Mike Burnick: Good afternoon, everyone, and welcome to this special online briefing for Gold and Silver Trader. I am Mike Burnick, your host, and let me introduce Larry Edelson, editor of Gold and Silver Trader. Larry, it is good to speak with you again.
Larry Edelson: Yes, hi, Mike. Good afternoon and welcome, everyone. Thank you for attending today. I see we have quite a crowd so that is really wonderful that everybody is very interested in these markets and what we are doing. So with that, let’s get started.
I am going to devote most of the time today to Q&A, to your questions and my answers.
I have four very important charts that I do want to go over with you, the first one being gold as you can see here. I remember last week I gave you an issue where I showed you that gold was forming a triangle. You can see that with the two triangular lines there from the left on the top sloping downwards towards the right and from the bottom sloping upwards to the right. That triangle is still in force. However, I do believe that we are now, with the decline that we saw late last week and earlier on Monday, we have seen the bottom of an interim decline and we are now heading up along that green line trajectory there where we are going to see gold rally in the weeks ahead up to about the 1390, 1400 level.
In the very short term, there are two paths that gold can take. One would be complete lift off which would be your first green line there, the upper green line, and the second would be one slight dip back down around 1295, maybe even 1290, and then as that second green arrow shows, up to 1390. Now it is very difficult in the short term. The market is very jittery these days. All markets are and we are in the summertime when the liquidity is typically less than it is during other times of the year. So the short term is very, very difficult to pin down. But the two scenarios firmly point substantially higher and we are on our way to 1390, 1400.
Now, that is going to be a very powerful move and that is what I positioned you for over the last couple of days and we will probably add some more positions as soon as I see which scenario we are going to take, whether we are going to go straight up from here or whether or not we are going to have one more pullback and then move higher.
That said, let’s go to the next chart which is silver. Silver pretty much has the same scenario. It is coming out of the… It already took a stab outside the top of the triangle, fell back below it. It is bottoming now. It is acting actually a bit firmer than gold and we still have two scenarios here although I have not labeled the chart such. The point here is whether we get one more little decline in silver or we do not, silver’s next big move should be up to about the 23, 23.50 level going into probably September. I do not think it will extend out into October but once we get the 23 in silver and 1400 in gold, we will then see another pullback before heading even higher. The critical support level for silver is $20 and for gold it is really around $1285 right now. So we are building a nice base to jump out of those triangles and head substantially higher.
The next chart concerns one of the ETFs that we have which is JNUG. That is the Direxion Junior Gold Miners ETF, triple leveraged, and you can see it is an almost exact replica of the gold chart and the silver chart, more so the gold chart. But either way, it is forming the same type of pattern here and whether or not we get one more modest decline or not really does not matter. We are headed up to 42 to 46 in JNUG and that is what I am positioning for.
Now, I know we took a couple of small losses earlier on JNUG. I kept the risk very tight there and that is how you want to trade. Losses are part of the game. As long as you keep your risk very, very tight, you position yourself for the big moves. It is part of the territory. I do it a lot myself. I take on small bullets that I shoot to calibrate the big trade that I am about to do and that is what we have been doing.
With the latest addition to JNUG you will notice that I gave you a wider stop. It is a little bit above the critical support level and that is for a reason and I think we are very nicely positioned now for the next major move in gold and silver and I will, as soon as I get confirmation that this next wave is unfolding, I will be looking to add more mining shares to the portfolio.
Now, the next market I want to show you is very, very important because I think it is going to come into to some major play in the next few months and that is the stock market. There is no question in my mind, absolutely none, that it is topping. We could see one more push higher, maybe up to 2000, slightly above 2000 on the S&P 500, around 17,400 on the Dow. But this market is topping and the longer it holds out and the more it rallies, the worse the correction is going to get and the way my models are lining up right now, I would not be surprised that we see, and it would be very natural to see this, the stock market take a major correction and gold and silver and mining shares go up.
So I have put this chart up here because I really want everybody to focus on the stock market. It is more important than the dollar right now. It is more important than the other currency markets. It is more important than other commodities. This is the market that is going to drive everything over the next few months as it tops. So please stay on top of the market. I strongly recommend exiting stocks or hedging stocks. You are within an earshot of the high. We are going to see a correction down to about 1850 on the first leg down and as low as, well if it gets nasty, as low as about 1500 on the S&P. It is not going to be the end of the bull market but it is going to be a sharp correction.
Okay. That is it for the charts today and now I really want to address your questions as I am sure you have plenty and I always find it the most informative part of these sessions. So let’s get right into it.
Mike: Absolutely. Some great charts to keep in mind. It certainly seems as though the trends in all the major markets are definitely playing your way here, Larry.
