1. Market Update
Given all the potential risks in the markets, you need to own gold and other alternative investments. The extreme and worldwide experiments by central bankers are a huge threat to our society although they claim to save us with their negative interest rates and waves of fiat money liquidity. In the end not even one of those experiments has ever worked out in mankind's history. Why should it this time? Therefore one of my favorite investment remains gold.
Finally the gold-market has started to work off its overbought situation after the spectacular start into the new year. Besides any short-term noise $1,046 very likely marked the bottom of the five year bear-market and gold should already be on its way towards $1,500. The fact that gold has held up well above $1,000 during this necessary bear-market is a hint of extreme strength and underlying buoyancy to me. Now that optimism is falling again remain patient and wait for the dip towards $1,180 - $1,215.
Besides gold and silver I am interested in mining stocks as well of course. Today I am going to present another very interesting silver small cap which will be followed by some senior and junior gold stock recommendations during the next couple weeks.
Finally Bitcoin and cryptocurrencies are become more and more exciting. Today I have prepared a lengthy introduction to Ethereum which could change the world as we know it.
2. Bitcoin - still bullish but momentum is fading
Bitcoin continues its sideways consolidation below the massive resistance zone between $470 and $500. Currently it is dancing around its 50MA ($443). Unfortunately an important trend-line has been broken last week. The Bollinger Bands are still moving sideways predicting that soon or later a big move will come. Basically everything is still bullish but I don't like the ongoing behavior. A pullback is gaining probability here. Investigating the past of Bitcoin I realized that the exponential 200 day moving average is more helpful for Bitcoin's technical analysis. Therefore I am now using the pink EMA200 ($403). Should Bitcoin start to correct this line will become the logical first target. That would mean at least a 10% correction is possible. I am not willing to give back our hard earned profits. We can always buy back later. Therefore I recommend to move the stop to $435 (last week's low). This stop will move us to the sidelines as soon as Bitcoin should start to plunge. In that case we should buy back our Bitcoins below $405.
Action to take: Hold your Bitcoins and let your winnings run. Don't buy here.
Stop Loss: Move your stop to $435 (if we get stopped out buy back below $405)
Profit Target: $800
Timeframe 6 -18 months
Initial Risk($80) / Reward($430) = 1 : 5.4 (very good ratio!!)
Position Sizing: Don't risk more than 1% of your equity.
3. Ethereum - the hottest story in cyberspace..!?
Ethereum is a public blockchain platform with programmable transaction functionality.
Ethereum includes a digital currency called "Ether". The price in US-Dollar for this cryptocurrency "Ether" (ETH) is up more than 3,700% over the last six months! Ether has a lot in common with the famous digital currency Bitcoin. Both are a purely digital store of value and means of exchange that cannot be counterfeited. Both are implemented so that no one can manipulate the currency supply. Both can be transferred around the world, like email, and in a very final way, like cash. Both have value today because users expect them to have value tomorrow, and because they can do things traditional money can not.
Ethereum's other half is a complete programming language, sometimes called EtherScript. A programming language is how people tell computers what to do. Computers are not able to guess at what humans really intend, so instructions written in any programming language are precise. There is no ambiguity about how a computer will run a program. Under the same conditions, it will always run the same way. This feature would be great to have in legal contracts and human law. With EtherScript you can write such agreements.
In short, Ethereum is both a digital currency and a programming language. But it is the combination of these ingredients that make it special.
I totally understand people who distrust new technology and the anonymity of the internet. But I don't think extreme skepticism is justified. As some of you might know I am a music producer since 1994. I remember very well all the talks even and especially among the professionals back in 1999/2001. Nobody could imagine that mp3s would be able to kill the CD and drastically change the music market. Today even mp3s are close to dead. People are now streaming music. They don't even pay for it anymore. Maybe a flat-rate but more often they just have to watch a commercial which they can skip away after 4 seconds to listen to the music for free. As a producer and copyright owner you get paid only fractions of a cent these days for any stream/play! Back then many of my producer colleagues were shouting about the low sound quality of digital recordings and we're unable to imagine the huge change that was directly upon us. This same denial had been going on when the CD entered the market killing the vinyl in the early 80ies.
These experiences have taught me to always be open minded and accept that one of the most important laws in our life is never-ending change. The ones who can adapt are likely the ones who succeed or as Darwin once put it: It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.
Today thanks to the internet human knowledge is growing faster than ever before (although we still behave like monkeys). In our digital information age Ethereum has a huge potential and could become the new basis for private and public law. We could get rid of all those commissions for lawyers, notaries and banks for example....
