From the lows to the highs $30 move in a very short period of time. Gold and other Precious metals are interesting for a couple reasons, they are a fear hedge and inflation hedge. The current situation in the middle east is continuing to degrade as citizens are revolting. A lot of people are saying that food inflation is partly to blame, as prices of rice for example are near there recent highs looking to breakout further.
The dollar also jumped today, strange as gold usually moves inverse to the dollar. It is my expectation that the dollar will still get a bid when the stock market finally wakes up to the reality, however, unlike 2008 PMs will also get a bid sooner. Any major sell off in the PMs space will be an incredible buying opportunity. I was reading an opinion on Zerohedge which had an interesting note:
"While many wake up in cold sweats with the memories of 2008’s commodity crash and the concurrent U.S. dollar rally fresh in their minds, these nightmares are misplaced. The U.S. dollar has been hyper-inflated since 2008 and the only thing that has kept commodities under wraps has been the absence of a sudden and violent mobilization of those dollars into real goods."
This is game theory, what does the prisoners dilemma teach us? Always cheat. if not you are going to be caught on the wrong side of the game. As the US dollar strengthens, why wait for the dollar to weaken again before purchasing real goods? Inflation in Cotton for example.
The scary thing about this chart is I could show you similar charts for almost all commodities (minus Nat Gas as it is a special case, Shale!!!). Corn, Rice, Wheat, etc.
In North America only 10-15% of disposable income is attributed to Food, however in emerging economies this figure is closer to 50-70%. Hence food riots are occurring around the world. Once this inflationary pressure reaches our shores it will be to late for most people to prepare for especially fixed income retirees and people will lower incomes.
Looking at that cotton chart should really make most of you reading this think a bit more about real inflation and just like the wealth trickle down effect governments always mention, inflation is exactly the same. We haven't seen it yet.... but no doubt it is coming.
Anyways less doom and gloom and more Mining Stocks!!
Today we have seen a nice pop in the AXR.TO, current holding a position in this stock. So my mindset previously was to setup a Cover Call on this at $8.00 for a premium of 0.75, however, Ask prices have only be at 0.55 and I am unwilling to sell an option for that price. I may be reconsidering the cover call depending on next week as I do expect this stock to pull back however more upside is likely until 7.25 ish. My enter was at 6.60 and it seems like I could hold this stock for a bit longer.
An alternative is to dump the stock probably next week, in anticipation of a pull back. The technicals are signally that a potential pull back is likely but with silver / gold prices finally on the move, I wouldn't want to pull the plug to early.
Slow stoch is overbought, the 50 MA and bollinger band is at 7.20ish just above which should be relatively strong resistance, and the MACD is about to challenge the 0 Level. However, the histogram which indicates short term momentum has had growing strength.
My 1-2 month prediction for all stocks I have been following AXR.TO, SSB.TO, PTM.TO, EDR.TO, FVI.TO (also a nice pop today), FR.TO is the following.
There is a potential that they are currently in a wave 3 to the upside. Which means a low risk trade would be waiting for a small correction, an either attempting to pick the bottom if you wanted to be more aggressive or wait for the high which we are in the progress of making gets taken out. Enter after this high with a stop loss directly under it. The risk would be minimal and if I am correct you have just entered into a wave 3 of a wave 3, which typically would be an extremely strong move. If I am wrong you get stopped out almost immediately. This is going to be my plan going forward and I will post specific trades as this up move dies out and we see a small wave 2 correction within the greater wave 3 unfold.
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