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Golden Minerals is a junior silver producer with a strong growth profile, listed on both the NYSE Amex and TSX.
Message: food for thought, another opinion
Michael's Market Update
Michael Anderson, CTA Sept. 6, 2008 There is much going on in the markets and economy right now, so I thought I would fill you in a bit. Please bear with me here as there are a lot of important issues to cover. The gold and silver markets have been sold down fast and furious over the last few weeks. As these markets are sold and the prices drop it causes even more selling from traders following the momentum and also investors that get nervous and sell out. Other investors and funds are forced to sell because of margin calls and redemptions. Like a snowball rolling down a hill, the selling gathers momentum and size. Soon there is panic and everybody is running for the hills. It is in conditions like this that market prices can get pushed far below their fundamental value. It is obvious to anyone who studies or follows these markets that the price of silver, gold and the mining stocks are totally disconnected from reality and are waaaay oversold. But the good news is this- Once all this selling is over and the dust settles, the fundamentals will bring the prices back up, I believe, and make new highs. A few questions and answers........
What started all this selling? There is strong evidence that 2 large banks, for no apparent logical reason, sold huge amounts of silver and gold contracts into the markets in a very short period of time. All this selling forced the price down as it overwhelmed all buying. As the price dropped it triggered other selling from funds and investors whom have automatic sell orders in place at certain price points, increasing the momentum of the selling. The fact that two banks were allowed to sell in such large quantities is, to me and many other analysts, traders and researcher's, evidence of intervention and manipulation. The massive quantities they were allowed to sell were completely out of balance with the market and was done knowing that it would drive the prices down hard. As usual, regulators in charge of policing the markets allowed it to happen and looked the other way. For a better perspective on this please read Ted Butler's commentary at this link..... If anyone has any doubt that these markets are manipulated, please refer to the overwhelming evidence that the Gold Anti Trust Organization has documented at....
Did the fundamentals of the market change and are silver, gold and mining stocks no longer good investments?
How long can this imbalance between supply, demand and the price continue? How long can this manipulation go on?
Encouraging Words
But no one, and I mean no one, is asking the most important question of all........ What is that question?......... WHERE IS THE MONEY FOR ALL OF THESE BAILOUTS GOING TO COME FROM???? Everybody seems to have this notion that the Fed and government have unlimited, free funds. But that is NOT the case. When the government spends money, bails out banks or Fannie Mae/Freddie Mac, that is our money......as in You & Me.......They are spending OUR money! Remember, the government does not even recieve enough money in taxes and income to pay the existing bills they have now. They have to either print it or borrow more money every week just to pay current bills and pay the interest on what they have borrowed in the past. The spending and bailouts seem never ending and will weigh on the economy well into the future. What this means is that inflation is already written in the cards for a long time to come. What has been the best protection for inflation throughout history? Why gold and silver of course. Silver, gold and mining stock prices are down because their prices were forced down and not because there is something wrong with them as investments. The manipulations can't last as the fundamental value will shine through in the end. Sincerely, THE FACTS, FIGURES AND CONCLUSIONS OF THIS ESSAY ARE THE OPINION OF THE AUTHOR. DUE DILIGENCE SHOULD BE EXERCISED AND WOULD BE WELL ADVISED TO VERIFY ANY INFORMATION CONTAINED HERE BEFORE MAKING ANY INVESTING OR TRADING DECISIONS BASED ON THESE CONCLUSIONS. YOU ARE ENCOURAGED TO RESEARCH THIS TOPIC AND COME TO YOUR OWN CONCLUSIONS. THE RISK OF LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FOR FURTHER INFORMATION ON THE ADVISOR AND SPECIFIC RISK FACTORS ASSOCIATED WITH AN INVESTMENT IN THE ADVISOR'S PROGRAM, PLEASE REFER TO THE ADVISORS MOST RECENT CTA DISCLOSURE DOCUMENT PRESENTED AT: Remember that gold and silver have been money for thousands of years, and still are. They are a store of wealth and have accepted value everywhere in the world. Silver and gold cannot be devalued like paper money that can be printed at will. All currencies are being devalued by printing more and putting them into circulation, causing the high inflation we are now experiencing and will continue well into the future. Eventually, gold and silver will be more and more in demand as people begin to lose faith in the currencies and will want to store their savings or invest in something that can't be devalued. I believe that this price decline is only temporary, like the many other price declines that we have experienced over the last decade and sooner or later the market will adjust back to the fundamentals. I believe that it is only a matter of time until we see new highs in silver and gold. There are many, many factors that point to the metals being severely undervalued right now and also point to much higher