Bleeding Green

The precious metals are on fire literally and the green in our portfolios is a sight to behold and enjoy. There are so many charts to look at this month so I will get right into it and be as brief as I can.

Metals Review

The Dow did it this month by rising 4.07% and only has 142 point before it hits the 200 month moving average. I do not think it can get above that level. Also there is a downtrend which coincides with that level. If however that 8642 area can be bested conclusively I will have to revisit my strategy going forward, but for now I remain a bear.

The indicators here are still quite oversold and the Slow STO just recently flashed a buy signal. Volume has been very heavy the last couple months with all the short covering, which from what I have seen and heard has basically ended and the repositioning for a move down has begun.

The S&P rose 5.31% this past month and is nearing an important line of resistance. There is also a downtrend line which converges in the same area. The amount of equity being raised these days is a sure sign that top prices are being paid as companies clamour over each other for every last dollar they can suck out of investors before the real crash begins.

The 30 year Treasury Bond fell 2.83% on the month and is the most significant chart in this letter. As the price falls the yield moves to the inverse. That simply means that higher interest rates or yields are demanded and the only reason for that is the amount of money being printed which in-turn devalues the dollar.

Inflation is a monetary event, not a price event. Many items have come down in price but that does not mean we are in a deflationary period. A reduction of the money supply is deflation and what is happening now as more money is printed daily is inflation plain and simple.

I though we may see low yields for another year but it appears that will not be the case. Perhaps locking in low mortgage rates sooner rather than later is a good idea. The 112 area is where the thirty year up-trend is. If that is broken then it signifies a massive tide change and basically confirms the coming loss of faith in the US dollar.

The US dollar fell 6.36% on the month and is slightly below the critical line at 80. That line has been a very important line to stay above for the past twenty years. If the dollar stays below 80 then the long bond above will surely be heading towards breaking it's historic up-trend.

While the major indices are still moving up these last two charts portend poorly for their future prospects. I am expecting quite a large fall in the indices before we see them rally up and back to quite high levels. The kicker will be though that inflation is substantial making the rallies only nominal and not real when taking inflation into account.

For example taking inflation into account gold would have to best $2,200 to beat it's $850 high in 1980 in real terms, or in terms of purchasing power. It's amazing that you can hardly buy a pop these days for under $2. That always blows my mind. Inflation is the hidden, gradual tax and most people do not take it into account. Now, more than ever you must think about it and plan for it.

The TSX in Canada faired very well and rose 11.70% on the month and more importantly has regained the 10,000 level and is now above the major resistance, now support, line. The downtrend line was also taken out in very strong fashion. The much better and more real results of the Canadian banks buoyed markets in the last week of the month.

Canada's Venture exchange also faired very well rising 11.41%. The junior and exploration heavy index is right at a major battle line but looks ready to pass go. 1,250 will be the next hurdle, but if gold and silver continue to rise as they are it may not take long to move above that level. The extreme value some companies in this index represent is still intriguing today. One speculative company in this index I hold actually rose from a penny to $0.14 before falling back to the $0.08 level making some of my subscribers very happy and a little bit richer. That stock still remains very far from it's high of $1.

The S&P gold index gained 22.8%. The index is now trading back in it's range between 350 and 275. However the price looks ready to move out of that range quickly and likely into all time high ground above 385. Let the good times roll!

The HUI launched 33.34% this past month which is stunning. It's amazing how little new interest there is in gold and silver sites and services like mine. It makes zero sense that gold silver and their equities are moving at this rate and still people are not interested. It's very bullish and not just me. Several others have said the same to me personally.

The XAU rose in similar fashion to the HUI rising 33.44% on the month. The HUI is close to moving above major resistance at 400 and the XAU close to moving above the line at 160, but 170 will be a tough level to overcome.

The GDX soared 34.18% on the month and moved solidly above the major resistance band between 35 and 43. All systems are a go as the big hedge funds move into this sector while the public sits back and wants nothing to do with it. That will change and will signify the time to expect a correction. I will keep you apprised.

The smaller junior producing companies I focus on are ripe in this index and I expect it to continue to outperform the metals moves by about 300% both on the up and downside.

It looks like we are in for a major shift where silver will be outperforming gold for a while. The trends are fairly long term and give me a good idea of where to put some money. I've pounded the table about silver to outperform gold since this ratio was in the 90's, and it is very handily now. I expect this to continue for at least a year.

Saving the best for last gold has now locked in an all time high monthly close. It's about time, and will attract major attention in June, likely moving gold above $1,000 on it's way to at least $1,200 before any meaningful correction.

