Since turning bullish on precious metals back in the spring of 2003, I have stated we’re a secular bull market that will have short, but sharp corrections. We just had another one. This, IMHO, should be the last one before we enjoy another major leg up.
Most of the fundamentals that got us to where we are today remain. One that only began in the last year in ernest should continue to be the driving force - strong physical buying. Like it or not, gold and silver ETFs are a net positive. Yes, we don’t know for sure if they hold pure bullion, but what matters is they’re providing an avenue to buyers who likely otherwise wouldn’t be in the market. Before ETFs, many institutional investors avoided bullion due to not wanting to worry about where and how to hold it. They were limited to buying mining shares and many felt that wasn’t a pure way to play gold and silver.
There remains other bullish factors including, but not limited to:
Decreasing mine supply.
Dramatically lower exploration worldwide.
Credit constraints.
Concerns about paper monies.
A shift by the Chinese and others away from financial assets to precious metals.
New Central Bank forming in Middle East and Gold will back it.
Central bank selling no longer greatly impacts price.
Media finally beginning to recognize seven year bull market.
We now have a classic bullish reverse head and shoulders formation. The right shoulder may need a little more work before taking out the neckline at $1,000, but when you combine the fundamentals with the technical picture, you have to love gold’s chances for more upside.
Silver needs more work technically but it’s broken a significant downtrend that started last June. (See my comments on silver from last night)
Use any weakness to add to or make new long positions.
Peter Grandich is Chief Commentator for AGORACOM.com, Canada’s largest online small cap investment community. Read and respond to his blog at http://grandich.agoracom.com/