So let’s get to some of the questions we have here. The first one here, Larry, is from Joy. Joy asks, “Will you ever touch anything outside of gold and silver such as, for example, oil or agriculture for trades in the future?”
Larry: Absolutely. Probably we will do some energy trades in GST when the time is right. Not so sure about agricultural but I will certainly consider adding energy when the time is right. That is another market that is shaping up after one more decline for a very bullish move higher.
Mike: Okay, another question from Jan, “Larry, is it time to ‘back up the truck’ and buy gold?”
Larry: Well, it is definitely time to back up the truck as I have mentioned previously. It is not time to load it to the brim. It is time to back up the truck and start loading it but you want to be careful loading that truck because you want to load it and pack it properly.
Mike: All right, a question from Phillip, “If as you say a large correction or crash is underway or is coming in the stock market, won’t mining stocks also suffer? Also if markets crash this is deflationary. Wouldn’t it offset any safe haven gains in gold and other commodities?”
Larry: Well, mining shares typically in a stock market crash go the other way. They go up. We have seen this in most financial panics, whether major financial panics or mini financial panics. And I think that is especially true today because they are so undervalued and they have been beaten up so dramatically over the last three years.
As far as the deflationary aspects of a mini crash, no, I do not think it is that deflationary because it is just going to be a correction. It is not going to be a permanent meltdown or anything like we saw in 2009. Talking at most about a 20%, 21% pullback which would be just perfect because all the talking heads will say we are now in a bear market because they use that ridiculous 20% benchmark for officially calling a bear market and that will be exactly the time to buy.
Mike: Exactly.
Here is a question from Bob. “There has been a very muted reaction in gold to the escalating unrest we have seen around the world. Does this indicate that gold wants to go lower in the near term or the short term?”
Larry: I don’t think so. Now, bear in mind that the war cycles are ramping up for another six years all the way into 2020 and all markets and all cycles wax and wane, okay? The fact that gold did not explode up to $1,400 when the Malaysian flight MH17 was shot down, terribly, unfortunately, it does not mean anything. These markets and even the war cycles themselves wax and wane as they build. So, no.
The main driver behind gold, the next bull market in gold and silver is going to be geopolitical tension. So it is not going to be inflation. It is not going to be… That will be a part of it but that is not going to be the main driver. The main driver is going to be geopolitical conflict. The world is literally coming apart at the seams and that is pretty much obvious to everyone. I was talking to my 25-year-old son last night out in Los Angeles and he said to me, “Dad, what is going on? Everywhere I turn the world is getting crazy.” And if the young generation is picking up on it, you can bet that it is pretty intense and the unfortunate thing is that it is going to get a lot worse.
Mike: Okay, another question from Robert, “I have read recently about the Chinese government selling large quantities of gold but this does not seem to affect the market. How come?” Any thoughts?
Larry: I have not heard of any Chinese selling of gold so I am not sure where that is coming from. Typically they are quiet buyers on every decline. That said, I do not think China is as big a factor in the gold market as everyone seems to believe. They are very large consumers of gold. The Bank of China, the People’s Bank of China, China’s central bank, is accumulating gold. But that by itself is not going to send gold to $5,000.
But in the next couple of years you are going to see central bank sales of gold by European countries that are bankrupt. But when you see that, do not take it as a bearish sign. Take it as a bullish sign because it will be their final admission that they cannot survive and that they have to sell their gold to pay off some debts and when the world wakes up and realizes that Europe is going down the tubes, that will be extremely bullish for gold.
Mike: Okay, another question here from Rosalee, who wants to know why we are not recommending Royal Gold as an option in this GST.
Larry: Royal Gold is a buy and hold royalty miner. It is a fantastic stock but it is more for a buy and hold type strategy and not a trading type strategy.
Mike: From Clay, he would like to know, “How do you think oil, gas, and steel will react during the anticipated market correction and should we stay out of these investments until after the correction?” Also John would like to know about copper in such a scenario.
Larry: Well, I would be a little bit wary about energy shares until we see the pullback in the equity markets and oil is looking for one more low around 90, 92 before it takes off again to the upside.
As far as steel goes, steel and copper are very dependent upon China. China is the largest consumer of both commodities and, as we have seen in the last few weeks and I predicted, China’s economy is starting to pick up a head of steam again. China’s economy is just fine. So copper, I am very, very bullish on. Steel prices will probably pick up as well.
Mike: Bill wants to know, “For those of us that are interested in investing in gold and silver bullion, can you provide your thoughts on current price levels and when to back up the truck and load up?”
Larry: I do that for my monthly Real Wealth Report. Yes, if you refer to that, if you are a subscriber and you refer to that, that is where I give those longer-term signals. I will try to, when I see a similar type of set up, I will of course let Gold and Silver Trader subscribers know as well.
