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Quiet Guy

Bounce Ahead?

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Regular readers may recall that I have become quite bearish about PMs over the next year or so. That doesn't mean I won't listen to contrary opinions. There seems to be a breaking story about short covering in PMs:

http://money.msn.com...as-shorts-cover

It's finally happening. After being beaten down for so long, gold and silver are breaking out in what appears to be the first uptrend initiation since July 2012.

There are many catalysts. As I've written about recently, inflationary pressures are building in the global supply chain as central banks look poised to repeat the mistake of keep money too cheap for too long. Also contributing is a fresh rebound in global economic activity as factories spool up to replenished dwindling inventories. The U.S. dollar has been weakening.

But above all, Wall Street types are fueling the surge as overextended short positions -- bets against silver and gold -- are quickly being closed. That suggests the move higher is just starting.

Does anybody think there's anything in this? At the very least, there seems to be scope for a short term bounce.

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Does anybody think there's anything in this? At the very least, there seems to be scope for a short term bounce.

You can see where the breakouts are:-

http://stockcharts.com/def/servlet/SC.pnf?chart=$gold,PLTADANRBO[PA][D][F1!3!!!2!20]&pref=G

It's on the cusp of this $1340/50 area breakout. The higher ones are fairly obvious too if it gets there before the big April breakdown around $1540.

For the time being it's still a counter trend rally within a longer term bear market/downtrend.

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How stable / safe is 'bullion vault' these days?

Bullionvault is as good as it gets, for a storage facility that doesn't have a little box with each investors' metal in it, available for inspection upon demand. As you can pick your country of choice CA / UK / US / SG / CH then you at least can take your pick of which country is least likely to steal your money. (My bet is on CH or SG being safest, personally).

Stability - excellent.

Safety - depends on the thieving politicians of the host country.

I would still counsel anyone to maintain a position in physical metal in their own possession, first. Then one can buy a position for trading the AU / AG ratios or for the excess holdings if one is very wealthy and cannot reasonably store the whole of one's position. (Not me, I am afraid).

To reply to the original poster, I would say it's a bounce. The Chinese and Russians will decide if this bounce turns into a take-off.

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Bear market rally until it can hold above $1350 for a few months I'd say. There was indeed a rush to cover Shorts, I was lucky to get out with just a £50 loss since I moved my Stop to the entry. I got my physical stack and I'm just waiting for some confirmation as to which way it wants to go. We're either set for another tumble to $1050 - $1150 or we get propelled to $1500 - $1600 IMO. I'm considering going both long and short out of the money in GLD options right now. The volatility building should make probability of profit quite high. Worst case scenario would be sideways for the rest of the year but I think it looks unlikely.

DYODD and tread carefully, this is a potential game changer what happens in the next 2 months.

Edited by Renewed Investor

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