RE: strong fundamental valueInvestors are advised to pay attention to high quality explorers
Investors are advised to pay attention to high quality explorers
The global debt crisis and the war on deflation by the Federal Reserve is causing precious metals to approach a key resistance level. Gold is nearing a 52 week high while silver is close to breaking US$19. A break above these levels on high volume could be the beginning of a major move higher.
Gold and silver has been a safe haven asset. Many concerns were expressed if miners would collapse in a weak equity market.
However, since the last Federal Reserve meeting, gold and silver has shown impressive relative strength compared to the overall market.
The Federal Reserve discussed the increase of treasury purchases to keep interest rates artificially low. They also made it clear that every attempt will be made to prevent deflation. This low interest rate environment and weak economic outlook, which may continue for some time, has encouraged investors to move money out of equities into safe haven assets such as gold and silver. Gold and silver is also gaining interest as investors are realizing bond yields are too low and may be risky at these levels.
The Fed’s greatest fear is deflation, high unemployment and a move into new lows in equities before the election. If the S&P continues to deteriorate and unemployment data comes in negative, I expect an announcement of more central bank interventions to reflate the economy. This next round of quantitative easing could cause a massive rush into gold and silver.