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  • Is Gold at a Turning Point?



    By peakprosperity.com

    There’s no way to sugarcoat the dismal performance of the precious metals in recent months. But a revisitation of the reasons for owning them reveals no cracks in the underlying thesis for doing so.

    In fact, there are a number of new compelling developments arguing that the long heartbreak for gold and silver holders will soon be over.

    A Hard Look in the Mirror
    The past two years have not been kind to holders of the precious metals. The price of gold is down over $500/oz since the record high (nominal) price it hit in August of 2011. That’s a decline of 28%. Silver has seen a decline of 56% over the same period.

    A healthy amount of that decline came in the past seven months, which have pretty much seen a steady price deflation punctuated by sharp (and historic) downdrafts:

    On top of these grim charts, daily headlines touting, often with delight, the demise of gold appear nearly everywhere in the media.

    NOURIEL ROUBINI: 6 Reasons Why Gold Will Plunge to $1,000
    10 Countries That Are Losing a Fortune on the Collapse in Gold
    The Shine Is Off
    Gold U. Takes It on the Chin
    And forget about PM mining stocks. They have been absolute widow-makers for investors:

    (Source)

    It’s hard to argue that PM mining stocks aren’t the most hated sector in today’s markets. The chart below shows that last month, the bullish sentiment on gold miners dropped to 0%. Can’t go any lower than that:

    Wasn’t reckless central-bank money printing going to flood the world with paper currency, sending gold prices – and those of its “poor man’s” sister, silver – to the moon? Weren’t the markets going to crack as the unresolved economic and financial rot in the U.S., EU, and Japanese systems became further exposed, sending capital fleeing into the bullion market and driving prices much, much higher? Weren’t escalating mining costs going to march up the price floor for the precious metals?

    Why haven’t any of these scenarios happened? Were we wrong in our reasons for purchasing gold and silver?

    Are we the clueless patsy at the poker table?

    The Way of the World
    These are very understandable questions to be asking. You wouldn’t be human if you didn’t.

    So, it’s wise to return to the #1 lesson of investing: Never fall in love with your positions. Be sure to question your rationale regularly and often. Remove emotion from your decision-making, look to what the data tells you, and continually ask yourself: Ignoring my past decisions, would I purchase this investment today? If the answer is no, lightening up your position is almost always the right decision.

    Chris and I follow the precious metals markets on a daily basis, and we frequently challenge the logic behind our support of them. But at this time, we can find nothing – nothing – that has happened over the past two years that invalidates the principal reasons we’ve laid out for owning precious metals. You can review these reasons in detail on our foundational report, The Screaming Fundamentals for Owning Gold & Silver.

    The hard truth for us investors is that secular market trends take time to play out. Nothing moves in a straight line. And they are many false signals along the way. There are no sure bets, no risk-free winning options to pick.

    But the good news is that the laws of physics and rationality always prevail in the end. If you can identify the right endgame and position yourself for it patiently, the messy volatility along the way really won’t mean much in the big picture.


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