THE PRECIOUS METAL ERROR

In November of 2009, I predicted that precious metals could not rise indefinitely. But trading reality turned out to be more subtle than this. Silver rose above its previous all-time-high before a 25% price set-back late spring finally indicated the pending end of an incredible bull run. At the same time, gold raced from all-time-high to all-time-high. Analysts, journalists, the investment community as a whole were convinced that those precious metals will be the only products resisting the impending financial meltdown either caused by a European or American financial collapse.

This monday, traders, investors and all the other interested parties of 'indefinite' bull markets have become wiser. There will be no single investment instrument which can withstand a global financial meltdown.

Reality is, investment funds need their cash to make money regularily. Mostly, investments are highly leveraged. When confidence starts to wane, the key stock markets are often the first to take the big hit. But big declines in the stock markets mean that huge amount of assets are literally wiped out overnight. This generally causes liquidity gaps which need to be filled. Those gaps often require hard cash; cash generated from emergency sales - like liquidation of precious metal holdings. Yes, that as well. The genuine investor realizes that gold prices at $1,900 are considered high by any standard of looking at it. In fact, one has to question if in our life-time such prices will ever be seen again. And a key investment rule says, 'when the price is high - sell'.

While gold - the darling of the 'housewife' investors - still remains relatively firm, silver crashes relentlessly. The dream of millions of precious metal investors and traders which saw gold approach $5,000 and silver reach $100 ended by Friday last week.

Last week we learned that a real crisis does not mean that precious metals will be the savior. The investment king is and remains cash. Cash can balance asset requirements of companies, cash can raise the value of a company, cash can save one from bankruptcy and cash can balance books of companies at the verge of collapse.

After the collapse of the Japanese stock market in the 80's of the last century which at that time has been the darling of the worldwide investment community, the collapse of the precious metal market last week has brought all of us back to reality. There are no markets which can withstand changing sentiment. Trading financial instruments remains a risky business. There are no such investments tools which can be called 'absolute safe'.

Having said this, our attention needs to focus back on making right decisions based on solid analysis.

Enjoy a definitely exciting trading week!
Yours sincerely,
Gerhard

CORPORATE CHANGES - BLOG FORMAT

For a period of 3 weeks, our blog has been offline. We apologize for not keeping you up-to-date, however, our company is in the process of reorganization and we expect to be back providing up-to-date trading ideas by early October.

Our consulting business is based on highly specialized hotel development and technical trading advisory services for the commodity futures markets. To keep in line with our expansion plans we currently are in the process of looking for an international partner.

We also consider to change the format of our blog in due time which in the future will focus on actual entry and exit trading steps taken by our own experts.

Looking forward to welcome you again here at the beginning of October.

Yours sincerely
Gerhard Pilz