This was a rough week for most asset classes. The only exceptions were crude oil, up 5.7% to recover most of last week's losses, the HUI gold stock index, which added 5.6% to the prior week's rally, and the Japanese Yen, which gained 1.4%. The biggest drops were in commodities, with coffee (off 7.3%), palladium (down 5.9%) and copper (dropping 5.7%) leading the way lower.

After JPY, the strongest government-issued currency was the Chinese Yuan (down 0.4%). The weakest were the Canadian Dollar (off 2.9%) and the US Dollar, which fell 2.1%. Bonds also dropped, with the Long Term Treasury Fund TLT (down 0.9%) and the short term bond fund SHY (off 1.9%), but both outperformed USD cash.

Stocks (other than the gold miners) were lower, led by the European STOXX (off 3.7%) and the Dow Jones Industrials and the S&P 500, which fell 3.3% each. Japanese stocks, helped by the strong Yen, dropped the least, down 0.8%.

While crude oil recovered most of last week's losses, the metals gave up far more than they gained last week. Cotton, which had a huge rally last week, held on to most of these gains, closing this week off just 0.7%

Gold stocks continue their rise, but are still at historically low prices, offering a great buying opportunity.

Priced in Gold Weekly Summary

Click for PDF version

0

This was a good week for currencies, bonds, and most stocks, but mixed for commodities. The best performing asset was Bitcoin, which rose 4.3% – more than making up for last weeks decline.  The next best was cotton, which gained 4.0%. The weakest asset classes were gold stocks, off 2.7%, and coffee, which dropped 2.2%.

The strongest government-issued currencies were the US Dollar (up 3.0%) and the Chinese Yuan (which rose 2.8%). Bonds were also strong, with the Long Term Treasury Fund TLT turning in the weeks third-best performance, rising 3.3%. The short term bond fund SHY rose 2.9%, but failed to keep up with USD cash.

Stocks (gold miners aside) were all higher, led by the Nikkei (up 3.1%) and the Dow Jones Industrials, which rose 2.4%. Once again, the Euro STOXX FEZ was the weakest, rising just 0.1%.

The week’s bad news was concentrated in the commodity area. In addition to the drop in coffee, silver fell 1.8% and crude oil was down 1.3%. Cotton was the only really strong commodity, but copper and platinum managed small increases.

Although gold stocks finished the week lower, at 4.4g they are still well above their new support at 4.2g, and I think they represent a good value here.

Priced in Gold Weekly Summary

Click for PDF version

1

A great week for all asset classes except Bitcoin, which fell 1.6%. The best performing asset was coffee, which rose 7.8%, followed by gold stocks, which gained 4.4% (more on this below). Aside from Bitcoin, the weakest asset classes were platinum, up 0.8%, and cotton and the USD, each of which gained 1.0%.

The strongest government-issued currencies were the Canadian Dollar (up 3.2%) and the Japanese Yen (which rose 2.9%).

Stocks were all higher. The DJIA rose 3.3%, while the S&P 500 added 2.4%. The Euro STOXX FEZ was the weakest, rising 1.2%. 

As mentioned earlier, gold stocks led the rise in equities. The HUI closed the week at 4.5g, solidly above the 4.2g resistance level I have been watching for the last year. This level was first broken 2 weeks ago, and has been tested twice since then, holding each time. Gold stocks are also trading well above their 200 day moving average.  This could be a good time to add exposure to this asset class.

Although Bitcoin is down for the week, it is still the only asset which is higher today than it was a year ago. It looks like it might be joined by the HUI gold stocks soon, however!

Priced in Gold Weekly Summary

Click for PDF version

0

This was a bad week for currencies and bonds, but a mixed week for stocks and commodities. The best performing asset class was palladium, which rose 7.3%, followed by crude oil, which gained 5.2%. The weakest asset was Bitcoin, down 6.6%, followed by long term bonds (TLT), off 5.3%.

The weakest government-issued currencies were the Yen (down 4.5%) and the Euro (off 4.3%). The “strongest” was the Chinese Yuan, which fell only 1.5%.

