Bullish on gold

Actually, I have been bullish on gold since a few months ago when it made new lows, but did not commit. Gold prices are starting to inch up again.

Royal Gold (RGLD), my favourite pick, has made new highs for the year. I must kick myself, for even if I have been targetting this one, has not made it my priority to get in when it softened to 59 recently (see 5 Apr post). Currently trading at 74.

Other gold stocks on my watchlist include Barrick Gold (ABX) and Silver Standard Resources (SSRI).

Why I am out of short positions

I am out of my short positions after a brief fling. Reasons are that Lowe's prices have reversed back to the uptend, and I now want to shift my funds to long the still-bullish oil sector and the Singapore markets. Hence, I have long on:

Vard (MS7): 1.085. Will add more if share price softens.

STI: 3064. Will add more if index softens.

Local oil stocks to watch

I am particularly optimistic about the O&G sector.
On the local front, the ones to watch (Maybank) for are:

Ezion (TP:2.70): strong liftboat opportunities in Asia-Pac and Middle East

Mermaid (0.59): emerging oilfield services player

Nam Cheong (0.45): key beneficiary of recvering OSV market

Vard (1.27): improving order win momentum

Bearish going forward

My decision to short the markets back in February was way too early, as markets reversed to new highs instead. I was forced to cut my short positions, and turn long instead, incurring an overall small loss still.

Now, I am initiating new short positions, as I believe that the markets are finally primed for correction. The reasons:

•  US stocks now trading at frothy valuations (PE 18 times)
• The Fed's tapering of quantitative easing ends in October or November, and investors will begin pricing in Fed's rate hikes
• Sentiment indicators show extreme investor bullishness

In fact, Normura's Bob Janjuah has predicted that some point in the third quarter, anything up to a 10% correction would occur. A bigger correction, depending on how soon we hit 10 on the VIX, may happen four or five months after that. Historically, when the VIX hits 10, it tends to explode upwards (very bearish sign). Of course, it can stay around 10 for a very long time, meaning markets can still trend higher for now.

 

For me though, I am maintaining my shorts.