Monday, October 7, 2013

Charts on Gold, Plus Who's Got the Mo-mo Mojo?

I'm going to write about gold today, because judging by my stats, EVERYBODY is interested in gold. But then I'm going to turn to other, more immediate ways to make money. Seriously, you should be checking out the action in other parts of the market. In fact, I'll show you a chart of Apple today that, if it were a chart of gold, would have the gold bugs flopping around in puddles of their own jizz.

Anyway, let's start with the central banks. Man, they have been buying a lot of gold, haven't they? Last week, I covered the latest statistics, which would seem to indicate that central banks are going to continue to add to their Smaug-worthy gold hoards at an avaricious clip -- as they have been doing for years.
This has continued despite the correction in gold. Since gold peaked, central banks have bought 884 metric tonnes of gold. Russia has bought the most, at 171 metric tonnes.

Well, now the central banks are saying they're through, dammit!

Speaking at the London Bullion Market Association in Rome, Juan Ignacio Basco, deputy general manager at the Central Bank of Argentina, said the 2013 volatility in prices had "definitely changed" attitudes among central bankers towards gold investment.

"We don't feel comfortable with gold's volatility," said Basco, "even though it's only a small part of the portfolio."

Another person on the panel with Basco added: "Many central banks are now prioritizing other assets over gold."

Who Are You Going to Believe, Me or Your Lying Eyes?

How unfortunate that Argentina's actions do not match its words.  That country has bought nearly 62 metric tonnes of gold for its central bank reserves over the last decade. It added the last 8 tonnes at record-high prices between July and October 2011. And this gold-buying came after Argentina sold down its 120-tonne gold reserves down to near zero in the late 1990s.

Well, if any central bank would have a reason to sell gold right now, it would be the U.S., right?  The U.S. has 8,133.5 metric tonnes of gold -- worth about $344 billion in today's market. That would cover some checks now that the Congress has de-funded the government.

But Uncle Sam has no intention of selling that gold. We know that because a Treasury official quoted by said: "Selling gold would undercut confidence in the U.S. both here and abroad, and would be destabilizing to the world financial system.” 

So, the Treasury considers U.S. gold holdings to be a key element in maintaining confidence in the financial system. Some "barbarous relic," eh?

Also, there's the embarrassing fact that $344 billion is only enough to keep the government going for a month. What then?

And then there's the fact that in January, Germany's Bundesbank confirmed that it plans to take 1,536 metric tonnes of its gold that is stored in the U.S.  That process will take a few years.

I wonder if Uncle Sam even has that gold to spare. I also wonder if Uncle Sam wants to buy that gold on the cheap. But I'll leave those thoughts to the tin-foil hat crowd ... for now. 

In any case, I'd say that the central banks have shown their hand ... and it's a hand that likes to own a LOT of gold.

What If They Gave a Crisis and Nobody Came?

People keep saying and writing that the budget battle/debt ceiling crisis is bullish for gold.  Unfortunately, gold doesn't agree. In fact, gold fell more than 2% last week despite the budget debacle.

Gold fell despite the fact that Treasury secretary Jack Lew told CNN on Sunday, "Congress is playing with fire!" Because "if the United States government, for the first time in its history, chooses not to pay its bills on time, we will be in default."

So why isn't gold up? I think part of the reason is the same one I laid out in September -- that this crisis is artificial and can end anytime House leader John Boehner feels like it.

By the way, let's revisit that chart I posted in my September article, "Your Next Buying Opportunity," in which I made the case that you should buy the pullback.

We haven't had much of a pullback at all. No wonder everyone is so freakin' calm. As far as the markets are concerned, there is no crisis.  So is it any wonder that gold is drifting sideways, despite the fact that the US dollar is near an 8-month low?

Investors are not very worried and do not expect any debt ceiling rupture to last long. Heck, just like me, they're all sitting in cash, waiting for that sell-off to buy it.

But listen, my friends. If you're focused on gold, then lift your myopic eyes out of the muck of US politics and focus on other parts of the world.

Bullish Forces for Gold Around the Globe

In India, gold prices are surging as demand picks up. Holiday season is around the corner.

In China, the physical gold deliveries on the Shanghai Exchange are growing ENORMOUSLY. 

Look at that surge in gold sales! If this was happening in the U.S., I think CNBC would be broadcasting from the floor of the COMEX every damned day.

By the way, Sun Zhoaxue, president of China's biggest gold mine, says: "The average Chinese person only holds 4.5 gram of gold, that is far below an average of 24 grams per person globally."

Do you think the Chinese gold rush is over? I'd say it's barely started!  Just to get equal with the rest of the world China would have to import or mine another TWENTY-FIVE THOUSAND metric tonnes of gold and allocate the biggest part of this among the population.

And the Chinese have a cultural affinity for gold. They aren't settling for "average."

Gold has its problems.  And some people are focused on the wrong things -- like the obsession with gold eagle sales.  The markets for gold in India and China dwarf any gold eagle buying in the U.S. to mere molehills.

But if gold is your obsession, then focus on the big picture.  And the big picture is quite bullish for gold.

Chart Fiesta -- GLD, Alacer and More

In the short-term, gold and the GDX keep banging their heads on the 20-day moving average like a 7-foot guy walking through 6-foot doorways.

There's not much joy there, amigos. Not in the short-term. A wise man would wait for the trend to change.

That said, do you want to see some bullish gold miner charts? Sure ya do. You just can't help yourself.

First we saw Alacer break out of a lower range and move to a higher range. Now it looks like somebody keeps buying Alacer on the dips ... and they're getting impatient. You can credit rising production, project expansion, the sale of non-core assets -- it looks good.

Here's another that might surprise you ...

Remember when we'd all written Bear Creek Mining off for dead? Well, now the thinking that the geopolitics in Peru are turning more friendly. And that's breaking life into a stock, and pushing it toward a potential breakout.

I don't own either of these stocks.  You shouldn't either, unless you do your own due diligence and buy it for your own reasons.  Don't buy something just because a fat-head puts up a good looking chart. If you do something that stupid, let me know -- I'll reach right through the intertubes and slap the stupid off your face.

Now, I promised you a sexy chart of Apple, didn't I?  Here you go ...

You can see Apple put in a double-bottom. Then it broke through overhead resistance, which it retested as support. Now, it's coiling up. The next move should be a breakout. $600 could be in Apples' reach.

This is why the tech-heavy Nasdaq-100 is kicking the S&P-500's ass ... and running rings around the Dow.

Hell, I could go on about bull markets all day. I haven't even talked about the bull market in select energy stocks (a topic for another post).

The point is, if your investing universe begins and ends with precious metals, you're missing out. I like precious metals longer-term, and I think there are some incredible bargains you can pick up in the metals right now IF YOU HAVE PATIENCE.  I think the global trends point to much, much higher prices longer-term.

But if you want some boom-boom and vroom-vroom in the short-term, you need to look for the mo-mo mojo elsewhere.

When will gold miners finally find their mojo?  Stay tuned.

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