Wednesday, July 30, 2008
Tuesday, July 29, 2008
The Second (and last) Great Buying Opportunity for Mining Shares in 2008
Darrell Brookstein, Mining Insights 07/29/2008
The TSX Venture Exchange Index is at all-time lows (it’s only two to three years old) and this milestone is reaching its nadir at the typical seasonal lows for mining shares and gold in mid-July to end of August. The seasonal conforms to real-life factors, not some randomly occurring price cycle. The factors affecting gold price cycles include the Christmas jewelry-buying season, weddings season in India, dental and electronics industries’ purchasing, etc.
1990-1994 was a peculiarly difficult period for junior mining shares, but I haven’t seen a much worse a period than “now” since 1978 when I began to focus on these types of shares. The washout since the 2007 highs has been devastating, and while the first buying opportunity I identified in 2008 was good relative to the prior two years, with hindsight it’s clear we would have been a bit better off to wait. But by roughly averaging prices then with prices now, I am convinced we will be shown to have made extraordinary purchases, when others were/are throwing the babies out with the bathwater. My old partner, Rick Rule, used to say, “Feed the geese when they’re quacking” (meaning: sell stock to buyers when the buyers are clamoring to buy).
Well, they certainly are not quacking now. This is the opposite of a great selling opportunity, and, that is, by definition, a great time to buy.
NOW is the time to complete your investments for the rally in mining shares I see lasting for from 15 to 40 more months, and starting over the next six weeks.
We have seen nothing to dissuade us from our expectation of $1038 gold and $25.11 silver minimums, and, based on our proprietary, pattern-recognition trading methodology, we still expect those prices this calendar year or by end of first quarter 2009, the latest. We still believe $1300+ gold and $31+ silver are possible before this bull market ends. Attendant with that, the TSX Venture Exchange Index would go significantly above its all-time high.
Based on 30 years of professional involvement with precious metals mining shares, we believe the second great buying opportunity for 2008 is upon us and is likely to be the most important opportunity of both the last and future 12 months.
If you are technically sophisticated and want to wait for a bottom to be “in place” before making further acquisitions, you have our blessing (FYI – Our educated guess is that the actual bottom occurred on July 17 or will occur at a slightly lower level before August 10). However, for most of our readers, purchases should be made immediately and certainly before August 20.
The TSX Venture Exchange Index is at all-time lows (it’s only two to three years old) and this milestone is reaching its nadir at the typical seasonal lows for mining shares and gold in mid-July to end of August. The seasonal conforms to real-life factors, not some randomly occurring price cycle. The factors affecting gold price cycles include the Christmas jewelry-buying season, weddings season in India, dental and electronics industries’ purchasing, etc.
1990-1994 was a peculiarly difficult period for junior mining shares, but I haven’t seen a much worse a period than “now” since 1978 when I began to focus on these types of shares. The washout since the 2007 highs has been devastating, and while the first buying opportunity I identified in 2008 was good relative to the prior two years, with hindsight it’s clear we would have been a bit better off to wait. But by roughly averaging prices then with prices now, I am convinced we will be shown to have made extraordinary purchases, when others were/are throwing the babies out with the bathwater. My old partner, Rick Rule, used to say, “Feed the geese when they’re quacking” (meaning: sell stock to buyers when the buyers are clamoring to buy).
Well, they certainly are not quacking now. This is the opposite of a great selling opportunity, and, that is, by definition, a great time to buy.
NOW is the time to complete your investments for the rally in mining shares I see lasting for from 15 to 40 more months, and starting over the next six weeks.
We have seen nothing to dissuade us from our expectation of $1038 gold and $25.11 silver minimums, and, based on our proprietary, pattern-recognition trading methodology, we still expect those prices this calendar year or by end of first quarter 2009, the latest. We still believe $1300+ gold and $31+ silver are possible before this bull market ends. Attendant with that, the TSX Venture Exchange Index would go significantly above its all-time high.
Based on 30 years of professional involvement with precious metals mining shares, we believe the second great buying opportunity for 2008 is upon us and is likely to be the most important opportunity of both the last and future 12 months.
If you are technically sophisticated and want to wait for a bottom to be “in place” before making further acquisitions, you have our blessing (FYI – Our educated guess is that the actual bottom occurred on July 17 or will occur at a slightly lower level before August 10). However, for most of our readers, purchases should be made immediately and certainly before August 20.
Monday, July 28, 2008
Silver – Euphoria - David Morgan
First, the junior market does do well in the initial stages of a new bull market. This is pretty much self-evident. Many companies with merit and many without merit did rise in price dramatically during the first leg up in the precious metals bull market. Also, let me be clear that exceptions can always be found; we are speaking in general terms here. The bull market was similar in the 1970s and I have written about it in the past. Once we enter the optimistic phase of this market, which right now I am forecasting to begin around the August to September 2008 timeframe, we will see the junior sector perk up.
However, some junior mining companies may have run out of money and/or given up. Near the end of the cycle where we enter the most lucrative but also the most dangerous phase of the market, the “euphoric” phase, we will see the junior market absolutely fly. The reason is psychological—people love cheap stocks, and many of the best companies in the industry will be trading well over $50 per share and many well above that. Those who are very late to the party will buy stocks based upon the “story” surrounding the stock and also the price.
During this euphoric mania it is possible to see penny stocks go from prices under a dollar to $10, $20, and even $30 per share. This is the exception, not the rule, but in general terms the junior market is so small and the amount of people flooding into the market so great that almost all “cheap” mining stocks get pushed higher.
