puru saxena arguing rationally against the PM's. Sorry to see this.
<<Over in the commodities space, the Reuters-CRB Index has weakened further and it is now trading well below the 200-day moving average. Furthermore, it is notable that the prices of copper and crude oil have also rolled over and it appears as though the sellers are in control. Contrary to what the ‘hard asset’ bulls may tell you, the truth is that aggregate global demand is currently weak and the world’s reserve currency is strengthening. Therefore, this is not a favourable environment for commodities and we do not recommend exposure to this sector.
Looking at precious metals, it is becoming clear to us that both gold and silver put in major tops in 2011 and the onus now lies on the bulls to reverse the downtrend. As you will recall, we sold our positions last spring and since then, our advice has been to avoid this sector. Whichever way you cut it, the reality is that the price action in both gold and silver has been extremely disappointing and despite the ongoing QE-ternity, the selling pressure has overwhelmed the buyers! Look. If you review the price charts objectively, you will note that both gold and silver have formed a series of declining tops and they are currently trading well below the 200-day moving average. Needless to say, such price action is bearish and in our view, there is now a real risk that the prices of both gold and silver will fall below last summer’s lows. If that happens, the secular bull-market will be over and prices will probably drift lower for several years.
At present, nobody knows whether last summer’s lows will be breached, but the recent abysmal performance of the mining stocks suggests that next big move may be to the downside. Contrary to the bullish chorus of the ‘gold bugs’, the AMEX Gold Bugs Index has already sliced through last year’s low and it is now trading at levels not seen since 2009. We are sure you will agree that any market trading at a multi-year low cannot be in an uptrend; thus this is not the time to have any exposure to the mining stocks. Yes, central banks are creating additional currency units and yes, monetary inflation is here to stay. Nonetheless, all this is yesterday’s news and by now, ‘stimulus’ has already been discounted by the market. Thus, if you own precious metals and are convinced about your thesis, you should wonder why then, are prices falling?>>
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