Daily Gains Letter

gold prices


Gold Prices Setting Up for Profitable Trading Opportunity?

By for Daily Gains Letter | Mar 30, 2015

Bullish gold pricesWith the stock market scrambling to find buying support and with the May West Texas Intermediate (WTI) back up around $50.00, I’d like to take a closer look at gold prices.

Why Gold Prices Are Catching My Attention

Everyone is aware the Federal Reserve will likely take the next steps and begin to raise interest rates either in July or by September, which will help drive up the dollar. A strong dollar translates into lower gold prices, which will help to keep some pressure on the demand side for the precious metal.

Yet a look at the charts shows a potential trading opportunity in the works, despite the futures chain showing the price of gold staying around $1,200 to $1,215 an ounce for much of the next three years. June 2018 gold is trading at $1,214 an ounce.

Take a look at the chart of the gold spot price below:

Gold spot price

Chart courtesy of www.StockCharts.com

The chart shows a bullish double-bottom formation and a potential opportunity for some quick gains. The first bottom was in November 2014, followed by the recent bottom at around $1,140. A move upwards could see the metal drive up to around $1,300, an increase of about eight percent. In 2014, gold spot prices also staged a double bottom at around $1,190, with an eventual upside push to $1,400.

Having said all of that, I doubt a rally would be sustainable at this time, given the associated strength in the dollar.

Economic Factors Supporting Higher Price of Gold

Supporting factors for gold bullion prices include the rising crisis in battle-torn Yemen, which is likely heading into a … Read More


Looking for a Good Gold Play? Here’s What to Watch For

By for Daily Gains Letter | Sep 8, 2014

Looking for a Good Gold PlayI have not talked about gold for some time, as there has been no reason to get excited about the yellow metal. Yes, it’s shiny, but it doesn’t appear to be sparkling at this time.

After the gold bugs got excited about the opportunities in the precious metal, pushing prices to above $1,300 following the onset of geopolitical issues in both Ukraine and the Middle East, the aftermath has been dull.

As I said back in June, the only reason I would trade gold would be to buy on weakness near $1,200 as the fundamentals, in my view, are irrelevant at this time. Gold still seems to be more of a geopolitical trade. (See “How to Make Quick Profits in Gold at This Time.”)

Look, there’s no big buying from India; China is buying, but it is simply not enough to sway the global supply/demand balance in favor of the yellow precious metal.

Gold Bugs Index Chart

Chart courtesy of www.StockCharts.com

Consider the fact that the greenback has been edging higher, with the U.S. dollar index at its highest level in more than a year. This move makes the dollar-denominated gold more expensive for foreigners, who have traditionally been major purchasers. The end result is a letdown in demand for the yellow metal.

In my view, gold is simply a trade on the geopolitical risk, as there’s really no major reason to want to buy at this juncture, given the market’s underlying fundamentals.

The gold bugs clearly don’t want to hear this, but I believe that unless the situation in Ukraine or the Middle East worsens, prices could head lower, towards $1,225 or even … Read More


How to Make Quick Profits in Gold at This Time

By for Daily Gains Letter | Jun 30, 2014

Where the Investment Opportunity Lies in Gold Right NowA few weeks ago, I suggested that gold prices could likely head higher should the situation in Iraq escalate into a bigger conflict that brings in Iran and the United States.

In my view, gold is simply a geopolitical trade at this time, contingent upon what happens in Iraq. There’s also the situation in Ukraine. At this time, though, it appears as though President Putin has no interest in escalating the conflict and making the country vulnerable to more economic sanctions.

When I last wrote on the precious metal, spot gold was trading at $1,276 an ounce. The yellow metal managed to edge higher to $1,324, prior to the current stalling on the chart. If you bought any of the SPDR Gold Shares (NYSEArca/GLD) exchange-traded fund (ETF), I would suggest you take the money at this time.

Gold-Spot Price Chart

Chart courtesy of www.StockCharts.com

Now, gold could easily surge if Iraq loses control of the country, but I truly don’t believe this will be allowed to happen by the United States and Iran. After spending more than a decade in Iraq and a trillion dollars trying to reform the country, there’s simply too much at stake to lose.

Assuming the advancement by ISIS is eventually eliminated, gold would surely lose its safe haven premium that is priced into the current value. We could, in this case, see prices fall back down below $1,300 an ounce, based on my technical analysis.

I also keep hearing about the massive buying of gold from India and China, yet I truly feel this is overblown at this time. The two countries are the biggest purchasers of the … Read More


Why Now Is the Opportune Time to Invest in Gold

By for Daily Gains Letter | Jun 18, 2014

Two Investments Benefiting from the Geopolitical Tensions in Iraq & UkrainecGold and oil are finally seeing some upward lift, but it has more to do with the geopolitical landscape than inflation and economic growth.

As I said in recent weeks, the price of gold could be headed higher, but only if we see a rise in geopolitical tensions. That’s what we are witnessing at this time, so there could be quick money to be made.

While the Ukraine situation appeared to be settling down, the destruction of a Ukrainian aircraft with soldiers on board will not help the already tense situation. Russia has also halted the flow of oil into Ukraine after failing to reach a compromise on only owing for past oil and the price for future oil. This failure could cause a bottleneck not only in Ukraine, but also in Poland and other European countries that depend on Russian oil. Of course, in the worst-case situation, this could impact growth in the eurozone at this critical time when the region is still fragile, with high unemployment and mixed economic renewal.

We also have the massive uprising in volatile Iraq, where the brutal ISIS (the Islamic State in Iraq and al-Sham) rebel militia is spreading its control in the country, now marching on Baghdad. The negative implications of ISIS increasing its control over the country could wreak havoc not only on the oil production out of Iraq, but it could also create geopolitical instability in this already volatile region that also includes tensions on Syria and Iran.

The two events will likely drive safe haven buying in gold, which has been moving higher after bouncing off some support around … Read More


How You Could Still Profit from Gold Despite Weakness

By for Daily Gains Letter | Jun 4, 2014

Why You Still Stand to Gain from GoldWith money continuing to flow into the equities market and stocks, the gold market has seen an outflow of capital. The Ukraine situation appears to be under control, and with minimal geopolitical influences, the yellow metal has failed to gain any catalyst to move higher.

The prices paid for goods and services, as measured by the Consumer Price Index, are under wraps, despite rising food and energy prices. The headline reading, including these two volatile items, jumped two percent in April in urban areas, which was the highest reading in 2014, matching the highest readings in 2013. Right now, inflation is not a major issue, but it could become more of a factor as we move forward.

Moreover, we all know that the Federal Reserve is expected to eliminate its entire bond purchases by the year’s end, which will likely drive bond yields, interest rates, and the U.S. dollar higher. The result would be a stronger U.S. dollar and pressure on gold prices.

