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Indepth Energy and Precious Metals Research Reports
Gold Bubble Fears Overblown Print E-mail
Analysis | Research | Written by Wells Fargo Securities | Tue Aug 23 11 10:21 ET
When we first published this report in April, gold was hovering around $1,500/ounce. Amid all the political wrangling in Washington about raising the debt ceiling and narrowing the budget deficit, gold rose further to $1,664/ounce through August 5. After Standard & Poor's downgraded the United States' credit rating from AAA to AA+ on August 5, gold jumped about $55/ounce to $1,719/ounce on August 8. Investors' concerns about the validity and efficacy of the debt deal, uncertainty about further deficit reduction suggestions that will be suggested by the Super Congressional Committee, continued dollar weakness and the worsening of the European debt crisis all appear to have helped push gold even higher since then to around $1,871/ounce as of this writing.
Gold Stocks Break to New Highs Against Equities Print E-mail
Analysis | Research | Written by Trendsman Research | Mon Aug 22 11 00:27 ET

In our most recent commentary we wrote about the relative strength in the gold equities. Gold equities have not only bucked the downtrend in the equity markets but in relative terms are breaking to new highs against equity indices. In the chart below we plot precious metals prices, GDX versus the Morgan Stanley World Index and GDX versus the S&P 500. We highlight how each performed during bear markets. Other than in the crash in 2008, precious metals and the equities have performed quite well during times of struggle for conventional stocks.

For a historical perspective on the gold stocks relative to the stock market, one should consider this chart from Nick Laird of Sharelynx.com. This picture shows the ratio of the Barrons Gold Mining index versus the S&P 500. Although a year old, the current ratio is fairly close to where it was in 2010.

It is important to note that the strong outperformance of gold stocks usually begins later in the bull market. During the 1923 to 1937 bull market, gold stock relative performance surged from 1930 to 1935. In the 1960 to 1981 bull market, gold stock relative performance didn’t begin in earnest until 1973. We are 11 years into the current bull market and the BGMI/S&P ratio has yet to surge though it has increased gradually.

History tells us two things. First, it shows that when Gold is in a bull market, the gold equities will outperform the stock market if its in a bear market. That was the case from 2007-2009, 2000-2002, 1977-1980 and from 1929-1932. Second, it shows that the biggest gains for gold stocks in both nominal and real terms come in the second half of the bull market.

Precious metals and the related equities cannot have a strong bull market lasting several years if conventional stocks are rising. If conventional investments are rising then the mainstream and retail investor won’t put one cent into Gold. After all, if conventional assets are healthy then why do you need Gold? Gold flourishes in an environment where stocks and bonds are questioned. The gold stocks do best in such an environment, provided the equity market is not crashing.

We have already had two 50% declines in the last ten years. We are following the typical pattern of a secular bear market. The pattern calls for a cyclical bear market over the next few years. The private sector has already had to deal with two recessions in ten years. It is prepared for this environment. This cyclical bear will be a government-led recession in which high inflation and rising interest rates hurt growth. Meanwhile, households are still in a delevarging process that will last another five years at least. It is a muddle through environment.

For gold stock investors, this is nothing to fear. This is exactly the environment we need for gold and silver stocks to flourish. Their relative strength amid the equity carnage is a positive omen. They are starting to act as called for by the aforementioned history. However, we do understand why some investors are concerned. Equities are selling off and with 2008 in the rear-view mirror this can be even scary for Gold. If you’d like professional guidance in riding this bull market and managing the ups and downs then we invite you to learn more about our service.

Good Luck!

