Printer Friendly

eMail Article

September 05, 2008

Sell the First of May, Return after Labor Day
by David Morgan

The above adage is well known by precious-metals investors; in fact I used this quote in one of our monthly reports. I recall how many inquiries we received, asking if indeed I thought this summer (2008) would show the pattern similar to most summers for the precious metals. At times I questioned which direction the metals would break, but stated, as mentioned in last week's column, our analysis forecast a long correction going into August 2008.

Having such a strong upward movement in the precious metals from August 2007 after a very big washout (similar to the one we are now experiencing) to March 2008, many are questioning if this is again possible. We have just passed September and Labor Day is behind us; should we get back into the precious-metals markets?

Indeed we have never left entirely. We did hold some buying power available and suggested to our readership that they purchase throughout the summer and into the end of September 2008. Right now as I write this week's missive, the precious metals are at a point I consider "do or die," meaning it looks from this vantage point like the metals are retesting the recent lows, and those of us that are still bullish think the market can bounce up from here.

However, it is not a strong financial environment: stocks were broadly lower on Thursday; the major market indices were all down around 3%; the S&P 500 lost 3%, the Dow lost 3%, and the Nasdaq lost 3.20%. Selling pressure was relatively even across the board. Gold and silver were off about 1%, gold doing better than silver. The XAU (Gold and Silver Index) was off 4% more than the broad market, not a good sign. Bottom line, all sectors were lower. In other words, no place to hide other than the bond market.

Coming back to the precious metals, it is difficult to gather enthusiasm when each passing day seems to bring lower prices, but this is exactly the type of sentiment that signifies bottoms. Can I guarantee this is the bottom? No I cannot, but all those calling for the end of the commodity cycle are not sure either.

But there is no lack of interest on the commodity front; in fact, power and control are combining. The Chicago Mercantile Exchange has acquired NYMEX, as stated below.

CME Group Inc. has completed its acquisition of NYMEX Holdings, Inc. This creates a company with pro forma 2007 annual revenue of $2.7 billion and average trading volume of approximately 14.2 million contracts per day. Customers from more than 85 countries trade CME Group products, primarily electronically. Corporate headquarters of the combined company will remain in Chicago. "We are extremely pleased to complete our transaction and welcome NYMEX and COMEX into CME Group," said CME Group Executive Chairman, Terry Duffy.

Duffy continued, "This is another milestone for CME Group and NYMEX in our long and successful histories. Together, we will continue operating the largest and most diverse derivatives exchange in the world. We are extremely grateful for the support of NYMEX shareholders, members and employees. As a united company, we are well positioned for a new phase of growth, innovation and product development that will benefit our customers, shareholders and market users around the world." (Emphasis mine)

I remain a bit skeptical as to what further derivatives and innovative "products" can be developed that would benefit us. I have been around much of the world, speaking about the dangers of the derivatives markets. In fact, it seems to me, with the failing of many derivatives in the financial sector that began in August 2007 and continues today, most of us financially oriented are fed up with the derivatives markets. Well, perhaps by consolidating power and managing the markets closely, who knows -- some might just benefit.

It is an honor to be,

David Morgan
Silver-Investor.com

Mr. Morgan has followed the silver market daily for over thirty years. Much of this Web site, www.silver-investor.com, is devoted to education about the precious metals.

Mr. Morgan has been published in The Herald Tribune, Futures magazine, The Gold Newsletter, Resource Consultants, Resource World, Investment Rarities, The Idaho Observer, Barron's, and The Wall Street Journal. Mr. Morgan does weekly Money, Metals and Mining Review for Kitco. He is hosted monthly on Financial Sense with Jim Puplava. Mr. Morgan was published in the Global Investor regarding Ten Rules of Silver Investing, which you can receive for free. His book Get the Skinny on Silver Investing is available on Amazon or the link provided. His private Internet-only newsletter, The Morgan Report, is $129.99 annually. To suscribe to the Morgan Report click here.

Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Because individual investment objectives vary, this Summary should not be construed as advice to meet the particular needs of the reader. Any opinions expressed herein are statements of our judgment as of this date and are subject to change without notice. Any action taken as a result of reading this independent market research is solely the responsibility of the reader. Stone Investment Group is not and does not profess to be a professional investment advisor, and strongly encourages all readers to consult with their own personal financial advisors, attorneys, and accountants before making any investment decision. Stone Investment Group and/or independent consultants or members of their families may have a position in the securities mentioned. Investing and speculation are inherently risky and should not be taken without professional advice. By your act of reading this independent market research letter, you fully and explicitly agree that Stone Investment Group will not be held liable or responsible for any decisions you make regarding any information discussed herein.

Copyright © Silver Investor 2006-2009 All rights are reserved.

Image rendition and html coding Copyright © 2000-2009 SafeHaven.com

« BullionVault.com -- Buy gold online - quickly, safely and at low prices »
« Honest Money: A History of U.S. Gold & Silver Currency -- by Douglas V. Gnazzo »

« Opinions expressed at SafeHaven are those of the individual authors and do not necessarily represent the opinion of SafeHaven or its management. Articles are available via RSS/XML. Please visit RSSHelp for instructions. »