And as I previously mentioned, there’s still broad interest in the stock market, which will impact the buying in the yellow metal. Investors are continuing to look for returns, and at this time, that isn’t gold.

The gold story is a non-factor at this moment, and I think the best gains are behind us for the time being, as the precious metal traded at around $300.00 in 2002 and reached its highs in 2011. The long-term chart below shows the yellow metal in a decline.

Gold - Spot Price (EOD) Chart Chart courtesy of www.StockCharts.com

The reality is that there’s simply no attraction in buying the yellow metal at this point, in spite … Read More


Three Silver Plays That Can Weather a Short-Term Downturn

By for Daily Gains Letter | Mar 27, 2014

Three Silver PlaysTechnically, the Federal Reserve’s job is to oversee the monetary policy (short-term interest rates) of the world’s biggest economy. Obviously, it does, but it’s also important to remember that its opinion and carefully chosen words also have a major impact on the global markets and world economies.

If the Federal Reserve says the U.S. economy is doing well, investors flood the markets. If, on the other hand, the Federal Reserve says the U.S. economy is having difficulty gaining traction, investors turn their attention to precious metals to hedge against a weak U.S. and global economy and inflation.

It’s worked like clockwork since the Federal Reserve stepped in to help kick-start the U.S. economy with its generous monetary policy after the markets crashed. During the first round of quantitative easing (November 25, 2008 to March 31, 2010), silver climbed 65%.

Sensing the economy was still unstable, the Federal Reserve initiated its second round of quantitative easing (November 3, 2010 to June 30, 2011), during which time silver climbed an additional 39%. In September 2012, the Federal Reserve commenced its third, open-ended round of quantitative easing. If history is any indicator, the third round of quantitative easing should have been a boon for silver—but it wasn’t.

Silver prices edged steadily lower over the ensuing months. In April 2013, The Goldman Sachs Group, Inc. famously trimmed its outlook for gold to $1,450 an ounce by the end of 2013 and $1,270 at the end of 2014. The company noted that the banking crisis in Cyprus didn’t have the expected positive effect on the price of gold.

Silver and gold prices fell lower in … Read More


Global Risks Creating Opportunities in This Precious Metal

By for Daily Gains Letter | Mar 27, 2014

Precious MetalWhile the stock market has been struggling this year, under the radar, gold has been moving higher.

The tense stand-off in Crimea is clearly adding some support to gold, as an outbreak there could drive the precious metal much higher in the short term.

The geopolitical risk also includes the tensions between Israel and Iran in the Middle East.

On the fundamental side, we have China continuing to amass significant positions in physical gold, as the country looks to diversify its massive $3.0 trillion in reserves away from U.S. bonds. Buying in India has stalled, but the country continues to be the world’s largest market for the precious metal.

The one major supportive variable that’s missing is inflation, which is a proven driver of gold prices. The reality is that inflation is benign in the United States, along with much of Europe and Asia.

With gold currently holding just above $1,300 an ounce, the precious metal is at a crux. Stabilization in Crimea would remove some of the risk discounted into the price, but I doubt this will happen in the immediate future, as Russia has set the process to annex Crimea from Ukraine.

We know that the contested move by Russia doesn’t sit well with the United States or the United Nations, yet I really do not see Russia backing away for now. That is unless the economic sanctions put forth on Russia intensify and begin to send the Russian economy into a downward spiral.

But until we see a resolution in the stand-off, I expect gold prices will continue to incorporate some risk discounted into the price.

In … Read More


What I Learned at the World’s Biggest Mining & Exploration Convention

By for Daily Gains Letter | Mar 6, 2014

World’s Biggest Mining & Exploration ConventionThis week, I went to one of the world’s biggest mining and exploration conventions, which was hosted by the Prospectors and Developers Association of Canada (PDAC) and was held in Toronto. There were hundreds of gold mining and exploration companies showcasing their projects and making their case for how they could be the next big investment.

Saying the very least, it was an interesting experience.

From time to time, I go to conventions like the one I went to a couple days ago. I go to gauge the sentiment of those who are very close to the industry, to see where gold bullion prices might go next.

This week, at the convention, I found that gold exploration and production firms, analysts, and even those who sell mining equipment are skeptical about where gold bullion prices are heading next.

Let me explain…

Over the day at the convention, I spoke to many different companies that produce or explore gold bullion. The majority of them said something along the lines of, “The markets are tough these days,” or “Funding is difficult to get… We are cutting our exploration budget and not going ahead with further expansion.”

Analysts who look at companies involved in the gold bullion sectors weren’t very optimistic, either. Remember when gold bullion prices were reaching their highs? At that time, you would hear calls for the precious metal prices to go higher than $3,000 or even $5,000 an ounce.

This isn’t the case anymore. The negativity is intense. Analysts said something along the lines of, “At the very core, exploration companies and producers won’t increase in value unless gold … Read More


Three Ways to Protect Your Wealth from Global Uncertainty

By for Daily Gains Letter | Mar 5, 2014

Crude oilNothing helps create volatility on the stock market like the threat of war. And just a few short days after the close of the bloated $52.0-billion behemoth in Sochi, Russia has embraced its ne’er-do-well Olympic spirit and invaded the Ukraine. Or, according to Putin, “pro-Russian soldiers” have simply moved into the Ukraine to defend Russian interests.

With a growing threat of war/retaliation on the horizon, investors have been pulling their money from riskier assets, like stocks—sending global financial markets reeling. Crude oil and gold prices, on the other hand, have been on the rebound.

While it seems utterly crass to deconstruct the potential for war down to economics, the fact remains—a stand-off or sanctions could both disrupt gas supplies to the European Union and send U.S. crude oil prices higher.

For starters, any issues in the Ukraine could disrupt the flow of natural gas supplies from Russia to the European Union. That’s because the European Union gets about a third of its crude oil and natural gas supply (and a quarter of its coal) from Russia, mostly piped through the Ukraine. Russia, the world’s biggest crude oil producer, generated 10.9 million barrels a day in 2013 and currently exports close to 5.5 million barrels of crude oil per day.

Since the end of the Cold War, no one really worried about relying on Russia for crude oil and coal. All of that has changed. While the notion of war is remote, it’s still on the table. Nations far removed from Russia and Ukraine might push for economic sanctions, just as the U.S. has done, threatening visa bans, asset freezes, and … Read More


Extreme Cold Weather Boosting Profits in This Natural Commodity

By for Daily Gains Letter | Feb 21, 2014

Natural CommodityJust like any other commodity, natural gas prices are affected by supply and demand metrics. If demand increases and supply remains the same (or declines), you have a perfect recipe for higher prices. Since the beginning of the year, this commodity’s prices are up more than 40%!

