Inflation with a dash of middle east instability

Gold and silver are showing strong signs that they intent to put a hurting on the shorts. As I type this, silver futures are powering above 52 week highs and gold futures are showing strength, while the dollar is anything but strong. Backwardation has largely disappeared from the silver futures this evening, but I believe we will be seeing more of it in the futures as people scramble to secure physical silver and storage becomes worthless. The dollar is bouncing around below the 77.70 level and seems ready to plunge to 75 baring any sort of European currency crisis – I know what are the odds? In any case, should the dollar rebound it will promptly be slapped back down via a bearded man with a printing press.

Add to this the instability in the world: governments are being overthrown, currencies depreciated in a race to the bottom and the rich of the world are nervous and looking for places to hide their cash. In addition to this ordinary people are looking to precious metals to protect their wealth – especially in China – which is good for the PM’s but especially silver. OH, did I mention large short positions – as people seem to love to hop on that bandwagon asap.

Here are the earnings for the group:

2/23: AUY; 2/24: NEM, MFN, GG, BVN; 2/25: IAG; 2/28: CDE; 3/3: SLW, SSRI; 3/4: NGD

Below is the Gold bugs index which has clearly broke above its 50DMA and looks poised to run higher with all the MA’s lining up below.

 

Out of this earnings group I have three charts which I would like to share. These are stocks which I strongly believe will do well with rising PM prices but have lagged the group so far. They all have yet to report earnings.

 

 

 

I have a position in NGD and added on Thursday. I like this stock both from a technical perspective – the consolidation under previous resistance – as well as the macro perspective outlined above. Again, all of these companies have yet to report and holding into earnings certainly adds risk but they are lagging the sector and present an opportunity to participate if you are not already long. Inflationary pressures should also see this sector outperform, as you can’t print more gold.

For those of you who continue to doubt inflation is here, and will continue to get worse consider the following:

As a final note, some people like to point to rising yields as a sign of expected economic recovery. I subscribe to the belief that Ben is beginning to lose control. Besides with your bonds being denominated in fiat currency which is being created all the time, and an increased risk of default would you not want additional yield to purchase the garbage passed off as a risk free investment?

Disclaimer: Do your own due diligence before purchasing.


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