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Is Gold Becoming a Risk-off Asset?


Posted by Jordan Roy-Byrne - Daily Gold

on Friday, 15 February 2013 07:53

Lately we’ve been writing about the negative correlation between the equity market and the precious metals market. This phenomenon has been in place since summer 2011 and has re emerged in the past few months. Since November 23, the S&P 500 is up 8% while the gold shares are down 14%, Silver has lost 11% and Gold 7%. For those who have studied history this should not come as a total surprise. From 1972 to 1977 and November 2000 to July 2002, precious metals and the equity market trended in opposite directions. We’ve postulated that precious metals and the mining shares won’t begin a new bull phase until the cyclical bull market in US equities ends. We don’t expect that to happen immediately but there are some important signals beneath the surface (with the safe-havens) that we should direct our attention to.

First, let’s take a look at the recent activity in a number of markets. From top to bottom we plot Silver, Gold, GDX, TLT and the US Dollar. The first three markets have been in a downtrend since the end of September. Meanwhile, TLT and the buck began their downtrends in the middle of November. It appears that these markets have been tightly connected since the end of November. That is the bigger picture. The short-term term picture shows the US$ potentially breaking out and bonds not breaking to a new low.

feb14ed1

Meanwhile, we should take note of the action in some other markets since late November. Both emerging markets (EEM) and the S&P 500 have advanced, but EEM is slowing down. Commodities failed to make a new high even as the US$ made a marginal low. As we can see, the inverse of the buck is threatening to breakdown and realign with commodities and CEF, a fund which is half Gold and half Silver. The rally since November is now seeing a negative divergence as emerging markets have not made a new high and the US Dollar could be breaking out.

feb14ed2

The bottom line is the action in precious metals, commodities and the US$ is signaling a warning for the equity market. The bond market needs to confirm this warning and if it does it could be the catalyst for a sell-off in equities. Keep in mind, the S&P 500 is approaching strong long-term resistance while in a state of euphoric sentiment. If you don’t believe that, check the recent sentiment surveys and ignore those who don’t provide hard data. By the way, public opinion on bonds (fromsentimentrader.com), is only 14% bulls! Sounds like we should sell bonds and buy stocks, right?

Meanwhile, the precious metals appear likely to test major support in the coming days and weeks. There will be some more pain but things are setting up perfectly for the next cyclical bull market. Gold is positioning itself contrary to risk-on assets. It has detached from the stock market and that is a good thing. There will likely be a transition period as precious metals find a bottom and the equity market reaches its peak. For now, look to buy precious metals if they reach an extreme oversold condition next week. As for the gold stocks, if you’d be interested in professional guidance in uncovering the producers and explorers poised for big gains then we invite you to learn more about our service.

Good Luck!

Jordan Roy-Byrne, CMT
Jordan@TheDailyGold.com

 

 



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Gold & Precious Metals

Jim Rogers: "We Should Be Terrified" Fed Tactics Going To End Badly


Posted by Jim Rogers

on Friday, 15 February 2013 07:29

Legendary investor Jim Rogers sees now as a great time to load up on gold and silver coins - and he's not alone.

A record 7.5 million ounces of silver coins were sold in January as investors hunted for a safe haven investment.

"You can't get [silver coins]. They sell out," Rogers, who owns a rare 2013 silver coin, said onYahoo! Finance's "The Daily Ticker." "Several mints have run out of coins because everybody's worried about the future of the world."

And 150,000 ounces of American Eagle gold coins were sold in January, the highest monthly total since July 2010.

"Gold has been up 12 years in a row which is extremely unusual for anything," added Rogers. "A lot of speculators are rushing into gold right now. I'm not rushing into gold, but I'm certainly not selling it. If it goes down, I'm buying more."

We Should Be Terrified’ Because Fed Tactics 'Going to End Badly'

The Federal Reserve’s massive easing campaign will produce a crisis for the economy, says Rogers.

“The central bank has been printing staggering amounts of money, and the government has been spending a lot of money because they wanted Mr. Obama to get re-elected,” he tells Newsmax TV in an exclusive interview. “That's still spilling over into the economy.”

Central banks across the world are matching each other virtually ease for ease, notes Rogers.

“We should all be terrified of what has happened, because governments around the world are printing huge amounts of money and spending huge amounts of money,” he says. “The debts are going up like a rocket. This is going to end very badly,” notes Rogers, author of the new book “Street Smarts: Adventures on the Road and in the Markets.”