My simple point is: Be open minded, take the time to learn more about these exciting new developments. Bitcoin could bring us the long anticipated free market money. Ethererum might be even better. Who knows. Obviously don't invest large amounts of money. But you can start very small to learn more about the technology and to get comfortable. You can start with less than $1!! I am going to track Ethereum as well and will keep you updated.
4. The Midas Touch Gold Model bearish since May 23rd
My Gold Model finally changed to the bearish mode yesterday. The trigger was a new sell signal on the weekly chart for Gold.
Compared to my last public report we have two new bearish signals:
Gold in USD - Weekly Chart
Gold Volatility CBOE Index
Two signals moved to neutral:
Gold in $, €, £, ¥
GDX Goldminers Sentiment
The model has a strong trend following tendency so it is not surprising that we got this bear signal kind of "late". Gold is already down $60. But this might just tell us that the current move down is only a counter trend move.
However the bulls have quite some work to do before the model will shift back to a bullish result.
5. Gold - Point & Figure chart support around $1,180 - $1,190
Looking at the P&F daily chart for gold tells us that a pullback towards $1,180 - $1,190 is still very likely but at the same time should be the worst case. A lengthy sideways consolidation in the coming weeks and months could push the support zone higher but gold will very likely test the blue uptrend-line before the next rally can start.
6. Gold - finally has started the long awaited pullback
The summer doldrums are right in front of us and gold finally is acting along its seasonal pattern. According to the statistics over the last 40 years gold should find a low within the first two weeks of July. Sometimes it happens earlier and sometimes it can take until August. But that's the timeframe to get ready and to finally buy the ongoing pullback.
No matter what short-term forecast I draw into the chart the only thing that will make us money is to "buy low and sell high". Since failing below last year's high at $1,303 gold is nearly $70 lower! That's good but probably not enough after the $257 rally since last December. The daily chart is getting oversold and should be ready for a short-term bounce - maybe even back towards $1,260. If the sell off doesn't stop here gold would be sliding down along its Bollinger Band looking for next support around $1,220 - $1,225.
Yet the weekly chart is still very overbought and needs much more consolidation/correction so I remain patiently waiting for the chance to buy the dip between $1,180 and $1,215. Do the same!
Action to take: Wait until you can buy the VelocityShares 3xLong ETN (UGLD) below $10.00
Stop Loss: $8.50
Profit Target: $18.25
Timeframe: 8-10 months
Risk ($1.50) / Reward ($8.25) = 1 : 5,5 (very good ratio)
Position Sizing: Don't risk more than 1% of your equity
Investors should buy physical gold with both hands if prices move below $1,190 again. As well buy silver below $15,80. Buy both metals until you have at least 10% of your net-worth in physical gold and silver. But do not over expose yourself neither. 25% of your net worth should be the absolute maximum. If you want to be more aggressive put 2/3 into silver and 1/3 into gold.
7. Fortuna Silver Mines - Buy the coming pullback/dip
As promised I am going to present another silver stock that I like. Probably due to its great fundamentals and a very strong management Fortuna Silver Mines has held up pretty well during the five year silver bear market. From its January low the stock has been up 235% and is close to its all-time high. But some form of a pullback has likely started which might bring it back towards one of the typical retracement-levels. I think this stock is a great buy on any larger pullback/dip. I do recommend to use a "scale-in" tactic by placing at least two buy limits.
Action to take: Buy Fortuna Silver (FSM), 50% below $4.70 and 50% below $4.25
Stop Loss: $3.00
Profit Target: $7.50, $9.50, $14.25
Timeframe 12 - 48 months
Initial Risk($1.47) / 1st Reward($3.03) = 1 : 2.06 (acceptable ratio) Position Sizing: Don't risk more than 1% of your equity.
8. Portfolio & Watch List
9. Long-term personal beliefs (my bias)
Officially Gold is still in a bear market but the big picture has massively improved and the lows are very likely in. If Gold can take out $1,307 we finally have a new series of higher highs. If this bear is over a new bull-market should push Gold towards $1,500 within 1-3 years.
My long-term price target for the DowJones/Gold-Ratio remains around 1:1. and 10:1 for the Gold/Silver-Ratio. A possible long-term price target for Gold remains around US$5,000 to US$8,900 per ounce within the next 5-8 years (depending on how much money will be printed..).
Fundamentally, as soon as the current bear market is over, Gold should start the final 3rd phase of this long-term secular bull market. 1st stage saw the miners closing their hedge books, the 2nd stage continuously presented us news about institutions and central banks buying or repatriating gold. The coming 3rd and finally parabolic stage will end in the distribution to small inexperienced new traders & investors who will be subject to blind greed and frenzied panic.
Bitcoin could become the "new money" for the digital 21st century. It is free market money but surely politicians and central bankers will thrive to regulate it soon.
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