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We thought we’d do a quick follow-up on our recent piece entitled, “Gold and Silver”, where both precious metals continue to act well and remain in a favorable position from a fundamental and technical viewpoint. Although the action in the precious metals shares of late appeared to be lagging the physical bullion itself and perhaps had some concerned, PM shares exhibited strong action this week. In any event, such divergences have been customary since the onset of this bull market nearly 6 years ago, thus, no meaningful concern from our perch. It’s been our contention that Phase I of the secular bull market in both Gold and Silver ended during the May ’06 time frame. While many have since all but “thrown in the towel” due to a lack of patience or, have been tossed off of the bucking Bronco during the past nine (9) months consolidation period, nothing has altered our position, as we continue to believe that both metals are merely building cause before the next leg up ensues. From a fundamental perspective, we continue to witness evidence of supply and demand imbalances, as well as continued heightened geopolitical concerns. While many focus their attention on the above, as well as the inverse $USD/Gold relationship, ourselves included, it has been the action of central banks worldwide, the excessive infusion of credit into the financial system (currency debasing) that has and continues to be our primary indicator. Although we’re no longer privileged to such data via the abolition of M3, monetization around the globe remains at nose bleed levels, and the action in the metals of recent years, both Gold and Silver, are speaking loud and clear. Technically, both metals continue to build “cause” for their next major assault into greener pastures. Observing the charts below, it’s quite evident that the bull trend remains intact and only a matter of time before the May ’06 highs are breached and taken out. When one may ask? While no one knows for sure, we remain content in patiently awaiting the verdict.
Once both Gold and Silver “clear the hurdle” (May ’06 Highs) and are able to “stick” for more than 48 hours, such developments would provide confirmation in our eyes that we’re on our way to higher ground. While many have been shaken off of the bull during the past year or so and find themselves gazing into the ring from the outside, it’s our belief that Phase II of the secular bull nears. The question remains, whether one will pick themselves up off of the ground and shake off the dust and remount, or, will one allow the bull to scamper away without them? With that said, we’d like to leave our readers with a quote that we’ve found insightful and helpful, as well as in eye sight on a daily basis since the inception of our core positions in both Gold and Silver in the summer of ’03. "And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars, I want to tell you this: It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine-that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader, after he knows how to trade than hundreds did in the days of his ignorance". -Jesse Livermore (Reminiscences of a Stock Operator)
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