By: John Fisher
Yesterday we saw a massive move to the upside for both gold and silver. Now why would that be? The Republicans for all practical purposes are back in power. Doesn’t that mean more fiscal prudence in the future putting a damper on metals prices? Yes and no.
One Perspective:
When Bernanke announced another round of Quantitative Easing (QE2), planning to add another $600 billion to a $14 trillion balance sheet current account deficit – Wall Street and the common man cheered. The hope is that more money means higher stock prices, sustained low interest rates, possibly even lower mortgage rates, and a general sense that things are getting better.
If individuals see their investments and retirement plans going up on higher stock prices and their debt service stay low, they tend to loosen up the wallet. Bonds are in the clear – for the time being. Plus, our stock market also looks more attractive to foreigners. Hence a big up move in the equities.
Another Perspective:
Those that are of a “hard money” mentality believe that there is no free lunch. More debt means many things – a weaker dollar, more debt service, foreign treasury debt buyers becoming even more disenfranchised and reluctant, a pregnant bond bubble and a fiat currency getting closer to the fire. That, which Wall Street and the common man applauded, provides cause for greater concern.
So yesterday, stocks were up hard and metals were up hard. All parties appeared to be excited. In speaking with the primary wholesale-only distributors, few investors were selling or taking profits. Instead, investors were buying on the breakout forcing the bid price up. And on the COMEX speculators went long, forcing some short-covering.
Although we loathe artificial money, QE principal among it, if they are going to create it anyway, why not benefit?
And our greatest advantage is that we have already read the final chapter and know how it turns out.
Next stops (with possible short-lived corrections): Gold $1460; Silver $30
Action to Take: If you’re waiting for a pullback, you might get it – but you might not. Many of my prospects and clients waited for a pullback at much lower prices, and they didn’t get it. Now they feel like they missed their opportunity. Better to have or increase a position and get short-term pullbacks, than to have the market run away leaving you with regrets.
What to buy: CHEAP or stated another way “Low Premium”. Silver in this order: 90% pre-1965 silver coin followed by 100oz. COMEX approved refiner bars. Gold: Medallions, 100 Coronas and I have some good buys on coins that are less than 1 oz.
Quote of the day: “Whoever controls the volume of money in any country is absolute master of all industry and commerce.” – James A. Garfield
