Wednesday, August 3, 2011

Yeeeeeah ... man!

9:03 pm (Hawaii) One of the cooler things about learning the market in precious metals is that it's not just the territory of the puppetmasters behind the big banks and the Fed. Regular people understand it — not all, but some — extremely well. In fact, I venture to say that there are a few who have mastered the nuances of reading the market, the economic climate and the yo-yo manipulation of the puppetmasters so well that they bank major coin every time there's a shift in momentum.

One of those people is streetmoney21, a guru (my opinion) of the metals market. He's so good, part of me — the crazy, conspiracy-leaning side — wonders if he's actually an "agent" of the Fed or Treasury, dressing up like a regular dude to inform the masses. Now, if he was a shill, I don't think it necessarily means he is out to hurt anyone. In fact, maybe he's a paid "agent" working to help the masses — those of us who would hear him out — get on board and get off board at the appropriate times. After all, streetmoney21 got out of silver close to the top in early May. Just recently, he got back in. He's not the only trader who's done this, of course, but I'm guessing a lot of us regular peons can relate to him far easier than we would a guy in a suit and tie working out of a New York office.

In his vlog today, SM21 noted that he hesitated to get back in at 32 or 35, and that he went against his own rule: if and when a hunch is supported by strong evidence, scale in. I've done that with physical purchases, though not to the extent I should have. I did an okay job of scaling in when silver dipped to 34 and 35. Buying more with silver at 40 10 days ago was the most I've ever paid at. But I hesitated to scale in some more this past Sunday with price still at 40, and I hope I haven't missed the boat.

Gold is due for some consolidation. I'm hoping for 1625, but 1650 is probably where I'll look to scale in a bit more. Silver should rip through 42 en route to 45 with some sideways action, but I won't be shocked to see both metals get derailed by the CME mafia in the near term. That, to me, will just be a buying opportunity. Whatever we may think about the new exchanges in China, this much is certain: both gold and silver have risen significantly since they both began operation.

Coincidence? Maybe. But the price don't lie. I'm still interested in playing AGQ if it pulls back at some point. As I posted yesterday, a move from 220 to the all-time high of 382 would be a 72% rise, exceeding the percentage of a move in silver from 40 to 50 (all-time high) ... a 25% move. This time, I have to think AGQ from 220 to 382 — if it happens — would send spot silver well beyond 50. Why? The speculators are limited. Margin hikes took their impact down in a big way, and the new buyers are mostly (my guess) in this for the long haul. But if I'm weighing a 72% gain versus a 25% gain, I'm taking the 72%, then buying physical at 50 or even 55.

I'm all for great deals and super discount prices, but the math doesn't lie. With AGQ at 230 at today's afterhours close, it may be too late to get a 220 entry point. Again, I'm leaning toward scaling in ... probably after some consolidation the rest of this week. Volume will tell the story. There were some viciously massive moves today, practically in 2-dollar increments as AGQ moved up to 226, 228, 230 and higher. Those weren't peons like me. Those were hedge funds and maybe big money from overseas.

I'll be looking to hop on board with some declines, if we get some tomorrow and Friday. I won't lie; a drop to 35 would suit me just fine. But with gold powering higher (central banks, no question, plus increased retail buying), silver can't lag too far behind. It's a Catch-22 for us cheapskate buyers. Central banks push gold higher, silver goes with it, and those bankers are not about to sell their metal, not with the dollar headed down the toilet thanks to our mercenary leaders on Capitol Hill.

The key is to set some solid levels for entry and stick to them regardless of macro issues. So I'm looking for gold at 1650 and 1625. I'm looking for silver at 40 and 35. If they don't drop, I'm okay with scaling in here.

After all, 1800 gold and 45 silver are not that far off. As long as QE3 is on the horizon, I'll play AGQ, ZSL and DGP at select junctures. It's ready-set-wait time, finger on the trigger.

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