Bear trap vs. Bull trap

There is an interesting article about possible bubble in precious metals. The charts look very convincing but… Please, read the article first :)

I wonder what is the correlation of those charts. It’d seem rather high on the positive side.

Is the public really in gold and silver?

I talk to family, friends and friends of friends and nobody is in, yet. Some talk about it but no one owns an ounce. The public is very skeptic of gold and almost completely unaware of silver. Every time I hear about gold from a member of the public, which is not that common, is that it’s a bubble and that the price is too high. My experience tells me the public is sill fearful of precious metals and doesn’t really know how to invest in this sector.

Are institutional investors in?

Not really.
Mutual funds? On polish market there are 3 funds that invest in gold but they aren’t very popular. In the world the situation is similar i.e. gold mutual funds are the minority among all funds.

Pension funds? Not at all, not even on the global scale. They weren’t in in 1993 and they aren’t now. It’s true pension funds managers are encouraged to join the PM bull market and at some point they will but it will happen close to the top, about 3-5 years from the top – as always ;)

There are some hedge funds out there that invest in precious metals but they mostly trade/speculate with paper – physical gold or silver is not their thing.

Who’s really in PM sector?

Smart money i.e. George SorosBill Gates, asian Central Banks or me for that matter ;) but who else?

If PMs are so much under-owned (1-2% of all the investment capital) then how come there is/was a bubble in PMs? It just doesn’t make sense. The charts look impressive and scary but if there’s fear then were’s greed? ;)

Nothing would make me happier than prices of gold and silver falling by another 30-70% from current levels as it would be fantastic opportunity to buy cheap for the last time in the next 5-10 years.

Is there a mania in precious metals?

I guess there is a bit of mania among the so-called gold and silver bugs. Unfortunately they discard all signs of the natural free market deflationary pressures as simply manipulations of hedge funds and/or central banks. That is childish in my view but it doesn’t negate the fact that gold is the ultimate safe heaven i.e. insurance from the government inflation and silver as a commodity is the best play for an early recovery.

I’m clearly on the bear trap side of the precious metals market. Dear reader, which side are you on? ;)


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Filed under Analysis, English, Investment

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