12/13/2012 7:01 PM ET|
Trouble ahead for gold and silver
Precious metals take a beating after the Fed announces continued stimulus measures.
Diminishing marginal returns were on display Wednesday as the Federal Reserve -- as expected -- unveiled a fourth round of quantitative easing that will continue its current pace of $85 billion a month in bond purchases. But now, four years after the Fed first started expanding its balance sheets by using freshly printed dollars to buy long-term bonds, Wall Street just isn’t impressed anymore.
As a result, gold and silver got hammered Thursday on a combination of lower inflation expectations, lower economic growth expectations, and a strengthening of the U.S. dollar. By all indications, the new downtrend will accelerate from here, creating lucrative short side opportunities for nimble traders.
Silver looks to be the more vulnerable of the two metals as the iShares Silver Trust (SLV) drops out of a two-month consolidation range.
This is set to catch a lot of people by surprise. Total assets invested in the two largest gold bullion ETFs, the iShares Gold Trust (IAU) and the SPDR Gold Trust (GLD), have recently surged to new highs as people seek safety from the uncertainty of the budget negotiations in Washington, D.C.
The surge in new assets over the past two months has come despite a slow decline in gold prices, suggesting people are feeling far too good about gold and will need a serious decline to shatter the fantasy.
In response, I'm recommending short exposure via inverse exchange-traded funds (ETFs) such as the VelocityShares 3x Inverse Silver (DSLV) or the ProShares UltraShort Silver (ZSL). For individual short ideas, I've recommended short positions like Kinross Gold (KGC) to my clients. I'm adding DSLV long and KGC short to my Edge Letter Sample Portfolio.
I found these positions with the help of technical screens developed with Fidelity's Wealth Lab Pro back-testing tools, which you can find here. (Fidelity sponsors the Investor Pro section on MSN Money.)
Disclosure: Anthony has recommended DSLV long and KGC short to his clients. Be sure to check out his new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at firstname.lastname@example.org and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
you that believe in same-sex marriage God's wrath is on your doorstep, you can't hide from him in this world or the next Almighty God is calling all the Christians to step up in your belief, and pray harder than you ever prayed in your life, learn how to pray, how to speak and that means slow to anger, slow to speak. What comes out of our mouths can destroy our lives. Our Lord Jesus is calling for revival in every state every governments every church to bring back the holiness of the United States of America the country that God has blessed through the ages and now we've come corrupted because we don't want to listen to God's word the only word the truth of the Bible. So Christians of United States of America stand up let your voices be heard think before you speak for what comes out of our mouths can destroy the United States of America. That God has blessed, God knows what's in your heart in your mind before you even speak it so if you want to make United States of America holy again, pastors, preachers all that believe in Jesus Christ I urge you to stand up may your belief in Jesus Christ look up to heaven and see your father and your Lord Jesus Christ sitting at the right hand of our God, and the seven spirits of God. Read your Bible and only truth is through our Lord Jesus Christ brothers sisters don't be afraid for your actions pastors don't be afraid to stand up for what you believe preachers don't be afraid on your pulpit to preach the truth and nothing but the truth stand up I say to all of you tell your congregation this is our time this is our truth this is our sacrifice this is our God our Lord and Savior Jesus Christ God give us all a revival starting with the United States of America the power in this message will go out through the world as I have faith and I receive and I believe so God I take this message and I lay it on your throne may your will be done in Jesus Christ amen and amen [STAN UP NOW]
Then you think you hold enough to make a difference??? Well you don't!
The big holders will tank the price and force you to sell at pennies on the dollar and then run the price back up after you are left basically broke.
If you are holding it do you really think the government will allow you to use it for currency??? If so you are delusional at best!
Besides, you will play hell getting any of my food, water or ammo from me or anyone else for any amount of a worthless piece of rock!
Ok, conventional wisdom would tell me that the Fed dumping 80 billion into the economy every month has got to be inflationary. Precious metals, being the safe haven from inflation, should have gone up today. They didn't. The stock market didn't go up either. Commodities were down, energy was down. Interest rates are already near zero. Since I always assume the smart money boys know about these events before we do, this all tells me that they had already traded on the information (quite likely) OR they are getting really scared of deflation. Apparently, creating boatloads of money is not inflating their assets anymore. Has this rocket reached it's apogee?
Last week you all were recommending GLD and SLV. Now we should short it? Admittedly all the normal investment logic is broken these days so I don't hold you guys accountable for your picks. I hope any new readers will do the same. For the same reason I didn't buy GLD last week, I will not be shorting it this week. I think yesterday's and today's reaction to QE4 pretty much show that the investors are starting to realize that the emperor has no clothes.
The next realization will come when they start to recognize that any deal to avoid the cliff will be just as punitive as the cliff. Otherwise it will be just another can kicking postponement of the inevitable.
This can't be fixed until we reestablish our tax base and that means bringing our jobs back home. Anything short of putting people back to work will be ineffective.
Sure we need to cut out the waste and fix the tax code but the problem is bigger than that. You can't base an economy on debt and selling foreign made goods to each other.
I love these these media people who write about precious metals like they know what they are talking about. Plain and simple GOLD AND SILVER ARE BEING MANIPULATED BY JP MORGAN AND COMPANY. Stop this nonsense journalism. Its all paper trading that the big banks control.....thus they control the price of gold and silver!!!!!!!!!!!!
yeah Gold silver terrible investmentss....i will buy yours for half price take it off your hands for you!!
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