By looking at the charts and fundamentals for precious metals and the miners it is our firm belief that the precious metals sector has bottomed out and the downside is very limited from here on out. While there doesn’t seem to be an immediate rush back into the sector we believe that the worst is over and that now is a great time to be acquiring physical metals and, more importantly, producers with growth profiles. That’s where we really see the value and upside potential. [Let us provide you with a specific course of action.] Words: 792
So says Vin Maru (www.tdvgoldentrader.com) in edited excerpts from his original article.*
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) and www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
Maru goes on to say, in part:
Support has pretty much held throughout the summer and it’s looking good going into the fall. While we still may see one more down wave, it would be more of a fake breakdown below support just to scare the remaining weak hands. If that happens, I think backing up the truck would be a good idea, and getting aggressive in adding exposure to the sector. Buying at support around $1570 is a good place to start adding to positions. Over the next few weeks we expect gold to trade around $1600 (+ or – $30) in a sideways trading range.
The HUI is still lagging gold, but a solid base under 400 has been building and it looks like a good time to add at support around 390. If you look at the chart below, it started a major correction back at the beginning of March (when we suggested selling) and made a bottom in the middle of May. Since then the index has traded sideways between 390 and 460.
A particular item to note on the chart is a 3 fan formation that seems to be developing since March. If the summer lows and support holds at 390, then a re-test of 420 and the 50 dma should come soon, this happens to be the top of the 2nd fan line. If it crosses above the 2nd fan line and holds above the 50 dma, it could trigger a move to 460 and overhead resistance, with a possible move to the 200 dma at 485. This is something we will watch for and take one day at a time.
Juicing Profits with Covered Calls on the Senior Producers
If you are interested in options strategies for a flat market, you may want to consider writing calls against the shares you currently own or if you plan on taking a position in the senior producers over the next few weeks. This is great way to squeeze some extra money out of the market by writing covered calls while still maintaining a position in your favourite seniors.
If you own or are buying shares in major producers (which is a good idea as long as PM stay flat), make some extra money by selling call options slightly higher than market price (up to 20% higher is a good price) with a covered call option strategy. This way you get to own the stock, collect dividends if the producer pays them and then collect the premiums by selling the calls. If the stock breaks above the call strike price, you have the shares to deliver, and can still buy back your position at spot or wait for a slight pull back.
If you are unfamiliar with the covered call strategy, you can learn more about it by a simple google search or by visiting the Investopedia site discussing covered calls, below is a brief description from their site.
Definition of ‘Covered Call’
An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset in an attempt to generate increased income from the asset. This is often employed when an investor has a short-term neutral view on the asset and for this reason hold the asset long and simultaneously have a short position via the option to generate income from the option premium.
At the moment, all the producers have great value (even if you bought at today’s prices) and most will do very well in the next few years. You could literally throw a dart and pick any one of the majors as they will all rise in share price once gold starts rising….
We suggest slowly picking away at the junior and explorers as they are usually the last to rise in price in a normal cyclical move higher in precious metals….They have become so cheap that many are trading for cash value and very little value is given to proven reserves….
When all boats start rising with the coming tide into gold and the miners you want to be well positioned to ride the wave. Looking out on the horizon all we can say is: SURF’S UP.
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*http://www.tdvgoldentrader.com/blog/2012/8/3/buying-the-summer-lows-while-gold-bottoms.html (To access the above article please copy the URL and paste it into your browser.)
Editor’s Note: The above posts may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
“[The current]…base building process for gold…has been similar to the 2006/2007 base before it went higher (see chart)….If it breaks out through… $1,688, and in particular, eventually, through $1,791…the short-term target for gold would then be in the $2,050 to $2,060 range. After a short-term pause we would then expect a continuation up to the $2,400 area by the end of the year or beginning of next year.” (See long-term Gold chart)
I think the big issue going forward is the growing shortage of available physical gold. I strongly believe one of the reasons for the shortage is a lot of it is headed East. The last four or five months of the year gold should challenge, and easily take out, its all-time high.
The Fed is [going to] keep interest rates at zero until the end of 2014 [and that] is as aggressive as it gets and as bullish as it gets for gold. Inflation will be let out of the bag, maybe for the next three to four years. In this environment gold and silver are the best investments around…We are really talking about the next leg higher in this bull market…This is the leg I expect to take gold to $3,000 before the end of 2012.