Mike: Okay, another question about a potential correction in gold, “Larry, today you wrote and warned about a 20% correction in equities. Should we not wait for this correction before buying into more gold and silver ETFs and mining stocks?”
Larry: Again, I believe they are going to be contrarian investments. They are going to rise as the broad market falls. So, no, I do not believe you should wait.
Mike: Okay, Diane notes that, “Goldman Sachs commodity strategists wrote this week that they remain doubters of gold’s 2014 rally and are sticking to their prediction that the metal will reach $1,050 in price by the end of this year. In a note to clients this week, the strategists write that they expect the $1,200 level roughly 7% below last week’s price to function as a good estimate of the floor price for gold. What’s your thoughts on those numbers?”
Larry: Well, Goldman Sachs is not always right, not by a long shot. In fact, they missed the top in the gold market very, very substantially. I told subscribers gold had topped at about $1,900 12 days after its peak and Goldman Sachs became a bear at around 1,400, almost $500 below the peak. They were bullish all the way up to 1,900 and bullish as it fell from 1,900 to 1,400.
That said, is it possible… I think the main question is it is possible that gold has not bottomed and we will see new lows below 1,180 which was the June 2013, December 2013 double bottom. Look, that possibility always exists. I do not think it is a very high probability at this point in time. I think gold and silver are building very strong bases for a new rally. If I am wrong and gold and silver are going to make new lows, you will have enough advance notice via my signals and models to get positioned correctly. That I can assure you.
Mike: We have a technical question about stops here. Actually there are several along the same lines of what Wanda asks here. “Larry, why don’t we just buy JNUG and hold for the next two years?” In other words, some of the other questions revolve around stops, “Why place stops on trades when you are convinced that it is a bottom and we have a long-term rally ahead of us?”
Larry: Well, certainly that is a viable strategy. But that is not what Gold and Silver Trader is about. Gold and Silver Trader is about short-term profits, getting in, getting out with a profit, getting back in, getting out with a profit and leveraging and multiplying your profit potential as these new bull markets unfold. Now, if you want to go in and buy JNUG without a stop or hold it for two years, that is your prerogative. Certainly do that. But that is not what this service is designed for.
Mike: Ted has a question about the Commitments of Traders report. He notes that the current COT report shows that commercial traders are quite bearish on the metals still as they are carrying rather large short positions. Any thoughts on that, your comments?
Larry: Yes, it does not mean anything. When I started out in the business in 1978, I studied Commitments of Traders reports like they were the bible. I was told they were the bible, that when commercials were long, commercials tend to always be more right than smaller large speculators and that you always got to monitor what the commercials are doing, whether they are buying or they are going short. After about five years of studying Commitments of Traders report, I noticed that is was about 50/50. In other words, they were right about 50% of the time so I just tossed it out the window. I check on it occasionally and my experience is Commitments of Traders reports mean nothing.
Mike: Okay, here is a question from Tom. “When do you see gold going up on a consistent basis?”
Larry: Not until we get above 1449. When we get above 1449 in gold, spot gold on a monthly closing basis, then you are going to see a stair step higher, a very steady bull market, much like we have seen in the stock market.
Mike: Okay, a question from Travis, “Hello, Mr. Edelson. Thank you for what you do. Are gold 3-month, 6-month, or 12-month call options a good investment right now?”
Larry: Yes and no. Yes, if you catch the timing perfectly. No, because the markets are very, very choppy, very thinly traded. The patterns are taking time to unfold. There is a lot of backing and filling going on, so the option premiums can decay rather quickly in that type of scenario. The summertime is typically not a good time to be in gold or silver options, so I would prefer and in fact am waiting for the fall before I look more closely at the options.
Mike: Okay, a couple of questions about gold potential manipulation here, very similar along the lines of what John asks. “Is the price of gold and silver manipulated by large institutional investors?”
Larry: No, with a capital N-O.
Mike: Too big of a market, right Larry?
Larry: Yes.
Mike: Let’s see, another question from Steve. He asks kind of a technical question on trading. “Larry, within a $25,000 suggested trading block or portfolio, how much would you allocate towards options trading?”
Larry: Hard to say. I just have to guess at this point in time. I would say no more than 20%.
Mike: No more than 20. Okay.
Let’s see here is another question from Jay. “So far you have asked us to invest only a small portion of the cash you suggested we set aside. What will be the signal to start investing more? Do you see the precious metals market potentially making a significant move downward?”
Larry: That is a very good question. I am looking for patterns right now to unfold the way I expect them to and then I will be adding positions and we will be getting more aggressive. We will be getting super, super aggressive once we see gold close above 1,400 and extremely aggressive when it closes above 1,449 on a monthly basis, which I just mentioned before. That will represent the kickoff of a major, major consistent move higher in gold and silver. Until we get to at least 1,400, I am going to be playing it somewhat conservatively because I would rather build up some profits first and some ammo because this market has a long way to go. At 1,300 now, this thing is going to 5,000. Silver is going over, well over $100. We have got a long way to go, so be patient. Be patient. Healthy bull markets do not unfold overnight. They take time to form. We will get aggressive when it is time to put the pedal to the metal.
