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Przemyslaw Radomski, CFA
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Przemyslaw Radomski, CFA (PR) is a precious metals investor and analyst who takes advantage of the emotionality on the markets, and invites you to do the same. His company, Sunshine Profits, publishes analytical software that anyone can use in order to get an accurate and unbiased view on the... More
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  • Gold Prices Could Tumble If Dollar Soars

    Gold Prices Could Tumble if Dollar Soars

    Based on the May 18th, 2012 Premium Update. Visit our archives for more gold & silver analysis.

    Gold, traditionally a safe-haven asset, has been moving in tandem with riskier assets such as equities, industrial metals and oil this year, as investors for some reason which is difficult to fathom, have turned to the supposed "safety" of the dollar.

    Writing last week in the Financial Times, Bill Gross, manager of Pimco, the world`s largest bond fund, was ripe with metaphors. He compared the world's larger economies to the mighty whale which depends upon plankton (the smaller economies) for its survival. He called the troubles in the Eurozone a localized tumor which threatens to spread.

    The time where investors are no longer willing to accept negative yields on US Treasuries is near, warned Gross.

    "With the US suffering a credit downgrade to AA and offering negative 200 basis point policy rates for the privilege of investing in Treasury bills, the willingness of creditors - as opposed to debtors - to support the existing system may soon fade," Gross wrote in a Financial Times editorial published last Tuesday.

    "With dollar reserves widely dispersed in China, Japan, Brazil, and other surplus nations, it is fair to assume that there will come a point where 2% negative real interest rates fail to compensate for the advantages heretofore gained in buying sovereign bonds," he added.

    Gross recently cut his exposure to Treasuries, reflecting his negative outlook for US government debt. His USD 252 billion Total Return Fund held 32% in US Treasuries and Treasury-related securities as of the end of March 31, down from 37% as the end of February, according to Pimco's website.

    In his investment outlook for May, Gross warned that inflation in the US, which currently stands at 2.7%, is set to climb and further erode returns on government debt. (Needless to say, inflation is a boom for gold.)

    Gross wrote in the Financial Times:

    "Now the tides may be turning as once minuscule global economies find themselves in possession of a plethora of reserves. The hunted may be turning into the hunter and the global monetary system, which has evolved and morphed over the past century - but always in the direction of easier, cheaper and more abundant credit - may have reached a point at which it can no longer operate in the same way. Major changes to our global monetary system may lie on a visible horizon."

    Gross is not alone in his warnings regarding US Treasuries. Investors such as Peter Schiff and Jim Rogers have also voiced concern.

    Peter Schiff, CEO of Euro Pacific Capital, said earlier this month that the US bond market and dollar were headed for a collapse due to the inability of the Federal Reserve to service the nation`s debt with "artificially low" interest rates. Then again, it was said also years ago.

    Let's take a look at the charts (courtesy by stockcharts.com.)

    The index continued to rally this week and the move is visible even from this perspective since the index level is considerably higher than it was last week. The 1.3 point, 1.6% increase seen in the USD Index since last Thursday has seemingly ended the narrow trading range anomaly which we have commented on in previous weeks. The move to the upside brings the index close to its 2012 high but, more importantly, above the lower long-term declining resistance line.

    It seems quite possible that the rally will continue although a short pause is possible first. If the index moves above 82.5, the next resistance to be encountered will be in the 87 to 90 range, which is considerably higher than where we are today. Such a 5% to 9% move to the upside in the USD Index could be devastating for precious metals prices.

    In the medium-term USD Index chart, it does seem that a period of consolidation or sideways trading could be in the cards. This would further confirm the recent breakout which has, of course, already been confirmed by three consecutive closes above the 80.5 level. If a period of sideways trading is seen now, this will increase the bullish potential for the index in the days and weeks to follow.

    Now, let's see how Euro performed last week.

    In the long-term Euro Index chart, we see quite the opposite picture. In fact, if the Euro Index moves lower from here, it could complete the bearish head-and-shoulders pattern. This would likely lead to further significant weakness for the Euro Index and additional USD Index rally.

    Summing up, the recent moves to the upside and the bullish outlook for the USD Index have bearish implications for gold investors. Even though gold has declined recently, it could be the case that it will decline much more in the following weeks if USD continues its rally. Gold doesn't always mirror dollar's moves, but it appears to be the case this time.

    To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us today and additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. It's free and you may unsubscribe at any time.

    Thank you for reading. Have a great and profitable week!

    P. Radomski

    Editor

    www.SunshineProfits.com

    * * * * *

    Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

    Sunshine Profits provides professional support for

    Gold & Silver Investors and Traders.

    Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits' Premium Service gain access to Gold Charts, Gold Investment Tools and Analysis of Gold & Silver Prices Naturally, you may browse the sample version and easily sign-up for a free weekly trial to see if the Premium Service meets your expectations.

    All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

    By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

    May 23 12:24 PM | Link | Comment!
  • Political And Economic Factors Bode Well For Gold

    Political and Economic Factors Bode Well for Gold

    Based on the May 11th, 2012 Premium Update. Visit our archives for more gold & silver analysis.

    So far, 10 European political leaders out of 17 have been ousted out of office like a falling dominos in a little more than a year.

    The issue that has angered voters other than unemployment is austerity. We know from personal finances that when we overspend, we must cut back, pay our debts and rebuild our savings. That's the prudent thing to do and that's what the austerity school preaches. But what happens if the financial hole is so deep that there is no way to climb out by reasonable cutting back and saving? That's when you declare bankruptcy and your creditors share the pain. The laws of capitalism decree that if you don't assess risk correctly, you lose money. The conclusion is that austerity has to come with a mechanism for default, which is not the case in Europe.

    The growth club, represented eloquently by New York Times columnist and Nobel Prize winner Paul Krugman, believe that borrowing and spending will spur growth and consumption and that austerity will begat only more austerity. In other words, the European Central Bank (ECB) should print money and then Greece and the others can service their debts with cheaper euros due to the inflation caused by money printing. Is this not a kind of default, since you are paying back your debts with devalued money?

    We believe that the massive printing of euros will eventually take place and please keep in mind that unlike Fed, EBC has still room to lower its main interest rate. Once markets believe that this is the likely (or even inevitable) outcome, the gold price will soar not only in terms of euros but also in terms of other currencies.

    The ECB recently lent money at concessionary rates to European banks in an effort to co-opt these nearly bankrupt institutions into financing the nearly bankrupt European sovereigns. They offered loans against dubious collateral, to tempt commercial lenders to play the "carry" game, namely, buying Spanish and Italian debt of varying maturities yielding up to 7% while paying a mere 1% for a three year loan. The prospect of a devastating run on banks was avoided, for now.

    We wonder if this is not pushing the can down the road.

    There are certain things that look to be almost inevitable. The eurozone is in trouble, in particular Spain, Portugal and Italy. (We don't even talk about Greece, that country is already just about bankrupt in more ways than one.) The longer this crisis will take to play out the deeper it will get with more countries caught in the net, with Belgium, France and Netherlands not far behind. The proportion of young people between the ages of 15 and 25 who are now without a job is 51 per cent in Greece and Spain, 36 per cent in Portugal and Italy and 30 per cent in Ireland. In France "only" one in five young people are out of work.

    History has shown over and over again that when there are deep economic problems, the monsters that lurk in dark, dank corners come out brazenly into daylight looking for victims or scapegoats. It wasn't so long ago when this is precisely what happened in Europe. This week in Greece a Neo Nazi party took 21 out of 300 seats and 7% of the popular vote - the first neo-Nazi party to enter a European assembly since the Second World War. This is enough to give us shivers. The center seems to be falling apart and the extremes of left and right are gaining power.

    Even Somali pirates preying on merchants ships are having a hard time due to the economic downturn. On the one hand, things couldn't be better for them. Shipping companies have reduced ship speeds through the highest-risk area to save on fuel, making the ships easier targets. But the companies have switched to relying on guards, rather than speed, for protection, which will make for shoot outs on the high seas. The math is simple. A single day at lower speeds can save $50,000 in fuel at current prices - enough to pay the guards for the entire journey.

    The image reminds us of Europe, a cumbersome ship overgrown with barnacles, trying to make its way in pirate-infested waters. Instead of finding a solution to the problem, and perhaps there is no simple or fast solution, European leaders keep finding stop-gap, make-do, arrangements. So, do you put on speed with the hope of creating jobs and growth and outrunning the pirates, or do you cut back and hire armed guards?

    So why do we focus on these political and economic factors that much? Well, we do feel that there is a need to separate short-term turmoil from the long-term fundamental picture. Markets are intrinsically emotional and prone to a sudden change of mood. Sometimes even seemingly unimportant events can spark an abrupt move, yet in the long term the fundamentals make the decisive impact. And these are indeed favorable for gold and the whole precious metals sector.

    To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us today and additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. It's free and you may unsubscribe at any time.

    Thank you for reading. Have a great and profitable week!

    P. Radomski

    Editor

    www.SunshineProfits.com

    * * * * *

    Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

    Sunshine Profits provides professional support for

    Gold & Silver Investors and Traders.

    Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits' Premium Service gain access to Gold Charts, Gold Investment Tools and Analysis of Gold & Silver Prices Naturally, you may browse the sample version and easily sign-up for a free weekly trial to see if the Premium Service meets your expectations.

    All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

    By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

    May 15 10:58 AM | Link | Comment!
  • Gold’s Long-term Picture Remains Bullish

    Gold's Long-term Picture Remains Bullish

    Based on the April 27th, 2012 Premium Update. Visit our archives for more gold & silver analysis.

    Lately, gold has been a disappointment to many investors while it has been mostly treading water. Gold has traded well beneath its all-time high of $1,924 an ounce on September 6th and well above its subsequent low near $1,520 which took place in late December. Many anticipated higher prices this year, but the year isn't over yet, and neither is gold's long-term spectacular, secular bull market. We are now in one of those periods of consolidation that tries the souls of gold investors, tests their resolve and challenges their staying power. This is when the market takes a breather and adjusts to prepare for the next major move.

    If you need some encouraging news, according to the latest IMF statistics, at least 12 countries are known to have increased their gold reserves in March continuing a trend that goes back more than two years. Overall Central Banks appear to have purchased about 58 tons in the month, which suggests acceleration in their gold accumulation. The significant purchases were by Mexico, which increased its holdings by 16.81 tons; Russia with purchases of 16.55 tons and Turkey with 11.48 tons. The statistics only show the figures for those nations which are transparent in their reporting. In the past there have been some sharp 'upwards adjustments,' to gold reserves notably from China, which seems to like to accumulate its gold on the quiet. Last year Central Banks that do report their statistics bought 439.7 tons of gold and many gold analysts are predicting similar levels of purchases in 2012. And to think that years ago investors feared that the bull market will end a long time ago because of massive sales of gold by governments and monetary authorities over the world…

    Analyzing the fundamental situation and news is important, but the analysis would be incomplete without referring to charts. In today's essay, we will focus on the long-term charts of USD Index and S&P 500 and then briefly discuss the impact that they can have on the gold market.

    Let's begin with the analysis of the US Dollar Index (charts courtesy by http://stockcharts.com.)

    On the above chart we see that the sideways trading patterns continue between the two levels which are quite important from a technical perspective. These are the declining long-term support line and the horizontal support line based on the early 2011 high. At this point, the very-long term chart remains mixed with a bearish bias (after all, the prevailing trend is down).

    To illustrate how small the trading range has been for the USD Index recently, the past six Premium Updates have found the change from the previous week to be as follows: down .41, down .61, up .95, down .79, up .25, and down .39. So nearly every week saw a change of less than 1% for the index value of a week earlier, and with the good mix of ups and downs, this is a prime example of true sideways trading.

    Still, with the main trend being down, the odds are that the next significant move will take the USD Index lower, not higher.

    Having said that, let's take a look at the general stock market.

    From the long-term perspective, the bottom in the S&P 500 Index appears to be in. The support line based on previous highs has been reached and crossed but the breakdown failed. Prices bounced higher soon after reaching this line (based on 2011 high), and the long-term picture is bullish based on this development.

    The Correlation Matrix is a tool, which we have developed to analyze the impact of the currency markets and the general stock market upon the precious metals sector. Let's see how the above can translate into future price moves of gold.

    Since we are discussing the long-term impact, please focus on the 1500-trading-day column. The values of correlation coefficients are negative in terms of the relationship between precious metals (gold, silver, mining stocks) and the USD Index and they are mixed as far as metals-stocks link is concerned. Consequently, the rather negative long-term situation in the USD Index is what we should focus on and since its relationship is inverse, we can infer that the long-term picture for gold is indeed bullish.

    Summing up, both: fundamental and (indirect) technical factors provides with a bullish long-term outlook for the gold market. As far as short-term is concerned and whether the consolidation is over or not is a different matter and other factors (not mentioned above) must be taken into account.

    To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us today and additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. It's free and you may unsubscribe at any time.

    Thank you for reading. Have a great and profitable week!

    P. Radomski

    Editor

    www.SunshineProfits.com

    * * * * *

    Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

    Sunshine Profits provides professional support for

    Gold & Silver Investors and Traders.

    Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits' Premium Service gain access to Gold Charts, Gold Investment Tools and Analysis of Gold & Silver Prices Naturally, you may browse the sample version and easily sign-up for a free weekly trial to see if the Premium Service meets your expectations.

    All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

    By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

    Apr 29 1:26 PM | Link | Comment!
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