Before you start judging where the prices will go next, you have to see what kind of factors can affect the demand or supply. Consider gold prices, for example. If the demand for gold increases and, at the same time, there’s a discovery of a major mine—the prices may not move as much as anticipated if the mine wasn’t discovered. The reason behind this is simple: there’s supply to meet the demand.

A few factors that affect the natural gas demand and supply are playing out in favor of those who are bullish on it. For example, the commodity is highly affected by weather.

In extremely cold weather, natural gas is used to heat up homes—cold weather disrupts the short-term supply due to increased demand and causes prices to soar. In extremely hot weather, we see a similar situation occur in the commodity’s prices. Power plants use more natural gas to make electricity to meet the increased use of air conditioning units in homes and buildings. This phenomenon, again, causes a disruption in the short-term supply because power plants consume more. This results in higher prices as well.

What’s happening in natural gas prices these days is the very same problem; the short-term supply is being tormented by extreme weather—in this case, extremely cold weather. We have seen some extreme winter storms and … Read More


As Investors Grow More Skeptical Toward Stocks, Time to Move to Safe Haven ETFs?

By for Daily Gains Letter | Feb 19, 2014

Safe Haven ETFsWe see there’s a significant amount of economic news mounting against the argument that key stock indices will go higher this year. We see major companies on the key stock indices reporting corporate earnings that are dismal to say the very least. We see indicators of prosperity suggesting the opposite is likely going to be true for the U.S. economy. Lastly, we also see troubles developing very quickly in the global economy.

First on the line are the corporate earnings of companies on the key stock indices—which is hands down one of the main factors that drive these indices higher. We see companies showing signs of stress. Consider General Motors Company (NYSE/GM), for example; the company’s corporate earnings declined 22% in 2013 from the previous year. (Source: “GM reports lower-than-expected 4Q earnings,” Yahoo! Finance, February 6, 2014.)

Some might call this a story of the past; we need to look at what the future looks like instead. Sadly, going forward, companies on the key stock indices and analysts look worried as well. Consider this: so far, 57 S&P 500 companies have issued negative corporate earnings guidance, while only 14 have issued positive guidance. At the same time, analysts’ expectations are coming down as well. On December 31, the consensus estimate expected S&P 500 earnings to grow by 4.3%; now, these expectations have come down to 1.5%. (Source: “S&P 500 Earnings Insight,” FactSet, February 7, 2014.)

Looking at the broader U.S. economy, it’s not moving in favor of the key stock indices, either—the economic data isn’t looking very promising.

Industrial production in the U.S. economy declined in January from the previous … Read More


Gold: Slam-Dunk Sell or Trade of the Year?

By for Daily Gains Letter | Jan 23, 2014

Gold: Slam-Dunk SellDemand for gold bullion remains high. Each day there’s a new piece of information that continues to attest to this phenomenon. With this, I remain bullish on the yellow shiny metal. But one thing should be noted: I am not saying the bottom has been placed in, but that all the indicators are suggesting a bottom may be in the making.

From a fundamental point of view, the basic factors of price—supply and demand—suggest gold prices may be going higher (which I have said before). Demand is increasing.

We are seeing massive demand for gold bullion from countries like Turkey. According to the Istanbul Gold Exchange, Turkey imported 302.3 tons of gold bullion in 2013. This was more than double what it imported in 2012 and the highest amount since 1995. (Source: Larkin, N., “Turkey’s Silver Imports Surge to Most Since 1999 as Prices Slide,” Bloomberg, January 2, 2014.)

Pakistan is seeing massive imports of gold bullion into the country. As a result, the Economic Coordination Committee (ECC) of the Cabinet has imposed a ban of 30 days on gold bullion imports to Pakistan. This is the second time the country has taken such a step. The first time it imposed a ban on gold bullion imports was in July of 2013. (Source: “ECC imposes 30-day ban on gold import,” The Nation, January 21, 2014.)

The demand for gold bullion from India and China has shown great resilience in the past year, and I wouldn’t be surprised to see it continue. With the Chinese New Year fast approaching—a time when gold bullion is purchased by consumers as gift and good … Read More


As Consumer Confidence Wavers, Gold Bugs Come Back from the Sidelines

By for Daily Gains Letter | Jan 21, 2014

Consumer Confidence Declines, Gold Prices Back from the DeadIf you listen to the Wall Street analysts, January consumer confidence numbers weren’t really all that bad. The preliminary University of Michigan Consumer Confidence index came in at 80.4 versus a forecast of 83.4—and down from 82.5 in December. (Source: “Tale of two consumers continues as US consumer sentiment slips,” CNBC, January 17, 2014.)

Some attributed the blip to the polar vortex that swept through most of North America earlier in the month. The warmer winds of February are expected to pick up the disappointing slack in U.S. consumer confidence levels next month.

But I’m not so sure. Friday’s consumer confidence numbers missed expectations by the widest margin in eight years. It also marks the seventh miss in the last eight months. Throughout 2013, consumer confidence numbers only beat projected forecasts three times, which (surprise!) means Wall Street doesn’t really have its finger on the pulse of Main Street America.

What isn’t surprising is that upper-income households have increased consumer confidence, having benefited the most from strong gains in income levels, the stock market, and housing values. On the other hand, low- and middle-income households that are not heavily invested in the stock market are being weighed down by stagnant wages and embarrassingly high unemployment.

And, since there are more middle- and low-income earners than high-income earners in the U.S., and 70% of our gross domestic product (GDP) comes from consumer spending, it’s fair to say that both consumer confidence levels and the economic outlook for the majority of Americans is bleak.

It’s not as if the disappointing consumer confidence levels have come out of a vacuum. A raft of … Read More


Will 2013’s Worst-Performing Metal Rebound in 2014?

By for Daily Gains Letter | Jan 9, 2014

Metal Rebound in 2014The year 2013 was not kind to gold; the yellow metal closed the year down about 28%—its biggest annual drop in three decades. But in spite of the awful year for gold, it wasn’t the worst-performing metal in 2013. That dubious distinction goes to silver.

On the heels of quantitative easing, a devaluation of the dollar, and inflation, safe haven investors were expecting silver prices to trade in the $30.00–$50.00-an-ounce range. Sadly for these investors, that did not come to fruition.

After starting 2013 at $30.00 an ounce, the white metal finished the year around $19.50 an ounce—an annual loss of 36%. The dismal year is even more cringe-worthy when you consider silver recorded an average price of $31.15 in 2012—the second-highest on record.

