Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Posts Tagged ‘silver stocks’

Stock Market Success: Why It All Comes Down to the Fed

By for Profit Confidential

Stock Market SuccessSome of the economic news coming out of the eurozone lately has been better than expected, but the numbers are still showing contraction in the economy and unemployment is at a record high. The stock market might still be in an upward trend, but I’m not bullish going into 2013. Here’s the thing about the current state of the economy—the Federal Reserve is very much onside in terms of policy and practicality; you never want to fight the Fed if you are a stock market investor.

This is why the main stock market indices could rally right into the first quarter of 2013. And share prices aren’t expensive, even with so many blue chips trading right at their highs. So, while the global economic reality continues to be weak, the stock market is likely to keep appreciating over the near term. (See “Why Are So Many Stocks Hitting New Highs in the Face of Very Big Risk?”)

For speculative investors, I continue to like a portfolio with gold and silver stocks and with some exposure to the biotechnology sector in terms of a general strategy. Gold and silver stocks are highly cyclical, while biotechnology stocks are not. But the best stories in this kind of market continue to be about large-cap dividend paying stocks. And even if earnings growth is mediocre, we’re still going to get a lot of companies raising their dividends and increasing share buybacks to keep investors happy. The giant cash hoard that a corporation has doesn’t help the employment situation, but it serves investors who are seeking dividends extremely well. Below is a stock … Read More

Look at These Big Capital Gains in Gold and Silver Stocks

By for Profit Confidential

Big Capital Gains in Gold and Silver StocksGold and silver prices are going up, and it’s a great time to be back in the precious metals sector. Gold and silver stocks corrected significantly, along with spot prices this year, and a lot of value developed among the best stocks in the sector. Both gold and silver prices were due for a correction; gold more so than silver.

Gold and silver stocks corrected significantly more than the percentage change in spot prices and then, like magic, the entire sector turned around on a dime, due to the market’s hope for a third round of quantitative easing (QE3). And while the global economic reality is beginning to set into the minds of investors, the fundamentals for both gold and silver continue to be excellent.

No matter what happens to the U.S. economy in 2013, the U.S. dollar is very likely to be under continued pressure because of all the fiscal headwinds. While no policymaker will admit it, a weaker U.S. dollar is exactly what the Federal Reserve wants, in the hope of stimulating exports and keeping liquidity high. And, as we all know, a weaker U.S. dollar compared to other benchmark currencies is a boon to gold and silver prices. The U.S. dollar outlook is the biggest near-term catalyst for higher precious metal prices. There are so many other fundamental factors that favor $2,000 gold and $40.00 silver, and Wall Street is starting to jump on the bandwagon.

We just had a great new entry point for new positions in gold and silver stocks this past summer; countless good mining companies hit 52-week lows, as the entire group … Read More

Here’s Why Gold Is Heading Higher

By for Profit Confidential

Money stackI previously talked about the run-up in silver, but gold is also sizzling hot on the chart and its ramp-up could continue towards the $1,800 and $2,000 levels in a best-case scenario.

In 2011, the world’s central banks accumulated the most gold in four years. The active buying was largely driven by the weaker greenback along with the perceived higher risk in holding U.S. dollars. The Federal Reserve’s worries and its subsequent decision to implement QE3 (a third round of quantitative easing) indicates America has some rough economic times ahead. (Read “Why We Might Not Want to Fight the Fiscal Cliff.”) The same goes for Japan and China, where we are also seeing quantitative easing. All of the easy money is expected to drive spending, and the result will likely be inflationary pressure, against which gold is purchased as a hedge.

And then there is the European debt crisis and the reality that the entire eurozone appears to be heading towards another recession, including the region’s two biggest countries, Germany and France.

On the political front, there is turmoil in the Middle East, and there’s a chance, albeit low, that Iran will be targeted by the United States and the United Nations.

