Comments: Gold and Gold stocks continue falling. But some support may be found soon around the HUI 300 area. The selling generally seems like it's starting to get a bit overdone. Today featured the highest reported monthly trade deficit on record ($68 bil.) along with a (failed) terror attack on the U.S. embassy in Syria. It's hard to imagine Gold dropping too much lower with this kind of news in the background.
The key bearish factors at the moment are:
- A dearth of physical/jewelry demand, especially in Asia
- dovish noises coming from Iran, and
- a suspected minor technical upside breakout in the USD
The first issue may require lower prices to resolve, but the other two could potentially be reversed at any time. I would look to play a bounce as we approach the 300 HUI area. A bounce, if it develops, could go as high as 320 HUI, but, in my opinion, not higher.
Sentiment: bearish but expecting a bounce shortly
Portfolio PM Exposure: 66%.
2 comments:
Mike, I have a couple of questions. You can reply by e-mail if you prefer. First, are you trading other markets than PMs or do you concentrate solely on PMs? Sometimes I think I am spread too thin (precious/base metals, energy), but other days I'm glad to have the mix (when gains in one sector offsets losses in another...recently they all seem to be moving together...down).
Secondly, if you also trade other sectors, what percentage of your PF is allocated to PMs? I am not completely sure when you give you Portfolio PM Exposure whether that is your entire PF or if you have a separate PF for PMs vs. other sectors.
What kind of vehicles do you prefer to use? Individual stocks? Funds? ETFs? Just curious as to whether you have found vehicles that work well for you. I own mostly juniors which are great when the market is going up and a trap with no escape hatch when it's going down.
What's your timeframe? I get the impression that you are overall long-term oriented, but trade at least some of your PF on swings. Would be interested in your thoughts there. Right now, here is my own allocation:
Precious Metals 42.66%
Energy - 32.57%
Base Metals - 17%
Other - 7.77%
Cheers,
Paul
p.s. Thanks for the comments on my blog and adding the link. I will add one to your blog from mine.
Paul,
Thanks for your note, it was great to hear from you again! I will e-mail you separately after a day or two, but it might be good to reply here to answer your questions about my trading scope and the focus of my blog, as I agree that it is not perfectly clear based on the content alone.
1. First, are you trading other markets than PMs or do you concentrate solely on PMs?
A: I concentrate solely on trading precious metals. Ofcourse to do that, I also keep track of related areas, such as oil, the 3 major currencies and base metals (copper) as well as having a general idea of the status of the overall stock and bond markets. I firmly believe that a sector like precious metals requires undivided or nearly undivided study and attention. The volatility and quirkiness of this sector make it an iffy proposal for the casual or occasional dabbler.
Having said that, I think it is quite possible to trade related sectors like you are, especially with a bit of practice. For instance you mention a PM, base metal and energy portfolio. As all 3 are fairly closely related, in my opinion it is quite possible to have a slightly broader focus like that and still be successful, especially after some practice, though there are both advantages and disadvantages to that approach as you noted. I myself also occasionally do a base and oil/gas trade, though not with the same degree of success as PMs which are by far my main focus.
2. Secondly, if you also trade other sectors, what percentage of your PF is allocated to PMs? I am not completely sure when you give you Portfolio PM Exposure whether that is your entire PF or if you have a separate PF for PMs vs. other sectors.
A: That's a good question. Almost always, when I give my Portfolio PM Exposure, it the ratio of my portfolio investments in PMs to the total value of my portfolio, the rest of whcih is almost always cash: so Portfolio PM Exposure: 66% means 66% PMs and 34% cash. My portfolio is almsot exclusively PMs and/or cash. Occasionally, I will throw in an energy or base play, which may then constitute up to 5% of my PF, in which case I will just lump that in with my PM exposure. Once every 4 to 6 months, I will load up more heavily on energy or base, maybe up to 50/50 relative to PMs. In that case, I would report that separately (e.g., PM%/Energy%/Cash). Otherwise, it's safe to assume that the % less than 100 not allocated to PMs is cash or cash in settlement.
3. What kind of vehicles do you prefer to use? Individual stocks? Funds? ETFs?
I target mainly individual stocks. I will write a separate post soon about the type of stocks that are best depending on time frame and cycle. As a swing trader, I slightly favor medium to larger caps in the PM sector owing to their liquidity but I also typically have significant positions, say maybe 40% in the hotter juniors that are trading at over $5. I sometimes hold 2 or 3 less liquid juniors that I hold for longer periods and do not swing trade as much (they are typically in the $2 to $4 range, and even real penny stocks). I also sometimes play the same on breakouts. With these stocks, I think your description is right on though, i.e., "great when the market is going up and a trap with no escape hatch when it's going down".
I couldn't really argue with someone who holds an all junior portfolio--that's where the gains have been the greatest--but due to liquidity issues, that kind of portfolio is less appropriate for my trading style. In addition, I recently traded SLV and I will probably be doing so occasionally as it has good volatility, liquidity and no company risk. GLD, CEF and the UltraBull Profund specializing in precious metals have always been at the back of my mind, but I have never actually worked it into my portfolio.
4. What's your timeframe?
A: I am generally a swing trader, so my time frame is 1 day to 2 weeks typically, with my median time probably being around 3 to 5 days. However, because I swing trade a lot and because I concentrate only on PMs, it is only for brief periods when you will find me completely out of PMs and 100% in cash. In that sense, I am almost like a long term holder, except that I am trying to avoid the bumps along the way. With that said, I will occasionally hold less liquid stocks (e.g., illiquid exploration juniors) for a few weeks or even months.
Thanks again for your questions, it was great to be able to further clarify about the scope of my investments and the focus of my Blog. cheers,
T.
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