And how long can Fed easing continue? “As long as the printing press is run,” Rogers suggests. 

“Fed Chairman Ben Bernanke has said he's going to keep doing this until 2014 or 2015. The man doesn't know anything about economics. He doesn't understand finance or currencies. All he understands is printing money.”

Rogers doesn’t buy President Barack Obama’s claim that the economy has improved over the last three years. “Do you believe the government?” Rogers asks rhetorically. “If you are going to believe the government you are going to go bankrupt.” 

All governments lie — Democrat and Republican, domestic and foreign, he notes. “We're in worse shape than we were before Obama,” Rogers adds. 

“But even if things are better, it's only because the debt has much more than doubled in the last four years since he got there and because they printed a lot of money.”

Rogers excoriates Obama for his quest to raise taxes further. “No country in world history has improved itself by raising taxes,” he explains. “If you cut taxes and if you cut spending, then people will do a better job.” 

Rogers has been bullish on commodities for years. “I own them all,” he says. “I own more agriculture than others.” If the world economy improves, there will be commodity shortages.

And if the economy doesn’t get better, “they are going to print even more money,” Rogers maintains. “You have to protect yourself by owning real assets, and you also make money by owning real assets.” 

He still owns gold, though he says he has hedged a bit of his position for two reasons. 

First, the precious metal has appreciated for 12 years in a row. “Now, I don't know of any asset that has been up 12 years in a row without a down year, so that is worrisome,” Rogers notes. “It's overdue for a nice correction, so maybe we'll get it.”

Second, a lot of the recent buyers of gold are speculators. “That's usually a worrisome sign,” he says. So Rogers isn’t buying or selling gold, though if it falls further, he says he will buy again.

After bouts of weakness over the past 4 ½ years the euro hit a 14-month high against the dollar last month. But, “I suspect that [the euro] will come back to haunt us again,” Rogers explains. “There are serious problems in Europe.”

 



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Stocks & Equities

A special invitation for MoneyTalks Alberta audience


Posted by Andrew Ruhland of Integrated Wealth Management

on Friday, 15 February 2013 00:00

Ruhland Andrew - compressed tie horzWe have reserved seats for up to 20 Money Talks listeners, so the first 20 people who sign up will be guaranteed a seat.

A Winter 2013 Educational Workshop Series

#1 - Trading Workshop with Larry Berman - click to register
* Wednesday - February 20, 2013 at 7:00PM
* MacEwan Conference Centre at the University of Calgary - 402 Collegiate Blvd NW

- Co-Founder of the Independent Investor Institute and ETF Capital Management.
- Larry Berman speaking plus a live “Berman’s Call” for the final half hour

#2 - Applied Knowledge is Power: Protect and Prosper in 2013 with Andrew Ruhland - click to register
* Wed February 27, 2013 7-8:30 PM
* Lougheed House, 707 - 13 Avenue SW, Calgary AB

Here’s What You Will Learn:
- How to Reduce your Personal Investment Stress
- How we use our 10 Step Investment Selection Process
- How to generate sufficient returns without losing sleep
- How to interview and select an Investment Professional that “fits”
- Our Top Investment Themes for 2013

You Should Attend If You Are:
- Feeling burdened by the time required to manage your own portfolio
- Seeking income generation strategies with real-time risk controls
- Seeking an integrated, collaborative approach to managing your wealth
- Open to letting go of your financial worries so you can focus on who & what you love

Click here to download the agenda for our "Applied Knowledge is Power" event on February 27.



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Stocks & Equities

Faber : Stocks Are Set for a Possible Repeat of 1987!


Posted by Marc Faber

on Thursday, 14 February 2013 15:33

"Either the market is going to correct more meaningfully now or we have a shallow correction and a continuously rising market until July or August,". If stocks don't pullback soon, he says we risk a repeat of 1987 when stocks rallied 40% into summer only to collapse 41% in 2 months. 

"In March of 2009 everything looked horrible, now nobody can find a reason why stocks could go down," "We ask that you should buy stocks when everything looks horrible, you shouldn't rush to buy them when everything looks perfect.""If you have 100% of your money in equities and you just bought them now, maybe you should reassess your position,"

Ed Note: Faber makes several powerful points in the 5 minute video above. Faber begins speaking at the 18 second mark. 

