite short term volatility.