For December, the chart for gold showed a bullish “cup and handle” formation. Gold is bullish at $1,770, well above its 50-day moving average (MA) of $1,648 and 200-day MA of $1,654 on strong relative strength. The moving average convergence-divergence (MACD) is also on the rise and displaying a buy signal. I am concerned by the technically overbought condition and the fact that at the current … Read More

Mining Stocks Getting Exactly What They Need

By for Profit Confidential

Mining Stocks Getting Exactly What They NeedGold and silver prices are rising, and this is exactly what mining stocks need. After a well-deserved correction in gold prices, gold stocks were hit pretty hard as institutional investors abandoned the sector. Just like the spot price, speculating in gold stocks isn’t for the weak-stomached; volatility is standard in precious metals. But with volatility comes the opportunity for greater returns—if you buy the right companies at the right time.

Silver prices are currently moving nicely high—much stronger than gold. Silver prices have lagged spot gold for quite a while now, and some of the best values that recently developed on the stock market are silver stocks. Everyone says silver prices have more room for advancement, but I’d still own both.

Gold and silver prices are going up in anticipation of a third round of quantitative easing (QE3), or some form of monetary policy, by the Federal Reserve. Most Wall Street investment banks are now predicting that spot gold will be well over $1,800 an ounce by the end of the year. With all the turmoil we’re going to have to deal with next year, owning some gold and silver will likely be a good bet. What’s required for gold and silver stocks to really advance is the return of institutional investors to the sector, which will happen if gold and silver prices keep ticking higher.

I want to repeat my view that there are actually very few attractive gold and silver mining companies on the stock market at this time. Costs have been rising substantially at many precious metals companies, and profitability at a lot of companies has been … Read More

Gold Stocks Lagging the Spot Price—Time to Buy

By for Profit Confidential

Gold Stocks Lagging the Spot Price—Time to BuyOn the stock market, gold stocks recovered from their recent correction, but they are still lagging the recovery in the spot price of gold. The same goes for silver stocks, whose stock market performance is even more behind the spot price action. Institutional investors have lost a lot of their affinity for gold stocks, even though they still might like gold’s long-term prospects. In many ways, speculating in gold stocks is higher risk than just buying gold if you believe the spot price is poised to advance. Of course, the stock market return potential is greater with gold mining companies, but there are a lot of factors at play beyond your control as an investor.

There are a lot of options now if you want to express a position in gold, for example. There are all kinds of leveraged funds, which can double the returns (or losses) generated by the changes in the spot price. Many of them trade in the form of exchange-traded funds (ETFs) on the stock market, and they aren’t a bad way to go if you believe the spot price is going to move.

The actual number of attractive gold mining companies that trade on the stock market is very small, in my view. (See “Gold Stocks Becoming a Great Value in This Market.”)

Everything within the sector becomes more attractive when the spot price is soaring, but if you own gold mining companies, you want the ones that hold up on the stock market when the spot price doesn’t. There aren’t that many of them around.

The reason for this is … Read More

What You Need to Know about Silver Right Now

By for Profit Confidential

SilverSilver had a very volatile year in 2011. The big moves up and down might have been so jarring to knock out your silver fillings, but I hope not, as there appears to be a silver lining. After such a move, many investors in silver and mining stocks are asking the question: “What will happen now?” Although no one can predict the future, the most likely scenario is that we are setting the stage for resumption in the move up for the price of silver, with mining stocks to follow.

The price of silver, as well as mining stocks in general, cannot move up in a straight line. The move we saw in silver prices from 2010 to 2011 was too far too fast and was due for a pullback. This does not mean that the bull market is over in silver and mining stocks; far from it.

