ADVERTISEMENT
April 04, 2012 at 14:28 PM EDT
Buy Gold on the Fed Fiddling
gold dollarStocks are down and gold is lower on the latest Federal Reserve FOMC Meeting Minutes. The skinny is that the Fed sounded less dovish, and might be less accommodative in the future. It’s counter intuitive, because the Fed would only be less giving if the economy were solidifying. Nevertheless, stocks are lower because there could be less support from the Fed, and the market is not sure the notoriously faulty forecasters are on target. Gold is dropping, because of two reasons. If the Fed is less free with dollars, then the currency should strengthen; and if the economy is improving, than riskier assets should do better. Here’s why I suggest ignoring the Fed fiddling, and buying gold on the dip.

gold analyst precious metals bloggerOur founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative tickers include: NYSE: GG, NYSE: AEM, AMEX: ANV, NYSE: AU, NYSE: AUQ, AMEX: AZK, NYSE: ABX, AMEX: BRD, Nasdaq: CTHR, AMEX: CGR, OTC: CGCO.PK, NYSE: BVN, Nasdaq: DROOY, NYSE: EGO, AMEX: EGI, AMEX: XRA, NYSE: GFI, AMEX: GRZ, Nasdaq: GORO, OTC: MYNG.PK, AMEX: GSS, AMEX: GBG, NYSE: HMY, NYSE: IAG, AMEX: THM, NYSE: JAG, AMEX: KGN, AMEX: KBX, Nasdaq: KGJI, NYSE: KGC, AMEX: MDW, AMEX: MGH, AMEX: NSU, OTC: NJMC.PK, NYSE: NEM, OTC: NBRI.OB, AMEX: NXG, AMEX: NG, AMEX: RIC, Nasdaq: RGLD, AMEX: RBY, AMEX: SA, AMEX: XPL, AMEX: TRE, OTC: THMG.OB, NYSE: UXG, AMEX: VGZ, OTC: WITM.PK, NYSE: AUY, NYSE: CDE, NYSE: EXK, NYSE: HL, AMEX: MVG, AMEX: MGN, Nasdaq: SSRI, NYSE: SLW, NYSEArca: GLD, NYSEArca: GDX, NYSEArca: SLV, NYSEArca: AGQ, NYSEArca: ZSL, AMEX: GPL, NYSE: SVM, AMEX: PZG, Nasdaq: PAAS, NYSE: AG.

Buy Gold

The Federal Reserve’s Federal Open Market Committee (FOMC) published its meeting minutes for its March 13 meeting Tuesday afternoon. You can go ahead and read it, but all you need to know is that stocks are lower because of it. The focus of this article, though, is on gold not stocks.

As suggested in the introduction here, if the Federal Reserve parks its dollar-copter, the next step would be to look toward containing inflation. For this reason, the dollar is soaring +0.7% against the euro Wednesday through late afternoon trading hours Eastern Time. The PowerShares DB US Dollar Index Bullish ETF (NYSE: UUP) is up 0.5% deep into the afternoon. Much of the foolhardy popular press is blaming the dollar move on a soft Spanish bond offering… silly short-hands…

For the same reason outlined, gold is on the deep decline. Gold futures are off roughly 3.3%; the SPDR Gold Shares ETF (NYSE: GLD) is off 1.9%; and gold miners Goldcorp (NYSE: GG), Newmont Mining (NYSE: NEM) and Barrick Gold (NYSE: ABX) are off between 5% and 6%. Gold should be on the rise if the global community is once again terrified about a European disintegration via Spanish debt softness and soft data. That would be the give-away for reporters with a clue… Luckily you still have The Greek to fill in the void.

Here’s Why I Would Use this as an Opportunity to Buy Gold:

  1. The geopolitical powder keg remains tightly snug between U.S. warships and the Iranian coastline. Nothing has changed with regard to the Iranian nightmare. Iran has not budged in a significant way, and the West’s sanctions are increasingly suffocating it.

  2. Recession seems to be overcoming Europe, where 20% of American exports are sold into. Wednesday, a Purchasing Managers Index for Europe was reported below 50, indicating the region is likely in recession. Also, regional retail sales fell 0.1% in volume and 2.1% year-to-year. The regional economy shrank 0.3% in Q4 2011, and seems set to mark another quarter of contraction, which would qualify it for recession. Compounding on this, unemployment for the euro zone reached a record high in February.

