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Is Gold a Bubble? Will it be Useful for TEOTWAWKI/SHTF?

29 May

Mark Dice recently interviewed at least a dozen people right next to a coin shop. No one has any idea what it is worth. If you think precious metals are in a bubble you are mistaken. Although Dice is a bit abrasive, the addition of the coin shop right next to him to the scenario is incredibly telling. Most people simply dismiss him, regardless of the benefit a little investigation might bring.

Additionally, this should probably indicate that storing gold or silver for a SHTF scenario may be a bad idea. It will likely be worth a lot and people still won’t care. When will this change? It will change when any economy tries to recover from the fiat money-printing fiasco.

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A Coming Bull Market in Gold and Silver?

10 May

I am sick of people saying what is and is not a bull market. I want to see real evidence before I even begin to ask the question. When we think about how that kind of claim can be justified (instead of going by what CNBC tells us) one of the first places to start is the accumulation-distribution line.

According to www.stockcharts.com, here’s what the A/D line indicates:

“The Accumulation Distribution Line is a cumulative measure of each period’s volume flow, or money flow. A high positive multiplier combined with high volume shows strong buying pressure that pushes the indicator higher. Conversely, a low negative number combined with high volume reflects strong selling pressure that pushes the indicator lower. Money Flow Volume accumulates to form a line that either confirms or contradicts the underlying price trend. In this regard, the indicator is used to either reinforce the underlying trend or cast doubts on its sustainability. An uptrend in prices with a downtrend in the Accumulation Distribution Line suggests underlying selling pressure (distribution) that could foreshadow a bearish reversal on the price chart. A downtrend in prices with an uptrend in the Accumulation Distribution Line indicate underlying buying pressure (accumulation) that could foreshadow a bullish reversal in prices.” 1

Translation: acc/dist line shows when people are buying more or selling more. That means that REAL predictive value about bull or bear markets lies in one’s assessment of buying momentum.

I want to draw your attention to how this is happening right now in gold and silver. Check out this silver chart from stockcharts.com:

And this gold chart from stockcharts.com:

Note the massive divergence in the a/d line from the price line. What does this say? Two things: 1) that someone is selling a lot of gold and silver right now (either in physical bullion or paper contracts), and 2) that, despite the massive selling, much more money is flowing into these assets than the price reflects. In short, someone is intent on selling low and everyone else is much more intent on buying it up.

So, is this “sell-off” bullish or bearish? According to the article I previously mentioned, “A downtrend in prices with an uptrend in the Accumulation Distribution Line indicate underlying buying pressure (accumulation) that could foreshadow a bullish [emphasis mine] reversal in prices.”

This line does not say what the future will bring. It could be at some point that this buying momentum drops off. But so far, there is a massive divergence that often portends the coming of a bull market. Silver and Gold may continue to go down, but the a/d line should inform you about the level of risk you are taking if you decide to buy.

Video

Where Should You and Your Metal Go?

14 Apr

Hint: different places.

One of the most difficult tasks is figuring out where to store your tangible assets, like gold or silver. Another one is figuring out where to best utilize your primary means of production: you!

Throw in some technical analysis of Apple and you should have plenty to think about.

Brother John has put together a great video discussing the silver market, Apple, metal storage, and Asia.

Highly recommended.

Shifting Standards

27 Mar

In the last 99 years, our country has undergone a massive change. If it had happened in 5 years, it probably wouldn’t have happened. We have essentially changed in the way we ascribe value. The ramifications of this change cannot be underestimated nor fully understood. But the change itself can be.

On December 23, 1913, the United States government put its own constitutional mandate to create money into the hands of the Federal Reserve, a private banking system led by an unelected group of people who generally worked in the banking profession. Nearly twenty years later, on April 5, 1933, President Franklin Roosevelt issued Executive 6102,  which outlawed the possession of coined gold.  A little over 32 years later, on July 23, 1965, the Coinage Act of 1965 discontinued the coining of silver dimes. On August 15, 1971, Nixon ended the convertibility of the dollar into gold for foreign central banks. Incidentally, the penny’s copper composition was changed from 95% to only 5% in 1982.

Today, the nickel stands alone as a coin which, except for a brief shift in WW2, has maintained its composition of 25% nickel and 75% copper since 1866. The student of history will not be surprised that recent legislation may soon change the nickel to be made from steel.

For the entire 20th century, the US systematically removed its currency from the constraints of metallic standard. Think about that.

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Contemplating the Future for Silver

24 Mar

Contemplating the Future for Silver

For those of you who have thought about silver, here is a chart I put together on a whim. I took a basic 10 year chart, because I prefer longer term estimates over short term analysis. I have no idea what the future looks like, but I just tried to extract a pattern from the past and replicate it.

The one thing I’m sure of is that there will be more volatility in the future than there was in the past.

Again, since I have no technical training, I have no personal recommendations for your own investment, except to keep a diverse portfolio. Any decisions you make should be made between you and your personal investment adviser.