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Gold & Precious Metals

Grandich: The Worst is Behind Us

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Posted by Peter Grandich via Resource Investor

on Tuesday, 06 November 2012 00:00

Peter Grandich is Cautiously Optimistic About the Juniors in 2013.

Resources Wire editor Kevin Michael Grace interviewed Peter Grandich October 24, 2012. In this second part of that interview, Grandich focuses on the prospects for junior-resource companies.

RW: The last time we spoke, you were quite gloomy about the juniors. Since then we’ve seen a rally. Are you less gloomy than you were?

PG: I don’t know if I was gloomy; it was more being realistic. We had suffered the worst bear market in quite some time in the junior resource market. There is no question that they’ve risen off the bottom, but I thought that those who were forecasting dramatic rises from that point were sadly mistaken.

Financing is still very difficult, and nothing in that area will change until at least early next year. I fully concur that the worst is behind us, but we’re not about to have nirvana any time soon. The juniors really made more of an overall sideways move. I don’t expect that the whole market to move up substantially and hold those gains until gold makes its move above $1,900.

....read more HERE

This following interview focuses on gold and the debt crisis:

Gold And The Debt Crisis

Peter Grandich Sees $2,000 Gold in 2013

RW: Let me start with market suppression. We’ve heard mainstream sources talking about the suppression of gold. And John Williams of Shadow Stats has also had some mainstream attention. Are you encouraged by this?

PG: I think the unemployment number was the biggest surprise. The talk wasn’t from the normal “conspiracy” groups but from Jack Welch, who used to run GE. While it brought attention to the possibility of manipulation, I don’t think it did anything to tone it down or stop it. Those who are doing it will continue to do so until such time as we see a smoking gun.

RW: On your blog, you called Comex “Crimenex.”

PG: Yeah, I’ve used it again, a couple of minutes ago. I’m not the first to use that terminology.

RW: Do you think gold suppression is sustainable? If so, for how long?

PG: I differ a little bit from the more day-to-day people in that I don’t believe it happens as often as they believe it does. But I don’t think there is a big difference between me and the others in that there has certainly been a reason to deter gold from rising as fast as it might have otherwise. If and when the manipulation is done, it’s obviously done in the paper market, which we know as Comex. I feel for those like GATA who say this is happening on a daily basis, as they continue to demonstrate a bigger and better circumstantial case.

Still, most of the mainstream media ignore them. I feel their frustration because when they do see something in the media about it, it’s from the parties on the opposite side who say there is no such thing, you’re stupid, a kook or tinfoil-hat person. Yet the other side has been so wrong on the price movement of gold. It always seems that those of us who have been right for the bulk of the decade are those who always have to respond to any decline in the gold price. But those who have been so wrong about the gold price never seem to have to answer for their mistakes.

RW: The people who hate gold are always talking about a bubble, and the bubble is always bursting or about to burst. Isn’t it a commonplace that in bubbles you have massive over-investment? Isn’t it true that there are still relatively few people invested in gold?

PG: Yeah. I’ve called it the biggest stealth bull market in my nearly 30 years in business. I never could have imagined it when I started working in the financial community. That something can rise in such percentage terms and not only see a lack of support but also no real participation across the board by average investors.

Bubbles are like the NASDAQ stocks in the 1990s and real estate a few years ago when the vast majority of people were in it, and their expectations were for it to only go higher. Nothing can be further from the truth in the gold market, and that’s why the bubble talk is really just BS and a façade they try to create.

The fundamental arguments they’ve made for gold to fall hundreds of dollars haven’t worked out. So they try to say that the only reason we got up here is that there are masses of people buying and hysteria accumulating. I respond that if everybody was buying it, all these people wouldn’t be profiting from their ads telling people sell their gold, send it through the mail, etc. I think that’s more the BS from what I and others have coined the Permabear camp.

....read page 2 & 3 HERE



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Gold & Precious Metals

2 Key Points & What to Expect Now

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Posted by Jordan Roy Byrne - Daily Gold

on Monday, 05 November 2012 01:28

Putting Gold & Gold Stocks in Proper Context

The precious metals complex had a great rebound at the end of the summer but is now in the midst of a correction. Recently we wrote that the correction was nearing an end. We believe that to be the case. A short-term bottom could occur sometime this week. However, the precious metals sector was unable to retain much of the very strong momentum it previously had. Thus, the metals and stocks will need some time to confirm support and generate positive momentum before they have a chance of breaking to new highs. That being said, we wanted to take a broader view and analyze the sector in its current context in comparsion to the past.

