Thoughts on Markets

Wednesday, August 06, 2008

Is the Bottom in for Precious Metals?


WOW! The precious metals were really trounced upon yesterday. They are still not out of the woods. At the same time the DJI really spiked upward some 238+. And oil dropped again! It is good to have some break at the pumps these days. I imagine that investors were very pleased with the Fed leaving interest rates alone and the lower fuel prices. The dollar rebounded some, again.

The following in from Casey's Daily Resource Plus:

"Since the start of the week, gold has lost $40 and silver is down $1.15. These losses have nothing to do with changes in supply or demand, as 90% of the the time the price is determined by what is happening between the tech funds in the Non-Commercial category, and the bullion banks in the Commercial category. The interplay between these two groups of traders determines the price...it's as simple as that. If the tech funds are buying and the bullion banks are going short against them...the price rises. If the tech funds are pitching their longs and the bullion banks are covering their shorts, the price declines. It's as simple as that. Virtually nothing else matters.

This clean out that we are having right now is identical to the many that we've had in the past, and all have involved the same participants. When the bullion banks have flushed as many longs as they think they're going to get, then the bottom will be in...and we're close now.

As Ted said to me on the phone today..."most of the damage has been done--but has all the damage the boyz can do, been done?" Good question. As I said in my interview with Al Korelin on the weekend, sometime before the end of August (options expiry is on the 26th) the bottom will be in."

The boyz must be reasonably happy for the short time being, as both gold @ 880 and silver at 16.56 are both on up ticks. The DJI is off about 70, but showing some signs of recovery. Of course, it is early in the trading day, so we will have to wait out the day.

Most mining stocks are showing signs of life. DROOY @ 5.73, HMY @ 9.33, SLW @ 11.40, and SSRI @ 27.98 seem to be in good buying range. However, one should be very careful about buying now. The prices do make them very inviting, though.

I suggest protecting profit, if any from the general market and moving from general stocks to cash. If we are headed into a world wide down turn, recession, or depression, cash will be great! As Richard Russell has often said that he prefers cash and gold.

Keep your focus upon long term trends in investments and financial security. Also, continually praise God for His Sovereignty and grace to us. Give Him the glory. Rejoice in all things at all times. As Paul wrote, "Rejoice, and again I say rejoice."

Best to each, Doug

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