Market Update: ‘Sucker’ Rally for Stocks Blinding Investors to Reality?

With the Dow crossing 14,000 and investors seemingly infatuated with the stock market’s latest rally, gold closed sideways last week and finished at 1,668.25. But before anyone falls too hard for stocks, some perspective may be in order. First, CNBC has sounded a “sucker alert” as reports surface that insiders have been nine times more likely these past few weeks to sell shares than buy new ones. This doesn’t bode well for the long term, not when insider selling usually foretells a drop in the markets. Second, put the value of the Dow today against the price of gold – even despite this rally – and the Dow is down since 2009. Might we be near the end of this “sucker” rally? Perhaps. But even if stocks continue to grow, history suggests that gold is likely to continue to outpace them. Keep your eyes wide open.

The other sensational story this week is not in silver, which looked like a big game cat preparing to pounce, ranging at $31.52, but in platinum and palladium. Both have outpaced the gains of gold this week, setting 12 month highs in their prices.

Precious metals on the move

London Fix PM price at week’s end, and change over previous Friday:

• Gold: $1,668.25, down 0.05%
• Silver: $31.52, up 0.3%
• Platinum: $1,714.00, up 1.6%
• Palladium: $746.00, up 0.1%

In the news

Excessive money printing in Europe and Japan could result in fiscal decline; gold will look very good to many 
“The biggest factor to watch out for gold is the possible economic degradation of Europe and Japan. Gold may once again benefit as safe haven because of worries of currency devaluation.” — Zachary Oxman, Managing Director, TrendMax (link)

Consolidating gold mining in the Americas is good news for the price of the yellow metal
“For 2013 we are using a price of $1,800/ounce, a little bit above where the quote is now. I agree with a Barron’s quote from Darren C. Pollock at Cheviot Value Management LLC, who said, ‘We are in the middle of a monetary stimulus marathon, this is no sprint.’ Just about all of the major currencies are ‘reflating’ at the moment. Against that backdrop, we are bullish on gold prices through 2013 and into 2014.” — Eric Winmill, Mining Equities Research Analyst, Casimir Capital (link)

Are we about to see gold break to $1,900?
“When we get a breakout from a volatility squeeze, you get a big move in the direction of the breakout, and the odds favor the upside. The pattern suggests that ‘the break-out is imminent.'” — Spencer Patton, Steel Vine Investments LLC (link)

Spotlight on Silver

Despite mounting evidence, J.P. Morgan denies charges of silver price manipulation
“Is silver price manipulated? It might be, but given that it would be so difficult to prove it, that is not the right question to ask in our view. The correction question would be if anything can be done to make sure that you make money on your silver investments whether silver is manipulated or not. The answer to this important question is yes, it can be achieved thanks to diversification of strategies and keeping at least part of one’s silver holdings in the physical form.” — Przemyslaw Radomski, CFA (link)

Silver coin dealers may once again become currency traders
“The irony here is that the return of true physical price discovery where silver prices are forced to align with or be expressed by real supply and demand factors could be the ultimate signal of a U.S. Dollar confidence failure, especially if the premium moves visibly and with velocity.” — Dr. Jeffrey Lewis, Silver Seek (link)

Spotlight on Platinum

Forecasted global shortages in platinum production has one ounce buying 1.04 ounces of gold
“Platinum is at the forefront of precious metals investors’ minds because of supply issues in the world’s biggest producer. There’s sound reasoning for people to be putting their money into platinum.” — Gavin Wendt, Senior resource analyst and founder of Mine Life Pty (link)

The week ahead

• Gold bullion sales should pick up as the Lunar New year festivities spread across Asia
• Japanese investors let go of some of their gold positions to get into Eurozone action
• The dollar, euro and yen will be watched in earnest to calculate the rate of contagion of currency burn
• Further bad news from the mining industry will support increased price for both palladium and platinum