The market will be closed tomorrow, but since we were unable to reschedule our workweek to post the Premium Update earlier (it will be posted tomorrow), we decided to at least send out a short message summarizing our views on the market today.
The biggest story this week is the rumor that Ben Bernanke has finally admitted that gold and silver are the only true money and that the US is going to be the first country in the worlds that returns to the gold standard. The rumor goes that this does not change the approach toward "stimulating the economy" by issuing more money. In case of the new gold standard it means that gold will be distributed to all US citizens and the amount that each citizen is to receive will depend on the amount of gov't-related paperwork that one had to do during the previous tax year. This is one of the points of the new soon-to-be-introduced reverse-taxation policy - gov't institutions will from now on tax themselves in order to provide additional financing to the leaking budged and to stimulate the economy by creating new jobs at the IRS.
Naturally, everything written in the above paragraph is just an April Fools' Day joke - your Editor just couldn't resist. Moving on to the real part of the message, we will provide you with a short summary of each market that we usually cover. Please take a look below for details.
The general stock market is consolidating above the January high, which makes it more and more probable that the next big move will be up, not down. This is neutral news for PMs in the short term and rather positive in the medium term.
The USD Index has failed to confirm the move above the previous trading channel, and it is now trading below it. The move lower that we've mentioned in the past updates is even more probable than a week before. This is positive news for PMs in both short and medium term.
The correlation matrix shows further evidence of the return of the highly negative correlation between USD and PMs. Additionally, the link between gold, mining stocks and the general stock market is much weaker than it was the case during the past several weeks. As mentioned earlier, this is positive news for PMs, because the return of this correlation is what we expected to see before the next big move up.
The gold market is still moving according to the self-similar pattern from August 2009. Based on that it seems that we may need to see at least an additional week of gold trading sideways before it moves much higher. Still, the chance that a move higher happens very soon is not very small, so we still believe that having an open long position in PMs is a good way to go right now.
The silver market moved considerably higher so it may need to pause for some time, but in the end it seems that the rally is not over yet.
The precious metals stocks are lagging at this point, but it seems that it will change once gold rallies strongly. The move may be similar to the one from early September 2009, so - again -it might be a good idea to have an open long position at this point.
Summing up, the situation appears even more bullish than it was a week before.
Tomorrow's update will also include our comments on the recent CFTC meeting and the implications that it may have on your portfolio. Meanwhile, if you didn't have a chance to listen to the interview with Andrew Maguire and Adrian Douglas, I encourage you to do so:
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/3/30_Andrew_Maguire_%26_Adrian_Douglass.html
Thank you for using the Premium Service.
Sincerely,
Przemyslaw Radomski