Silver prices tanked in mid-April on the back of gold’s violent descent. Gold prices plummeted (in part) on the rumored sale of gold reserves in Cyprus. This decline occurred despite the demand for physical gold remaining strong in India and China. This point is important because, together, these two countries account for more than half of the annual demand for gold.

Still, silver prices fell in step with gold and then continued to slip lower over the ensuing months after the Federal Reserve hinted it might begin to taper its $85.0-billion-per-month easy money policy.

While analysts are divided as to how silver will perform in 2014 (some of them are calling for a range of $19.00–$26.00 an ounce and others are suggesting $30.00–$34.00 an ounce), the year will present investors with some solid opportunities.

For starters, the recently announced pullback in quantitative easing from $85.0 billion … Read More


A New Year’s Resolution in Gold Bullion?

By for Daily Gains Letter | Jan 7, 2014

Gold BullionDid gold make a New Year’s resolution? If it happened to set its sights on 2014 being better than 2013, then that might not be too hard to accomplish. For gold bugs, 2013 was abysmal. Gold bullion prices ended the year down about 28%—the biggest annual drop in more than 30 years.

Gold bullion prices experienced an unprecedented run-up after the tragic events of September 11, 2001 and soared higher in 2008 as the global economy teetered on the brink of a recession. Investors’ justifiable fears of economic turmoil and inflation sent them running to gold bullion and gold mining stocks to hedge against this economic uncertainty. Between September 2001 and September 2011, gold prices soared more than 560%.

But since then, gold prices have lost their lustre. And in June of this year, the precious metal hit a three-year low of $1,179 an ounce after the Federal Reserve hinted it would begin to taper its generous $85.0-billion-per-month quantitative easing policy. Investors took this as a sign that the U.S. economy was on solid footing.

Gold bullion prices remained weak near the end of the year after the Federal Reserve announced on December 18 that it would begin to reduce its monthly bond buying program to $75.0 billion a month starting in January. Gold bullion ended the year at $1,202.

2013 will be remembered as the year when (misguided) economic optimism helped lift the Dow Jones Industrial Average by 26%, the S&P 500 by almost 30%, and the NASDAQ by 34%. In 2013, that same optimism also shaved off half of the value of gold mining stocks.

But it could … Read More


Losing Faith in Gold? Read This Before You Sell

By for Daily Gains Letter | Nov 25, 2013

Faith in Gold“The sky is falling, sell;” “It’s useless, run away;” “There’s going to be deflation, so it won’t serve any purpose to your portfolio”—these are a few of the ways gold bullion is being described these days. The yellow metal is facing scrutiny, and those looking for it are gasping for air.

Looking at all this negativity, should you lose trust in gold and sell, like the mainstream says?

The scrutiny against gold bullion is significant, but I remain bullish on the metal in the long run. As it stands, I don’t see demand declining, and as the prices remain suppressed, I expect the supply to decrease.

When gold bullion prices slid lower, we started to hear that the buyers would run for the exits, but we still don’t see that happening; as a matter of fact, more consumers are jumping in to buy the precious metal.

The nations that are known as the biggest consumers of gold bullion are still buying. According to the World Gold Council, in the third quarter of 2013, gold bullion jewelry demand in China was 164 tonnes, an increase of 29% from the same period in 2012. In India, the demand for gold bullion remains robust; for the first nine months of this year, the demand for gold bullion was higher than the previous year by 19%, despite the government and central bank working together to curb the demand. (Source: “Gold continues its journey from West to East as buoyant consumer markets balance investment outflows,” World Gold Council web site, November 14, 2013.)

“Consistent with the first two quarters of 2013, the global gold market … Read More


Fundamentals & Technicals Pointing to Silver as the Next Big Trade

By for Daily Gains Letter | Oct 10, 2013

Silver as the Next Big TradeI have been a very big advocate of using both fundamental analysis and technical analysis together to get a better idea of what to expect next when it comes to prices, be it for stocks, precious metals, currencies, or other investment instruments. But when I use this strategy to look at silver, I can’t help but be bullish.

First, let’s look at the technical side:

As you can see in the chart below, silver hasn’t performed well since the beginning of the year—it’s down roughly 30% from its peaks in February—but few things have changed since it had sell-offs in April and June. The prices found support at the $19.00 level, and have not seen those levels again; as a matter of fact, the precious metal’s prices have been trending higher since then.

In addition to this, the moving average convergence/divergence (MACD), a momentum indicator, is suggesting that bulls are coming in slowly. Furthermore, silver prices recently crossed above their 50-day moving average, a move considered to be significant and in favor of the bulls.

Silver Spot Price(EOD) Chart

Chart courtesy of www.StockCharts.com

On the fundamental side, there’s a significant amount of information that suggests the price of the white precious metal may increase going forward.

First and foremost is the relationship between gold and silver. I have mentioned in these pages before that we are seeing the fundamentals of gold prices getting better. The central banks are continuously printing, keeping easy monetary policies low, and those in the emerging markets are buying the precious metal. As the gold prices go up, silver prices will follow the same direction.

Secondly, the demand for the … Read More


Debt Ceiling Debates Pushing Central Banks Toward Financial Independence

By for Daily Gains Letter | Oct 10, 2013

Financial IndependenceI realize gold is out of favor right now, but there are just too many technical and fundamental indicators pointing to the upside. With the yellow precious metal currently trading near a three-year-plus low, one has to wonder if now is a good time to get involved.

While gold prices recently dipped below the 50-day moving average, they have been finding support on the back of the U.S. government shutdown and impending debt ceiling showdown.

Gold prices were up earlier this week as the U.S. government shutdown barreled into its second week with no end in sight. Astute investors have turned their backs on the U.S. dollar in favor of the yellow precious metal, a global, borderless currency that acts as a store of value.

Granted, Federal Reserve chairman Ben Bernanke claims he doesn’t understand gold prices. But that hasn’t prevented other central banks around the world from adding it to their coffers.

Central banks, which own roughly 18% of the world’s gold supply, are expected to increase their reserves of the precious metal in 2013 by as much as 350 tons, valued at about $15.0 billion. In 2012, central banks from around the world purchased 535 tons of the yellow precious metal, the most since 1964.

Gold may be trading down more than 20% year-to-date, but between July and September, it posted its strongest quarterly gains in a year. Why is the precious metal re-emerging? Oddly enough, it has nothing to do with the Federal Reserve’s $85.0-billion-per -month monetary policy; rather, it’s the idea that the world’s strongest economy and holder of the reserve currency could default on its … Read More


How to Profit from Gold’s Current Price Instability

By for Daily Gains Letter | Sep 24, 2013

Gold’s Current PriceGold prices hit one-week highs after the Federal Reserve did exactly what it said it would do (not what the market feared it would do)—continue it’s $85.0-billion-per-month bond buying program until unemployment numbers decrease and inflation increases.

