2. Whether you are a conservative trader or a brave currency speculator you may wish to consider a
long-term investment in one of Mother Earth's rare gifts. Throughout the centauries Gold had played
a central role in numerous cultures. Who would have believed that the precious metal, priced at $35
per troy ounce would peak to almost $2,000 an ounce? Its increased popularity an Asia and its
inability to corrode over the years earned gold its safe-haven status. At times of war, financial turmoil
and global economic slowdown traders rush into the warm arms of gold, seeking shelter in the
immortal commodity. However, our financial leaders mutated gold's financial genes, surgically
removing the bullish mask off the precious metal, leaving it vulnerable to the bearish atmospheric
conditions.
QE, Gold and the Stock Market
Quantitative Easing (QE) operations infected global markets, this is a known fact. However, in regards
to the yellow metal, EU leaders are to blame. If Spain or Italy will request a financial bailout from the
EU, a bail-in program will be insisted, which in includes the central bank to liquidate its gold reserves.
Due to the ongoing QE operations, even if a new crisis emerges investors will cling on to their
investment in stock market after learning from their 2008 errors and liquidate gold as a healthy book
balancing. This automatically removes gold's safe haven status as liquidity is being drained out of the
precious metal. You might think to yourself that this is a European disease but from what I hear, Japan
is considering is also considering bail-in program but only in the form of a deposit haircut.
That means there is great amount of capital on the fence, waiting for a spec of light in the financial
darkness.
Going Natural, Long-Term Investment
Natural Gas is the answer. The latest reserves discovered in the UK that have doubled the
expectations and could very well support the UK for 25 years. (This may strengthen GBP against a
basket of currencies, which may deepen the BOE currency war with the FX markets, led by Mark
Carney).
Natural Gas was also found in Poland that may free their dependence on Russia although the signed
agreement is only due to expire somewhere in 2037. Global warming is already taking its toll by
bombarding the earth with odd weather as you may or may not have noticed. Navigant Consulting
expect 34.9 million vehicles on the road that function on natural gas (Natural Gas Vehicles, NGV's)
from the current 18.2 million. If a high demand is expected the market is likely to have it priced-in
much before. The means of extracting Natural Gas from earth, known as 'fracking' is objected by the
locals as it may contaminate the drinking water and cause mild tremors. The relatively low price of
natural gas makes it unattractive for global investors as the ROI may only be seen in over 10 years.
Why buy natural gas then? India holds the key.
Coal and crude oil together account for over 80% of India's energy. A new law was passed the
government that will take effect as of April 2014, doubling the price of natural gas. Yes, you are
reading correctly, doubling the price of natural gas to $8.00 from $4.20. The new law was made to
attract fresh investments into natural gas explorations as the nation of India will hope to reduce the
costs of electricity, transportation and cooking oil. Although the artificial price of natural gas means
higher costs for farmers and may speed the rate of inflation, India is keen on doubling its proportion
of natural gas by 20%.
3. This could very well be adopted by other countries to attract gas explorations and lower their
dependence on crude oil. I am not suggesting the price of a barrel will be smacked lower to $20 but
traders will start buying natural gas contracts as a long-term investment. In 20 years you will proudly
tell your children or grandchildren that you lived at the time natural gas was priced at $3.542.
I label the upcoming era, 'The Great Drill.'
Technical Angle
From a technical angle, natural gas weekly chart holds to its established uptrend from 2012. The
100WMA (in orange) and 55WMA (in blue) act as a firm support to recent weakness. The 21WAM(in
brown) acts as first meaningful resistance, currently marked at 3.820 at the time of this writing. The
medium-term bullish objective is seen at 4.810. The long-term target, based on the monthly chart is
drawn at 13.075.
Based on my technical and fundamental analysis, I am executing a long trade in natural gas at current
price (3.538), protective stop layered at 3.110, targeting 4.810 initially.
Approximate RR: 1:3.2
Risk Level: Medium
(All rights are reserved to Matti Williamson)
