Discipline and Action
The opportunities we are getting right now in the markets are exceptional and typical of this time of year. I mentioned that we seasonally see a dip in Gold in mid December and then 3 weeks of upward price movement. The best and safest strategy you could use right short of buying Physical Gold is to buy GLD ETF or Jan 2013 options. These are both in our portflolio and are very attractively priced. This is a minimum 3-6 month trade. Gold as I write is under 1690 !!!!
Silver
Silver has a tendency to make a seasonal bottom in September, and then has a tendency to post major seasonal peaks in April. It tracks the price moves of Gold, but from a traders or investors perspective, it is considered the poor man's gold. Due to technology and the age of digital imaging, silver has lost a major portion of it’s industrial demand element because there is no longer a tremendous demand from the photo industry. It is still needed, however, for film and x-ray processing.
Silver prices are also subject to spikes in demand from the investment community, which uses silver as a hedge or protection from concerns over inflation or times of economic instability and uncertainties. Dollar weakness helps support silver’s value. Longer-term cyclical forces can dramatically impact the seasonal price moves of this market, like we saw in the June – August time period in 2007, just ahead of the credit bubble bursting and the onset of recession in December 2007.
The reason I am very bullish on Silver this week is that since 1986, there has never been a time when commercials (banks and institutions) held more longs than shorts on Silver contracts. The lowest for this indicator was +4.9% in July 1997 (not shown), before the Warren Buffett rally.
It can also be noticed from the chart that whenever the % net shorts go down the price tends to move up. The general expectation in the Silver markets is that the commercials will have closed their short positions before the big move up in Silver. It looks like that may be happening now.
Silver ETF SLV, SLW, Silver Stocks & Jan 2013 options are all a Strong Buy in our portfolio.
Cocoa
I still see strength coming in the Cocao markets in 2012 we will keep an eye out for an entry point. Here is a prediction from a friend.
Copper
Copper prices tend to form seasonal bottoms during the month of December. Traders can look to go long on or about December 14th and hold until February 23. This trade in the last 38 year history has worked 28 times, for a success rate of 68.4%. Since 2001this trade has been profitable 8 out of 9 years and profittable every year since 2007.
Commercials (red in the bottom indicator) have been establishing a long position as we move into seasonal strength (orange in middle indicator). Price will likely follow.
Copper and Cocao can be purchased using Futures contracts or spread betting spot price movement.
Best,
Robert McManus
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