Mike: Okay, here is a question from Doug. He wants to know regarding our stock ratings model, “Why is the SPDR gold trust, GLD, rated so low, a D in the Weiss ratings model and how reliable would this fund be in cashing out after a big run up in gold prices?”
Larry: Well, that is a similar question to why ratings models not just Weiss but S&P or anybody else have terrible ratings for a lot of the mining shares. The simple reason is mining shares and ETFs like GLD are not really equities. By that I mean they are commodities. And they are valued more, not by their earnings per share or even their balance sheets per se, but by the underlying assets that the company owns. And if the underlying assets have gone down in value, meaning gold over the last few years for mining shares and for GLD, then the stock ratings models are going to give them a lousy grade, period. But the ratings models, again that is any ratings model, not just Weiss, does not take into effect for commodity companies the value of those assets and what might happen in a bull market down the road. It makes no forecasts. All it does is track what happened to the stock of the underlying assets.
Mike: Okay, we have got a couple of questions here, Larry, on your new precious metals training course, your educational course that is out there. Maybe you can comment on them. One of them, let’s see, actually I had it here for just a minute and… Oh, here it is, from Steven. He asks, “Regarding your precious metals course that is online, do we have to be a chartist in order to take advantage of the Weiss wealth building courses?”
Larry: With the precious metals course that is online now, no. That is to help you save money, buy bullion better, and stay away from scams, okay? That is not necessarily about trading although I do give some tips about timing your investments in that course. I can say I do, myself, have a personal coaching course coming up. For that I would expect that you would want to learn about charting, yes.
Mike: Okay, another question from Bill. He wants to know your hidden Elliott wave patterns that you have discussed before appear to be somewhat at odds with Robert Prechter’s Elliot wave counts. He is of the view that gold is now heading to new lows. What is different about your wave analysis versus that?”
Larry: Well, I will explain it as simply as I can. One of the fundamental faults of, let’s call it, traditional Elliott wave analysis is that it does not take into consideration what happens at turning points in Elliott waves. At turning points of major Elliott waves there has to be what is called a hidden 1-2 and that is a turnaround of five waves up followed by a three-wave corrective wave. It has to exist in order to turn the trend around. It exists on tick data if you get down on a microscopic level and you look at actual trades. But in traditional Elliott wave analysis, it does not take into account that first hidden wave. The end result of that, by not taking that into consideration, is that your timing can be off by years.
In the case of the stock market, I know Bob. I have a tremendous amount of respect for him and especially for the work he has done in socioeconomics. But we all know that Elliot wave, traditional Elliott wave has failed to catch important turning points in any market and has been off by years and one of the reasons is the hidden waves which I will be teaching more of in my personal coaching course when that comes out.
Mike: Okay, a question from Fred, “If the euro currency is going to eventually get weaker, my question is should we be buying the euro stock markets, for example, right now?”
Larry: No. Because you have got a situation in Europe where let’s say the stock market probably will continue to go higher with the Dow but the euro currency, let’s say the European stock market goes up 20% and the currency goes down 20%. You made absolutely nothing, okay? So that is why you are better off staying out of Europe and staying with the U.S. stock market long term because there you are going to see substantial gains over and above any currency depreciation that occurs because the weakness in the euro will be feeding into dollar strength overall. That is not to say the dollar is going to go to new highs. The dollar is in a long-term bear market but it is going to decline a lot less than the euro is.
Mike: Okay, Paula wants to know what timeframe do you have in mind for the S&P correction? Do you think it will come by August?”
Larry: Yes, it is possibly days or at most a week or two away. I think it is going to unfold and probably bottom in late September, early October.
Mike: Wilbur wants to know, “Larry, if we have seen a bottom in gold and silver and you expect some wild swings, then why use tight stops?”
Larry: The reason for that is you always want to minimize your risk. Yes, it means getting stopped out on occasion and having to get back in sometimes at a disadvantageous price, perhaps a little bit higher than what you would like to get into lower. But you have got to manage risk. It is okay to swing a few times as I mentioned earlier and miss the ball, okay? What we are doing now is calibrating for the big trades and by that I mean we are kind of probing the market, checking the liquidity, checking support and resistance levels with minimal risk so that we can get positioned for the big move. The markets do allow you to do that. And you will see the wonders of it all when we line up the bat and hit that home run, okay? Those small losses will fade into the background. But you have to trust me on this. It is a matter of calibrating the rifle, so to speak, so that you do not miss the target.
