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Hold The Fort

By Warren Bevan      Printer Friendly Version Bookmark and Share
Dec 19 2011 10:39AM

It was another pretty tough week and doubly so in the precious metals arena with the metals being hit hard and the shares being hit even harder.  This is being compounded by the forces that be not wanting precious metals higher during this time of crisis as well as tax loss selling en masse right now in the mining sector.

I’m not selling any shares personally and looking for entries to add to existing positions and perhaps even add a few new companies to the mix.  The fear is rampant and those are the times to get in and make a fortune in times to come.

I’m seriously considering dumping some physical gold and silver and allocating that cash to the mining sector but to be honest I’m scared to do that.

The physical metals are just that, while the shares are much more volatile and less secure but the payoffs could be huge.

It’s a never ending tug of war in my brain this holiday season and one that is unlikely to end and give me peace in the near future.

It’s just such a tough thing to sell physical precious metals and get fading currencies as the future of said currencies is far from certain.

For now the battle in my mind rages but I’m doing a weekly chart update of all our miners this weekend for subscribers and even more-so for myself.  Hopefully this will answer a few questions in my mind and I can come closer to a decision on how to allocate my wealth going forward, or even to change my allocations at all.

Regardless of my action or inaction, I’ll remain very heavily in physical gold and silver and possibly go heavier into the mining stocks while I am also on the cusp of increasing my dividend portfolio.  I’m also wanting to do some more swing trading soon but this market is simply not conducive to that at the moment as every-time we have a nice chart setup it breaks out then promptly fails.

I don’t remember a time when markets have been so indecisive and false and cash is definitely best for your trading allocation while action should soon be taken on the super sales going on in the mining sector and precious metal sector as well.

It may not feel like Christmas in the stock market, but if you buy right it soon will.

Metals review

Gold was smashed 6.58% for the week but held support at the $1,550 area.  The drubbing is harsh right now but it’s not the first time we’ve experienced it, nor will it be the last in this secular bull market that has years to run still.

We really need to zoom out and look at a weekly chart to give us a better view and I’m doing that this weekend for subscribers along with weekly charts of all our mining stocks which is now near 30.

As gold broke the 200 day moving average this past week we saw a large influx of commentators proclaiming the end of the gold bull market and that’s fine by me.  There were to many bulls anyhow.

The facts are that we’ve broken the 200 day average before and seen the same routine every-time.  The world is much worse off economically than the previous times and the debt issue simply cannot be solved.  There literally isn’t enough money in the world to pay off the debts....I can hear the printing presses warming up now!

Personally, gold can fall quite a bit from here and I won’t worry since I’d much rather coins to being fully exposed in the stock market or worse yet sitting in depreciating cash.

It’s all a ruse, don’t fall for it.  Take advantage of the Christmas gift of cheap physical gold and silver soon.

It’s how your deal with adversity that determines how successful you’ll be and it’s near a great time to do some serious buying of high quality mining stocks.

Right now with the holidays in full swing anything can happen with gold and we could well see a move to $1,425 or so and it wouldn't really mean much other than gold is cheap for us all.

We won’t get back into the real swing of things until the new-year so I won’t harp on about this technical damage on the daily chart.

As would be expected the volume was heavy on the downside in the GLD ETF as the 200 day average was broken.  I can’t say it looks like a bottom is in yet looking at volume and price action but I’ve been wrong before.

I suppose in hindsight there was a head and shoulders bearish pattern on silver and you could even make the same case for gold.  Silver fell 7.97% on the week and so far has found support at the $28 level.

Much the same can be said about silver as I said about gold.  It’s a great place to be when you think about the other options and I’m really hoping for a further fall to pick up a little extra physical silver.

The SLV ETF volume was heavy on Wednesday’s drop but not extraordinary by any means.  As with GLD, SLV doesn’t yet look to have put in a bottom to me.

Platinum fell 6.34% on the week in what ended up being a drubbing all across the board.  It wasn’t pretty and volume was heavy.

We have to look to the weekly chart for support now and go all the way back to almost 1 year ago to the day to find support at the $1,400 level.  If we fail here then there isn’t much stopping a move to test $1,300 where there is much stronger support from the mid 2009 timeframe.

The PPLT ETF saw very heavy volume on the lows of the week at support so we may now have at least an interim bottom.

Palladium was hit very hard, to the tune of 7.91% this past week but after the two weeks previous it’s only a 61% Fibonacci retracement which is very healthy.

That being said it looks like we could very well test the uptrend line around $580 before Christmas.

Volume in the futures was heavy on the downswing and not quite as noticeable in the PALL ETF but both the futures and ETF didn’t show much enthusiasm off the lows whatsoever which tells me the low isn’t yet in.

As always we’ll see as I’ve been wrong before, but this is how it looks to me at this time.

Fundamental Review        

With the Christmas season, or should I perhaps say the more politically correct Holiday season, upon us we are likely to not see any sort of resolution from Europe or anywhere else until the new year now.

We haven't seen a bank failure since November 18th until this past week when we saw perhaps the last two of 2011 to fail and join the final spots in this year list of biggest losers.

The big news came late in the week with potential downgrades of Cyprus, France, Ireland, Italy, Slovenia and Spain coming out but this should be no surprise.

We also saw 7 of the worlds largest banks debt ratings cut this past week.  It’s also something we should not have been surprised to see as they are the major ones at risk of country default since they hold so much debt of the failing countries.

It’s good to finally see some high level insiders charged over the mortgage fiasco and fraud but it’s so late in the game now.  What really stuns me is that no enforcement will be taken at all.  No time will be served and no monetary compensation will be sought as long as the companies agree to admit guilt and not dispute it.  Unbelievable.  US taxpayers should sue them, but in reality they’d have no chance as the whole system is rigged and we all know that by now.

The whole thing is rather confusing and I suggest reading the long story yourself to get a feel for the complexity and sick way the system doesn’t work.

Exports of gold from Hong Kong to China rose 51% in October to 85.7 tonnes which is astounding.  This more than triples last years output during the first 10 months of the year to 286.8 tonnes if gold.  To say China’s appetite for gold is insatiable is an understatement and more importantly remember that China is the worlds largest gold producer and not much, if any, of that gold ever leaves the country.

Kyle Bass had some great insight which you can read about here .

The MF Global saga is continuing and now it seems that customers with warehouse receipts for gold and silver, which means you actually have the bars in a warehouse, are going to see their bars value shrink by 28% as all assets are split up and distributed equally not taking into consideration whether the assets owned by customers were real or not.  You must own physical precious metals and ensure you can physically touch it in short order without jumping through many hoops or I assure you, you don’t own it.

I’ve tried to keep it short and to the point for you this week and I’ve got quite a bit more work to get done for private subscribers as well so I’ll sign off here.  I’m not sure how I’ll deal with things next weekend.  I’ll just play it by ear and likely send something very short out as it’s a weekend we should all take off to spend with family and friends, and that includes myself.

Until next week take care and thank you for reading. 

Warren Bevan



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