One of my favorite financial writers, Edward Harrison (of CreditWritedowns.com) made two very interesting posts today:
http://seekingalpha.com/article/195090-anticipating-eurozone-collapse
http://seekingalpha.com/article/195224-ten-ways-to-spot-a-bubble-in-china
Also J.S Kim made a post about the current focus on US vs China that was very interesting (Kim is very pro physical gold and silver and con fiat currencies):
http://seekingalpha.com/article/195097-in-the-real-world-series-of-poker-the-stakes-are-default-of-sovereign-debt
I must say that I am very terrified for the outcome for the Eurozone. I live in Sweden, we don’t have the € here (I personally voted against it as I didn’t trust the ECB), but of course we are going to be heavily affected anyhow. A lot of our exports are denominated in Euros as this intra-EU trade is very significant for Sweden. The same goes for all countries around the Eurozone (UK, Switzerland and so on). This in concert with the possible Chinese bubble and the possibility of a double dip in both US and EU sure doesn’t look good. If there is a bubble in China and it busts of course the resource producing countries like Australia, Brazil, Canada and Russia (and numerous others) will experience lowered export and price in many commodities like metals and oil will be effected. The AUD is very strong today because the increase in Chinese import of resources from the continent.
If we have a failure in the Eurozone, a double dip in the stock markets globally, a bust in China and 1 trillion of petrodollars looking for alternative investments, what should one do? Buy gold I think. Clearly the central bankers think all problems are solved by printing more money (I got 1000 trillion of Zimbabwe dollars from a seller on Ebay for £15 last week. I think it will look good framed on the wall above my desk.). China seems to understand that gold is the only currency that have survived the fall of great empires in the past for a reason. I think the Arabs are as smart and will shift their profits over to gold purchases (covertly of course).
Also, just a small remark. I have increasingly seen the word ‘endgame’ being used in articles the last few weeks. As a poker player I’m very familiar with this concept as the final phase in a multi table tournament, when you’re down to the final table. I don’t quite like the notion in financial discussions as I really don’t think the “tournament” ever will be over, but still I find it interesting that many writers now use the term. Somehow it says quite a lot on their view of current events…
As some might know I’ve been a bit bullish about Gold (and Silver) now and then. But I can’t really say that I’ve been a goldbug. Well, this might have changed today. I just wish I would have found this excellent article back in 2006, but chances are that I wouldn’t have taken the time to read it then. The change in the last four years shouldn’t be news to anyone.
Check it out: http://www.safehaven.com/article-5205.htm
I already have some gold (via ETFs) in my portfolio and I probably will increase the commitment gradually. I’m also contemplating a more active strategy using the possibility to trade gold on the spot market via many MT4 brokers (the XAUUSD symbol). But as we all know, if things actually happen like in the article above, paper-gold (anything that you don’t physically control) is probably just as bad as all other paper (like USD notes). Therefore I will try to get my hands on some physical gold to keep safe somewhere.
Yeah, I’m selling a lot of my equities right now. The markets was amazing last year, we all know that. I was very skeptical in the beginning months, thinking that it was too early for recovery. But I went along for the ride, and I am glad that I did. Now I’m beginning to worry again, primarily because of the extreme recovery made, is it really sustainable? I’m thinking that it probably isn’t, so I have begun to sell holdings, starting with the ones in emerging markets. Brazil, Russia, India and China was truly amazing last year, but a lot of it (at least in the case of B and R) was fueled by increasing commodity prices, something that China in large part have been the driving force behind by buying and stockpiling a lot of resources. Now there’s rumors that China has enough and will stop buying, immediately leading to lower prices.
In the end my idea is to reduce my equities to about 25% of what I was holding yesterday. I will buy some gold, but I’m not a real gold bug, it’s more of a hedge.
So, what will I do with the money? I will switch it over the long term forex trading. I’ve been running RoboMiner for 6 months now, and made about 80% over that time (really depends how you calculate since I’ve been adding funds now and then, but MyFXBook has gotten it to 80% gain and 50% absolute gain). That is amazing I think. But I think that EA could have done better still with some changes (the Pro version adds a few things like ability to trade all currencies and the shift-function). So I’ve been working on my own grid trader again, that actually is getting quite nice I think. I’m about to start demo trading it seriously at different brokers right now, but in a month I hope I’m confident enough to put it live on a rather big account. I’m really pleased with the backtest performance, which in the case of a long term grid trader is quite precise.
I will start the live test on my existing Alpari UK account and look into opening others. I’m thinking about starting a $10000 account at Forex.com/UK (but perhaps in euros, since I already have a USD account, again to hedge a bit) to get the Pro spreads and five decimal pricing. I’m also looking at FXCM UK. I really would like at least 1:200 and favorable swaps. Well see. It is fun to code EAs again at least 
Remember my prediction last week about a bullish breakout if a triple bottom formed in Brent oil? Well it happened exactly as predicted.
Brent crude oil 4H chart
Also the same pattern have formed in Gold and Silver. So now all of them are in a rush upwards. Look here at the small charts.