Mike: Makes perfect sense.
Eli has a question about your cycles of war. “Given your thesis and you prescient prediction of rising war cycles, why is gold continually seeking new lows or failing to rally more?”
Larry: Well, I think I pretty much addressed this question earlier. It takes time for these things to unfold. They wax and wane. All markets have their own rhythms, their own cycles, their own good days and bad days, their own sociopsychological phenomena. They wax and wane. It is hard to understand. We think in logical linear terms so we expect okay, an airplane was shot down, Mr. Putin is turning out to be a tyrant, he is provoking potential world war 3, gold should be going through the roof. Well, it does not work that way. You are probably going to see Mr. Putin back down and then come back out a few months from now with even more force against Europe. You are going to see gold wax and wane.
These things take time to develop. They are cyclical. They build upon themselves, just like we as people have good days and bad days. We build energy and then we run out of energy and then we build energy again and then we run out of energy. These are cycles of nature. This is how everything works, from our own human lives to sociopolitical phenomena and to markets. So you have got to be patient. You have got to let these things build themselves. The trends are definitely there.
Mike: Okay, here is a good question from Constantine. “What is a good hedge for gold or for silver?”
Larry: A hedge for gold or silver, meaning if they were to go down?
Mike: Correct.
Larry: Well, there are some inverse ETFs and there are put options, of course. But I do not think you need any of those right now.
Mike: Okay, Ken would like to know, “When do you expect the ‘real moves’ in gold and silver to begin? Specifically when do you see $2,000 for gold and $50 or more for silver?”
Larry: Well, I think we are about 12 to 18 months away from that. The real move will begin when we see a monthly closing above 1,449 in spot gold, in cash gold. When you see a monthly closing above 1,449, you are going to start to see a market that will look very much like the stock market since 2009, virtually straight up with minimal corrections. So we have a little bit of a ways to go before we get there. But that is the major, major bull market signal.
Mike: Okay. 1,449, we will keep an eye on that.
Simian asks, “Hi, Larry. Where do you see natural gas prices going?”
Larry: Ah, great question. To the moon. That is one market I am closely, very closely watching right now. We are bottoming in a correction from the first wave up that took natural gas from 2.50 up to about $6 several months ago. We have had a several multi month correction working off that first wave higher. We are within striking distance of the end of that correction and will soon begin a third wave higher which will bring natural gas from roughly the 3.50 level up to about $8 or $9 — explosive move and then thereafter, another pullback and then even higher. So natural gas is on my radar screen as well for Gold and Silver Trader.
Mike: Okay, Susan would like to know how will the new sanctions on Russia affect gold and silver, if at all?”
Larry: Well, I think they are bullish. I think they are very bullish. Right now, this morning or last night, Europe went to phase 3 sanctions against Russia, the most severe yet and we have not seen Mr. Putin’s response. The United States is now considering additional sanctions plus the news from this morning was that we are going to prosecute Russia for some nuclear missile tests that they did a few years ago in violation of the nuclear arms treaty. So the vise is getting a little bit tighter every day against Mr. Putin and we do not know how he is going to respond.
So it is not over. It is going to wax and wane but it is not over. I would not be surprised at some point that this ends up in some sort of military conflict in Eastern Europe. That would not surprise me one bit at all. But it is not going to happen tomorrow. My cycles of war tell me we are probably about four months away from military conflict in Eastern Europe.
Mike: Certainly a scary prospect.
Let’s see, here is an interesting question from Ira. “Can you explain the difference, Larry, between ownership of actual company stocks, mining shares like Silver Standard Resources for example, and ETFs like JNUG? Do investors take on greater risks when they do not own actual shares of a company?”
Larry: Well, JNUG is a basket of mining stocks. So with an ETF you are buying a basket of mining stocks versus one individual stock. Are there risks? Yes, there are some day to day fluctuations that cause some additional risk but is there the risk of default with the ETF? No, I do not think so. There may be some defaults with some of the bullion ETFs when gold gets into high gear and moves above $2,300 an ounce in its inflation adjusted price and demand starts going through the roof. There might be some problems with some of the bullion-based ETFs and I would recommend that, way before that, I will be recommending that you switch from any ETFs to bullion. But with equities, no, I do not see those concerns.
Mike: Okay, Bernard would like to know, “What do you see happening with platinum and palladium?”
Larry: Very bullish, very bullish. Palladium just hit a multiyear record high last week. Obviously they will perform much like gold and silver as the war cycles ramp higher and, at times, even with more bullishness because there is a critical supply situation with both of the white metals, platinum and palladium, because most of it comes from either Africa or Russia, both politically unstable regions.