US stocks were down (the DJIA lost 1.9%, the S&P 500 lost 1.4%) but European and Japanese equities rose 0.4% each. Gold stocks were the strongest equities, with the HUI rising 2.2% to close at 4.2g, a critical resistance level.

Other metals were mixed, with copper up 2.9% while silver fell 2.3% and platinum dropped 0.7%.

Note that every asset class except Bitcoin is lower today than it was a year ago – particularly palladium and crude oil, which are off 37.5% and 34.5% respectively, even after their recent rallies.

Priced in Gold Weekly Summary

Click for PDF version

0

A good week for stocks; a mixed week for commodities and currencies. The best performing asset class, by far, was crude oil, which rose 11.0% – but with crude’s weak performance during the first 6 weeks of the year, it is still sitting near its all-time lows. The weakest asset was cotton, down 3.8%, followed by palladium, off 2.6%.

Gold stocks slightly outperformed the S&P 500, rising 2.2% to the S&P’s 2.0% gain.

Bitcoin was the strongest currency, up 2.4%, followed by the Canadian Dollar, which rose 2.1%. The Chinese Yuan fell 1.3%, followed by the Euro, which lost 0.6%.  Treasury bonds underperformed USD cash, with TLT falling 0.1% while the USD rose 0.3%.

Priced in Gold Weekly Summary

Click for PDF version

2

This podcast is a continuation of my 30-July-2015 interview with Keith Weiner, CEO of Monetary Metals and president of the Gold Standard Institute USA.

In the first part, we discussed the ultimate fate of the dollar. In this episode, we look at the true purpose of the Fed, the limits of central bank power, and then examine investments and speculations that allow us to profit from today's economic situation.

Audio MP3

Download Podcast Part 2 (54:12, 26 MB)

Resources for further study:

Resonance and Feedback
Death of the Swiss Franc
Gold Bonds
Monetary Metals Supply and Demand Report

Last week we saw gold stock and platinum prices hit new all-time lows and bounce sharply. Silver continued to fall, but still has a way to ge before making new lows. Please remember that I update a Weekly Summary on the site each weekend. Check it out for the latest commentary on major asset classes.

0

This podcast is a recording of a conversation I had on July 30th with economist Keith Weiner, CEO of Monetary Metals and president of the Gold Standard Institute USA. We intended to chat for about 20 minutes, but wound up talking for almost an hour and a half! Due to the length, I’ve broken it up into two parts.

In part one, we discuss the simultaneous signs of deflation and inflation in the world economy, how this came to be, and where this process is taking us. We also discuss possible solutions, including ending the Fed, “mending” the Fed, linking the dollar to gold, and why none of these solutions will succeed. We also talk about an exit strategy for the dollar that could actually work.

Audio MP3

Download Podcast Part 1 (36:20, 17.4MB)

Resources for further reading:

The Theory of Interest and Prices in Paper Currency

In the next podcast, we will discuss the half-life of the dollar, the dollar's recent rise, the true purpose of the Fed, and just how much power central bankers really have. Then we turn the discussion to investments and speculations. Be sure to tune in for part two!

0

Last week gold stocks crashed to their lowest levels ever. The HUI “gold bugs” index closed the week down 7.1% at 3.53 grams, a new all-time low, and on Monday 20-July fell another 9.8% to close at 3.18 grams. The Barron’s Gold Mining Index has made several new lows in 2015, but it also closed the week at a new all-time low of 11.59 grams, 21% below its long-standing 14.74 gram low set back in April of 1942.

HUI 2010

Meanwhile, the S&P 500 closed the week UP 4.8%, the Japanese Nikkei 225 rose 4.5%, and even the EU STOXX gained 3.5%. Bonds did as well as mainstream stocks, with the long term treasury fund TLT rising 4.7% for the week. But keep in mind that although the S&P 500 has tripled since its low of 2011, it is still only 1/3 of its value at the top in 2000 – it would need to triple in value again to make a new all-time high.