  3. The European financial crisis has not yet subsided. Wednesday, soft demand for Spanish debt sent the markets into a spin. In a recent interview, Standard & Poor’s Sovereign Ratings Head, Moritz Kraemer said he believes Greece will probably have to restructure its debt again, involving needed aid from its European partners. Obviously, European heads are on record saying the latest bailout would be the last for Greece; now they may be put to the test at a time when their word will be measured. Moritz noted the risk posed by upcoming elections across Europe and Greece.

  4. The American economy has been showing signs of strain, with recent manufacturing data, housing reports and consumer information indicating softness.
Thus, all the reasons gold has climbed over the last few years continue to exist, if they are not intensified. So while foolhardy capital may flow out of gold and gold relative investments Wednesday on a few words from the Fed, I suggest investors look to the weakness as an opportunity to add to positions.

Article should interest investors in precious metals stocks: Goldcorp (NYSE: GG), Agnico-Eagle Mines (NYSE: AEM), Allied Nevada Gold (AMEX: ANV), AngloGold Ashanti (NYSE: AU), AuRico Gold (NYSE: AUQ), Aurizon Mines (AMEX: AZK), Barrick Gold (NYSE: ABX), Brigus Gold (AMEX: BRD), Charles & Covard (Nasdaq: CTHR), Claude Resources (AMEX: CGR), Commerce Group (OTC: CGCO.PK), Compania Mina Buenaventura S.A. (NYSE: BVN), DRDGOLD (Nasdaq: DROOY), Eldorado Gold (NYSE: EGO), Entrée Gold (AMEX: EGI), Exeter Resource (AMEX: XRA), Gold Fields (NYSE: GFI), Gold Reserve (AMEX: GRZ), Gold Resource (Nasdaq: GORO), Golden Eagle Int’l (OTC: MYNG.PK), Golden Star Resources (AMEX: GSS), Great Basin Gold (AMEX: GBG), Harmony Gold (NYSE: HMY), IAMGOLD (NYSE: IAG), International Tower Hill Mines (AMEX: THM), Jaguar Mining (NYSE: JAG), Keegan Resources (AMEX: KGN), Kimber Resources (AMEX: KBX), Kingold Jewelry (Nasdaq: KGJI), Kinross Gold (NYSE: KGC), Midway Gold (AMEX: MDW), Minco Gold (AMEX: MGH), Nevsun Resources (AMEX: NSU), New Jersey Mining (OTC: NJMC.PK), Newmont Mining (NYSE: NEM), North Bay Resources (OTC: NBRI.OB), Northgate Minerals (AMEX: NXG), NovaGold Resources (AMEX: NG), Richmont Mines (AMEX: RIC), Royal Gold (Nasdaq: RGLD), Rubicon Minerals (AMEX: RBY), Seabridge Gold (AMEX: SA), Solitario Exploration and Royalty (AMEX: XPL), Tanzanian Royalty Exploration (AMEX: TRE), Thunder Mountain Gold (OTC: THMG.OB), U.S. Gold (NYSE: UXG), Vista Gold (AMEX: VGZ), Wits Basin Precious Metals (OTC: WITM.PK), Yamana Gold (NYSE: AUY), Coeur d’Alene Mines (NYSE: CDE), Endeavour Silver (NYSE: EXK), Hecla Mining (NYSE: HL), Mag Silver (AMEX: MVG), Mines Management (AMEX: MGN), Silver Standard Resources (Nasdaq: SSRI), Silver Wheaton (NYSE: SLW), SPDR Gold Trust (NYSEArca: GLD), Market Vectors Gold Miners ETF (NYSEArca: GDX), iShares Silver Trust (NYSEArca: SLV), ProShares Ultra Silver (NYSEArca: AGQ), ProShares Ultra Short Silver (NYSEArca: ZSL), Great Panther Silver (AMEX: GPL), Silvercorp Metals (NYSE: SVM), Paramount Gold and Silver (AMEX: PZG), Pan American Silver (Nasdaq: PAAS) and First Majestic Silver (NYSE: AG).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

New York

Inquiries about Wall Street Greek content and advertising services can be emailed to Advertise @WallStreetGreek.com.

Stock Market XML and JSON Data API provided by FinancialContent Services, Inc.
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.
Press Release Service provided by PRConnect.
Stock quotes supplied by Six Financial
Postage Rates Bots go here