The premium to NAV for the Central Fund of Canada was at a -1.6% (USD) yesterday and today its price is down 1.85% while gold is down 1.40% and silver 1.30%. Hence, people are panicking and selling. I am buying. It’s what we have to do when things get like this. Well by ‘we’ I mean me, because I want to buy something of value from irrational people.
There is a lot of volume coming into the gold stocks on this plunge. That is a positive. The negative is that short-term support was lost and that the daily chart was no longer over sold (unlike the weekly). You may recall that a non-over sold daily situation was a precursor to a violent plunge once previously. This condition adds fuel for these hard drops.
I am watching for value as well in the gold stocks, but have not bought anything. HUI 250 is very possible, yet with the big market finally cracking a bit, I feel as though things could get woogly (a highly technical word I reserve for only the most grave circumstances :-)) here.
Emotions are flying now and if Dow and SPX finally join the rest of the market (see small caps, tranny, housing, real estate, semi’s, etc. etc. etc.) we may have some end game dynamics kicking in for the precious metals.
If I am wrong and gold and silver really are going to a deflationary hell, then the CEF buy will be undone. Otherwise, I expect it to be the first small step in series of steps that could prove quite profitable one day. You buy when they are puking, remember?
Keep HUI 250 on radar, but also keep open the prospect for high volume capitulation soon if not now. I don’t plan any more updates to add to your noise level in the next little while.