The Markets
An issue facing the markets (one which could work as upward pressure on precious-metals-as-safe-haven) is the residential and commercial mortgages that will have matured between 2009 and 2013. Despite the latest results from the Mortgage Bankers Association's National Delinquency Survey, there are still many commercial loans that are now delinquent which will not qualify for refinancing.
Gold Stocks
The bottom (for gold stocks especially) comes between January and June. Silver is all over the place, but 10% to 20% pull-backs seem to be part of normal trading over the past 10 years. Thus, I wouldn't rule out re-visiting today's (Sept 20th) prices in 6-8 months, after a good bull run, on some bizarre temporary pull-back as people cash in profits. The correlation between the gold stocks and the general market seems to be eroding, and may soon be completely disconnected if the current financial crises come to a head. However, if you watch the S&P500, you'll probably notice than on days where there is not particularly bad news and the S&P is falling, the Gold and silver miners, and ETFs will be picking up speed.
I suppose that sums up the trouble (and blessing) with precious metals stocks. Most PM stocks tout a 3:1 leverage to gold, but they haven't realized this for some time. I just listened to an interview with Rick Rule, who said that one important reason Gold and silver mining companies have not kept up was due to massive expenditures in mining infrastructure over the past 8 or so years. These projects have been completed, and mining company cash flows have thus gone "parabolic." Also, he mentioned that Gold and silver ETFs took investors, who typically speculate on mining stocks, out of the stocks and into the ETFs in a big way. But the elephant in the room, according to Rule, are the massive retirement funds in the US. These funds apparently have a small average (0.15%) allocation to gold. When this changes, it will have to light a fire under the metal prices, and thus the mining stocks.
It's still difficult and laborious to try to figure out whether any stock is in "tank" mode and thus getting ready to explode, or in "juice mode" and starting to deflate or wind down for a season. They "look" expensive today, and I suppose that's the problem. With the added wildcard of the JPmorgan silver price manipulation lawsuit, I am strongly suspecting that another temporary fire could be lit under the price of silver sooner rather than later; but when? Who knows.
Understanding Delivery
Looking at the CME daily delivery reports over the past month or so has raised my eyebrow a few times. Here's a brief Explanation of the PDF - an issuer is taking a short position in the commodity. They are essentially betting on a price drop. A stopper is taking a long position on the commodity, and are betting on a price increase over time. Even though this is a "delivery report", the reality is that the metal is usually just being moved around within a couple of warehouses. For example, the GLD store their holdings in a secured warehouse, and when the gold changes hands, it's simply moved from one spot to another within the compound.
It definitely appears that JP Morgan, Scotiabank, and a few others have been shorting massive amounts of silver (and gold) over the past few months, but that is likely the new regulations doing their job. It also (interestingly) appears that the short positions of those big banks are dwindling. So it's shaping up to be a perfect storm of sorts, if that's possible.