Gold, often seen as a safe haven investment and hedge against inflation, had lost more than 20% of its value since the beginning of the year after the Federal Reserve hinted it would start to taper quantitative easing, which would put an end to its loose monetary policy.

More recently, gold prices had been on the decline since the beginning of September on encouraging U.S. economic data and suggestions that a war in Syria would be averted. Between September 3 and 17, gold lost approximately six percent of its value.

But in spite of gold’s year-long tumble, it’s important to remember that gold prices are still roughly 60% higher than they were in late 2008, before the Federal Reserve kick-started its first round of quantitative easing.

Gold was poised to fall even further had the Federal Reserve announced it would begin to taper its quantitative easing policies. It didn’t, however, and the markets responded in kind.

The price of gold bullion soared 4.2% last Wednesday to around $1,367 per ounce, its largest daily gain since June 2012, after Federal Reserve chairman Ben Bernanke said it would stick to its stimulus plan (for now).

The correction in gold prices was inevitable. That’s because gold, and many other sectors, have become overly reliant on the Federal Reserve’s support. Gold prices drop when investors think the Fed’s going to taper, and they rise when it doesn’t. … Read More


Silver a More Profitable Investment Than Gold This Year?

By for Daily Gains Letter | Sep 9, 2013

zulfi09092013

Gold bullion gets a lot of attention in the financial media and economists talk about it regularly. Sadly, another precious metal, silver, isn’t usually a topic of discussion. This metal moves in line with gold bullion, and for investors, it can serve as an alternative to owning the shiny yellow metal.

When gold bullion prices started to tumble in late April and then declined even further in June, silver prices did the same. Please look at the chart below of silver and gold prices. The golden line represents the spot price of one ounce of gold bullion, and the red and green line represents silver prices per ounce.

Just like gold found support at the $1,175 area, silver prices found support at around the $19.00 level. Since then, they have been on the rise, having roughly increased more than 23%; gold prices are up about 18%.

Where are silver prices headed next?

Looking at it percentage-wise, silver has the ability to outperform gold prices.

Silver Chart
Chart courtesy of www.StockCharts.com

To give you some idea about what I mean, consider this: for gold prices to go up 50% from the current level of around $1,400, they will have to increase $700.00; to get there, it can take a long time and a lot of buying. Now, for silver to increase 50%, from the current level of around $23.50, it will have to go up by $11.75 to $35.25. This sounds attainable because the silver prices have seen that level; for gold bullion, $2,100 would be in uncharted territory.

Here’s why I think silver has the potential to increase.

The demand for silver … Read More


Gold Keeps Rising: Time to Drop Your Bearish View on the Yellow Metal?

By for Daily Gains Letter | Aug 29, 2013

290813_DL_zulfiqarI will be the first one to agree that it’s very difficult, if not impossible, to price gold bullion. Unlike stocks or bonds, it doesn’t provide investors with income or necessarily have an interest rate. Sadly, just for this reason, the yellow metal gets a lot of scrutiny. We saw what happened to gold prices not too long ago: they were slammed on the notion that the precious metal doesn’t have any use in a portfolio anymore, and it seemed as if no one knew where the precious metal would find support.

Now, a couple of months after the sell-off, the price of gold bullion is up about 20% from its lows around the $1,175 area.

Looking at all this, one must wonder: what’s really next for gold bullion? Is the bull market that began in 2001 over, or do gold bullion prices still have some room to grow?

Gold -Spot Price Chart

Chart courtesy of www.StockCharts.com

When I look at gold bullion prices, I tend to focus on the supply and demand side.

Looking at the demand side of gold bullion, it seems robust. As the prices were falling, there was a significant amount of concern that the consumers will eventually diminish in numbers.

We did not see this phenomenon occur. Consumers stayed; as a matter of fact, they rushed to buy more. Keep in mind that earlier in the second quarter of this year, gold bullion prices had a significant downturn. By the logic presented, buyers should have diminished by the end of the quarter.

Consider this: the Word Gold Council (WGC) reported that the demand for gold bullion in China during … Read More


Where the Real Opportunity in the Gold Market Is

By for Daily Gains Letter | Aug 16, 2013

Real Opportunity in the Gold MarketThe direction the price of gold bullion is headed is heavily debated these days. Those who are bearish continue to say the shiny yellow metal has no space in an investor’s portfolio. They argue that the price action we have seen in the gold bullion market since the beginning of the year, especially the sell-offs in April and June, were just a few minor sell-off episodes. We are headed much lower than $1,000.

When it comes to the price of gold bullion going forward, I have to distance myself from the bears. I cannot predict where gold prices will bottom or where will they top, but what I see is certainly worth noting. Both the fundamentals and the technicals of gold bullion are showing the presence of bullish sentiment.

At the very basic level, the demand for gold bullion is increasing, and it is very evident. Take sales of gold bullion coins at the U.S. Mint, for example. For the first seven months of 2013, the demand was higher by 82% compared to the same period a year ago. The U.S. Mint sold 679,500 gold bullion coins in total, compared to only 374,000 in the previous year. (Source: “Bullion Sales/Mintage Figures,” U.S. Mint, last accessed August 14, 2013.)

Demand for the precious metal in China is robust and continues to increase. Consider this: according to the Chinese Gold Association, in 2012, 460 tonnes of gold bullion were consumed in the Chinese economy; this year, the number has increased to 706.36 tonnes. If the demand remains, China may very well become the biggest consumer of gold bullion in the world (it’s … Read More


Two Key Measures for Picking the Right Gold Producers

By for Daily Gains Letter | Jul 25, 2013

Two Key Measures for Picking the Right Gold ProducersMy good old friend, Mr. Speculator, is at it again. This time around, it’s not the housing market or technology stocks that he thinks will see significant gains—it’s the gold producers. His argument is very simple: gold prices are down, and if they bounce back, gold producers will be able to provide maximum gains to investors’ portfolios, compared to holding physical metal.

There’s some merit to Mr. Speculator’s argument. Gold producers’ stock prices can certainly profit heavily as gold prices increase, providing significant gains to an investor’s portfolio.

There is no rocket science behind it. If a gold producer is able to take out gold from the ground at $1,000 per ounce with all costs in, and if the price of gold is at $1,300 an ounce, then that gold producer will profit $300.00 per ounce, or 30%. Now suppose the price goes to $1,400; his profit will jump to 40%, a 10% increase, as the price of gold only goes up by 7.7%. The phenomenon eventually reflects the stock price.

