Major Rally Ahead In Precious Metals
We are on the verge of a major rally in gold. Gold’s retreat to the 200 day moving average has provided long term buy and hold investors another excellent discounted buying opportunity. Every time gold has retreated to this line it has found support as is the case right now.
We had a recent pullback a few weeks ago as gold and silver were about to move. At that time we believed that this pullback would be short-lived. This week we are seeing a major reversal and move above the 200 day moving average as Bernanke explained that the unemployment rate is not keeping up with the rate of growth.
US QE4 After Euro QE3
Bernanke is preparing the world for the U.S. QE4 after the Euro QE3($1 trillion LTRO). After all of these stimulative measures, we are surprised that gold has not yet hit new highs. Silver may outperform gold on this next leg higher and we are closely following the gold to silver ratio.
Gold miners will be increasingly looked upon as an income play which are sitting upon a large cash position and must return it to shareholders through dividends or look for resource growth. We expect to hear an increase of M&A activity over the next few months.
This recent correction in gold and silver from record highs has lasted several months. This base building process may be a sign of a more powerful move as many of the weak hands were shaken out.
The geopolitical tensions in the Middle East could further drive up the prices in oil and precious metals. This may be some of the early signs of a flight into commodities and real assets such as rare earths, graphite and uranium.