Here’s the 1987 chart – you can see how monumental that 508 point (22.6%) 1987 drop was:

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Personal Finance

R. Russell: History About To Repeat - Hang On To Gold


Posted by Richard Russell - Dow Theory Letters

on Thursday, 14 February 2013 09:26

Richard2Almost 90 Years Old & The Godfather of Newsletter Writers, Richard Russell writes:

 “The central banks of the world are on a mission to keep the world economy going. A great bull market started in 1980. It ended in 2007, a period of 27 years. As such, it was, in duration, the longest bull market in US history. A bear market started in October 2007.”

“Bear markets tend to last from one-half to one-third as long as the preceding bull market. On that basis, the bear market that started in 2007 might be expected to continue for at least nine years (one-third of 27) or until 2016. However, the Central banks, and certainly President Obama, have attempted to halt the bear market and thus continue the prosperity we have enjoyed ever since World War II.

As proof of the Fed’s success, I would expect both the D-J Transportation and Industrial Averages to advance to new highs, thereby signaling that the tide had reversed to bullish (a bull market). According to classic Dow Theory, the primary trend of the market cannot be manipulated. Further, according to classic Dow Theory, the movements of one Average, unconfirmed by the other Average, are useless as guides to direction, and are more than likely to prove deceptive.

Sundry Observations — From what I see, Americans are still spending and partying as if nothing has changed. Here in Southern California, the restaurants are full, and this is especially true of the breakfast places (in my opinion, the height of free-spending is going to a restaurant for an expensive breakfast when you could have had an inexpensive breakfast at home).

.....read more & view 2 charts HERE

Ed Note: 2 Fabulous Articles by the 89 year Old Russell: 

  1. "Rich Man, Poor Man (The Power of Compounding)"
  2. "The Perfect Business"

 

Russell began publishing Dow Theory Letters in 1958, and he has been writing the Letters ever since (never once having skipped a Letter). Dow Theory Letters is the oldest service continuously written by one person in the business.

Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron's during the late-'50s through the '90s. Through Barron's and via word of mouth, he gained a wide following. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-'66 bull market. And almost to the day he called the bottom of the great 1972-'74 bear market, and the beginning of the great bull market which started in December 1974.

The Letters, published every three weeks, cover the US stock market, foreign markets, bonds, precious metals, commodities, economics --plus Russell's widely-followed comments and observations and stock market philosophy.

In 1989 Russell took over Julian Snyder's well-known advisory service, "International Moneyline", a service which Mr. Synder ran from Switzerland. Then, in 1998 Russell took over the Zweig Forecast from famed market analyst, Martin Zweig. Russell has written articles and been quoted in such publications as Bloomberg magazine, Barron's, Time, Newsweek, Money Magazine, the Wall Street Journal, the New York Times, Reuters, and others. Subscribers to Dow Theory Letters number over 12,000, hailing from all 50 states and dozens of overseas counties.

A native New Yorker (born in 1924) Russell has lived through depressions and booms, through good times and bad, through war and peace. He was educated at Rutgers and received his BA at NYU. Russell flew as a combat bombardier on B-25 Mitchell Bombers with the 12th Air Force during World War II.

One of the favorite features of the Letter is Russell's daily Primary Trend Index (PTI), which is a proprietary index which has been included in the Letters since 1971. The PTI has been an amazingly accurate and useful guide to the trend of the market, and it often actually differs with Russell's opinions. But Russell always defers to his PTI. Says Russell, "The PTI is a lot smarter than I am. It's a great ego-deflator, as far as I'm concerned, and I've learned never to fight it."

Letters are published and mailed every three weeks. We offer a TRIAL (two consecutive up-to-date issues) for $1.00 (same price that was originally charged in 1958). Trials, please one time only. Mail your $1.00 check to: Dow Theory Letters, PO Box 1759, La Jolla, CA 92038 (annual cost of a subscription is $300, tax deductible if ordered through your business).

IMPORTANT: As an added plus for subscribers, the latest Primary Trend Index (PTI) figure for the day will be posted on our web site -- posting will take place a few hours after the close of the market. Also included will be Russell's comments and observations on the day's action along with critical market data. Each subscriber will be issued a private user name and password for entrance to the members area of the website.

Investors Intelligence is the organization that monitors almost ALL market letters and then releases their widely-followed "percentage of bullish or bearish advisory services." This is what Investors Intelligence says about Richard Russell's Dow Theory Letters: "Richard Russell is by far the most interesting writer of all the services we get." Feb. 19, 1999.

Below are two of the most widely read articles published by Dow Theory Letters over the past 40 years. Request for these pieces have been received from dozens of organizations. Click on the titles to read the articles.

 

 

 



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