Gold headed for the biggest monthly gain of the century

'Silver may be poised for solid gains in 2012'\

LONDON (Commodity Online):  Silver may be poised for solid gains in 2012 after a poor showing in 2011  and strong demand for the metal, said optionsXpress in a research note.

“Technically, the  (Comex) March  Silver  contract  has made significant progress, but prices need to  sustain rallies above $35 to keep the rally going,” optionsXpress added.

Silver has been one of the strongest commodities during January. “Oversold conditions and increased demand from industrial users  of the metal have contributed to the rebound,” OptionsXpress said.

“Investors  have also become a  bit numb to the financial crisis gripping Europe, and they appear to be less convinced that the worst-case scenario is a real possibility.  Silver has also ridden the coattails of the  Gold  market, which has performed well as an inflation play.  Silver traders also got a boost from the FOMC, which  forecast interest rates to remain at extremely low levels for the next 2-3 years, stoking some inflation fears,” OptionsXpress said.


Further, there are expectations for  lower interest rates in China  that could  Lead  to buying of raw materials, including  base metals and silver, OptionsXpress conluded. 

Gold stocks poised to repeat the massive Great Depression rally

By Hubert Moolman
During the Great Depression, at a certain point,  Gold  stocks started a massive rally. While most things were going down in price, gold stocks made significant gains, becoming one of the best performing sectors during that time.

It was no coincidence that gold stocks performed as well as they did. Like all goods, gold stocks will thrive under the ideal conditions. During the Great Depression, those ideal conditions were present.

The purpose of this editorial is to look at what those conditions were, and identify a pattern that was present before and during those rallies. If we are able to identify those circumstances and pattern, we could look to see if they are present today, or in the future, in order to know when to expect a massive gold stocks rally. – end of extract.

I then go on to identify those ideal circumstances and patterns that were present before and during the great gold stocks rally. The conditions today are very similar to then, and is an ideal set-up for a most spectacular gold stocks rally over the coming months. Here, I would like to illustrate, by way of a chart, how the conditions were similar.

The gold stock rally of the 1930s coincided with major economic decline, as well as a significant increase in the real price of gold.  Below, is a chart (from planbeconomics.com) of the long-term Gold/Oil ratio:

On the chart I have highlighted a peculiar pattern that exists just before the gold stocks rallies of the Great Depression and the early 70s. The pattern is basically:

The peak in the stock market (DOW) and Dow/Gold ratio – point p

Gold rallies significantly from about after 1 – point g

After a significant bottom in the Gold/Oil ratio and after that ratio has been rising for quite some time.

Note that the yellow lines in the chart represent the point where the  Gold  stocks really took off (broke out)

Currently, conditions are setting up in a similar manner to the Great Depression and the early 70s. We have a significant bottom in the long-term Gold/Oil ratio, we have had a peak of the Dow and the Dow/Gold ratio (in 1999) and we have had a gold rally that started after 1999, and is about to accelerate. We are also at a point where major economic decline can be expected (see my previous video), similar to the decline during the Great Depression.

So, it appears that we have conditions that are ideal for gold stocks to finally take the  Lead  in this bull market.

Do the charts for these gold stocks agree?

Below, is a chart of the HUI:

The HUI appears to have bottomed, and is currently embarking on a massive rally. The yellow line should be good support, should price fall back again. Buying close to the yellow line would also be a good long-term entry point. Please note that the green drawn line is just for illustration purpose, it is not meant to show exactly how the chart will play-out.

A scenario for the HUI, which is very likely, is that the HUI follows the example of silver’s rally from the $19 level to $49.  I think this is very likely, since it seems that the HUI is now in a very similar situation to where  Silver  was in August 2010.


Source:  hubertmoolman 

Silver and Gold will win the currency wars

By Greg Canavan
On Wednesday, Federal Reserve boss Ben Bernanke promised speculators he would keep interest rates low until 2014:

'To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions – including low rates of resource utilization and a subdued outlook for inflation over the medium run – are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.'

The Fed also promised to keep buying longer-term treasury securities with the proceeds from the maturing shorter-term securities in its portfolio. That, along with weaker economic growth forecasts, saw long-term bond yields fall. And when yields fall, prices rise – so bond market investors were happy.

While Bernanke didn't announce QE3, he said it remains an option. Interest rates aren't going anywhere for another couple of years. The stock market loved it. So the Fed's announcement contained something for everyone – the bond AND stock market investor. Sweet.

We'll explain why, despite the initial reaction, you shouldn't get too excited about stocks in a moment. But the big picture issue to contemplate here is that the Fed has just fired another salvo in the global currency war.

Over the past few months, the Fed has taken a back seat to the European Central Bank (ECB). The sovereign debt crisis engulfing the region has revealed the ECB to be a formidable opponent to the Fed when it comes to money printing.

Of course, the ECB says it's simply providing 'liquidity', but everyone knows that's just another euphemism (the list grows by the day) for printing money. The ECB's actions have resulted in the Euro weakening against the Dollar, exactly as planned.

A weaker Euro allows Eurozone nations to become more competitive in international markets. Despite Germany's apparent distaste for easy money and a weaker currency, its powerhouse export sector is perhaps the biggest beneficiary of the ECB's actions.

While the Euro is not yet weak enough versus the US Dollar to cause genuine concern, the ECB's newfound monetary vigor is raising eyebrows. Bernanke's promise of low interest rates for years to come and the threat of more QE was a less than subtle reminder that a weak US Dollar is a long term Fed objective.

It's also an objective of the ECB, the Bank of England, the Bank of Japan, and the People's Bank of China. The problem is, they can't all be successful. Well, maybe they can against a little currency like the Aussie Dollar.

The Aussie is a major beneficiary – or casualty, depending on your viewpoint – of this ongoing currency war. While all the major trading nations and blocs attempt to keep their currency weak to boost exports, capital flows to Australia as it seeks refuge from the hostilities.

The Aussie is again in the headlines as it surges higher against a range of (formally) powerful currencies. This currency strength should provide the RBA with cover to reduce interest rates at its next meeting in early February.

Up until now the RBA has refrained from getting involved in the currency wars. It sees a strong Dollar as a tool to contain inflation. But China's economy is coming off the boil, easing the inflationary threat to Australia.

Such a strong Dollar, at a time of rising unemployment and moderating inflation, might not be such a welcome tool. So expect the RBA to join the fight this year. While they won't say so explicitly, we're betting interest rates fall to record lows in an attempt to counter the easy money policies of the world's major economies.

Everyone loses in war. In this unfolding currency war, no fiat currency can win. Currency devaluation is a crude method of stealing demand for goods and services off someone else. It doesn't create new demand or wealth. It's a zero sum game. But it does  Lead  to increasing levels of distrust and economic animosity.

As a result,  Gold  and  Silver  (and maybe foreign exchange brokers as the world turns into a casino) will be the only victors. That's why both metals soared on the news of Bernanke's announcement.

And don't expect to be protected by the stock market either. If these currency wars eventually lead to high inflation, as is expected, the stock market might not be the wealth preserver (in times of inflation) it's made out to be.

The last time we experienced high inflation globally was in the 1970s. It was a terrible decade for investors. Inflation in goods and services might mean higher prices but the other side of that coin is high costs – both operating and capital costs.

It also means higher market interest rates. In a world with too much debt, the last thing we need is higher rates (or falling bond prices) in the US or Japan. But the way this currency war is unfolding, that's where we are headed.


Source:  soundmoneysoundinvestments