Mike: Okay, a question about gold bullion. Christine asks, “Larry, you say to buy bullion bars in order to get the lowest markup; however, my dealer will only buy back at spot. Is this common?”
Larry: Yes, of course he is only going to buy back at spot. He is going to sell to you a little bit over spot and he is probably going to charge you when he buys back. But if you were to buy bullion coins, which most people do, most analysts do recommend the bullion coins, you are going to pay substantially more when you buy and when you sell. That is why I recommend ingots and bars.
The analysts who recommend the bullion coins, let me tell you why they do that. They recommend it because they make more money and they tell you a story that gold bullion coins are going to be easier to use for barter some day when the world falls apart. Well, I do not agree because those bullion coins, if you barter with them with anybody, anybody in their right mind is going to want to assay them and make sure that they are genuine. They are going to do that with bars and ingots too. But they are also going to be doing that with bullion coins. So why pay more? It is that simple and that is not some place you want to go unless you really love rare coins and you want to deal with an expert.
Mike: Okay, a few questions here on gold mining stocks. Carolyn would like to know, “How do you decide which mining shares to trade in your portfolio at a particular moment in time?”
Larry: Well, I have sent out the initial screen of the stocks that are my, the major ones that are my radar screens that I am tracking closely each and every day and that is based on really largely on their reserves, proven and probable gold and silver, their resources, their balance sheet, their management, but most importantly their reserves, resources, and their cost of production and then, of course, the technicals and cyclicals, their chart patterns.
Mike: Another followup question to that from John. He says, “I have your list of gold stocks but I am getting conflicting messages about buying them now. I have bought the two stocks you already advised to buy, but you have also predicted the stock market faces a possible correction soon. So won’t the gold stocks get slammed as well during a correction?” Kind of similar to the previous.
Larry: Not necessarily, no. In fact, I think we are going to see a major counter trend move in mining shares as the stock markets falls. That is, mining shares are going to really leap much higher as the broad market declines. That is not unusual. In fact, that is the normal relationship.
Mike: And Jay would like to know your take currently on IAMGOLD and Kinross Gold specifically.
Larry: I am probably going to be adding to those positions as long as the patterns unfold the way I expect them too. So I am very bullish on them.
Mike: Okay, shifting back to the possible correction, I have a question from Don. He says, “Hi, Larry. With the upcoming correction in U.S. stock market, what do you think the impact will be on Asian stocks?”
Larry: They are going to go in opposite directions. Asia is already looking terrific. Asia declined for the past three years, in some cases more than that, five years, okay, while U.S. and European markets were forging ahead, okay? So anyone who tells you that they have to go together in the same direction at the same time does not know what they are talking about. Western markets have been going up. Asian markets have been going down. Now Western markets are going to go down. Asian markets are going to go up.
We are already starting to see China’s economic numbers come in much better than expected. The Shanghai market is breaking out to the upside. There are a couple of other editors that have noticed that at Weiss Research. Thai stock market where I am here in Thailand, despite a political crisis and a military coup, is up 22% since the beginning of January in barely seven months. Vietnam’s market is looking very good. Asia is looking very good.
Mike: Better than the U.S. and Europe, for sure.
Larry: Yes, and something, let me just add in there is something which I will be reporting on soon, as soon as I finish my research. In 2015 the ASEAN community comes online. That is the Association of Southeast Asian Nations. It is ten Southeast Asian nations ranging from Thailand to the Philippines, Indonesia, Malaysia, Vietnam, Cambodia, Brunei. They are forming an economic union and it has been in the works for many, many years. It goes live in 2015. It is going to become within the next five years the third largest economy in the world. The official spoken language is going to be English and it has, I mean… China is always going to be a huge factor in the world. It is going to be the number one economy in a few years. But ASEAN, the Association of Southeast Asian Nations is going to be right up there and Europe is going to tumble to three or four.
Mike: Okay, a question and actually a comment from Michael, “Great stuff, Larry,” he starts. “I have core long-term multinational stock holdings that I do not want to sell. Will you be offering hedge positions, perhaps using options through this service?”
Larry: On occasion for gold and silver, yes. But not for the broad stock markets.
Mike: Actually several questions about options, another following up on that from Harry. He says, “What is your strategy regarding using options?” I know you addressed that earlier but a lot of people have probably come and gone on the call, so maybe you can speak to that again?
Larry: Well, I am always looking at them. When I see a low-risk entry point and it looks like the market is not going to waste any time going where it is supposed to go or where my models say it is going to go, then I will be looking at buying options. As I said earlier, that probably won’t begin until September/October because the market is not, the summertime is not conducive to options trading right now in gold and silver even if we get that move that I am looking for, which I believe we will, up to $1,400 over the next couple of months. In my experience, July and August are terrible months to be trading options unless you are writing them.