Gold is likely to end up in its longest consolidation, which would surpass the 2006-2007 and 2008-2009 consolidations. Note the chart below and our observations on the three consolidations. Gold’s current position is weaker than the previous two consolidations but that won’t be of concern as long as the metal holds above the 400-day moving average at $1650. Whether Gold holds at $1650 or bottoms at $1600, the metal is likely to remain in this consolidation for a while.

nov4edgold

Checking the gold stocks (HUI), we see that the 400-day moving average provides excellent context. The gold stocks put in a strong double bottom and rallied up to the moving average. The market is now correcting the previous overbought state. In the three previous examples, the market began its rebound off of a major bottom (2000, 2005, 2008) and encountered initial resistance at the 400-day moving average.

nov4edhui

We focus on 2005 and 2008 because those are most applicable to today’s situation. In 2005, the HUI traded around the moving average for almost three months before pushing up to the previous all-time high. A similar thing happened in 2009. The HUI wrestled with the 400-day moving average from May until September before eventually rallying back to all-time high.

To conclude, there is nothing to be worried about in regards to precious metals. First, we should note that the shares have been showing more strength than the metals, which is always a very good sign for the near future. Second, the metals and more specifically the shares have been acting exactly as they did within a similar context in the past. After a rebound from a major low, the shares typically correct and wrestle with the 400-day moving average before embarking on a move to previous highs. Traders and investors are urged to be patient and accumulate at support when sentiment is constructive. Now while the market is wrestling with the 400-day moving average is the time to do your research and find the companies that will lead the next leg higher and outperform the market indices like the HUI, GDX and GDXJ. If you’d be interested in professional guidance in uncovering the producers and explorers poised for big gains then we invite you to learn more about our service.

Good Luck!

Jordan Roy-Byrne, CMT
Jordan@TheDailyGold.com

 

 

 



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Gold & Precious Metals

A Powerful Case This is a Normal Gold Correction

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Posted by Frank Holmes via The Daily Reckoning

on Friday, 02 November 2012 08:50

In fact, going back 30 years, the historical seasonality of gold has been to rise during September, with a subsequent correction in October.

I spent the latter half of last week at the New Orleans Investment Conference, talking with investors, mining companies and analysts about the state of the gold industry. The annual conference falls at an interesting time of the year, as the price of gold typically corrects in October.

DRH11-1-12-01

This fall, gold has followed this historical trend, with the metal climbing throughout the month of September to reach a high of $1,790 an ounce on October 4, only to have a normal correction to $1,701 by October 24. This decline typically comes ahead of the Love Trade fueling demand prior to the Hindu festival of lights, Diwali, which begins in November.

Miners, Show Me the Money!

At the conference, I’ve been discussing the multiple forces squeezing the profits and earnings out of gold miners, causing equity investors to become the Rod Tidwells of the gold world, getting miners energized to “Show me the money!” In my opinion, this phenomenon highlights the importance of selectively choosing among those gold companies that exhibit the best relative growth and momentum characteristics to help obtain outstanding investment results.

DRH11-1-12-02-300x300My workshop presentation in “The Big Easy” integrated preeminent thinking from multiple gold experts, including research firm CIBC, Gold Fields and the World Gold Council, about how gold companies’ performance has been neither “big” nor “easy.” There’s been a decline in production per share, an 80 percent increase in the average cost per ton of gold over the past six years, and a 21 percent decline in global average grades of gold since 2005. Cash taxes per ounce of production have increased dramatically, and, according to CIBC World Markets, the replacement cost for an ounce of gold is now $1,500, with $1,700 as a sustainable number. Cash operating costs eat away the most, at $700 an ounce, while sustaining capital, construction capital, discovery costs, overhead and taxes eat up $800. At the October 24 gold price of $1,700 an ounce, only $200 is left over as profit, says CIBC.

Gold companies have had their share of challenges in the past. Prior to the huge run-up in gold prices in the late 1970s, forward price-to-cash flow ratios crashed from a high of about 22 times to just under 9 times. Eventually, as gold climbed to its high, multiples spiked back up to 21 times.

DRH11-1-12-03

Miners also didn’t increase the supply of the precious metal in the 1970s. Back then, there were only a few major players in the gold game. South Africa was a significant gold-producing country, as well as Russia and North America.

However, following years of a gold bull market in the 1970s, production climbed. In fact, Pierre Lassonde, chairman of Franco-Nevada and a living legend in the mining and resource world, says it took seven years for the gold industry to respond after the rise in the price of gold. Ironically, as the price kept falling over the next 20 years, production doubled, says Lassonde.

DRH11-1-12-04

Beginning in 2000, gold companies have experienced a similar phenomenon, with production remaining flat, even declining in some years. In 2008, mine supply of gold fell to levels not seen since the early 1990s.

Now, after a seven-year lag, the industry has responded as we’re beginning to see some growth in supply.

From 2006 through 2011, production throughout the entire gold industry has increased about 3 percent, says CEO Nick Holland of Gold Fields. During his keynote presentation at the Melbourne Mining Club in July, he indicated that most of the growth was not coming from the major producers. In more mature markets, such as South Africa, Australia, Peru and the U.S., annual production decreased by about 5 million ounces since 2006. Emerging markets on the other hand—China, Colombia, Mexico and Russia—added about 7.6 million ounces over the last six years, Holland says.

