Just a little over a year ago precious metals investors had their attention turned to terrorism, natural disasters and possible global epidemics as the major driver of growth in prices. A year later all the attention in PM’s is turned toward monetary policy, the subprime mortgage crises and a larger looming credit crunch.
At the moment gold and silver investors have their attention focused a number of financial statistics that may elicit the next leg of the bull run. Here is what I am watching and my end of the year price targets for each:
Gold’s current price: $ 673.20
Raw Greed’s target year end price: $700+
Silver’s current price: $12.02
Raw Greed’s target year end price: $13+
USD Index current price: $80.81
Raw Greed’s target year end price: Under $80
USD current interest rate: 5.25%
Raw Greed’s target year end rate: 4.75%
Amount of current gold hedging in oz.: 31.2 Million oz.
Raw Greed’s target year end amount: Under 28 Million oz.
COT (Commitments of Traders) total gold short positions: 385,717
Raw Greed’s target year end figure: Under 325,000
COT (Commitments of Traders) total silver short positions: 121,824
Raw Greed’s target year end figure: Under 105,000
A note about COT option and future positions taken from this article:
The raw data analyzed below was obtained from the CFTC’s famous Commitments of Traders reports that it publishes weekly. These CoTs are data-rich and offer all kinds of valuable information on long and short positions that traders are taking in commodities futures. Charted over time, the CoT numbers help illuminate long-term futures trading trends that can affect commodities prices.
The official COT summary of options and futures for gold, silver and copper can be found here:
CFTC Commitments of Traders Report - CMX (Combined)
In the short-term I’m watching the Fed’s action for an interest rate drop on September 18th. This should be enough to cause the USD Index to fall under $80 by the end of the year. Some authors are writing that a drop in interest rates will drop the attractiveness of the USD as an investment tool, others are writing that dollars returning home is a good thing and will boost the domestic economy causing the dollars value to rise. For an example of the confusion, many financial authors wrote that the unwinding of the yen carry trade would weaken the Yen, but as the Yen has returned to Japan the currency has risen. If the USD returns home, will it cause the USD to rise? This is of particular importance to gold investors since a generally accepted rule is that gold trades against the dollar.
If my price targets are met, I fully expect to see shares of silver and gold miners rebound by the end of 2007 even if the overall stock market continues to gyrate. Shares of junior miners have been hit particularly hard in the past month and continue to offer the greatest upside potential of all the PM’s stocks.
A few stocks that I expect to see tremendous upside from are:
Gold Fields Incorporated [[GFI]]
Coeur d’Alene Mines Corporation [[CDE]]
Tanzanian Royalty Exploration Corporation [[TRE]]
Northgate Minerals Corporation [[NXG]]
IAMGOLD Corporation [[IAG]]
Hecla Mining Company [[HL]]
Pan American Silver Corporation [[PAAS]]
The article is here:
The Statistics to Watch for Precious Metals | Raw Greed Stock Blog, Fundamental Investing Through Speculation and Greed
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Raw Greed Stock Blog, Fundamental Investing Through Speculation and Greed
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