Holy smokes, this has been quite a week. I think last Wednesday and Thursday
took a couple of years off my life expectancy (and my net worth).
Friday was the polar opposite, but the most exciting development was in the
price of gold and silver - not only that gold hit $800 and silver soared 8%, but
that they broke through pronounced resistance levels.
Gold started showing its contrarian intentions on Thursday, a day that oil
fell below $50 and commodity stock were pulverized.
Friday saw companies like AngloGold Ashanti (AU) stun investors with a 43%
upside move. Goldfields (GFI) moved up 37% and Sandridge
Energy (SD) moved up a whopping 36%. This
is all in one session.
Even Hecla Mining (HL) found a way to skyrocket 35%
Friday, and widely-held Barrick Gold (ABX) soared 31% on double its
average daily volume.
If you missed Aaron Trask's interview on Tech Ticker of author and investment
adviser Peter Schiff, you should watch it soon. The link is here
for your viewing pleasure.
A longtime gold bull, Schiff believes the dollar's "phony" rally will soon
end. To his credit, Schiff admits being caught off guard by the greenback's
recent bounce.
Schiff believes efforts by global central bankers to fight the credit crunch
will lead to devalued currencies, and higher commodity prices. (To his greater
credit, Schiff has nailed a lot of call correctly in recent years, unlike most
others.)
Gold's recent slump — it remains more than 20% below its summer highs — is
partially due to the "massive margin call" hitting U.S. financial firms, Schiff
surmises.
That process has created the "opportunity of a lifetime" in foreign stocks,
currencies, and commodities, says the author of "The Little Book of Bull Moves
in Bear Markets"and a self-admitted bear.
It sounds like he wants us to sell the traditional stocks on any rallies
though. Schiff believes the general stock market has another 5 to 10 years of
bear market action ahead as America struggles to come out from under a mountain
of debt.
Even if it is "just" two to five years, that's a long time to try to wait for
a recovery. Remember the saga of 1966-1982 where most stocks went way down and
the indices when nowhere.
Whether the precious metals and their stocks are "off to the races" or just
experiencing a seasonal boost after a very tough 7 month period is yet to be
seen.
My best sources tell me that there will still be plenty of volatility and
that the US dollar isn't done in its attempt to be a strong safe haven (even
though that makes little sense).
It's hard to avoid the temptation to sell into these rallies and I wouldn't
blame us if we do. But something is changing here, and once the giant
liquidation sales are over it seems like an "opportunity of a lifetime" might
present itself for sure.
Keep your eye on the gold and silver ETFs (GLD and SLV) and the premium vs. discount
on the NAV of the Central Fund of Canada (CEF).