Silver 4H chart
I am riding the upwards push in Brent (via oil certificates and in the oil producers PA Resources and Malka Oil on the OMX Exchange) and Silver (via certificates). I actually think the silver push will go the highest. I predict resistance for Brent at $70 that will stop the push (and then slow down at least for a while). For silver I see first resistance at $14.40. If that breaks the next level is the current yearly high in the range of $15.50 - $16.
As for Gold I’m not trading it right now, but we will probably see another attempt at breaking the $1000 barrier. If it does, I will buy. But before that there probably is resistance at $960.
We’ll have to keep watching those charts. These commodities are very sensitive to the predictions for the general recession, and the market manipulation in them are enormous. The prices does in no way reflect the actual supply and demand.
It seems that the true resistance for brent oil curde was $60. The market tried to push throu twice, but quickly got back over forming a “double bottom”, a pattern associated with a bullish break out. Well it seems the pattern proved correct. The price is right now above $61.50. Very interesting.
Silver is still in a down trend but I expect it to hit restistance soon too, so keep your eyes open.
Update: Seems the market didn’t listen to me (again). The next bar closed at 59,80. Well under the 20-SMA again and testing resistance again. Well see what happens. If it bounces that is a tripple bottom, which is very bullish. If if breaks, who knows where the bottom is. I’ll just wait and see. As of before I hold no positions in Oil at the moment.
Just a small update on the Gold, Silver and Oil sectors.
Gold Daily chart with 20-SMA.
Silver Daily chart with 20-SMA.
Brent (Oil) Daily chart with 20-SMA.
So, where do you think these commodities are heading? Yeah I think so too. You don’t even have to use any special indicators for this one. It is however interesting to spot support levels. I am guesstimating support for gold at $870, it held up there in April. For silver I am seeing $12 as S1 and crude is first $58 and second $50 if it breaks.
So what can stop this downward trend? Well rapport season starts now and there is the G8 meeting starting today. OPEC has stated that they think $70-$80 is ‘fair’ for crude, and I guess they will cut production if we stay at levels downwards of $60. As for silver it is highly connected to the recession and the bear market rally we have been experiencing. I don’t see it recovering. Gold is harder to predict, as it is very closely tied with the USD (which I have been shorting for ever now, but has been getting stronger…).
Back in May I bought a small post in Malka Oil, a Russian oil dwarf traded at the OMX Exchange in Stockholm. The company have been going through some very very serious trouble in the wake of the credit crisis and semi-crash of the oil price. Once traded in the range of 4-5 SEK this company was on the brink of bankruptcy and I got in at 0.12 SEK (the lowest traded price was 0.04 in march, but then it was a real lottery ticket). So what has happened since the low point? Well, there’s been private security (mercenaries) occupying the oil field (!) and other exciting actions like that. The company’s pipe line is still blocked by a disgruntled previous vice chairman that claims Malka Oil ow his construction company millions. Legally this conflict was closed last Monday by a Russian court, that ruled in favor of Malka Oil. Since then the price of the stock has risen to a high of 0.23 SEK and closed this Friday at 0.20 SEK.
So, what will happen in Malka Oil now? Well today there’s a share holder meeting (it was postponed to wait for the Russian court ruling). It is expected that there will be much information released about the company’s state, and it is expected that it is good news. So, I think we will see another nice push after the meeting. The proven oil reserves are really cheap here. If they can get production started again (after the mercenaries were there) and is able to use the pipeline I think the market will recognize this with a fair price based on the current oil price, which is in a upwards movement in itself.
That said I only have a small post in the company myself. Don’t put your life savings into it
In general I think we will see a price of 75 USD during the summer, just as OPEC wanted.
Gold and silver got hit last Friday after a very nice two weeks. I which I had been more active and got out, but I didn’t. I will sell off half my positions today because I don’t see a clear trend right now, just as I don’t at the exchanges in general. Summer is here…
I’ve been quite inactive this week, I think it’s been hard to see a clear trend at the exchanges, I still think we are going to be trending downwards from here until the autumn, but it is not shown in the prices decisively as of yet. So I turned my head to the commodities and bought gold, silver and oil, as I saw a trend there still. I used the 2X certificates by SHB offered at OMX, but any vehicle is good I think. As of earlier I have the GLD ETF at NYSE in the portfolio for example (that when considering this weeks weakening of the SEK against the USD has done very well). So far I’ve been right on the money, with BULL GULD up 5.6%, BULL OLJA up 15.86% and BULL SILVER up 12.98% (as of this writing).
I’ve written about silver before and still my analysis is the same, it is in for higher prices this year. The reasons are mainly two, the weakening of the dollar and increased demand versus availability (stores and production is down). The Gold market is driven more by the uncertainty in the worlds currencies, but should not be underestimated. Lastly oil is going up from a very very historically low level this winter. OPEC has cut it’s production in order for it to go up, so why not play along?
As for the broader commodity ETF’s some are getting close to their 200-SMA’s. DBA (Agriculture) has already crossed it. DBB (Base Metals) is just shy of it, but has been trending in range for a month. DBC (General commodities Index) looks better, it is closing in on the 200-SMA with a upwards trend. DBE (Energy) is still quite a bit from the 200 day moving average, but it is in a strong upwards move (most certanly because of the Oil price of course). All in all I think that there will be buy signals in these ETF’s in a month or two.