Of gold finds that contain at least 2 million ounces of gold, research from the Metals Economics Group (MEG) finds that there have been 99 significant discoveries between 1997 and 2011. Only 14 of the 26 major gold producers made these major gold discoveries. “Today, the major producers and their majority-owned subsidiaries hold 39 percent of the reserves and resources in the 99 significant discoveries made in the past 15 years.” This amounts to less than half of the yellow metal needed to replace the gold companies’ production from 2002 to 2011, says MEG.

According to Lassonde, this is the “elephant in the room,” as new finds have become elusive. The chart below from CIBC shows that there was only one major discovery that was more than 3 million ounces in 2011. Over the past seven years, there have been only nine major discoveries of gold.

DRH11-1-12-05

Lassonde doesn’t think we have hit “peak gold,” but believes the gold industry needs a “3D seismic” event similar to what occurred in the oil industry before we see considerable finds.
For as many challenges as gold companies face today, they have rarely experienced such a well-diversified consumer base and diversified demand for their product: It’s “the best we could ask for,” says Lassonde.

A newer trend that I’ve discussed is the reemergence of emerging markets central banks as buyers of gold, as they have been “relearning that all paper currencies are suspect,” says Lassonde. Today, he says “cash is trash,” with the value of euro, dollar and yen in question.

He believes this source of demand could be long-lasting and quite significant if you look at emerging market countries’ gold holdings as a percent of total reserves. In 2000, the European Central Bank decided that the right proportion of gold to own should be 15 percent. Pierre says if you apply that figure to the potential gold holdings of the emerging market central banks, they would need to accumulate 17,000 tons of gold. At a purchase of 1,000 tons a year (or about 40 percent of today’s production), these central banks would have to buy gold for the next 17 years!

DRH11-1-12-06

Another growing source of demand has been from the Fear Trade’s scooping up of gold exchange-traded funds (ETFs). Eight years after the products were launched, 12 gold ETFs and eight other similar investments are valued at around $120 billion and hold 2,500 tons of gold, says Nick Holland.

I believe the Fear Trade will continue buying not only gold but also gold stocks, as the group is driven by Helicopter Ben’s quantitative easing program.

In the latest Weldon’s Money Monitor, Greg Weldon discusses the consequences of the Federal Reserve’s debt monetization and liquidity provisions, showing the “somewhat frightening pace” of expansion in money supply.

Weldon says that over the last four years since August 2008, the U.S. Narrow Money Supply, or M1, which is physical money such as coins, currency and deposits, has increased 73 percent, or more than one trillion dollars. This is about as much as it expanded in the previous forty years!

DRH11-1-12-07

Don’t let the short-term correction fool you into selling your gold and gold stocks.

The dramatic increase in money suggests that monetary debasement will continue, and in addition to all the above drivers, I believe these are the positive dynamics driving higher prices for gold and gold stocks.

Frank Holmes

Original article posted on Daily Resource Hunter

 

 



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Gold & Precious Metals

How to identify a major gold top

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Posted by Steven Saville = The Speculative Investor

on Thursday, 01 November 2012 08:12

Most important gold peaks of the past 40 years occurred well after the monetary backdrop had turned gold-bearish

In the October 1st weekly update, we described three signs that will likely be seen at around the time of, or just prior to, gold's ultimate price top. First, we said that by the time the ultimate top of gold's bull market is close at hand the general public will have given up on the idea that returning to economic health requires more money-printing, more government spending and more debt. The purveyors of such economic quackery will still have their fans, but they will most definitely be in the minority. Second, we reiterated the historical fact that the most important gold peaks of the past 40 years occurred well after the monetary backdrop had turned gold-bearish. We then said that as a consequence of gold's tendency to follow major changes in the monetary situation, gold probably won't reach its ultimate top until well after the Fed stops trying to 'stimulate' the economy using cheap credit and money-pumping. Third, we cited the strong tendency observed under the current monetary system for long-term bull markets to go to absurd extremes and culminate in spectacular upside blow-offs during their final 12 months.

Not one of these three signs has been evident during the past few years. Furthermore, based on the time it would take for the above-mentioned signs to appear it is reasonable to conclude that gold's ultimate price top lies a minimum of two years into the future.

