Zak Mir on Gold & Silver & What price advice?

While there are of course many aspects of life that keep on getting more and more expensive: house prices, private education and fuel to name a few, it would appear that in the financial world there is one  area which is experiencing terminal deflation: advice.

Perhaps this is not surprising given the way that, courtesy of the Internet, and despite the best efforts of the FCA / SEC, almost anyone can be a financial markets’ guru’ whether via a blog or Twitter, or myriad other methods. It is also worth adding that in my experience of retail investors, especially as clients of mine when I was a lowly broker, your average punter was keen on either trying to extract advice for free, or going down the execution only to save a few quid in commission.

Perhaps even worse, is that even with the advisory clients, the first thing that they would do is ignore a carefully constructed argument regarding going long or short of a stock – especially if it proved to be correct, and only followed advice on those all too rare situations (!) when it proved to be incorrect. So, what can be concluded from this particular example?

My view in overall terms of the way private investors behave is that they are simply not geared to taking advice, largely because the reason they are in this particular game is because they wish to be independent financially and go it alone in terms of that pursuit. But is this sensible?

For instance, I would be delighted to pay Hugh Hendry or George Soros not only for an education  on the markets but also specific trading ideas. In addition, because I had paid probably big money for the privilege, I would  be extremely disciplined in term of following this advice.

In fact, the Hendry/Soros argument is that it is to be presumed that everyone has someone they respect enough in the markets to pay a decent amount of money for good advice. Indeed, to turn the argument on its head, it is amazing how many people are perfectly happy to lose thousands or even millions to not get advice from people with a proven track record in the markets, just in order to save either a few pounds per trade, or to preserve their ego, or their vanity in terms of wanting to go it alone..

On the subject of George Soros,  I seem to remember that he announced that he had bailed out of a significant amount of his exposure to Gold in February – a time when the metal was still well above $1500 an ounce. Ironically, this piece of advice was given for free, and it would be interesting to know how many people were swayed by the revelation from one of the world’s best ever traders?

Certainly what can be said is that the metal has been on a one way ticket down over subsequent months, so presumably some people did head for the exit. The current position would appear to be a relatively straightforward one in terms of the daily chart of the metal, in the sense that we are now hovering well below the former April intraday support at $1321, below which the obvious target is the floor of an October descending price channel as low as $1200 on a one to two months timeframe. I would suspect that only sustained price action back above even as high as $1350 could even begin to reverse the ultra bearish trend which is starting to emerge here. Clearly, the fundamental argument must be that if this market could not make headway even with assurances regarding QE going into the start of this year, now that the punch bowl has been taken away the outlook must be regarded as very grim indeed.

Finally, moving onto Silver and it can be said that the daily chart here would appear to be even worse in some ways that of Gold. This is because the metal has been in a descending price channel since March 2011, with the floor of  the channel currently heading as low as $15. But not only do we have been sizeable percentage downside if the configuration of the price channel is to be believed, but it also can be seen quite clearly that after the May / early June mid consolidation move for this market, that a repeat of the eight dollars decline seen during April could be on its way to imply a target towards $15 or even lower on a measured move basis.