Wednesday, October 22, 2014

Gold Denominated In Other Currencies

Sometimes it is good to look at things from a different perspective. Let us look at gold denominated in U.S. dollars and other currencies:

As you can easily spot, when related to other currencies, gold looks not so badly as in the case of U.S. dollars.
For example, gold denominated in euros is approaching the resistance level (and not support as gold denominated in U.S. dollars).

Sunday, October 19, 2014

A Quick Look At U.S. Economy

Banks are vital entities for every economy. If banks do not lend there can be no real growth. When we look at the balance sheeet of the American commercial banks we can spot that since the last financial crisis banks have been behaving very prudently.

source: FRED, Simple Digressions

As you can see, between October 2007 (just before the last financial crisis began) and October 2014, loans granted by the American banks were growing 2.4% per year; in the previous cycle, beteween Oct, 2000 and Oct, 2007 the c.a.g.r. was much higher: 9.5%. So in the current business cycle the banks are very reluctant to grant loans (or, it is better to say, the businesses are reluctant to raise loans). And remember that interest rates are standing at  nearly zero!

But look at the cash assets. In this business cycle the cash assets were going up 38.4% per year. These cash assets of the American banks ($2.9 trillion) are nothing more than deposits held at the FED. Simply, banks have sold U.S. treasuries, which they held before, to the FED and the cash obtained from those sales was deposited at...the FED.

For many years the talking heads were telling the public that the American economy is healthy. No, it is not. Businesses do not want to borrow money, which has a negative effect on investments.
What is more, the money artificially created by the FED through many stages of quantitative easing just went back to the FED, not to the economy.
On the other hand, it is a very positive phenomenon. The businesses, seeing artificially low interest rates, did not subscribed to it. They are just standing aside.

By the way, I recommend the economic insight offered by two American economists: Van R. Hoisington and Lacy H. Hunt. Each quarter, these guys publish excellent analysis on American economy. Here is a link to the last piece.

Wednesday, October 15, 2014

U.S. Stocks Are Going Lower

There are two strong signals indicating that the U.S. stocks bull run is finished at the moment.
Here is the first one - the old good Dow Theory:

As you see, both indices have broken their supports which were the secondary lows. This is a confirmation the stocks are going lower.

Another chart:

Value Line Geometric Index has also broken its suport - we have a similar technical situation as in 2007 (see my previous post here).
Well, now I am waiting for a major correction to the upside.

Sunday, October 12, 2014

The Tocqueville Gold Fund - This Is a Chart for Gold Bulls

The Tocqueville Gold Fund invests in precious metals assets. The main holdings, as of 31 August are:

 source: Tocqueville Gold Fund

As the table shows, the Fund, apart from gold bullion (8.12% of the assets), invests mainly in precious metals miners and streaming companies. For those unfamiliar with gold stocks:
  • Royal Gold and Franco - Nevada are streaming and royalties companies
  • Goldcorp is one of the biggest and lowest costs PM producers
  • Agnico Eagle, Eldorado Gold, Yamana Gold are big PM producers
  • Tahoe Resources and Detour Gold have just started PM production
  • Primero Mining is a medium PM producer
The Fund portfolio is quite an interesting offer for gold investors. What is more, the Fund is overseen by John Hathaway - the highly respected gold veteran.

Let us look at the long term chart of the fund:

As you see, the price of the Fund is in a long term upward trend and the last sell out in the sector looks like a good entry point for gold bulls.

Friday, October 10, 2014

U.S. indices approaching some support

The U.S. stock market does not look good for bulls. But, apart from crashes, prices do not go down in just one move. It is rather quite a complicated structure.
Presently, after the initial fall, the market may find some suport. Let us look at the chart below:

VIX, which measures the stock market volatility, indicates the possible support. Since 2013, when VIX had been trading around 20 -22, the corrections were over. It is interesting whether this story will repeat these days. Well, looking at the charts of the main U.S. indices, with some of them breaking down their trend lines, I would expect only a minor correction up.

Saturday, October 4, 2014

Precious Metals Market - Situation Is Very Interesting

First of all - I cannot find any optimism on precious metals market. Everybody is busy with guessing to what levels gold or silver are destined to fall. But I know one thing - when everybody is pessimistic about any asset class  the bottom is near or we are just at it.  The same is with gold and silver.
Anyway, this time the situation in PM market is a little bit different. But before more details are provided, please, look at the current situation at this market:

It looks as the whole sector is standing on the edge of a major disaster with silver breaking down below its strong suport.
Maybe, but not so fast. Previously, in 2011 - 2013, when a bear leg in PM market started, the first assets to breake down were stocks of Juniors and Producers. Gold and silver followed them one year later.
Today, the leading factor is silver - it broke down in September. Gold and Producers are at their supports while Juniors are behaving pretty well (see the chart at the bottom of this post).
I do not have the slightest idea where all that mess will end but definitely Juniors are being strongly accumulated. And due to the fact that the only players buying Juniors are proffesionals (with very deep pockets), this occurence confirms my belief that we are near the bottom in the PM sector.