We are revisiting this topic today because our October 1st commentary omitted an important indicator of a gold top. It's an indicator we've included in many TSI commentaries over the past 10 years that for some unknown reason escaped our most recent discussion of what to look for when trying to determine if gold's bull market is nearing its end. We are referring to the relationship between gold and the U.S. stock market. The relationship is illustrated below and can be expressed as follows: Secular trends in the Dow Industrials Index relative to gold go hand-in-hand with secular trends in stock market valuation (represented on the following chart by the S&P 500's price-to-peak-earnings ratio, also known as the Hussman P/E). Due to this relationship, gold probably won't be close to a major peak relative to the Dow until after the SPX's Hussman P/E makes a prolonged move to single digits. To put it more succinctly, near a major gold top the U.S. stock market will be very under-valued.

Note that the relationship between gold and the stock market isn't just a coincidence. It stems from gold being the world's most durable, transportable and widely accepted store of value. As other investments fall out of favour (as indicated, for example, by a long-term downward trend in the U.S. stock market's P/E ratio) there is an increase in demand for the store-of-value function that gold has provided with great success for thousands of years.

SS1

The U.S. stock market is not remotely close to being undervalued at this time. Therefore, the link between gold and the U.S. stock market's valuation is sending the same signal as the other indicators of a major gold top, which is that a major gold top is probably still years away.

Regular financial market forecasts and analyses are provided at our website: 
http://www.speculative-investor.com/new/index.html
We aren’t offering a free trial subscription at this time, but free samples of our work (excerpts from our regular commentaries) can be viewed at: http://www.speculative-investor.com/new/freesamples.html 

 
 
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Gold & Precious Metals

No Way Has the Silver Market Peaked

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Posted by David Morgan - Silver-Investor.com

on Wednesday, 31 October 2012 05:48

Silver hit $806.00 500 Yrs ago, in the Year 1477 as seen on this 650 year Silver Chart (Ed Note: Click HERE or on the image for a larger view)
 
 
600yearsilver
 
 
There is plenty of data that the silver spike toward $50 last year was it for the silver market. Don’t be fooled, we heard the same thing in 2008 after silver had hit the $21+ level and during the depths of the financial crash silver sold near the $9 level. While many were throwing in the towel and admitting utter defeat we said…
 
BUY, BUY, and BUY some more – sometimes just the power of conviction is all that is needed. The conviction to stay the course and buy when FEAR was in the silver market!
 
When gold had dipped, silver was at the buy of a lifetime…it was silver investing that could make you rich!
 

Think about it, buying silver near $9 and selling near $48 would yield great returns. Those who jumped in near the bottom received almost five times their money without any leverage at all. . 

Silver-Price(Ed Note: Click HERE or on the image for a larger view)

What was so interesting is how much more money will be made in this sector but many that read this far will NOT invest. They will think the market is too far along in the bull progression and therefore they have missed the majority of the move.

It used to be one of my mantras – “If there is only one thing to teach you about the upcoming silver bull market it is this90% of the move comes in the last 10% of the time!”

Think about that statement—Would you be happy to capture 90% of any market move? What this means is you could just now be waking up the precious metals and build your wealth even starting at what appears as--- this late date.

What if the entire precious metals bull market hits the average 17 year cycle. Since gold bottomed for this cycle in 2000 it would suggest that 2017 for the top. A full five years from today. If the last year or so of this market is the most explosive and gold explodes and you are along for the big gains in the blow-off phase how would you feel?

Now is the market really going to make the majority of the move in the last year, let alone 90%? Probably not, however think about the facts you already know, look at the housing bubble the most excitement and largest gains happened going into the top, the last few months of the move. Think about the technology stocks bubble, the Japan bubble, or any other market. This simply is market behavior!

However, this time is different—Why?

Because this time it will not be about being a smart real estate investor, or understanding that technology is leading the growth cycle, or the Japanese have a more efficient system. It will be about the one word I seldom use—FEAR…

Yes, you and many throughout the world will be concerned that you don’t have enough money for retirement…

Or concerned  that your pension will not be there? Or concerned your employer cannot meet his obligations? Concerned that the Dollar, Euro, Yen, or any government script will be worth tomorrow what it is today?

Worried that the system truly is cracking up and plans that you made based on solid evidence a decade ago are invalid and you need to take action into your own hands instead of relying on your financial planner, stock broker, defined benefit package or even the safety net provided by the governments at large.

When that shift takes place, that tipping point, when just enough people on a global basis collectively say, we are mad and we are not going to take it any more therefore we are moving into the precious metals. Once this happens look out the buying frenzy will be upon us, many have heard there is no fever like gold fever, this may be true, but bear in mind there is nothing close to a silver bull market! – Not a thing—nothing because silver shines the light of truth about the corrupt financial system better than gold because more people own it!

How high can silver go?

And as we brace ourselves for the final chapter of a U.S. dollar currency crisis…silver has a long way to go.

Let’s take a look at history. In 1980, as the nation was still reeling from the Carter-era inflation and investors were buying up precious metals…silver peaked at $52 an ounce. Adjusted for inflation, that’s about $143 today!

Those who get in now will be richly rewarded…and can get a lot more for their money.
 

by David Morgan

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