Although the summers have been notoriously slow for the precious metals it looks like this year will be the exception. With the global economic crisis about to pick up steam again and Martin Armstrong's cycles works being very accurate and calling for falling markets and rising gold prices now, I think it will be more work than relaxing this year.

All indicators say go now and we are a mere $20 away from the $1,000 wall. This time, effectively being the third attempt at breaking the wall, should be able to knock through and possibly never return to a three digit print ever again.

Silver rose 27.16% on the month and makes me giddy! Silver rose $2 in the last two weeks with the last $1 effectively completed the last two days of the month and is within reach of $16 and closed only a penny from the months high mark. Silver is so bullish but will likely need a bit of time to move above the $16 strong resistance level. Once that falls it's $18 then $20 and beyond.

The are major battles going on between monetary authorities and their henchmen, and the large hedge funds right now. This months battle was won by the hedge funds. It's so much fun these days, and as I said earlier so quiet, that it really makes me think we are just starting a major run up from here.

Recently the venerable Richard Russell mentioned we could be about to begin the mania phase in gold. That's the third stage where the public comes in with reckless abandon. I must disagree with the legend. I maintain we are just at the start of the second phase where institutional buying begins to take place before they tout it to their clients who move in for the mania. I still don't see much mutual fund activity or hear all that much about gold yet.

It is just starting and Paulson's hedge fund recently putting a huge stake into gold and the equities is the beginning. He is a smart cookie and never the last to a party. He is one of many who will be trying soon to enter this small market and will result in prices being driven up much farther than you can imagine today.

It wasn't that long ago that you'd nearly be roped up and shipped off to the asylum for saying gold would hit $1,000. It's happening finally, now. Are you ready?

Platinum rose 8.24% on the month and is precariously close to moving back above the long up-trend line which was broken in late 2008. A 46.40 move on the last day of the month was responsible for half of the months gains. The volatility in the metals is incredible and so much fun when it's working on the upside.

Palladium moved up 8.28% for the month and is about to break the downtrend. It is still so cheap on this ten year monthly chart. $200 or $240. Who cares? It represents a fantastic value right now even if it only goes back to $600 but I am hopeful we will see a four digit print before this secular precious metals bull market is through.

Fundametals Review

A few weeks ago the idea was floated of regulating the over the counter derivatives market who's nominal value is approaching $1 quadrillion. I opined that they would fight tooth and nail to avoid this and sure enough the fight is beginning. Lobbyists are to begin by releasing a letter to regulators professing their commitment for transparency. If that is true then what's the problem? The problem is many of these complex derivatives are worth much less than the 100% they are valued at on the books today. Maybe 20% in my estimation.

I doubt we will ever see the true value of these since it would effectively show the worlds major financial institutions are bankrupt. All the institutions would have to do is repeat the scare tactic they used when the first bailout program was passed on the second vote. They basically threatened the end of the economy as we know it and that marshal law would have to be enacted almost immediately. It was a bluff that worked then, and would work again.

It reminds me of a joke I heard recently. What's the difference between the drunks in Vegas and Washington? The ones in Vegas gamble with their own money!

A nice video talking about government manipulation can be found here and is well worth a viewing.

Venezuela is at it again by rejecting a miners gold concession as Hugo seeks to gain more control over gold deposits. The concession has been under review for over a year and the decision was just announced. This apparently does not follow the law which states the government must reply within a six month period which has long passed. The company is said to have invested over $5 billion in the project which now holds 10.2 million oz of gold. The company does hold several other adjacent concessions which do not expire until 2018. The property is next to the massive Las Cristinas deposit which is also going through similar illegal maneuvers. It just highlights the importance of investing in safe jurisdictions.

Another ETF is breaking records. The South African ETF is about to break the $1 billion level as the country officially enters recession. This ETF however can be redeemed for physical gold which has happened recently but inflows have been higher than outflows. Now that's how an ETF should be structured unlike the American much larger counterpart.

The Dubai Multi Commodities Centre (DMCC) continues to seek a 50% share of world gold trade. They are in talks with China, Canada and Costa Rica to have their gold shipped to Dubai where it could be refined and sent on it's merry way in theory. That goal is unachievable in my view and a thinly veiled attempt to get as much gold shipped there as possible only to never leave. The Middle Eastern oil and USD rich countries need desperately to reduce their reliance on and hoard of US dollars. They know physical gold is the best place to put money and are working towards it.

Once again, but having no negative affect on gold, the IMF gold sales has been brought up. The story says congressional approval could come as early as next week. Good. Sell the gold, make the mistake, and give it to China and be done with it. According to the story the potential sale is priced into the market already and should not have any lasting negative effects.

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Until next week take care and thank you for reading.