Watch Out for Gold and Silver... Rising Up!

http://musingsonwallstreet.blogspot.sg/2012/06/gold-equities-is-making-reverse.html

On 6 June 2012, I wrote that gold equities could be moving up again. NUGT or 3x Direxion Gold Equities ETF was at around USD13 then. It dipped drastically and is now hovering at 12. This 3x ETF is very volatile and not for the faint hearted!

Gold is rising again. The trend has reversed since 30 July 2012. On that date, XAUUSD was USD1620 oz. It is now USD1637 oz.

XAGUSD is also making a come back. Silver's intermediate (i.e. trend that lasts several months) buy signal occurred on 6 Aug 2012 at USD27.93 oz. It is now 29.35 oz.

The fundamental reason is that if ECB were to buy bonds and the US start QE 3, EURUSD will fall and so will USDSGD. Gold and Silver will rise because it is the only currencies that cannot be printed.

As the stock market is struggling to break higher, gold and silver are breaking new highs. Hence not every risk asset is perfectly correlated.

If you wonder whether it's better to buy the gold ETF (UGL or GLD) or gold stock ETF (NUGT or GDX), read both articles:

http://seekingalpha.com/article/793961-gold-vs-gold-stocks-part-i

http://seekingalpha.com/article/810681-gold-vs-gold-stocks-part-ii

I do not agree that gold stocks will continue to underperform gold futures. Gold miners can produce cashflow and pay dividends because the gold that they mine and sell can turn into profits, whereas if you buy gold bullion, you will never receive dividends. However, if your exposure to equities in your portfolio is already > 50%, it may be better to hold gold bullion for diversification rather than gold equities. I agree with the author that in 2008, the indiscriminate sell-off of equities resulted in gold miners being blasted downwards by 70% while gold bullion fell by half the amount (35%). So I prefer gold bullion to gold equities personally, purely from a diversification angle.

Entitlement Society in Europe and the US

Looks like I'm not the only person who disdains the social welfare model in Europe and the US. Marc Faber is ripping at this.

http://marcfaberblog.blogspot.sg/2012/08/entitlement-societies-growth.html