Your Last Best Chance to Go for the Gold and Silver
January 21, 2011
– Comments (16) |
RELATED TICKERS: GG
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I'm not calling a bottom to this correction, since I never underestimate the short-sightedness of the weak and margined longs combined with the idiocy of the algorithm-driven big money, but now that gold and silver equities have sold off substantially from their recent peaks, the attractiveness of the sector for those retaining confidence in the continuation of the multi-year trend has been significantly enhanced already. As I mentioned in my last post, I have begun to redeploy the cash I raised last month in a systematic way, gradually increasing the pace of redeployment as the correction carves deeper.
And yet, while near-term sentiment has certainly shifted on a dime and raised a hurdle for the longs to clear, murmurings of renewed credit distress in Europe and a severe liquidity crisis in Asia are crossing the wires. The SHIBOR, Asia's interbank lending rate that is the region's equivalent of the LIBOR, has surged monstrously in recent days from 2.5% to 7.3%! As I routinely remind those who spend too much time caught up with moving averages and retracement levels, the macroeconomic developments that no one alive can predict or control can rear their heads at any given instant ... laying waste to expectations based solely upon technical analysis. TA has its place, to be sure, but confidence therein must be measured in relation to the number of anvils hanging precariously above the dominoes of the global financial system at large. Those anvils are 100% unaffected by market technicals, and therefore fundamental factors trump technically derived expectations any single day of the week.
For all of these reasons, I believe we have entered a condition where, from this moment on until the last highs are taken out with fresh ones, this must be seen as your last best chance to go for the gold and silver. Optimized entry prices are logical to target, but those utilizing discount brokers may wish to ease into positions beginning now so as not to be left out in the event of a major pm-pushing development. I don't care whether $1,340, $1,280, or any old price ultimately ends up being the lowpoint for gold in this correction ... that will not affect my procedure for gradually accelerating buying activity into bouts of near-term weakness. [IMO, however, the likelihood of breaching $1,280 is very remote, if even it comes to be tested.] On the flipside, I'll likely begin to raise some cash anew once the next surge brings us beyond the $1,500 mark. I aim to raise a 15%-20% cash position into each successive breakout in gold and silver, and redeploy most of that capital systematically into each successive corrective pause. When you approach the sector in that way, you can truly come to welcome the pullbacks just as surely as you welcome the dramatic upswings. I still conduct TA, and I pay close attention to it. I still go into corrections with several likely support levels in mind, but I no longer care about trying to pinpoint the exact pivot point as I was fortunate enough to manage correctly a few times in the past. Such forecasts may inform the pace of my buying at a given level, but that's the extent of it.
Anyway, I thank you in advance for reading my latest submission, for voting in the reader's poll at the end of the piece, and for sharing your comments here, there, and everywhere. :)
http://www.fool.com/investing/general/2011/01/21/your-last-best-chance-to-go-for-the-gold-and-silve.aspx
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