Author Archive: Zeal Research

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Silver Undervalued

| July 21, 2012 | Articles: Insights
Silver Undervalued

After being sucked into the general commodities correction, silver has been relentlessly drifting lower since late February. But this weakness has forced the white metal down to a very bullish place technically. Silver is now quite undervalued compared to prevailing gold prices, its primary driver. Thus it has great potential to rally mightily in the coming months to regain much lost ground relative to gold. Silver is a fascinating commodity that has won a fanatical following among traders. It is extremely volatile, with big spikes or plunges always possible. This makes it irresistibly alluring to speculators, who alternately pile in to ignite huge rallies before running for the exits to […]

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Precious Metals Summer Doldrums (4)

Precious Metals Summer Doldrums (4)

With gold, silver, and their miners’ stocks drifting listlessly near correction lows, the sentiment in precious-metals land is even more pessimistic than usual. Bears abound while bulls are now an endangered species. But interestingly, demoralizing consolidations are par for the course this time of year. Throughout most of their secular bull, the precious metals have suffered during the summer doldrums. Back in the era of wind-powered tall ships, the doldrums were the name given to the areas of the oceans near the equator where prevailing winds often didn’t exist. These periods of dead calm meant there was no wind for sails, trapping ships for days or even weeks. Many years […]

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SPX and 2012 Elections 2

SPX and 2012 Elections 2

After the US Supreme Court inexplicably redefined Obamacare to uphold its constitutionality, politics are very much back in the news. And with the all-important US elections only 4 months away, it’s only going to get worse. Interestingly, the state of the US stock markets heading into voting is likely to both predict and heavily influence the outcome. The markets’ impact on Americans’ collective psyche is vast. For most investors and speculators, this is pretty obvious. When the stock markets are up we feel more optimistic about everything, so we tend to spend more. Economists call this the wealth effect. And when the markets are down we feel more anxious and […]

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Junior Gold Exploration – part II

Junior Gold Exploration – part II

Over the course of gold’s secular bull the demand for this precious metal has skyrocketed. And as a result gold’s primary supply source, mine production, has been forced to respond. Thankfully with the price of gold soaring to all-time highs, there’s been no shortage of mining companies hitting the hills to look for the next deposit. As a result of more and more miners looking for gold, more and more gold is being found. And thanks to an industry-wide boost in capex to develop these finds, this bull’s exploration cycle has recently started to bear its fruit. This fruit is production growth for three years running, including a 2011 tally […]

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Gold-Stock Valuations show Gold Stocks are incredibly cheap

Gold-Stock Valuations show Gold Stocks are incredibly cheap

Gold stocks languish in a sentiment wasteland these days, left for dead by everyone but a small contrarian remnant. So naturally bears abound, their arguments dominated by the idea that gold miners’ costs are so high that they can’t make money anymore. Provocatively though, this notion is totally wrong. As gold-stock valuations reveal, gold miners are earning profits hand-over-fist at today’s gold levels. Valuations are the fundamental heart of stock investing, ultimately driving the vast majority of long-term performance. Investors buy stocks because they want a stake in companies’ future profits streams. The less they pay for each dollar of future profits, the better their ultimate returns. And the price […]

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Cheap Gold Stocks – part 3

Cheap Gold Stocks – part 3

Gold stocks have recovered sharply following last month’s panic-like capitulation plunge. But this embattled sector still remains incredibly cheap relative to prevailing gold levels, which drive gold miners’ profits and hence ultimately their stock prices. While it is very challenging psychologically to buy in deeply-out-of-favor sectors, the panic-like gold-stock bargains out there today are simply amazing. Speculators and investors have long bought gold stocks for one primary reason, to leverage the price of gold. Between the April-2001 dawn of today’s secular gold bull and 2008’s once-in-a-lifetime stock panic, gold stocks indeed leveraged gold beautifully. When gold rallied in major uplegs, the flagship HUI gold-stock index would generally amplify this metal’s […]

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Strong-Dollar Fallacy

Strong-Dollar Fallacy

After a shocking upset in Greece’s parliamentary elections, the US dollar surged dramatically. Soaring 5.4% in May alone, the world’s reserve currency won legions of fans among traders. “King Dollar” was universally lauded, with everyone jumping on the strong-dollar bandwagon. But this dazzling strength was merely a short-term phenomenon. Zoom out a little, and today’s “strong dollar” is a fallacy. Perspective is everything in the markets. Attaining it is challenging and takes a lot of effort, but the fruits are well worth the toil. We humans naturally tend to extrapolate the present and very recent past out into infinity, expecting short-term situations to continue indefinitely. So when prices surge rapidly […]