Sadly, the biggest question haunting gold investors these days is if the gold prices have bottomed, or if they are headed for more scrutiny. Keep in mind that gold producers are highly correlated to gold prices.

Jim Rogers, one of the most famous commodity traders, said gold will see a “complicated bottoming process.” In his interview with Business Insider, he also said that the yellow metal may go down to $1,000, or even $900.00. (Source: Badkar, M., “JIM ROGERS: Gold Will Bottom When The Mystics Are In Despair, And It Could Take $900 Gold To Get There,” Business Insider, … Read More


These Signs Point to a Bullish Season for This Precious Metal

By for Daily Gains Letter | Jul 22, 2013

Bullish Season for This Precious MetalGold is making a comeback after having lost 21.5% of its value since the beginning of the year. Since the start of July, the precious metal has climbed almost 10%—trading near $1,275 per ounce.

The price of the yellow precious metal began its turnaround in late June after Federal Reserve chairman Ben Bernanke said the central bank would consider tapering its monthly $85.0-billion purchase of Treasury and mortgage-backed security bonds by the end of the year. On top of that, the Federal Reserve said it might even completely end its quantitative easing policies in 2014.

On Wednesday, July 17, gold prices edged higher after Bernanke calmed the storm he created, telling investors that the quantitative easing policies could, depending on the economy, stay in place for longer than expected.

Even though the economy has been improving at a moderate rate, Bernanke said, those improvements have been overshadowed by the national unemployment rate, which stands at a stubbornly high 7.6% (along with a 14.3% underemployment rate).

For investors, that means the era of easy money is going to continue into the near future—and money will continue to pour into the markets. On Thursday, the day after the Fed spoke, the Dow Jones Industrial Average and the S&P 500 rose to all-time intraday highs.

Not to be left out of the party, gold climbed more than one percent, hitting a one-month high of $1,299 per ounce.

Even after the Federal Reserve–inspired euphoria on Wall Street fades, there might be additional reasons for investors to keep their eyes on gold equities and related exchange-traded funds (ETFs).

According to Thackray’s 2013 Investor’s Guide: How … Read More


What You Absolutely Need to Know About Gold’s Future

By for Daily Gains Letter | Jul 11, 2013

Do Have Faith in Higher Gold PricesI have faith that gold prices are just about to go higher. While the current negativity towards gold continues to increase, it goes against the most basic of economic principles—supply and demand.

Since gold prices have begun their recent slump, some in the mainstream media have even said that the bull market in the metal that began in 2002 is over. They are saying gold bullion has no space in their portfolio and that it isn’t really a store of wealth anymore.

But the fundamental reasons for a rise in the value of gold bullion are actually increasing. The demand is going up and supply appears to be slowing—the very recipe for a price increase.

The demand for the metal remains very strong. According to data from the Hong Kong Census and Statistics Department, imports of gold bullion to mainland China from Hong Kong increased to 108.781 tonnes in May, compared to 80.101 tonnes in April—a 36% increase in just one month. (Source: Ananthalakshmi, A., “UPDATE 1–China’s net gold imports from Hong Kong jump in May,” Reuters, July 5, 2013.)

And there are major concerns on the supply side. The cost to take gold out of the ground is getting higher than the metal’s current price, making mining gold a losing proposition. Consider that Barrick Gold Corporation (NYSE/ABX, TSX/ABX), one of the biggest senior gold bullion miners, is halting its production at one of its biggest mines, the Pascua Lama mine in Chile, due to its costs increasing from $5.0 billion to $8.5 billion. And Barrick isn’t the only one facing a problem in rising production costs; there are others … Read More


How to Make the Most of the Inevitable Changes in the Market

By for Daily Gains Letter | Jul 11, 2013

Downward Growth Revisions Still Offer Chances to ProfitRight now, the S&P 500 is just two percent from its all-time high and the Dow Jones Industrial Average is just half a percentage point away from its own record. That’s why I think it’s the perfect time to short both.

The stock market indices have gotten ahead of themselves. In fact, they might be the only spot in the entire U.S. economy showing signs of growth—the markets are running counter to every economic indicator they are supposed to reflect.

The International Monetary Fund (IMF) cut its growth forecast for both the U.S. and global economics. The downward revisions come on the heels of the Federal Reserve saying it would most likely start to taper its $85.0 billion-per-month quantitative easing policy this year. This action will, of course, lead to an increase in interest rates.

After initially predicting U.S. 2013 growth of 2.2%, the IMF revised it downward to 1.9% in April, then modified it downward again this week to just 1.7%. (Source: “Emerging Market Slowdown Adds to Global Economy Pains,” International Monetary Fund web site, July 9, 2013.)

That means that the IMF has revised its 2013 economic growth projections for the U.S. downward by almost 25%. It also altered its projections for the U.S. economy in 2014, from 2.9% down to 2.7%.

The downward revisions shouldn’t come as a big surprise. Unemployment remains high, S&P 500 companies continue to sit on record sums of cash, and gold prices have tumbled. Japanese government bonds have tanked and China’s economy is cooling; so, too, are interest rate–sensitive sectors, like utilities and homebuilders.

Here at home, the writing has been on … Read More


How to Manage Your Risk in These Volatile Markets

By for Daily Gains Letter | Jul 1, 2013

Risk Management in Today’s Gold MarketDuring the financial crisis, investors saving for retirement were punished for staying in the stock markets. The key stock indices plummeted and took many investors’ wealth.

After seeing the crash taking a heavy toll on their portfolios, investors moved into safer asset classes. They rushed to bonds, gold, and gold miners because they thought that’s where the value was—and where they could make some of their lost savings back.

Things are different now. If investors are still tied to those asset classes, chances are they are feeling a pinch. Gold prices are down significantly from their peaks and bond prices appear to be in a freefall. Since the beginning of the year, gold has fallen nearly 30% in value, and bond yields—those of 30-year U.S. bonds—have soared more than 20%.

Sadly, even with all the financial innovation, there isn’t an investment instrument that protects an investor’s portfolio completely from market fluctuations. However, investors can minimize their downside risks significantly by managing their risk properly.

Managing risk may sound like an easy concept at first, but it’s far from it. It ultimately consists of three steps and requires a significant amount of research. The three risk-management steps are risk identification, risk evaluation, and risk reduction.

Risk Identification: This is the most important part in risk management. Investors need to find what kind of risks will affect their portfolio. For example, imagine a person heavily invested in one sector; even if he or she is diversified across different companies, troubles can take a chunk out of their portfolio. Take gold as it stands now: even if investors bought different gold miners when … Read More


How Low Can Gold Prices Actually Go?

