Keep Buying the Precious Metals Bull Market

The European Gold Forum opens in Zurich today. The forum, hosted by the Denver Gold Group, is a private forum “designed to showcase institutional-quality precious metals companies to major global fund and portfolio managers, institutional investors and analysts.”

Our friend Bill Baker, whom you may recall from the last Apogee episode, is here as well as Matterhorn Asset Management’s Egon von Grayerz. Vancouver favorite Frank Holmes is the keynote for tomorrow’s session.

They’ll have plenty to talk about when the forum gets underway. Gold tumbled $20 this morning to $1,446, and silver plummeted nearly 80 cents. And as we write, silver just broke below $40 an ounce.

With gold pulling back to $1,450, Richard Russell says “buy again”, if you’ve been holding off.

“Because the precious metals are in a massive bull market,” writes the dean of newsletter men, “many eager amateur analysts are now trying their hand on calling ‘the top.’ This is a hopeless and ridiculous endeavor during a powerful bull market.

“Much of this top-calling is done by an anti-gold element: Those who dislike gold or those who have missed the entire gold bull market. My advice all along has been to ‘ride the bull’ and to ignore the ‘top callers.’”

“Stay invested in the metals until they exhaust themselves in panic buying.”

The precious metals tumbled as soon as US trade deficit numbers came out at 8:30 a.m. EDT. It narrowed 2.6% in February to $45.8 billion, after reaching a seven-month high in January.

Demand for imports fell for the first time in four months.

Coincidentally, oil has pulled back more than $5 in the last 24 hours. It’s now a few pennies below $107.

In 2008, oil crashed from $147 in July to $33 in December. The CRB, a broad commodity index, crashed 58% between July and March 2009.

Not a forecast per se, for this time around, but some food for thought.

“Invictus,” the pseudonymous blogger who keeps company with Vancouver favorite Barry Ritholtz provides a chart tracking the CRB since its March 2009 low…along with the Federal Reserve’s purchases of US Treasuries.

Commodities Show Correlation to Fed Purchases

Federal Reserve Treasury purchases started picking up pace in August of last year – at the very moment Ben Bernanke signaled in his annual Jackson Hole address that more quantitative easing (QE2) was on the way. Commodity prices have barely looked back since.

But QE2 ends on June 30. And there’s no guarantee QE3 will follow immediately.

Should Fed purchases of Treasuries level off as they did between Sept. 2009-Aug. 2010, commodities might well head into “consolidation mode”.

Addison Wiggin
for The Daily Reckoning