The USD is going parabolic, and mixing with the troubles in Europe and China, hypergolic. This is powering a leveraged RISK-ON trade in stocks and bonds, and creating blood in the streets of gold mining. Are gold miners going out of business? For many of the weaker companies, the answer is probably going to be YES. But for strong companies with bulletproof balance sheets and lots of gold in the ground, the answer is  certainly NO! I think we are approaching a once in a lifetime opportunity for profits in the gold mining sector. Let’s see how this week plays out.

Filed under monetary universe by  #

0

New to the site is coverage of European stock prices. This page focusses on the STOXX 50, an index of large caps similar to the Dow Jones Industrials in the US, and an ETF based on the STOXX 50 index, FEZ. Please note that one difference between STOXX and FEZ is that the FEZ chart uses “Adjusted Closes” which incorporate dividend returns, while the STOXX index simply shows closing prices. Accumulated dividends reduce the effective price of the stock, an effect that increases in magnitude as you look at progressively older prices.

STOXX prices are down about 65% from their 2007 highs, and down about 85% from their 2000 highs, despite having more than doubled from their 2011 lows. During most of 2014 and into Q1 of 2015, FEZ was in a down-trending channel, making a series of lower highs and lower lows. In February 2015, however, it broke out of this channel to the upside, and has been gradually working higher, making a series of higher highs and higher lows. FEZ currently sits at about 1.04 grams; it will be interesting to see if this trend can reach and surpass the 2014 high of 1.09 grams, setting the stage for a significant rally to the 1.3-1.5 gram level.

FEZ from 2014 to Jun 2015

Please note that although I am not currently sending out a update email each week, I am updating a page on the site each week with a bit of commentary and a summary of weekly, monthly and yearly changes to a range of asset classes. I usually update this page over the weekend, at the same time that I refresh most of the chart pages.

Filed under Stocks by  #

0
Reader Tony Lewis recently wrote to me with some excellent questions:
So when looking at your charts, in your opinion, would it be sound to buy when something is historically low in terms of gold grams? And what about gold itself? Is there a chart that determines when to buy gold?
Let’s start with the last question first: When should you buy gold?
 
To me, this is the same as asking, “When should I hold cash?” Owning physical gold insulates you from many forms of loss, especially the subtle forms, like loss of purchasing power through currency depreciation. It avoids counter-party risk. Really your only risk is physical theft. However, like cash, you have no upside. If you put 1 kg of gold in a safe, it will always be just 1kg of gold. It won’t ever grow, or pay dividends, or add further to your wealth. In 50 years you can come back, open the safe and still find 1 kg of gold sitting there waiting for you. So you have downside protection, but no upside.
 
I think everyone should have a “cash cushion”. Part of this would be in local currency, to help cover bills and expenses in an emergency. And part of it should be in gold, to cover the possibility that the currency could become worthless, either suddenly, or gradually over time. If you are saving up for a big purchase or expense in the future, like a child’s college tuition, your retirement, or a new house, it could make sense to do that saving in gold. The further in the future, the more sense gold makes.
 
The current price of the dollar in gold really isn’t relevant. The dollar goes up and down all the time, depending on many factors: monetary policy, the state of the economy, fears of terrorist strikes, military actions, etc. Sometimes people are in desperate need of dollars to pay down debt, other times they don’t want to hold dollars because they are depreciating so rapidly. Gold doesn’t suffer from these factors. It just sits there. So as an anchor to a portfolio, to reduce volatility, and to provide stability in uncertain times, gold is the perfect asset. If you don’t feel you have enough, buy more now! The price of the dollar (or conversely, the dollar price of gold) just doesn’t matter.
 
If you are trying to make a profit by trading in dollars, the situation is more complex. Assuming that you are starting with some dollars, you want to find a point when the dollar is overpriced, and use that strength to buy a lot of gold for a small number of dollars. Then when the dollar falls, and becomes fairly priced or even under valued, you want to use that gold to buy a lot of dollars. Lather, rinse, repeat. At each iteration, you should have more gold than you had before – you are making a profit by trading in dollars. This sounds simple, but is difficult in practice.
 
