Technical trader Clive Maund, the force behind CliveMaund.com, tells The Gold Report that the prolonged naked shorting of precious metals stocks has been immensely destructive to the sector and has left a battlefield littered with corpses, like the first day of the Battle of the Somme. The silver lining: He believes his charts are showing a Head-and-Shoulders bottom, which could signal an excellent entry point. That is good news for the companies Maund highlights, which he believes are strong enough to survive the onslaught.
The Gold Report: Clive, please tell us how market quantification techniques can help investors predict reasonable points of entry and exit in the precious metals stocks.
Clive Maund: The goal of what you call quantification techniques is to identity undervaluation and oversold conditions; the greater the undervaluation and the deeper the oversold condition, the more probable it is that a stock will advance after it has been purchased. Sound fundamental analysis will highlight the former and needs to be undertaken with an awareness that many companies will obfuscate their true financial state, or even plain lie about it; traditional tried and tested technical analysis (charting) techniques will identify the latter.
TGR: What about holding onto gold bullion and silver ingots? How does buying or selling the real thing compare to buying and selling precious metal stocks from your point of view?
CM: Nothing beats holding gold bullion and silver ingots. Quite apart from the psychological benefit of being in possession of physical gold and silver, which leads to a feeling of well-being and security that I am quite sure translates into improved health, the fact is that you have your hands on real money. In a sense the paper value of this real money is irrelevant; it is the paper that is intrinsically worthless at the end of the day, not physical gold and silver.
Seasoned holders of gold bullion and silver ingots know that they can ignore the blizzard of fiat swirling around them—it’s only the little guy who sits nervously on the edge of his chair watching the price of gold and silver in fiat currency. In this sense gold and silver are as solid as a rock. The purpose of investing in or trading precious metals stocks is to leverage the potential gains of gold or silver measured in fiat, and it is much more risky as individually they can collapse into worthlessness as gold or silver never can. If you aren’t buying precious metals stocks with the aim of leveraging potential gains in gold and silver, you would be better off buying the metals themselves.
TGR: Are we currently looking at an optimum entry point for buying precious metal stocks? If so, why? How can buying precious metals stocks be justified in a situation where gold and silver prices have fallen so hard and fast this year?
CM: I believe that we are. Gold and silver have been sidelined over the past couple of years as a result of hot money piling into markets that have been driven higher by unbridled expansion of fiat currency, notably the stock market and real estate. The competitive devaluation of currencies has continued at breakneck speed. The Federal Reserve, which should have been setting an example, is leading the charge with its doomed and irresponsible policy of quantitative easing (QE), which is the fraudulent dilution of the currency.
The key point to grasp here is that we are way past the point of no return. Especially in the U.S., the Fed has no choice but to continue with QE or even to expand it. The talk of “tapering” is a red herring, designed to create trading opportunities for its cronies as the masses hang on to the Fed’s every utterance. The fact is that if the Fed really did try to taper, the economy and stock market would go cold turkey and implode, and it knows it. Once markets really grasp that money supply expansion is here to stay and is going to accelerate, then there is no other way for gold and silver to go but up.
Any attempt to manipulate gold and silver prices lower by powerful plutocratic entities is doomed to fail as the paper market will be made increasingly irrelevant and sidelined by intensifying physical buying. I believe that physical buying will eventually curb manipulative forces by arbitraging away the gap between paper and physical prices, or at least putting a limit on it. In other words, if the physical price continues to rise, then the paper price will be dragged higher, possibly kicking and screaming as the manipulators dig their heels in. But they cannot stop the inevitable.
Here’s another point: The extent to which manipulators have been successful in driving gold and silver prices down in the recent past is a measure of how big a bargain they are now, and of their potential for recovery as the money supply expansion and competitive devaluation continue inexorably.(...)Click here to continue reading the original ETFDailyNews.com article: Mining Sector Signaling An Excellent Entry PointYou are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)
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