Argmaur Commentaries: Precious Metals Major Reversal

Precious Metals Downtrend Shows Signs of Reversal

February 23, 2010

A multi-month downtrend in precious metals is finally showing signs of reversing after coinciding with the following events:

- A credit crisis has hit Dubai, one of the world's top investment destinations, causing a real estate bust, job losses, and lower foreign direct investment inflows.

- As bank lending swelled by 32% in 2009 and contributed to massive inflation and real estate bubbles, Chinese banking authorities moved to Curb domestic bank lending.

- Concerns over Greece's debt (which is, by the way, less as a percentage of GDP than Italy's) provokes European Commission scrutiny.

Once again, the same analysts who have been telling us to sell since 2001, even though gold has climbed each year since, are at it again. Bob Prechter (Elliott Wave Theory) recently called for a 40% further decline in gold prices on TV--somehow the media continues to cover him even though his bearish long term predictions have been wrong year after year (you'll recall that he told us to sell gold last summer, right before the historic climb to $1226/oz.). He and others just don't understand the fundamentals of a long term bull market.

Our support level (discussed in our January 18 commentary) near $1,075 proved to be an excellent entry level although we saw an extremely quick move to $1,050 and has since climbed back above $1,100. Our PM stock, RBY reached price lows unseen since late October, but have since advanced over 20%, coinciding with the following events:

- On Friday, the US Dollar Index hits 8 month highs of over 81 and appears to be reversing direction.

- Last week we learned that China dumped $34 B in US Treasuries, losing its status to Japan as the world's top holder of US debt, and fueling concerns of future dollar weakness.

- Foreign Holdings of US debt fell by a record $53 B in December.

- The start of the Chinese New Year (Feb. 14) coincided with the first signs of a precious metals reversal, as Chinese gold demand increased.

As the markets change course, we're eager to give our clients and readers new undervalued stock picks to provide higher leveraged returns.

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