Gold has had a nice bounce now off the bottom set in December of 2013, but are we off to the races just yet? Here is what I wrote last month where I concluded “we could go higher from here for a bit to trap more of the bulls who say the bottom is in.”
We should start to see gold and silver begin their meteoric 3rd phase rise beginning sometime this year. Before that occurs I have been calling for one more test of the lows and will wait patiently for it. If you call me and ask what I think, I tell you, despite the fact that most other gold dealers will say you have to buy because of a “falling dollar,” “hyperinflation” or some other nonsense. I am dollar bullish which is something that most who sell gold don’t understand. I don’t see hyperinflation in a country that has the economic power that the U.S. does. I do see a government trying to screw it all up, despite all you hear that the economy is recovering. In fact, I do see a higher stock market for now and another test of the highs in the coming months.
But I also see things that can change my mind quickly. Europe has their issues and they will start to come to fruition towards the end of the year. We’ve already seen the negativity of what emerging markets are bringing, causing the DOW to fall over 1,000 points off its high, currently sitting at 15,440. Treasuries have been strong and with interest rates low this has allowed the Fed to taper another $10 billion a month. I watch the 3% level as my line in the sand as to Fed tapering. Anything above that and we’re back to QE. I also at some point see the dollar and gold moving higher together, but this may not happen till later in the year when Europe runs into more problems.
Gold and silver will begin to be buoyed by the world chasing the monetary metals. We have seen a taste of it in January and we’ll see more of it later this year. But watch the Market Makers try and scare you out one more time. We could go higher from here for a bit to trap more of the bulls who say the bottom is in. But I know I’m one of the few who think we have one more test of the lows. I hope we get it as I’ll be ready to write my “all in” article and become the biggest bull around! There are literally trillions of reasons to be bullish and while we may not time the bottom perfectly, most of my clients who are dollar cost averaging into a position will be very happy with their allocations into precious metals in the years to come.
Gold and Silver Price Action
When I wrote that comment above, gold was at $1,266 after topping at $1,372 earlier today and now gold is sitting just over $100 higher. Silver was $19.92 then, but is only 34 cents higher today, presently sitting at $21.26. Silver is acting more like copper, utilizing its industrial side, rather than it’s monetary side. But please know that I believe once silver bottoms, it will outperform gold. This leaves us to try and answer the question; when will we bottom?
A future crisis in a larger southern-tier nation could spark a deposit flight that is impossible to stem. Europe is stuck in a monetary corset: it needs a weaker currency to export its way out of debt and import some inflation. Yet the euro is rising due to a trade surplus and reduced financial risk. This is deflationary.
Europe’s banking union plans are in danger of unraveling amid a protracted political stand-off over the system for shutting failing banks.
“Problem banks,” those at risk of failure, fell for the 11th straight quarter to 467, down from 515 in the third quarter and 47% below a recent high of 888 as of March 2011. That’s less than 7% of the 6,798 banks and thrifts the FDIC said were operating as of Wednesday