gold investment, silver investment

E-mail Jun 27, 2008

June 27, 2008, 12:00 PM
We will be posting an essay on Kitco tomorrow, but we decided to let you know our thoughts in advance, especially given the fact that tomorrow is the last trading day of the week. Below is an excerpt from tomorrow’s essay:

(...)Clearly gold’s attitude toward rising dollar has changed since the day it established a low at the beginning of May.

This means that gold is likely to rise in the future and the brakeout, which has just occurred, has a high probability of NOT being another fakeout leading to further declines. This has now been confirmed by numerous factors, especially the precious metals stocks. In our last commentary we outlined a resistance level that was supposed to stop the fall. Despite the steep decline in the general stock market, PM stocks refused to go lower. This, combined with yesterday’s breakout on high volume, gives us a high probability that we will not go lower for at least several days, more likely weeks. That is IF we get lower, which is not that probable given aforementioned factors.

Summing up, our best guess is that we have just witnessed a breakout, which could take gold again into four digits, or very close to that level. Time will tell whether new highs will be achieved right away, but we would be cautious with predicting that. We will be monitoring the situation closely.
Gold has managed not to achieve new lows, despite dollar’s new highs, and PM stocks are acting very strongly especially with regard to the general stock market. Even if the stock market goes down from here (which we doubt) we will probably witness rising prices of precious metals equities.

We have decided to use our speculative capital to purchase call options on various securities.

Before we proceed with giving you details, please note that this part of the Update is for risk-tolerant and disciplined speculators. If you decide to follow us in these trades, please remember to use only a s mall part of your portfolio. How small? Definitely not more than our Position Size Calculator (please see the Tools section for more details) suggests. Even that may be too much for some people. Always ask yourself whether the position is small enough, not to interfere with your perception of the situation on the market, should you lose that money. It 's better to use too little money, than too much. Consult your financial advisor, if you haven't done so already.

We decided to divide our speculative capital into 2 parts depending on the time to expiry of options. First part are the short term options (expiration: August or month closest to it), the second part are medium term options (expiration: October or month closest to it). We have put twice as much capital into medium term options as we put in the short term ones.

Short term call options:


Medium term call options:


Telling you exact strike prices might be difficult, as it depends on the price of the underlying equity on the day of the purchase. We buy out-of-the-money options, but the strike price should be relatively close to the stock price. This is especially important in the short term. It is very occasionally when we make exceptions from this rule.

Our long term position consists of juniors and we are holding them, mostly on the profit.

We have previously outlined our preferences regarding the type of companies that we currently prefer as long term holdings, but for newly registered Users - right now we favor junior mining companies to big companies. We have established a position in juniors and we have accumulated profit on it in the last 6 weeks. We cannot emphasize enough that the key to successful investing in juniors over time is diversification.

All of the above is just our view on the current market situation and may prove wrong, as nobody can be right each and every time. By registering at our Website, you confirmed that you are interested in our thoughts on the current market situation, so we're sending it to you. Please do your own due diligence before making any investment decisions.

This is the initial, basic from of our commentary. The Weekly Commentary (+updates) will include more thorough, complex and longer content with detailed, User-friendly explanations. The new, convenient form will include many charts and tables with specific comments.

We will be launching our paid service soon, but before we do, we would like to ask you for specific suggestions regarding the 'weekly commentary' section. If you have any suggestions, requests, ideas, or you think that something could be done better than we currently do, then please drop us a note - either by replying directly to this message, or through the 'Contact us' section on our Website. Ultimately, it is you, who will benefit, if the form of our service better suits your needs.

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