When you consider silver was trading $16.00-$18.00 an ounce in early 2010 and then exploded to just under $50.00 an ounce in spring of 2011, this move was due for a healthy correction. This pullback in silver has opened the door for opportunistic, long-term investors in silver mining stocks to accumulate more shares at cheap valuations. As the price of silver is about to resume its upward trajectory, a lot of added gains can be had by looking into mining stocks, as they’ve lagged the market offering value to long-term investors.

price of silver chart

Chart courtesy of StockCharts.com

One interesting note on the price of silver: if we take a look at the high last August 2011 and the lows in December and we calculate … Read More

Trading Opportunities: Why Nothing
Looks Great at this Time

By for Profit Confidential

It’s a crazy trading environment out there. Whether you are in bank stocks, gold stocks, silver stocks, or even cyclical stocks, the stock market risk is high at this time, as we just completed a volatile week of trading. The European debt crisis is keeping buyers on the sidelines and waiting for something magical to happen. The economic recovery is showing improvement here, but, with a high unemployment rate and declining home prices, it will continue to be a difficult path.

The Stock Market’s Next Best
Trade Is Shaping up

By for Profit Confidential

The week around Thanksgiving typically has light trading volume, but positive price action in the stock market. Of course, in this kind of environment, anything can happen. Europe’s sovereign debt crisis continues to hold the U.S. equity market hostage, and institutional investors remain unwilling to make any bold moves in the stock market.

You Profited Big on the Stock Market Rally…Now What?

By for Profit Confidential

Listen up folks, stock markets have had a great run advancing in five straight weeks and breaking away from or near to bear market status. There may be more upside moves ahead of us should the economy continue to improve, but you also need to be careful.

How to Survive During
This Economic Chaos

By for Profit Confidential

The stock market sold off last Thursday. Even gold could not avoid the collapse, as the October gold futures plummeted to $1,700. We have the debt crisis in Europe, withGreecefacing a default situation unless its austerity program is accepted by lenders. Moody’s downgraded eight Greek banks after several Italian banks were also downgraded.

That Gold Chart’s No Fluke

By for Profit Confidential

The precious yellow metal continues to hold up well on the price chart, as traders shift capital from the higher-risk equities to the safe-haven sanctuary of gold.

Trading Action Repeating Itself—What
the Stock Market’s Setting Itself up for

By for Profit Confidential

While the price of gold and price of silver continue to be very strong, a lot of gold stocks and silver stocks have been pulling back in price. It’s a reflection of the current state of things, with investor sentiment seemingly stuck in a rut. We’re in a market with so much uncertainty that any call is valid and all outcomes are plausible. The stock market could completely fall apart, stay the same, or advance. A market malaise has set in and it’s almost entirely due to the sovereign debt situation.

Fighting Market Risk: Use Put Options

By for Profit Confidential

In Friday’s issue, I discussed the idea of generating some cash through writing covered call options should the market trade flat.

At this juncture, stock markets are pausing and showing some uncertainty. And, while I do not pretend to have a crystal ball, I do firmly believe in adopting strong risk-management to protect your investments and hard-earned capital. This is my best stock market advice.

Why Silver Prices Are Falling So Quickly

By for Profit Confidential

yal readers of this column are aware of the fact I usually write about gold, rarely about silver. Yes, they are both precious metals, but that have two very different roles in society and the economy.

I’ve always looked at gold as a safe haven against inflation and eroding fiat paper, especially the U.S. dollar. Silver is a metal used in industry, everything from photographic film to jewelry. My point has always been (and it may be severe) that, if the U.S. dollar in no longer the world’s reserve currency, what will replace it? I can’t see central banks buying silver as their reserve currency. We know central banks have always bought or sold gold as they have adjusted their reserves.

Gold Burning up the Chart: My Gold Advice

By for Profit Confidential

What a few months it has been for gold. With war worries in Libya to debt concerns in Europe and the United States, along with rising demand out of China and India, it appears to be the perfect storm for driving gold prices higher. In fact, the break at $1,500 was much sooner than I had expected and, based on the chart, prices could go even higher, albeit the buying may be somewhat ahead of itself and hence vulnerable to some profit-taking.

The June gold broke to a record high of $1,535.10 on April 28 and is looking to go higher. The chart showed a bullish inverse head and shoulders formation in March. Prior to this, there was a bullish V formation in January and early February. The June gold made a strong breakout at the $1,440 resistance that was in place since November 2010 in early April.

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