Opinion

Holiday surge in metals seems likely

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J. Keith Johnson
Senior Writer, The Gold Informant
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      J. Keith Johnson

      J. Keith Johnson is a self-proclaimed contrarian, always questioning the front page and striving to read between the lines. His Austrian and Libertarian perspectives on current socioeconomic and geopolitical events are fueled by his insatiable desire to keep learning. He’s not content to merely study and learn though. As he’s grown in understanding issues that sometimes have far reaching implications, he desires to help others understand the truth. Simply understanding the truth through the fog of disinformation, media spins and mainstream manipulations is a major part of the battle. But only in understanding the truth can people plan and prepare for the future.

      Having been a gold bull for fifteen years, he says he’s not a perma-bull; but he’ll remain a bull as long as the fundamentals dictate. After writing several blogs, studying markets and especially precious metals, J. Keith Johnson is now writing as The Gold Informant. You’ll find his articles on The Gold Informant website, Seeking Alpha, The Motley Fool, The Daily Caller, Goldco Direct and occasionally on various internet financial and news sites.

As we approach another round of elections, it behooves us to consider how metals have responded historically. The following chart is only a 10-year chart, but it certainly offers a little perspective.

The vertical lines represent October closing prices. It’s interesting to note that almost every November saw an increase in metal prices. Last year was highly unusual, with silver posting a November loss while gold posted a gain in the same month. Other than that, 2004, 2006 and 2009 were the only years we saw a drop in metals’ prices during November.

Even in those years, buying at the beginning of November was still a very profitable investment. Prices over the next year moved substantially upward in both metals.

Interestingly the same can be said about the S&P, generally speaking, except for those who bought in 2007. You couldn’t have picked a worse time to enter the market. Other than that and 2008, the markets have continued to go up into each November.

Also notice that the red lines represent election years. Historically, when markets are up, the incumbent wins. When they’re down, the challenge wins. However, as we approach this year’s elections, it’s very difficult to tell where that line should be drawn.

Compared to the 2008 elections, the markets are up. Compared to a month ago the markets are down. Furthermore, it seems that the overall mood or sentiment of the populace is pessimistic. Looking at the long term, it would appear we would get an Obama win. Looking at the shorter term, it seems that a Romney win is in the wings. The trend is still generally upward. But this consolidation has been stronger than many analysts predicted.

Regardless, we’re expecting this November to continue the trend in metals. The most recent consolidation has been good for the market, shaking off loose hands and building the case for the next surge.

We see this in the markets as well. Perhaps it’s the perfect setup for the oft-mentioned Santa Rally. Regardless, today’s lows in metals should be viewed as a buying opportunity, with some analysts predicting silver up to $60 within the next few months and $2,000+ gold. That wouldn’t be a bad way to kick off a new year.

J. Keith Johnson’s Austrian and libertarian perspectives on current socioeconomic and geopolitical affairs are fueled by his insatiable desire to both discover and share the truth. A Goldco Direct affiliate, you’ll find his commentary on The Gold Informant website, as well as various Internet financial and news sites.