Gold and Silver Investing: January 2013 Update | Pinnacle Digest ...

Pinnacle Digest writes: The bear market in precious metals and in precious metal equities has been ongoing for close to 1.5 years now. The winter months of January to April tend to be favorable for equities, particularly for the junior sphere which is already off to a great start. Gold was up better than $13 an ounce at 1:06 EST to $1,687.55 after hitting a day high of $1,694.70 on January 2, the first day of trading for the TSX and TSX Venture in 2013.

Gary Tanashian recently outlined a favorable bigger picture risk vs. reward situation for gold and silver. His key points are this:

• Technical upside potential appears greater than downside.
• The inflation-dampening Operation Twist is now put in the rear view mirror in favor of good old fashioned T bond and MBS Monetization.
• The Commitments of Traders structures are improving.
• Sentiment ? especially among gold newsletter writers tracked by Mark Hulbert ? is in the dumps and contrarian bullish.

Tanashian recently brought to light a very notable chart that highlights gold's value in relation to the money supply. This is important because if gold is ever to be revalued or pegged to a specific currency or a basket of currencies (return to sound money), the money supply will be the gauge from which its value is derived.

Below is the gold price adjusted by the Monetary Base, which is the key money supply measure to be watching for signs of inflation.

Gold Price Adjusted for Monetary Base Expansion

Tanashian explains that the above graph, courtesy of the St. Louis Fed, shows that the value proposition for gold has not changed since the beginning of the secular bull market.

Gold From a Technical Standpoint

Gold needs to take out $1700 to end its correction and then a break of $1800 to target new highs. Tanashian believes that from that point, the sky could be the limit when considering the value that has been pent up in the monetary metal.

Tanashian concludes that, ?the precious metals correction has been a challenge for 1.5-plus years now.? When it ends, the pent up energy is going to be something to behold.?

We are enjoying some of that energy today, with gold having one of its biggest single day breakouts in months.

Read this article...

Source: http://www.pinnacledigest.com/blog/gary-tanashian/gold-and-silver-investing-january-2013-update

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