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Global Gold-Mining Trends 2

Global Gold-Mining Trends 2

It wasn’t long ago that global gold-mine production had fallen to alarming lows. In 2008 this bellwether supply source was on the heels of a 5-year 13% decline, offering the markets its lowest output in 12 years. And this precipitous plunge had left folks scratching their heads considering gold demand was on the rise and its price was entrenched in a powerful secular bull. Thankfully this 2008 low would mark a major turning point in global mine production. And a powerful new uptrend formed that has seen volume rocket to an all-time high in just three years. According to estimates by the US Geological Survey, in 2011 mine production was […]

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Euro to Surge

Euro to Surge

The fortunes of Europe’s beleaguered euro currency have been heavily influencing US markets. Both stocks and commodities have been battered down recently by overwhelming euro bearishness. This has proven seriously vexing for traders trying to focus on fundamentals. But the extreme euro pessimism worrying everyone is actually very bullish. This loathed, oversold currency is due to surge again. Today of course the great fear plaguing the euro is centered around Greece. This profligate, unrepentant debtor nation seems hellbent on not honoring its commitments to the rest of Europe which could force its exit from the eurozone. And though Greece’s economy is immaterial relative to greater Europe’s, traders are worried Greece […]

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Gold-Stock Capitulation

Gold-Stock Capitulation

Gold stocks have been pummeled mercilessly this month, their price action looking almost apocalyptic. The psychological stress spawned by such extreme weakness is intense, breaking the wills of this sector’s few remaining bulls. This week their selling cascaded into a full-blown capitulation, a mass surrender by weary investors. While exceedingly miserable, these events flag major long-term bottoms. Over the course of gold’s powerful secular bull, the gold stocks have been a sentiment roller coaster. Early on their gains were enormous, gold stocks even rocketed higher while the general stock markets plunged in a brutal cyclical bear. Though they were nearly obliterated in 2008’s once-in-a-lifetime stock panic, as expected they soon […]

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How does a Gold Bull Climax look like

How does a Gold Bull Climax look like

Gold has had a rough time lately, grinding relentlessly lower. Such technical weakness has naturally spawned increasingly bearish psychology. This has led to a fringe view growing in popularity that gold’s mighty secular bull has already given up its ghost. If these new-bear arguments are correct, gold’s secular bull had to peak last August. But was that latest topping gold-bull-climax worthy? Not even close. As the word describes, “secular” bull markets last a long time. In the stock markets, secular bulls and bears tend to run for an incredible 17 years each! Gold’s latest bull was born way back in April 2001, over a decade before its alleged climax in […]

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Fear and SPX Toppings

Fear and SPX Toppings

With the US stock markets surging nearly a third higher in just 6 months, the odds are rising for a major topping. As the best times to sell high, recognizing these events in real-time is very important for traders. But it is a big challenge due to the gradual way toppings unfold. An indicator that can really help is the famous implied-volatility fear gauges. They tend to exhibit unique and identifiable behaviors at toppings. This is counterintuitive at first, as the dangerous emotion of fear is rightfully associated with bottomings. Traders get scared when the markets sell off sharply, and fear flares as new interim lows are hit. Toppings, on […]

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Global Gold Supply 3

| April 28, 2012 | Articles: Insights
Global Gold Supply 3

Ever since the beginning of gold’s bull market, this metal’s economic balance has come under intense scrutiny. Demand has been on the rise as more and more investors have embraced gold as a store of wealth. And the supply chain has done its best to meet this growing demand. However considering gold’s sharply rising price over the last decade, it is clear that this market has been experiencing a major structural imbalance. And the supply side of the equation has proven to be a fascinatingly volatile realm, making it quite difficult to set the scale. Interestingly this supply volatility is somewhat of a new phenomenon, as the major supply sources […]

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China Commodities Drag

| April 21, 2012 | Articles: Insights
China Commodities Drag

Commodities have been sinking like stones since late February, an unusual divergence from the rallying stock markets. This relentless weakness has wreaked havoc on commodities sentiment, leading traders to abandon commodities stocks. As we all try to make sense of this surreal bloodbath, one catalyst keeps coming up. Western perceptions of the Chinese economy have been a real drag on commodities. China is indeed one of the major drivers of this past decade’s secular commodities bulls. As the world’s most-populous country, it has over 1.3b people who collectively consume vast amounts of resources. China sports the fastest-growing major economy on the planet, which has recently catapulted it to become the […]

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