As the long term trend of the dollar is down, you are really playing bear market rallies to make your profits. Trading against the trend like this can work, but it is quite risky, and requires care and attention. And there is always the risk is that while you are holding dollars and waiting for them to appreciate, they will instead become worth much less, or even become worthless.
 
My assessment is that the dollar is currently vastly over-valued, with much more downside than upside. This doesn’t mean that it cannot become even more over priced. Still, I have been selling my dollars and buying other things with them, including gold, silver, platinum, real estate, crypto-currencies like Bitcoin, and value stocks. Gold for portfolio stability, and other assets that I think will grow in gold value over time. I don’t care whether they become worth more dollars or not. I want them to be growing in gold value.
 
This leads naturally back to the first question.
 
Is it a good idea to buy things that are at historically low prices? Of course, the old adage is to “buy low and sell high”, and this suggests that when things are historically cheap you should buy them… but the fact that something is cheap doesn’t mean that it can’t get even cheaper!
 
The real key is find things that are good values, assets whose value is under-appreciated by the market. This requires research into the fundamental value of the asset (supply and demand for commodities, management, cash flow and balance sheet for businesses). Over the years, stocks have grown in gold value, but they have long periods of falling value followed by long periods of growth in value. Here is a long term chart of the S&P Index, for example:

SP500 1880
 
If you have a really long view of your investments, it is probably fine to buy most things when they are at or near historic lows. Assuming that the asset will still have value in the future (like durable commodities, solid companies producing perennial products, etc.) you may have to wait a few years, or even a decade, before they once again start to shine, but eventually you will see profits. Buying at the top of the trading range, you might have to wait much longer… and in some cases, you might never see profits. Examples are Coffee in 1997, Palladium in 2001, and Uranium in 2007. Or US stocks in 2000.
 
But note the caveat in the previous paragraph, “assuming that the asset will still have value in the future”. I would not include most government issued currencies (especially the USD, JPY and EUR), government bonds, and even many stocks (especially small caps) in that category. These are things that can certainly be traded to grow the gold value of your portfolio, but they are traded on a short term basis, and have to be watched carefully. If you aren’t a full time trader, they should be traded with small position sizes, so that a complete loss will not hurt your portfolio too much. They can be speculative opportunities, but are not long term investments.
 
Turning back to US stocks, the S&P 500 is far cheaper now than it was in 2000 (about one-third the price) and considerably less than it was in the late 1960s. However, it is a bit higher than it was in 1929, and in fact, is higher than it has been for all but 20 or so years out of the last 135. So I would not rate it as “dirt cheap”.

Although stock prices have been rising for the last several years, I am concerned that the current US stock market looks more like 1978 than like 1985. If so, buying today might mean suffering through an 85% loss and waiting 15 years just to break even – but bought without debt, and held for the long term (maybe 30 years) you could still make 4 or 5 times your initial investment at the top of the next wave.

For those of us with a shorter time horizon, the best plan may be to treat stocks as short term speculations, going long while they are rising, and using trailing stops or other technical indicators to pull us back out to gold when they start to collapse.

One asset class that is has been beaten down to near all-time lows is gold stocks. Here is a chart of the HUI Gold Bugs index:

HUI 1997

I think that a carefully selected portfolio of gold mining stocks, similar to the Gold Stock Analyst “GSA Top 10”, has great potential. It may take a few years to really take off, but I think the downside is limited, and the upside is excellent. The key is to put only very strong companies into the portfolio, as the bursting of the credit bubble created by the world’s central banks will disrupt financing plans and stress any company that does not have an iron-clad balance sheet – even it it is sitting on massive gold reserves.

I subscribe to the Gold Stock Analyst and use their Top 10 recommendations myself. I have followed their portfolio (priced in gold, of course) for many years, and recommend it as the best way I’ve seen to play the gold stock sector. If you are interested in trying their service, let me know and I’ll see if I can negotiate a deal for my subscribers.