prices in the future. Hold on to your silver, gold and mining stock investments. If you are in a position to buy right now I think that would be very wise as there is virtually unlimited upside potential in the long term. The low prices of today are a gift and I don't think they will last very long. The world of investing is becoming more dangerous everyday. Hedge funds and investment funds are blowing up all over the place right now and suffering tremendous losses. Even some of the best names and traders in the business are in real danger of going under. T. Boone Pickens, the famous oil expert and commodities trader runs a hedge fund and it is reported that it is about to go under as they have suffered heavy losses. These losses are the result of the markets not responding to their fundamentals because of manipulation. Bailouts of banks, financial firms, businesses and who knows what else are becoming a very serious issue. Now the Fed is taking over Fannie Mae and Freddie Mac and bailing them out with taxpayer money. In the end it will cost trillions.........on top of the already huge sums spent to bailout countless other firms.....with more coming down the road. Intervention and manipulation can work in the short term, but cannot work forever as eventually the price imbalance will cause a severe shortage. Lower prices encourage higher demand, which is what we are seeing now. We already have a shortage in investment types of silver and gold now and if the imbalance continues we will also see a shortage of industrial silver. Since many manufacturers have to have silver to make their products, at the first sign of an industrial shortage they will panic and try to buy and stockpile all they can get. When that happens smart investors will see what is happening and buy up every available supply. At that point there will no silver available anywhere until the price rises high enough to motivate someone to sell some. I believe that price will be very much higher than it is today. There is only so much gold and silver available in the world. It would not take that much investment money to buy it all up. If just a very small fraction of the money in the stock or bond market were to move to the silver and gold sector it would completely buy up the market. Once it is bought up, the buyers would be very reluctant to sell as it would be uncertain that they could get more. Silver is a much smaller market than gold and because of silver's industrial use, much of what has been mined in the past has been used up and is gone forever. Therefore I believe that silver's move up in price will be even more dramatic than gold. Throughout the last 100 years or so the silver to gold ratio has averaged about 16 to 1. This means that 16 ounces of silver would be equal value to one ounce of gold. As I write this the ratio is extremely out of historical balance at more than 65 to 1. Silver would have to rise over 300%, with gold going nowhere, just to return to the historical average ratio. Because of this I believe that silver will outperform gold in the long run. It's impossible to predict when the imbalance will end, but I really can't see it continuing much longer. At some point the price will be very attractive to large investors who will take advantage of the opportunity to load up on bullion and shares of mining companies at bargain prices. ................................. The fundamentals have NOT deteriorated at all, in fact they have improved.......a lot. Inflation is now very high and with all the bailouts and government spending escalating every week, inflation is sure to be high for a long time to come, as the Fed prints and borrows more and more money. This is very bullish for silver and gold. Demand from investors is off the charts right now and there are extreme shortages of investment grade silver and gold products being reported from all over the world. As a result of these shortages the metals are effectively being withheld from investors and diverted to insiders and industrial users who deal in the large quantities and sizes. What that means is there is a huge pent-up demand for the metals that is building, which is sure to drive up the price in the future. Demand and sales of investment physical metal are reported to be breaking records in the U.S., India, the middle east and many other places in the world. The premiums (markup over the spot price) are rising and have more than doubled for many types of investment size bullion products. These shortages and high premiums are extremely bullish for gold and silver in the long term. So what we have now is a shortage of supplies and extreme demand, which in a free market would drive prices ever higher, yet the prices have fallen further and faster than ever before. All because a couple of banks shocked the market with huge sales of futures contracts. Not the real metals mind you, just paper contracts. Silver in investment size is out of stock almost everywhere and there is a ton of pent up demand waiting to buy. It is increasingly more difficult to find medium to large quantities for sale without a very long wait time and if you can find some it is selling way above the current spot price. There is a real disconnect here between the "official" market price and the cash markets. On the one hand the market says "this is the price", but if you go out to buy some, you can find none available at that price, if you can find any at all.
Michael Anderson
LEVEX Capital Management Inc.
Commodity Trading Advisor
http://www.levex.net/
4 Recommendations
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