As
usual Gold and Silver were most impacted by FED tapering indication Gold
smashed around 5.33% and Silver 7.5% in a day. A sentiment in both precious
metals has been dimmest.
One can
view all sorts of chart patterns and technical signals, and while a few will
eventually be correct at calling the bottom, we prefer not to base our
decisions on this type of strategy, starting with the fact that there are many
different interpretations and too much variance in the predictions. What we do
know is that given that capitulation is under way, the selling will overshoot
to the downside, just like surges can overshoot to the upside. Our response
should be to prepare to take advantage of that situation.
All the
headlines and stories about gold are negative and bearish. It will take awhile for these investors to re enter the market, especially those who just sold for a
loss. This won’t be a years-long process in the making, but it likely won't happen in a month, either. The implication here is that patience will be
required on the part of committed precious-metals investors.
We've seen this before. Remember the autumn of 2008, when gold fell 28%? In the
spring of 2006, the price dropped 22%. And as we've pointed out before, many proclaimed in 1976 that gold was
over when it fell a dramatic 47%.
None of
these sell offs dictated the end of the gold bull market. That won’t be the case
this time around, either. A panicked shakeout is just that.
The
fundamental case for Gold is growing, not diminishing.
In
spite of the downtrend in the price, the conditions that support the long-term
bull market are increasing in importance. The US and Japan alone will flood the
world with almost $2 trillion over the next 12 months. Europe’s problems have
not been solved, and the Eurozone teeters on the edge of a recession. And did
you know that not one G20 country currently has a balanced budget? The current
fiscal and monetary path of many major countries remains unsustainable, and no
amount of selling by traders and hedge fund managers has changed that.
One
might argue that these issues now have a diminished effect on the gold market.
Regardless of whether that’s true, the effects of these actions have not played
out. There is no easy way out of the corner our political leaders have painted
themselves into. In other words, the damage has already been done to
our fiscal and monetary state. The endgame to our debt situation hasn't changed. When the ramifications begin setting in, it will be imperative
that we all have meaningful exposure to gold.
In the
end, fundamentals always win. In spite of the selloff, the long-term trend is
still intact. Keep your eye on the big picture.
We’re
not exaggerating by stating that. Given the waterfall decline in both precious
metals and equities, investors with the courage to act and the cash to deploy
will not just be rewarded, but could very well change their financial futures.
The chance for enormous gains will be remarkable.
As a
result, some of you reading this will, frankly, get rich, especially those who
have exposure to the best junior gold stocks. Sadly, not all will realize this
level of profit; while there are a lot of reasons for that, the biggest is
because they won't have the two Cs – cash and courage. I hope you will be
among those in the first camp.
I’ll
leave you with a quote from one of the most successful fund managers in the US,
which was made while gold was in the midst of its dramatic selloff. It captures
exactly how we feel about the current situation – and I hope yours:
“You
should love this if you’re a long-term holder of gold, or a believer in gold as
a currency – you can buy your insurance cheaper,” said Mark Fisher, CEO of MBF
Clearing Corp. “A long-term buying opportunity is near.”
Recent
market actions have left many staunch gold advocates uncertain about what’s
ahead… not to mention how to invest wisely for both the short and long term.
What gold assets are the best to buy? Should investors be buying today or
holding for further drops?
For more info please visit:www.cfb.ae
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