By for Daily Gains Letter | Jun 25, 2013

Why Gold Bears May Be Wrong on Their PredictionsGold prices fell into turmoil after the Federal Reserve announced it might be slowing the pace of its quantitative easing. Prices tumbled and broke below the support level, which was formed after gold’s previous decline in mid-April to around $1,350.

Since the beginning of the year, gold prices have been in a continuous decline and have plummeted from trading at about $1,650 an ounce to below $1,300—a drop of more than 21%.

With this slump in gold prices came an increased amount of noise. Some are saying gold has lost its “haven” status, while others are saying we actually may see deflation ahead, so buying gold isn’t the brightest move for investors. Their estimates may vary, but it’s clear that they are extremely bearish on the yellow metal.You can see this decline in the stock chart below:

Gold - Spot Price Chart

Chart courtesy of www.StockCharts.com

With all the negativity around the precious metal, everyone is wondering: how low can gold prices actually go?

It actually turns out that the supply and demand side of gold suggests that the bears might be wrong in their projections.

While the gold prices have taken a hit, the demand remains exuberant. The World Gold Council (WGC) reported that in the first quarter of 2013, 963 tonnes of gold bullion was sold. In that period, central banks bought more than 100 tonnes for seven consecutive quarters, and buyers in India and China, the biggest gold-consuming countries, were resilient and bought even more. (Source: “Global demand for gold Jewellery up 12% in Q1 2013 driven by significant increases in India and China,” World Gold Council web site, May 16, 2013, … Read More


Gold Slides Lower—Time to Sell It All?

By for Daily Gains Letter | Jun 18, 2013

Gold Slides Lower—Time to Sell It AllGold has gained a significant amount of attention since the price plunged from trading just below $1,600 an ounce in mid-April to now hovering close to $1,400. It’s very common to hear someone in the financial media say how the yellow metal has no use in their portfolio and, most importantly, that the prices won’t go any higher. Some have even called the price plunge a sign of the bubble bursting.

My take on the issue is that while there’s no doubt that the prices have gone down from their highs, investors who are in the world of investing for the long term need to think on a bigger scale. If declining prices are the sole reason for investors to say gold is useless for their portfolio, then I beg to ask what the 2008–2009 stock market sell-off suggested; that investors shouldn’t hold stocks? Just look at the chart below, which shows gold prices sliding lower:

Gold Price Chart

Chart courtesy of www.StockCharts.com

The truth is that gold can be healthy for a portfolio over a long period of time. Remember that just like stocks, gold prices fluctuate.

Now, can the plunge in gold prices that started in April continue?

In spite of the decline in gold prices, the fundamentals for the precious metal remain strong. The demand is still there; as a matter of fact, it seems to be skyrocketing.

Consider the behavior of central banks as the prices have fallen.

“Overall, gold prices coming down is giving an opportunity to various central banks across the world to improve on their holdings,” said Ajith Nivard Cabraal, governor of the Central Bank of … Read More


Why Are Short Sellers Avoiding These Two Gold Stocks?

By for Daily Gains Letter | May 2, 2013

Avoiding These Two Gold StocksIs the global economy recovering? While the economic indicators aren’t exactly robust, that hasn’t stopped some investors from seeing the silver lining. Gold, held in exchange-traded funds (ETFs) and other gold-related equities, is primed for the biggest monthly drop ever as investors, sensing the global economy is in recovery, are selling off bullion.

And it’s selling fast. Gold slipped into bear-market territory in mid-April, on the heels of improving global growth and weakening fears of rampant inflation. On Friday, April 12 and Monday, April 15, gold prices sank 14%, the biggest decline in 20 years. And on Tuesday, April 15, gold hit an intraday low of $1,321.50 per ounce.

You can’t keep a hard asset like gold down, though. Over the last couple weeks, the price of gold has rebounded and is currently trading up more than 11%, near $1,472. That’s still 19% below the $1,559 per ounce gold was trading at on April 11, the day before it was trounced.

Gold still has a long way to go to make up for the mid-April rout. At depressed prices, though, many astute investors realize some gold companies are sitting in attractive ranges—the operative word being “some.”

The path to recovery is still fraught with challenges. With global production costs currently hovering around $1,200 an ounce, a further price depreciation could send some of the lesser financially stable gold producers into a tailspin.

One indicator investors like to consider when looking at stocks is the number of short sellers. Short sellers are those who are betting a company’s share price is going to fall.

While no single indicator can predict a … Read More


Protect Your Portfolio from the Consequences of Inflation—Without Gold

By for Daily Gains Letter | Apr 26, 2013

Protect Your Portfolio from the Consequences of Inflation—Without GoldInflation is when the general price level increases. As a result, purchasing power diminishes; simply stated, every dollar buys less than it did before. Central banks around the world, including the Federal Reserve, continuously try to tame inflation so that it doesn’t get out of control, usually targeting for an inflation rate of anywhere from one to three percent.

One of the main causes of inflation is an increase in money supply. The reason behind this is very simple: as more currency is printed, its value diminishes; hence, more money is needed to buy things. For example, in the U.S., what $1.00 could buy you in the year 2000 now costs $1.35—inflation has increased 35% in just a matter of a few years. (Source: “CPI Inflation Calculator,” Bureau of Labor Statistics web site, last accessed April 24, 2013.)

Please look at the chart below of the Consumer Price Index (CPI), a measure used by the Bureau of Labor Statistics (BLS) to record inflation. The CPI has increased significantly over time.

 

 CCPI-Consumer-Price-Index-chart

Chart courtesy of www.StockCharts.com

The impacts of inflation are immense. While inflation affects the daily expenses of families, it can certainly take a toll on the portfolios of long-term investors as well.

Using the earlier example, just to maintain the same buying power, an investor’s portfolio must have earned 35% at the very minimum, or their portfolio would be at a loss.

To say the very least, a portfolio must beat the inflation rate for an investor to have at least the same buying power when it’s time to use their funds for whatever they were saving for, be … Read More


Buying Miners: A Good Idea When Gold Prices Fall?

By for Daily Gains Letter | Apr 19, 2013

190413_DL_zulfiqarGold is in a bear market territory. The price of the shiny yellow metal has fallen almost 30% since the highs it made above $1,900 an ounce in April of 2011. Look at the chart below—it seems gold bullion prices have fallen off a cliff.

dl_04192013_graph1Stock chart courtesy of www.StockCharts.com

As there has been a significant decline in gold bullion prices, analysts are projecting many estimates, on both the bear side and the bull side. Some are calling the decline a great buying opportunity, while others are saying the bubble is bursting. Price forecasts have gone haywire, as well—I have heard estimates as low as $800.00 an ounce to $1,600 and higher.

With this said, is it a good time to buy gold? Should you buy physical gold or gold miners (after all, they are selling at deep discounts)?