Mike: Okay, Stacy has a question about the agricultural commodities. “Soybeans, wheat, and corn seem to be bottoming. They are certainly weak today. Any recommendations here?”
Larry: Let them bottom. They have a little bit more to go on the downside. Let them bottom and then those markets will follow suit with many other markets and turn around to the upside.
Mike: Okay, Doug would like to know, “Is shorting the euro using the ETF EUO a good idea?”
Larry: Yes. We have that in the Real Wealth Report portfolio. I may even recommend it. I have been looking at it for Gold and Silver Trader. The euro has already taken its first leg down. I am expecting it to rally back a little bit in a corrective bear market bounce over the next week or so and then it will begin its third leg down and the third leg is typically the most severe. So the euro is already tumbling over the cliff. It has hit a ledge and it going to bounce back up a little bit but it is about to really go into the void pretty soon. So that is a currency that I am watching very, very closely.
Mike: Okay, Rex would like to know about the Aussie/U.S. dollar currency pair. Where do you see that going one year from now?
Larry: I am very bullish the Aussie dollar. That is bottoming right now. It has actually had one leg up. It has pulled back a little bit over the last few days. Long term I see the Aussie going from — I am talking in terms of the futures pricing — from $0.93 to about $1.10.
Mike: Okay, Melinda has a question about the leveraged ETF. She says, “I am unable to buy the 3x ETFs at my brokerage account I am using to trade Gold and Silver Trader recommendations. Is there an alternative way to take advantage of these recommendations other than buying the leveraged ETFs?”
Larry: Well, you will not be able to take full advantage of the service if you cannot do the triple leveraged, so my best recommendation there is to find another broker who can and will do it for you.
Mike: Okay, a question from Travis, “For your many European subscribers, should we transfer our money out of European brokers such as Saxo to avoid losing our funds held by brokers there?”
Larry: I would. I would. I can just tell you what I would do. I would not have any money and I do not have any money in Europe, not even one euro.
Mike: Okay, Mark has a question about seasonality with respect to gold and silver. He comments that, “They have not yet reached their seasonal lows so do you think the current recommendations could go lower and, if so, by how much?”
Larry: No, I do not. It is already July 29 and the seasonally weak period for the precious metals begins around the third week of June. So here we are at July 29, halfway through the seasonally weak period, and gold rallied from 1,240 up to 1,310. So it is probably keeping gold right now from going maybe a little bit higher but I do not think it is a big factor. I really do not. I think the rising geopolitical concerns are a much bigger factor than the seasonal, so-called seasonal weakness in gold.
Mike: Okay, Ralph has a question. He says, “Larry, earlier you had mentioned that you feel that you could still double our money this year even though performance has been a bit off lately with some of the stops. Do you still feel that way, a double would be in the cards?”
Larry: Well, we have got some major moves coming up so, yes, I am confident in that.
Mike: Okay, James would like your comment on, “How will the mid term elections upcoming this year affect the markets and the price of gold?”
Larry: Right now I think the market… I do not think any market really is watching domestic issues much at all. It is really an international situation right now. The markets and the traders and the hedge fund managers I speak to are all concerned about Europe, they are concerned about the rising geopolitical tensions all over the globe, and I do not think they are really that focused on the domestic political situation at the moment. That will probably change but I do not see any major impact in the mid term elections on any of the markets, especially gold and silver.
Mike: Okay, Joe would like to know, “Will you trade any of the Asian markets in the future for this service?”
Larry: No, this service is really dedicated to gold and silver trading. We will occasionally take a look at energy and maybe a unique situation like the euro but the Asian markets are covered in my Real Wealth Report.
Mike: Okay, a similar question to that, “Hi, Larry. When you say Asian is booming, which country in particular is best to invest in with respect to similarities to the U.S. market, quality of life?”
Larry: That is such a personal opinion. It is hard to say. I live in Thailand. I think everybody knows that. Despite its political instability, it is a great country. It is centrally located. In two hours’ time I can be in Singapore, Kuala Lumpur, Delhi, Doha. I can be in Dubai in five hours. I can be in Beijing in five hours. That is one of the reasons I live here. I think Malaysia is very, very promising going forward and it is hard to say. Malaysia also has some wonderful retirement programs for foreigners, more so than Thailand. But I would not live in China. I would not live in Vietnam. I would not live in Cambodia, that much I can tell you. They are just not far enough advanced these days and China, I would live in Shanghai. I do not have a problem there and I have no problems with Hong Kong. But mainland China outside of Shanghai, it is still a communist country.
Mike: Okay, here is a question from Francis. “Larry, what is your take on the direction of the Swiss franc?”
Larry: The Swiss franc is tied to the euro, has been for a couple of years now. They tied their fate to the euro which was a dumb idea. When they start to see the euro really crapping out, the Swiss franc is going to have to abandon that peg and it will probably rally once it is depegged from the euro.
