Keep Buying the Precious Metals Bull Market

by Addison Wiggin.

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

Addison Wiggin is the executive publisher of Agora Financial, LLC, a fiercely independent economic forecasting and financial research firm. He's the creator and editorial director of Agora Financial's daily 5 Min. Forecast and editorial director of The Daily Reckoning. Wiggin is the founder of Agora Entertainment, executive producer and co-writer of I.O.U.S.A., which was nominated for the Grand Jury Prize at the 2008 Sundance Film Festival, the 2009 Critics Choice Award for Best Documentary Feature, and was also shortlisted for a 2009 Academy Award. He is the author of the companion book of the film I.O.U.S.A.and his second edition of The Demise of the Dollar, and Why it's Even Better for Your Investments was just fully revised and updated. Wiggin is a three-time New York Times best-selling author whose work has been recognized by The New York Times Magazine, The Economist, Worth, The New York Times, The Washington Post as well as major network news programs. He also co-authored international bestsellers Financial Reckoning Day and Empire of Debt with Bill Bonner.

  • JMR

    An “anti-gold element”? I didn’t know something like that existed.

    The gold market has sure changed from 10 years ago. Such talk was never even thought about.

  • Starving Steve (Jacobs)

    Some clues that we have already topped-out on gold: a.) weak housing market and deflationary pressures coming from everywhere; b.) silver hucksters trying to scare people into silver; c.) Old West-types (weak hands) beginning to be seen in the U.S, and pedalling gold/silver as a religion; e.) no solid evidence of inflation coming from the Fed, and the velocity of money circulation has dropped to zero; f.) no coins on the ground anywhere, not even pennies, not even in food-stores or banks where cash/coins are transacted; g.) people are scared; h.) mixed to downright soft commodities market, except for the precious metals; i.) continuing strong dollar versus the Mexican peso and even versus the Euro;
    j.)very little savings and plenty of debt, everywhere; k.)jobs remain scarce; l.) U.S. now exporting oil for the first time since 1949; m.) the purchasing power of the cash invested in one ounce of gold is very large and even unprecedented; n.) Bernanke must be bluffing because no-one could be so stupid as to risk hyper-inflation; o.) the gold chart exhibits an hysterical market, in weak hands, and in need of re-tests of former break-out levels; p.) the world and including America are going back to coal, natural-gas, atomic energy and hydro-electric energy, and this is deflationary; q.) if MV = 0, then whatever M is from whatever quantitative easing, inflation remains at zero; r.) big debtors and big dead-beats are big talkers about gold.

  • Starving Steve (Jacobs)

    s.) calls for $10,000 per ounce gold (see upper-right post 07/02/12) “the most popular post”.

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