When it comes to investing in gold bullion, some may suggest investing in gold miners to get the greatest bang for your buck. Their argument: if a gold miner has the ability to extract the metal from the ground at a cost below the spot price, and the price goes higher, investors can earn higher returns compared to just holding gold in solid form (bars, coins, etc.).

This is certainly true; profits are much higher when gold prices are on the rise. But as gold prices fall, the profitability of gold miners gets hurt, and the losses can occur in multiples as well. Consider the chart of the Market Vectors Gold Miners ETF (NYSEArca/GDX) below. This exchange-traded fund (ETF) holds some of the well-known miners and lets investors take advantage of … Read More


Worried About Inflation? Profit from It Instead

By for Daily Gains Letter | Apr 9, 2013

Dictionary Series - Economics: inflation

Central banks around the world are printing in overdrive mode. Their goal is to bring economic prosperity to their countries. For example, the Federal Reserve is printing $85.0 billon a month—buying mortgage-backed securities and government bonds. The Federal Reserve wants to improve the U.S. economy by lowering the unemployment rate.

The Japanese central bank is taking similar actions—its goal is to boost economic growth by lowering the value of its currency, the yen. Japan is an export-based country, and with higher currency value, it’s hard to sell to other currencies. Japan is in recession and the slump in its exports has been taking a heavy toll.

Regardless, what holds true is that a number of central banks printing their currency to spur growth in their respective countries is increasing. As a result of all this, many are worried these actions will trigger inflation to rise in the future—some are even calling for hyperinflation and the prices will skyrocket.

Keeping all this in mind, one question comes to mind: how does an investor actually make money with high inflation?

 

Gold and Inflation

Gold is known as one of the best hedges against inflation. The idea behind this is very simple; as central banks print money, the value of the currency declines. This phenomenon causes the value of gold to increase.

If inflation rises quickly, then gold prices will see a similar effect. Investors concerned about inflation in the future can buy gold to protect their wealth from deteriorating from rising prices.

Consider this: what $1.00 could buy in 1975, costs $4.35 now. (Source: Bureau of Labor Statistics, last accessed April … Read More


Investing in Gold: ETFs or Individual Stocks?

By for Daily Gains Letter | Apr 1, 2013

010413_DL_clark

Lots of investors believe investing in gold as an investment theme is a good idea. But I would bet that a lot of those investors don’t have any exposure to the commodity.

The track record of gold prices is self-evident, but it is a market that is controlled by speculators. Even if you think spot gold should be at $2,000 an ounce, it certainly could drop to $1,250 an ounce if futures traders wish it to.

So investing in gold comes down to just one thing—the amount of risk and exposure you are willing to have in your portfolio.

Gold stocks have certainly been hit hard in recent months. The whole sector has suffered from rising costs and a weakening spot price. One of the things that could be holding a lot of investors back from investing in gold is the fact that so few gold stocks pay dividends.

Barrick Gold Corporation (NYSE/ABX;TSX/ABX)) is currently yielding around 2.7% on the stock market. But the company is still a huge risk; it’s been going down on the stock market for ages now, and who knows where it will end up? Barrick’s stock chart is featured below:

04012013_dailygains1
Chart courtesy of www.StockCharts.com

Those in retirement aren’t likely to be interested in junior gold mining stocks. A collection of gold coins, however, might be stashed away in the dresser drawer.

Investing in gold or any commodity that trades on the futures market has always been a high-risk endeavor. The prevalence of gold exchange-traded funds (ETFs) certainly has made it a lot easier for investors to express an investment view regarding the commodity. And today, … Read More


Agriculture; the Next Black Gold?

By for Daily Gains Letter | Mar 20, 2013

200313_DL_clarkWhen the stock market experiences its next major pullback, it should be an attractive entry point to consider select large-caps that pay dividends. On the cusp of another earnings season, most large U.S. corporations are in excellent financial health.

There are a number of investment themes playing out in the current business cycle. When gold prices were lofty, stocks like Caterpillar Inc. (NYSE/CAT) and Joy Global Inc. (NYSE/JOY) were really doing well.

Stock markets in China, the world’s second-largest economy, have been drifting for several years, but emerging markets, like the Philippines and Malaysia, are growing like mad. And Japan’s stock market recently turned significantly higher. Many Japanese companies are expecting strong revenue gains this year on the back of a weaker yen.

The ebb and flow of the global business cycle is always changing; and with inflation creeping into the U.S. economy, the next big play will be in real assets, as the commodity price cycle makes its final migration into the agriculture sector.

Deere & Company (NYSE/DE) has the biggest market share of any large equipment manufacturer related to agriculture in the U.S. Currently, the stock is not expensively priced, with a price-to-earnings (P/E) ratio around 11.5. Deere’s stock chart is featured below:

dl_0320_image001Chart courtesy of www.StockCharts.com

On the stock market, Deere has proven to be cyclical and a very good long-term wealth creator for shareholders. Since 1963, the company has split its stock two-for-one on four occasions, the last one being in November 2007. Deere also split its stock three-for-one in November 2005, and the company has been increasing its annual dividends consistently for the last 10 … Read More


Save Yourself from Declining Gold Prices

By for Daily Gains Letter | Mar 13, 2013

130313_DL_zulfiqarGold bullion prices have seen a slight decline since the beginning of the year—the yellow metal was trading well above $1,600 an ounce in early January, and now, gold is trading close to $1,550 an ounce.

The reason behind the sell-off in gold bullion prices is mainly due to the optimism surrounding the expected improvement in the global economy and central banks’ expected move to tighten their monetary policies—raising interest rates and halting quantitative easing activities.

On top of all this, the stock chart for gold bullion, featured below, is showing a significant presence of bearish sentiment. As gold bullion prices declined, the 200-day moving average (MA) crossed above the 50-day MA—a bearish signal called a “death cross.” This is also considered a sell signal by technical analysts.

dl_031313-image003Chart courtesy of www.StockCharts.com

As gold prices slid downward, investors fled from gold miners—selling them at a much faster rate than they had bought them. Since the beginning of the year, when gold bullion prices have decreased by roughly six percent, the gold miners have done much worse. Just consider the Market Vectors Gold Miners (NYSE/GDX) exchange-traded fund (ETF), for example. It has plummeted by about 20% in the same period.

130313_DL_zulfiqarThe reason? When gold bullion prices decline, the profitability of gold miners declines with them. Think of it this way: if a gold miner is able to produce one ounce of gold bullion for a cost of $600.00 and the market price is $1,600 an ounce, then its profit would be $1,000. On the other hand, if its costs remain the same, and the price declines to $1,400 an ounce, the … Read More