The German team have thrown in the towel and have now turned bullish on the precious metals ‘pms’. They did so with great fan fair but their medium term model seems to have been over turned right across the precious metal complex. I’ll leave the detail of their report to them to explain.

I’m personally more interested in where this leaves participants at present. This beating of the bear case is very positive in several ways that i’ll run through quickly here.

Many participants have got this wrong and expected a continuation of the last year’s bear market in the ‘pms’. Many were sitting in short trades and or added to short trades at the resistances. Many are very light the asset class expecting to have been able to accumulate at lower levels. The market has moved in the opposite direction so these participants are under performing and or on the wrong side of the trade. We all know too well ‘from failed moves come fast moves’. In my view this recent move in gold is akin to a failed continuation of the recent bear leg. We have a breakout here and many on the side lines in what are generally thin markets. These participants are late to the trade now in what is not a crowded trade. In my opinion this all bodes very well for the ‘pms’. I believe they can enjoy an extended run here. Lets see. We don’t want to see a sharp reversal and last ditch attempt to reverse this recent bull leg.

On the miners, they have yet to breakout convincingly here. Once again they are under performing their underlying metals. The breakouts are very close at hand however. The HUI and Silver miners index are on the verge of a breakout.

Here the HUI (not the gdx)

 

And here SIL (silver miners etf)

 

This is also a very interesting trade as their continue to be large short positions in these miners.

Here, Hecla mining’s short interest, as one example, where over 10% of the stock is borrowed..  Or more than twice the average daily volumes. And that’s an important metric to look at as these not hugely liquid stocks. Iliquidity is a shorter’s worst nightmare:

http://www.nasdaq.com/symbol/hl/short-interest

A short squeeze on the breakout of these indexes would be a pivotal signal to go long and further expand the balance sheet.

Without further delay here the report:

Bullion-weeklytech-04-09-12

All the best

Rich

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