Sunshine Profits

This week we saw some interesting developments on the financial markets, mainly in the general stock market – S&P 500 has finally reached (and surpassed) the long-awaited 2007 high level and other more specific stock-market sectors have not been idle as well.

It seems that recently the whole precious metals sector has been devoid of the strong relationships with currencies and stocks (namely, strong negative correlation between gold and silver and the USD, and a positive one between metals and the S&P 500 Index) that we are so much used to, which makes the straightforward inference somewhat more complicated.

It seems that collective memory is becoming shorter and shorter. We just celebrated two important holidays in the Judeo-Christian traditions that commemorate events that took place thousands of years ago

We have been writing about a bullish outlook for gold, silver and precious metals mining stocks for quite some time now, even though the seemingly bad situation in these markets.

Cyprus lawmakers this week rejected a controversial euro bailout package, which would have set a dangerous precedent by taxing ordinary bank depositors to pay part of the bill.

The gold naysayers are still out there in droves, other than Lady Gaga who is ensconced after surgery in a custom-designed, 24-carat gold plated wheel chair.

Recent developments on the currency market may worry some gold and silver investors, as dollar refused to move lower at the cyclical turning point, an issue which we touched upon in our last essay, and euro seems to have broken below its medium-term rising support line.

The Dow Jones Industrial Average climbed a steep wall of worry and last Tuesday returned to its all-time high from late 2007.

Investors’ sentiment in the whole precious metals sector is so low that it seems it almost cannot move any further below its current level and it has profound implications for the market:

There are a lot of words in the dictionary to describe what you need these days to be a gold investor: patience, endurance and fortitude are some of them

Investors sentiment for precious metals and gold and silver mining stocks has deteriorated quite substantially recently. And silver is no exception here, which can be seen on the white metal charts.

We have been witnessing the abnormal situation in the intermarket correlations for quite some time now, i.e. positive correlation between dollar and gold and silver (or virtually no correlation at all) , and negative one between the general stock market and precious metals sector.