Posted by Frugal on 25th June 2011
The precious metal stocks have gone through a roller coaster ride like always. It looks like it probably have made the bottom for this down wave, but I don’t think the wave 2 of major wave 3 is over yet. Time-wise, it has only been 7 month correction (since last November top), and I don’t think it’s enough. I think there will be another big but short pullback probably in the month of September.
Gold however has never really corrected, and that really worries me. I am not sure how sustainable the rally will be. I have a feeling that it will see a price of less than $1400 before it can possibly hit $1850.
Putting everything together it seems that maybe this wave 2 of the major wave 3 in mining stocks could last much longer than anyone expects.
I think it is quite clear that the government authorities want commodities to have a bigger correction before they can afford putting QE3 into high gear. They also need the Congress to approve the increase of the debt ceilings first, before Fed can take the new debts onto their book. I expect that another major stimulus probably will come before the election of next year starts in earnest.
Currently stock markets probably need to go down further, so that Bernanke can rationalize the next round of money printing.
I will be buying just some more, but to go fully invested, patience is still required.
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