- Equity Markets sell off aggressively, meanwhile silver, platinum, palladium, nickel and gold all were higher. Look for strength in a weak market in the metals.
- Even during market weakness, follow the smart money. Goldcorp (GG) raises bid for Osisko (OSKFF). This has major positive ramifications for the junior gold sector (GDXJ).
- The effect of quantitative easing on the economy and inflation has been questionable. However, increasing geopolitical tensions with China and Russia could cause a quick price spike in commodities.
- Russia and China is going head to head with the West over the control of many metals and energy resources. Be careful as they may start selling US dollars.
- Be prepared for wars not necessarily fought with bullets but with natural resources, energy and greenbacks.
The equity markets continue to sell off led by the Nikkei, Nasdaq and Russell 2000 which are all down around 3%. During these sell offs I look for areas in the markets which are up and attracting accumulation. It is during the panic selling when the winning safe havens are found.
Notice as the equity markets sell off, silver (NYSEARCA:SLV), platinum (NYSEARCA:PTM), Palladium (NYSEARCA:PALL) and Gold (NYSEARCA:GLD) are all up 1%. Nickel is breaking out into new 52-week highs and the Rare Earth ETF (NYSEARCA:REMX) is hitting a new 2014 high. Could my recent prediction in this article be coming to fruition as the metals and junior miners begin to outperform the blue chips?
While the pundits may be discussing the 200-plus drop in the Dow, the smart money is following the junior gold mining (NYSEARCA:GDXJ) sector as it has been heating up with merger and acquisition activity.
Notice today Goldcorp (NYSE:GG) raised its offer by $1 billion for Osisko (OTCPK:OSKFF) to C$3.6 billion ($3.3 billion U.S.) with an increased cash bid. Goldcorp is trying to outbid Yamana (NYSE:AUY) to get this massive gold producing mine in mining friendly Quebec. I believe a huge influx of money has been rotating from the overvalued blue chips, social media, bank and real estate sectors into the junior mining resource stocks which has so far outperformed in 2014.
If Goldcorp is buying a low grade, high production asset then they probably think gold prices are headed significantly higher.
Keep on eye on oil as well. For weeks, I warned about tensions between the West and East over natural resources and metals. China and Russia are both negotiating with the West over the control of these assets. Ukraine and the South China Sea are the current battleground. For months, I told you this geopolitical uncertainty could cause an escalation of prices in metals and energy.
Quantitative Easing may not be boosting inflation but going head to head with China and Russia could be causing a price spike in many strategic metals, oil and natural gas. Already Russia has threatened Europe that they will turn off the natural gas.
Remember Russia and China control the rare earth, nickel, palladium, oil, uranium and natural gas price. They also own a ton of U.S. dollars and debt which they could start selling, causing an inflationary economic crisis. Be prepared for wars not necessarily fought with bullets but with natural resources, energy and greenbacks.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.