Anyone Talking About The Shiny Stuff?

In the past few days, the news headlines have been dominated by financials and technology.  First, there are new taxes being proposed on financial firms.  We bailed them out and now it’s payback time.  At least, that seems to be the attitude in Washington.  No more too big to fail.  Then, we have earnings.  Several financial firms are reporting their earnings in the next few days.  JP Morgan kicked it off this morning.  As a group, financials have performed pretty well this year.  But, besides financials, technology have also been the talk of the town.  Smartphones were extremely popular for Christmas gifts and with Windows 7 causing a technology upgrade, these stocks have done very well also. Then, we get word that Google wants to pull out of China because they are concerned about the Chinese government hacking into their systems.  Other American companies admit the same but have been too scared to say anything in fear of losing business in China.  All of this news in the financial & tech industries has caused investors to forget about some of the sectors that dominated the front page in 2009.

Gold, which was up about 25% last year, is off to a good start in 2010 as well but isn’t getting the headlines and I believe it’s on the verge of a big move.  The dollar, which had a nice run late in the year has given back almost half of its gains but it’s not newsworthy anymore apparently.  I think it’s still very relevant as are interest rates and gold will certainly be a mover in 2010.

You can see from the picture above that gold has been making higher lows for some time but has just recently been making lower highs as well.  Something will give and I think it will be soon, just like sugar late last year.  With the stock market overbought in the short-term, investors may look to re-allocate to another asset class and gold could be it.  I’m bullish on lots of different metals but I wanted to highlight gold since I get so many questions about gold generally.


5 Responses to “Anyone Talking About The Shiny Stuff?”

  1. 1 Matt Gravina January 15, 2010 at 9:39 am

    What are your thoughts on platinum and palladium? As I am sure you know both recently had related etfs launched that hold the physical substances. Do you think that the creation of these etfs has the ability exacerbate price moves? I used to listen to your radio show on podcasts, and I have been missing it greatly! Thanks for any input.

    • 2 keggerss January 15, 2010 at 4:58 pm

      I like both of them and actually like them better than gold. Very industrial. They will have their pullbacks as the economy fluctuates but longer-term the world can’t live without these.

  2. 3 Jon January 15, 2010 at 11:49 am

    There has been little new on the gold front. Goldman Sachs stated gold will average $1,261 an ounce in 2010 and $1,425 an ounce in 2011. I missed a big move in the platinum stock I monitor PLG from $1.60 to $2.50.

    Anyway, I agree with you, resources over the next 10 years are going to just become more scarce. I think it is the only place you could park money and have it grow year over year. I recently heard of a biding war between a mining company and China to buyout a mine in Canada. I think we are going to see a lot more of that going forward. China just surpassed us(USA) in the car market and those resources have to come from somewhere. Serving 1.8 billion consumers will put a huge stain on resources I think. And lets not forget India. It could be played two ways, accumulate the lows as the price grows or buy on lows and trade on highs, either way I feel it will be a very profitable sector.

    Am I thinking this through correctly?

    Jon in Tampa

  3. 4 Robert Fauvell January 16, 2010 at 6:42 am

    Go to US Global Investors website, weekly investor alert, and check out the 10 year periodic table of commodity returns. Mouse over the ten commodities listed, you will see that everytime the bottom commodity for the year end reporting finished up the next year. Also the top commodity for the year end reporting finished lower. Looks like a good set up for a pairs trade yes?

    This year Coal was at the bottom and Copper at the top.
    So I think short something that tracks copper futures closely, some copper stock PCU?

    At the sametime go long the etf KOL?

    Seems pretty safe bet that Coal companies or the ETF KOL should move up this year.

    your thoughts?

    • 5 keggerss January 16, 2010 at 6:57 am

      Good observation Robert. My only reservation is that those two commodities and the stocks that follow them are so correlated to each other that a pairs trade I don’t think will work over a longer time frame. With that said, I love the coal stocks and I think KOL is the way to play it. In addition, look at PKOL. On KOL, I’d wait for a pullback to $35-$36.

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