PFGBEST Perspectives
Tuesday, 12.13.11
About This Newsletter

By Peter Thomas

Precious metals have won the headlines for more than a year on choppy, high-volume trading in both cash and futures markets.  Analysts, including our own PFGBEST Research analyst Mike Daly, track price movements to alert clients of beak-outs from the trend lines. Meanwhile, investors and traders worldwide are weighing whether the benefits of dollar-cost-averaging outweigh the risks of holding precious metals.

How much to hold? How long to hold? Trade futures or hold hard assets? These are exciting times, with exciting
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What’s New?

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• For more than a year, PFG Precious Metals has offered the wherewithal to systematically invest as little as $100 per month to accumulate gold (or $50
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A Market Fundamentals Curve Ball
By George Cocalis, PFGBEST Sr. Market Strategist

For gold market day traders and longer-term traders, a realistic question of late is what market personality may show up in certain situations. The direction of the gold market is a puzzle within itself, especially with $40- to $60-point ranges almost the norm.

I’m going to give you an instance of one such trade that caused me more than a little blood, sweat and tears.

First, a note -- the increase in margins on gold, silver and copper futures by the CME Group has not been the reason for declines, but rather, a consequence.  This is important because many bloggers have focused on the margin increase as a reason for price dips, trying to use the explanation that “someone knew in advance that margins would be hiked” and therefore sold.  That’s bogus.

A better explanation for late summer/early fall big sell-offs in gold and silver is provided by the overarching fundamentals.

Indexed commodity funds sold commensurate levels of otherwise unrelated commodities to bring their weightings back in line. This selling tended to trip stops set by others. Moreover, it’s assumed that a number of speculators had to close out positions in order to bring their leverage down due to losses incurred elsewhere when stocks, commodities and carry trade currencies all plunged in unison.

Often the 'winners' are sold especially hard in this type of situation. This has nothing to do with fundamentals. It does make you want to keep a keen eye on charts for focus as well.

Fed announcements that portend continued policy (interest rate tweaking but no imminent money supply inflation) are negative to overvalued equities and industrial commodities. This kind of disappointment also weighs on gold's nominal price.

However, charts illustrate that even with some drubbing, gold's real price actually continues to hold up very well.
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