Mike: Thomas would like to know, “What happens if our government again forbids citizens to own gold?”
Larry: That is never going to happen. It is just not going to happen. I do not care what the fear mongers tell you. It is not going to happen. All the gold in the world means nothing to our government. It is bupkis compared to the debt problem that exists. By bupkis I mean, it is an ant on an elephant’s ass. Excuse my language, but it cannot possibly cure the problem. What they are going to want to do is increase taxes, confiscate some of your wealth through one-off taxes such as the IMF is implementing, a one-time 10% tax of your entire net worth and probably stuff your retirement accounts with Treasury bonds. Gold means nothing to them. They want to get rid of gold. They do not want gold. They want an electronic currency so they can follow every move you make.
Mike: Another question from Steven. We only have time for a few more. Steven would like to know, “Are you still in favor of using the Hard Assets Alliance to purchase gold and silver?”
Larry: Absolutely. It is who I use myself. It is by far my top recommended dealer.
Mike: Here is a question from Chris. He says, “Larry, standing by for further recommendations. It would certainly seem that the risk/reward potential is in our corner. Please comment, however, on the optimal time to buy physical bullion and whether equity in bullion positions, recommendations in palladium or platinum may also be forthcoming.”
Larry: Well, in my Real Wealth Report a few months ago I gave the recommendation to start getting your feet wet again, back in the water, buying physical gold, silver, platinum, and palladium. You should be accumulating physical precious metals and platinum and palladium at current levels. You should not be backing up the truck and just piling it on. You should be 5%, maybe 10% of your total investable assets should be in gold or silver in physical bullion right now, a little bit more in platinum and palladium and between 1,300 and 1,400, you want to be steadily acquiring more. This the time and place to do it. Now if gold falls back down to 1,240, just buy a little bit more. Use an average down approach. You have got to be buying now. But, by the same token, do not run out and buy all your gold at once.
Mike: Okay, here is a question from Eli. He says, “Hi, Larry. I have been following your directions and I am delighted with the results. However, within minutes of your instructions to buy Silver Standard Resources, it went vertical and by the time I was able to act on it, it had gained so much I was hesitant to jump in. Can you provide guidance for those of us who may have missed the boat? Are we now left to buy at the market or what is your guidance on what to do in that situation?”
Larry: Well, the best thing to do is to go to market. I know that causes some anxiety because you see it jumping already. But that is really the best thing to do. That said, you can use your own discretion if you want to wait to a pullback. I can and will try to give more detailed instructions if you are not able to act properly on one of my recommendations. But, that said, the best thing to do is get that position into your portfolio as soon as possible. Yes, you might pay up. And, also in the future, I will try to give limit orders on the upside as well such as pay no more than xx for a particular position. That may help some of you. But again, that said, when I put out a recommendation, you want to get in it, okay? Not every recommendation is going to be a winner but you want to follow my recommendations as closely as possible.
Mike: Okay, Ian has a question and a comment. “Hi, Larry. I have been a subscriber for a long time and keep up the great work. With the euro selling off, the dollar will, in the short term at least, has been going up. Will this affect the gold price? As the dollar goes up will gold go up with it or will it go down as is sometimes the case?”
Larry: That is a great… Yes, great question because it brings to bear something I have been saying for a while now. In the next phase of the bull markets in gold and silver you are going to see many occasions when the dollar goes up right along with gold and silver which most people, most analysts say is impossible. Case in point, from the sharp low of a week or so ago around 1,240, 1,250 in gold up to 1,310, 1,316 was the high this morning before we fell back a little bit, that entire time, a $70 move in gold, the dollar was strengthening. They went up together. That is signs of underlying bullishness for gold. When gold goes up along with the dollar, that is very, very bullish and that is what you are going to see down the road. So do not, do not worry if the dollar goes up. Do not jump and sell your gold because you hear someone saying the dollar is up today. They are going up together for a reason. That is flight capital out of Europe and Russia by savvy Russians who want to get out of Russia and others around the world, Africa and some other places. It is going into the dollar and it is going into the U.S. stock market and it is going into gold at the same time so they are all going up together.
Mike: All in unison.
Okay, well that is about all the time we have for today but if we were not able to get to any of your questions or comments or if you have additional questions, remember you can always send your questions directly to us. You can just email them to the Gold and Silver Trader editor’s mailbag which you will find right on our website and Larry can either answer those questions directly or perhaps in our next online strategy briefing.
So with that said, thank you, one and all, for joining us on this briefing today for Gold and Silver Trader. And, Larry, as always, thank you for your great comments and insights as well.
Larry: Thank you for hosting, Mike, and thank you, subscribers, for your loyalty and for joining us today. Thank you.
