Silver jumps 3.7%, gold up 1.9% and global stocks fall,
welcome to the New Year!
Peter Cooper

Silver moved out of the shadows as the New Year started with a spectacular rebound of more than three per cent and gold gained 1.5 per cent as investors rejigged their portfolios for 2014. Stocks mostly fell on military tensions between Japan and China, falling GDP in Singapore and poor Christmas sales for retailers in the US and UK.

Could this be the ‘new normal’ for 2014? Sometimes the pattern of trading for the New Year emerges very quickly in the first few days.

Newsletter tips

ArabianMoney investment newsletter readers may have got in early with our strong tip for a silver rebound (click here). Our old friends at Agora Financial led by Addison Wiggin also turned very bullish on gold and even market maven Mike Swanson put out a bearish call on US stocks.

His argument was pretty simple: US treasuries have almost halved in value since last May with yields up from 1.6 to three per cent. That’s a huge change in the bedrock of US finance and makes an absolute mockery of Fed claims that it will keep interest rates ultra-low. Ask anybody shopping for a US mortgage. That’s why sales of existing homes have stalled.

For let us remember how stock prices adjust to higher treasury yields. Basically if you want to keep stock dividends competitive then the only way for share prices to go is down. They can’t stay up, let alone continue rising when treasury yields are on the way up.

Still we continue to warn of the biggest black swans flying in Asia: Japanese and Chinese relations are at a new low with armed conflict an increasing possibility; Chinese PMI is bordering on contraction; Singapore just reported an annualized fall in GDP; Abenomics are a money printing monster that threatens huge instability in Japanese financial markets.

18th euro state

Europe is still mired in economic stagnation and outright recession in the peripheral states. That said the euro stood up better than expected last year and actually gained its 18th member state Latvia yesterday. European conservatism could still trump the triumphalist money printers in the final analysis.

In an uncertain world with US stock markets and many others around the world obviously in bubble territory then a retreat back into the oversold precious metals is a slam dunk for 2014.

If you want our advice on how to translate this knowledge into investment gains then you should be reading our monthly newsletter which is the only forum where we explain this (click here).

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