I think scarcity in oil is a dramatic tailwind for gold. Politicians will inflate. They don’t want oil to bring down the economy like it did in 2008. Remember, this inflation will take place with commodity prices already high. So this will create significant inflation. This means higher gold and silver. Gold at $3,000 by the end of the year, easy. Silver $60, $70, easy.
Our Fractal Model suggests the wave for Gold in US Dollars will sweep up into the $3500 to $3600 area into the mid-year time-frame. The leading edge of that time-frame begins in May and extends out for a few months. A potential for Gold to spike to a $3900 extended fib level exists. Like all parabolic moves in Gold, the late stages create the biggest price movements. Personally, I would be happy with a huge Gold run up to the $3200 level. Words: 1400
The interim peaks in gold have been spaced 21 months apart over the past 6 years and have seen gains from 80.2% to 97.3%. As such, given the fact that the low of this last correction came in at $1,524 four months ago, we can expect gold to reach a new peak price of $2,750 to $3,000 in 17 months time (i.e. June/July 2013). [Let me explain in more detail.] Words: 976
There will be a catalyst coming soon, probably some concerted action of money printing between the Fed, IMF and the ECB. That will happen as a result of the economies, worldwide, collapsing….The catalyst could come from anywhere but the money printing will be part of the next move in gold, that’s for certain….[and it] will lead to collapsing currencies, and investors buying gold at any price…I see gold reaching $3,500 to $5,000 in the next 12 to 18 months. Within 3 years, I see the gold price reaching at least $10,000.
Gold has been moving within a mega upchannel since 1970 and still has a ways to go before reaching the top side of this mega uptrend. How high is anyone’s guess but were gold’s price rise to match the 2300% rise realized in the 1970s (and our research suggests we could see the start of the bubble phase by next year) we’d see a $6000 gold price, which would blow the gold price well above the mega upchannel. [Let us explain our conclusions with the use of 2 charts.] Words: 495
Some of the most rewarding set ups in investing come when extremes have been reached. Currently the Gold Miners Bullish Percent Index has dropped to 7.14% – an extreme reading, one rarely ever seen, and not since the panic drop in March of 2009. Following that signal, GDX rallied for the next 2½ years increasing over 4 times in value. As such, a move up in the Gold Miners Bullish Percent Index from these historically low levels could signal another major move in gold mining stocks….[Let me explain further.] Words: 1078
Before we end the year we will hit new highs in both [gold and silver]. Then the mining stocks [will] react. The big problem has been [to date has been that] there is not this momentum in the prices of bullion, which is keeping people away from the gold stocks. If we can get the price of gold and silver going back up, I’m sure people will come back into the mining stocks.
If we’re not at a bottom [in gold and silver and precious metals stocks], we’re very close to it. The sentiment is dismal and you can see that particularly in the stocks which are almost tragic. I’m shocked quite frankly at the valuations and how low they are. In the fullness of time, this will be seen as one of the great buying opportunities of all-time.
Whatever their reasons, the number of investors wanting exposure to gold is increasing. Many who ignored it a decade ago are now buying. Those who started buying, say, five years ago, continue purchasing it today in spite of paying twice what they paid then. Slowly but surely, it’s becoming more important to more people…but what happens when it becomes a must-own asset to a substantial majority instead of a small minority? Sure, the price will rise, probably parabolically, but putting aside speculation on the price of gold for now, have you thought about what happens if you have trouble finding any actual, physical gold to buy? [Let’s explore that possibility and what that would mean for gold stocks in such an eventuality.] Words: 870
We’re making history here. Gold stocks have never been this undervalued before. We’ve had a 12 year bull market in gold, but we’ve also had a 15 year bear market in the mining shares…It’s very rare in market history to see an outlier like this. This is an extraordinary event. Years from now we are going to look back and shake our heads in disbelief at how undervalued gold stocks were in 2012.
By almost any measure, gold stocks are undervalued but should we load up? Gold mining companies are earning record margins. Stock prices, however, have not responded in similar fashion but when the broader investing community begins to take notice, investors will snap up these highly profitable stocks and push prices higher. The “catch up” in gold stocks could be tremendous but the question, of course, is timing. We don’t know when gold stocks will begin to catch up and the data don’t suggest they must rise right now or that they’ve hit bottom so should we load up just now? Words: 590