Important Update for the Precious Metal Market
Posted by Frugal on January 3rd, 2007
Here is some excerpts from his article:
….This study concludes that the real price has set a cyclical bottom in anticipation of a lengthy new bull market. Within this, gold stocks should outperform the bullion price as the exploration sector becomes the equivalent of the junior tech stocks in the mid-1990s….
I contacted their firm once. Subscription to their reports will cost upward of some $1000, and if you are multi-millionaire or managing tens or hundreds of millions, they will charge more based on your portfolio size. It’s very very expensive, and they have all the right to keep their name as “Institutional Investors”. Truly suitable for big investors.
I’ve read ALL of their free articles on their site. Consider the latest article on gold as a great gift from them. If you have time, you should read all of those other articles too. They provide such great insights into investing. Their May 11, 2006 article called the top in gold/silver about 3 weeks in advance. It was an excellent piece of work. I wish I was reading the articles back then. Please note that I did mention that he does not seem to believe in the energy and commodity super-cycle. It makes me kind of wary, but no one can be right all the time nor forever.
So how to play in this gold market? Bob did say that exploration stocks are the way to go. But they are the MOST volatile and illiquid of all also. I have an article on how to invest in precious metals. In short, you could buy GDX which tracks HUI index or BGEIX which tracks XAU, or any other PM funds (not the one by Vanguard VGPMX which has sufficient amount of energy-related stuffs). I would also suggest UNWPX, but it seems to have higher cash than usual closing Sep 06. By the way, don’t be alarmed by the big drop of these precious metal mutual funds at the end of year 2006. In recent years, these PM funds have been paying close to 10% or more in short-term, long term capital gains, and/or dividends at the end of calendar year. Lots of actions going on obviously.
Please do your own due diligence before investing. Read a lot more from other websites before you do any investing. And don’t be greedy. Diversify. PM can swing by some 50+% from peak to bottom. You don’t want to get burned.
As for myself, I am always “conservative”. I won’t be scooping up much at all without some pullback, since I’ve got a handful of PM stocks already.
As of now, I move my neutral/slightly bearish outlook on gold to neutral/slightly bullish stance. I’m still a little worried about a potential top in stock coinciding with a short-term bottom in PM in the upcoming months.
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January 3rd, 2007 at 10:34 pm
New Hoye article that has just gone up has also identified 2/27/07 pi cycle date for a short term top in precious metals. Let us not repeat the fiasco of May 2006 when Hoye and the confirmed Hindenberg Omen warned us.
January 3rd, 2007 at 10:57 pm
Novice,
Which article? I don’t see any newer article than the one that I mentioned. From today’s market, it looks more like the PM will be going into a short-term bottom rather than a short-term top towards Feb.
Were you reading his older article which mentioned this pi date? I know one of his 2006 article did mention that date, but I don’t recall that he predicted such thing so far in advance.
Please cut & paste the pointer if you have it. Or did they remove the article from their website?
Thanks.
January 4th, 2007 at 9:43 am
http://www.321gold.com/editorials/hoye/hoye010407.html I believe this is the article.
January 4th, 2007 at 7:09 pm
Frugal, I’ll be interested in what you think about the article.
January 4th, 2007 at 8:23 pm
Novice,
I just read it today, and throughout the day I have been thinking. I think Bob Hoye could be wrong this time, and primarily because that article was written when XAU was 143. At that time, I would have agreed that there is a non-zero maybe 35% chance that I would have agreed with him. The theme would be liquidity-driven rally towards pi date, which would have been a repeat of May rallies which was GLOBAL and in all markets.
But it looks like US Fed has got smarter this time. The first day of gold spot, I saw the usual pattern of UK’s style of hammering, followed by a wild drop right after 12pm/1pm in US market.
Today, I have been looking at all kinds of charts and ratio charts all day long. All I can say that IF gold rallies, today will be VERY close to bottom. Possibly just another down day. But I really have to think about what Hoye said. Currently, I don’t believe that he is right. I think there are more chance that he will be wrong this time. And the biggest reason would be that the technical picture has probably CHANGED. Unless we get to read another of his article after that date, he could have changed his own opinions by now (except only known to his subscribers).
I will update the comment section again in a day or two, once I can crystallize my thinking more. But for now, I tentatively believe that HUI may be heading down to 280 to 290 towards pi-date instead. I am guessing it will be a higher low than last time. If it unfolds like Bob Hoye said, then I believe we shall NOT see HUI dropping to 270 ever again (although it will still drop post-pi date). In fact, I believe that whatever drops that come in the first half of 2007 (latest 3rd quarter of 2007), they should be the LAST chance for you to buy. After that, I believe PM market will re-establish itself at a higher range.
If you had read another of Hoye’s article on gold, according to his 2005 article, the gold bull market was only in its 5th year out of 20 years based upon his historical studies. I currently believe bull market in PM can last at the minimum until 2010/2011.
The volatility in PM is EXTREME. I really don’t know what to advise of anyone, except that believe in what you invest, and invest in what you believe. Assuming that the bull market in PM is a true long term bull market, the “hindsight 20/20 truth” after 5 to 10 years from now is supposedly to be sit tight, and don’t get shaken out of this wild bull ride. Well, except that no one can tell you with 100% certainty that PM bull market would really continue for that long.