Trading Dairy Update

I don't think anything in Europe has been solved. I don't think the Euro is at its final bottom. I don't think risk asset bear market has ended. I haven't heard anything major from Bernanke (yet), nor have we had a major capitulation in markets with a spike in the VIX, credit default swaps or junk bond spreads. I'm pretty sure there are no major signs of a bottom right now despite various overly confident traders running out proclaiming victory by a very mediocre EU announcement. I found it so surprising that Eurocrats did not discuss anything regarding collapsing Greece, an increase levels of government debt in all countries since 2008 and a worrying recessionary down-spiral in Eurozone's economic activity, further proved by this mornings PMI numbers.

Having said all that, I am a very eager participant in a secular bull market for Precious Metals on regular basis due to long term fundamentals. My cash levels have now swelled up, as I have delayed purchases for months on end. I believe that cash is pretty much worthless over the long run in the current Central Bank money printing environment. At the same time, Silver is now down 4 months in the row - something that didn't even happen during the Lehman default of 2008. Silver is also about 45% from its $49 peak in May 2011, while S&P 500 is only 4% from its peak in April 2012. Furthermore, Silver is still below its peak from the 1980 high in both nominal and inflation adjusted terms. There is a lot of value here!

Technically speaking, Public Opinion is once again below 35% bulls, which shows that hardly any optimists are present in this asset class - a contrarians dream. This Friday's COT report on Silver was negative too, with least amount of net longs since 2001. Gold and Silver's good seasonal period starts in August. Finally, Bullish Percent Index on Gold Miners, as well as all other major long term breadth indicators in this sector, are incredibly oversold for a prolonged period of time and mining shares have not confirmed new closing lows like Silver did last week (so far anyway). 

Therefore, I am increasing my investment fund's stake into Physical Silver (PSLV) by 20% of NAV from recent large inflows I have received and continue to hold existing large investments. Nevertheless, I think Gold, Silver and Platinum will most likely go lower from these levels and possibly have one last break down below current support levels of $1530, $26 and $1400 respectively. On any further declines in coming months or quarters, I plan to accumulate more physical Gold and Silver through CEF due to constant monthly inflows my fund receives.