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Jordan Roy-Byrne, CMT
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Relative Strength of Gold Stocks Signals the Future Print E-mail
Analysis | Research | Written by Trendsman Research | Tue Aug 16 11 03:45 ET
Savy and experienced market technicans and traders will laud the concept and importance of relative strength. Relative strength analysis can be used on any time frame. On large time frames it can tell us which sectors could be future leaders. On shorter time frames it can also provide insight to the future. In this analysis we examine the relative strength of the gold stocks today and compare it to the past as some important insights can be gleaned.
An Acceleration in Gold has Begun Print E-mail
Analysis | Research | Written by Trendsman Research | Tue Aug 09 11 02:29 ET
In recent months we've been talking and writing about a potential acceleration in Gold. The chart said we were close and in all honesty Gold has actually been in a state of gradual acceleration since the 2008 low. Furthermore, we'd noted that in most secular bull markets, accelerations usually begin in the 11th or 12th year and are totally obvious by the end of the 13th year. Given the move of the past five weeks, there is no reason to think otherwise. An acceleration in the bull market has begun and will take Gold to $2000/oz and quite a bit higher in the next 18 months.
Gold Accelerates as US Equities Enter Cyclical Bear Market Print E-mail
Analysis | Research | Written by Trendsman Research | Wed Aug 03 11 11:32 ET
In recent weeks I've read a few missives from mainstream advisors and pundits on the merits of stocks. These people despise Gold and are quick to point out that since March 2009, stocks have outperformed Gold. This means very little as it is an arbitrary date. Gold will continue to outperform stocks and then stocks will outperform into the next decade.
Historic Move in the Gold Stocks is Directly Ahead Print E-mail
Analysis | Research | Written by Trendsman Research | Tue Jul 26 11 00:50 ET
A variety of factors are lining up that lead us to believe we are on the cusp of a major move higher in the gold stocks. We feel we have been saying this for a while but the reality is we are moving closer and closer to that moment. The fundamentals couldn't be more obvious and being in the 11th year of a bull market means the timing is ripe. We think you will find the facts and conclusions extracted from the technicals, sentiment, and valuations very compelling.
Precious Metals Ready for Big-Time Run as Global Breakdown Begins Print E-mail
Analysis | Research | Written by Trendsman Research | Tue Jul 19 11 07:19 ET
An important shift in global markets is taking place and it bears introspection. Gold has broken to a new high while Silver has established a bottom. Precious metals stocks have rebounded significantly from support. At the same time, important global stock markets are in the early stage of a technical breakdown. We don't foresee a repeat of 2007-2008, yet odds are good that global stock markets are beginning a cyclical bear market and unlike the last cycle this is coming at a time when precious metals are set to accelerate to the upside.
Gold in Excellent Position for Seasonal Breakout Print E-mail
Analysis | Research | Written by Trendsman Research | Wed Jul 13 11 01:09 ET
Last week we wrote about Silver so this week we decided to provide an update on Gold. In looking at the price action and sentiment indicators we find that Gold is once again ripe for what is becoming an annual seasonal breakout. Gold has broken to a new all-time high in three of the past four years and presently, we are anticipating another breakout.
Silver Bottoms Amid Subtle but Bullish Factors Print E-mail
Analysis | Research | Written by Trendsman Research | Wed Jul 06 11 09:43 ET
Successful market timing is based on careful use of technical analysis and sentiment analysis. Technical analysis measures supply and demand and sentiment analysis takes that a step further by looking at investor attitudes their positions and money flows. This information helps us assess probabilities. Nothing is certain but we want to see strong evidence before forecasting a turn in the market. In regards to Silver, we see strong evidence that a bottom is in place and the market will move higher in both the short and intermediate term.
Commodity Outlook: Oil Capacity the Hot Topic Print E-mail
Analysis | Research | Written by Saxobank | Tue Jun 28 11 07:32 ET
Oil markets will be watching economic developments closely as we head into Q3 due to concerns about OPEC's recent failure to address a potential shortfall during the second half of the year. OPEC seems to be split between those who have spare capacity and those who don't. Apart from political differences, Saudi Arabia was looking to increase supplies amid autumn forecasts of a two million barrel-per-day deficit. The other bloc, led by Iran, which needs high prices and is already operating at full capacity, argued that demand for oil is set to soften due to weaknesses in the U.S. and other economies.