Golden Agriculture: Stay cautious.

Golden Agriculture's share price made a successful attempt in recovering lost grounds as price opened at 57c and closed at 58c, forming a white candle on rather low volume in the last session.  Given the lack of enthusiasm in the upmove, one wonders if there would be a follow through which would see the 20dMA at 58c taken out as the immediate resistance.

The MACD continues to move lower after completing a bearish crossover with the signal line. MFI and RSI have both formed higher lows which is encouraging.  OBV is flat.  Technically, there isn't any clear direction.

Fundamentally, CPO price has stayed above RM2,700 and Golden Agriculture should be a strong beneficiary of this.  However, with the recent bad press and uncertainty as to whether things would worsen, it might be better to err on the side of caution and to stay sidelined. Support provided by the 100d and 200d MAs could be a better entry point and that is currently at 55c.

Related post:
Golden Agriculture: Unable to break out.

Buy more silver on weakness.

On 7 February 10, I mentioned that "Silver is a real asset, with real value, just like gold, as its supply is finite.  Fiat currencies, on the other hand, do not have any intrinsic value and more could be produced at will.  So, we expect silver to at least keep pace with inflation and in an inflationary environment, an investment in silver should protect our wealth from being eroded."

In that blog post, I mentioned that my research showed that silver was very undervalued and was trading at the higher end of the Gold:Silver ratio since 1980.

At that time, silver was US$15.15/oz while gold was US$ 1,052.20/oz.  It was just reported by Bloomberg today that "Gold for December delivery was 0.2 percent higher after reaching US$1,299.70 an ounce on the Comex in New York. Silver for immediate delivery in London climbed as much as 1.2 percent to US$21.3875 an ounce, the highest price since October 1980." Read article here.

Silver has gone from US$15.15 to US$21.38 an oz.  This is a gain of 41% in slightly more than 7 months.  Gold has gone from US$1,052.20 to US$1,299.70 an ounce.  This is a gain of 23.5% in the same period.  An investment in either one of these precious metals would have been very rewarding but silver has obviously outperformed gold by a large margin.

I am glad I bought some silver and I would like to buy more silver on weakness when the opportunity presents itself as I continue to believe that having some investment in precious metals is an essential part of anyone's portfolio. Silver is a laggard in the realm of precious metals and it is just catching up.

Do I have a target price for silver? Silver reached its peak in value on 15 January 1980 when 1 oz of gold could purchase only 14.9 oz of silver.  Based on today's price of gold at US$1,299.70 an ounce, it would mean US$87.22 an ounce for silver!  Mind boggling, isn't it? That would be 4 times higher than the current price!  Of course, I am not suggesting that silver would hit that price anytime soon, if it does go that high at all. I am merely putting things in perspective. Remember where the price was in February? Good luck.

A new record! Gold prices struck a record $1,300.07 an ounce in afternoon trade on the London Bullion Market as investors sought a safe haven for their money amid increased uncertainty over the global economic outlook. Silver, meanwhile, jumped to $21.44 an ounce . Published: 5:44PM BST 24 Sep 2010 - Read article here.

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Gold or silver?
Gold nearing US$1,300 an ounce.