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Confidence In the Long Term


This is a fantastic opportunity to do some asset re-allocation at terms that we would all have happily gobbled up only a month ago.

Editor's Note: This article was written on Wednesday, September 13.

What a great way to come back from vacation! Precious metals are copping a royal 'rogering' and their associated equities are looking ghastly on the charts after some awful recent performances. We finally made it home from Minyans in the Mountains 3 (90 hours door to door - don't ask!!) and then headed off skiing with the kids where we chilled out and recuperated. No phones, no internet and no one talking about "the market." It was a bloody good week!

To come back to this mess in the metals isn't that unexpected. The last five years are littered with examples of the "elevator shaft" phenomena in gold and silver. But it still causes some angst and frustration no matter the hedges. I'm long! Thus it follows that these moves always hurt my revel. True, but my time horizon is not three weeks or three months. My portfolio is looking at 3-10 year returns and this move is hardly shaking my confidence regarding the long term picture for precious metals. I guess we'll test the 540 level that my technical mate drew my attention to. He called that a break of 605 suggests 540 before we head back up. Hmmm. It will require a lot of physical metal to keep it there for any period of time.

This most recent $60 sell-off in a week has certainly been driven by "paper" players further exacerbated by significant margin calls against the paper "longs." There is an obvious sizable physical metal seller in the market at present judging by the London Fixes. The buyers are still there, they just aren't gonna stand in front of a train. I reckon we'll be back around the 615-30 level in a few weeks or so.

This is NOT a terminal move for either gold or silver IMO. This is a fantastic opportunity to do some asset re-allocation at terms that we would all have happily gobbled up only a month ago. This downdraft allows a lot of people who "missed the boat" on the last sell-off to 565 to take their positions. The macro picture is basically unchanged from what Professor Weldon presented in the Precious Metals breakouts at Minyans in the Mountains 3. The case is for gold (and more-so silver) is robust by any measure in any currency as he so eloquently illustrated.

I see this as a great little 15% discount for physical metal and it doesn't matter what currency you are looking at. Everyone at Vail whose wife/partner said "where's mine?" (after playing with my gold and silver coins/bars), may do well to go find some coin/bars at these levels. So what if you miss the "maybe" $40 lower that gold could head down to on this move. The 5-10% downside risk is negligible versus owning the most coveted element in the history of mankind. Money doesn't buy happiness but giving the Mrs. some real gold comes close, trust me on that one. Opinion only!

Gold and silver have been smashed in ALL currencies and the shares of precious metal producers have been crushed, notably yesterday's 10% slamming. I understand the equities are leveraged to the price but we appear to be verging on the ridiculous. Goldcorp (GG) at sub $25 catches my eye although I haven't looked into this recent corporate move that they have announced, so I won't do anything till I have investigated the whole deal. I don't like all this consolidation in the industry but there is bugger all we can do about it. Who's next?

I read that the commodities boom is over. It must be, someone on TV said so. Hmmm. I have some thoughts on this and will expand on them when I can.

Position in gold, silver, GG

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