The key is to not get too greedy, and take profits off the table—do not expect to sell at the exact top. As I have taught all along, especially for those who trade the futures market, it is always better to sell into strength. The euphoria lasts a very short time, usually a matter of weeks. At that time, it will be most difficult for me to not only remain objective but also to put up with the amount of e-mails that I will receive telling me I am wrong, the market is “different” this time, and I have become a traitor to the cause by even suggesting selling. However, I am fully prepared and plan to do the very best job possible, regardless of how much flack will be flying my way at the top. I still expect the ultimate top to be in the 2010-2012 timeframe, subject to change, as we get closer.
However, some junior mining companies may have run out of money and/or given up. Near the end of the cycle where we enter the most lucrative but also the most dangerous phase of the market, the “euphoric” phase, we will see the junior market absolutely fly. The reason is psychological—people love cheap stocks, and many of the best companies in the industry will be trading well over $50 per share and many well above that. Those who are very late to the party will buy stocks based upon the “story” surrounding the stock and also the price.
During this euphoric mania it is possible to see penny stocks go from prices under a dollar to $10, $20, and even $30 per share. This is the exception, not the rule, but in general terms the junior market is so small and the amount of people flooding into the market so great that almost all “cheap” mining stocks get pushed higher.
The key is to not get too greedy, and take profits off the table—do not expect to sell at the exact top. As I have taught all along, especially for those who trade the futures market, it is always better to sell into strength. The euphoria lasts a very short time, usually a matter of weeks. At that time, it will be most difficult for me to not only remain objective but also to put up with the amount of e-mails that I will receive telling me I am wrong, the market is “different” this time, and I have become a traitor to the cause by even suggesting selling. However, I am fully prepared and plan to do the very best job possible, regardless of how much flack will be flying my way at the top. I still expect the ultimate top to be in the 2010-2012 timeframe, subject to change, as we get closer.
Friday, July 25, 2008
Silver Standard Payout
Sometimes exploration success comes at a price, and this is a fact that the management and shareholders of Geologix Explorations are currently having to face up to. Thanks to its exploration acumen, Geologix has transformed a historical resource of 11.2 million tonnes averaging 0.96 grams gold and 12.86 grams silver in the Main Zone of its San Agustin gold-silver-zinc property in Mexico into a new 43-101 complaint resource estimate containing nearly 1.6 million ounces of gold and over 41 million ounces of silver. Sounds good, so what’s the issue?
Well, under the 2006 deal with Silver Standard Resources, Geologix had to issue one million shares and spend US$2 million on exploration drilling within two years. The junior also had to prepare a resource estimate based on 15,000 metres of drilling and pay Silver Standard based on the amount of contained gold and silver in the estimate. With this in mind, Geologix confined its drilling to only the known Main Zone and to Zone II, in an effort to limit the payout. Still, the new resource came in at nearly 60.8 million tonnes grading 0.49 grams gold and 11.7 grams silver per tonne, with 0.51% zinc in the indicated category, and nearly 53.4 million tonnes running 0.42 grams gold and 14.6 grams silver, with 0.59% zinc in the inferred category.
Based on current metals prices, the option deal calls for Geologix to pay US$15 per ounce of gold, and US$1 per ounce of silver in the measured, indicated and inferred resource categories. That means that about US$23.92 million is payable to Silver Standard for the gold credits, and US$41.69 million is due for the silver credits. In other words, Geologix needs to come up with approximately US$65.61 million to hold San Agustin outright, less a 2.5% net smelter return royalty capped at two million ounces of gold equivalent.
In order to work out a strategy to exercise the option, Geologix appointed Cynthia Thomas, and her company Conseil Advisory Services, as its Financial Advisor. Cynthia has the right background and credentials to complete the job, including a stint as Director, Mining Group, Investment Banking for Scotia McLeod in the late 1990s. She’s also on the board of Victory Nickel. She’s now exploring a wide range of alternatives for funding the exercise price, which may or may not include equity.
Not ones to sit on their hands, and with the San Agustin option agreement drilling now complete, the management of Geologix are moving full steam ahead on expanding the resource base on this low grade but favourably located project. The idea is also to test targets on strike 800 metres northeast, and 200 metres southwest.
So far, the new drill holes have more than doubled the width of Zone II to 425 metres, with intercepts of 312.9 metres grading 0.49 grams gold per tonne, 23.12 grams silver per tonne, 0.15% lead and 0.81% zinc from 44 metres depth. Other strong results from the new round of drilling include: hole 179, which returned 0.24 grams gold, 19.75 grams silver, 0.14% lead and 0.48% zinc over 366 metres from surface in Zone II; and hole 177, which cut 23 metres grading 0.49 grams gold, 27.37 grams silver, 0.16% lead and 0.76% zinc from eight metres depth in a hole in the southwestern corner of the current prospective area.
Meanwhile, step out drilling to the northwest in Zone II returned a 317.75 metre section running 0.32 grams gold and 19.1 grams silver per tonne, plus 0.15% lead and 0.89% zinc, as well as a second zone down to depths of nearly 417 metres averaging 0.5 grams gold, 13.3 grams silver per tonne, plus 1.47% zinc over 58.95 metres.
Overall, company President Dunham Craig likes what he sees. “Phase III drilling continues to expand mineralization beyond the outline used to calculate the June 2008 resource estimate at a rapid rate with no end in sight as drill holes continue to end in mineralization”, he says. “Our deep drilling is now underway and, coupled with the current flank drilling, we expect our second resource estimate this fall to be significantly larger. Considering the project's excellent infrastructure and size increase, we are excited that this is becoming one of the larger polymetallic bulk tonnage projects in Mexico.”
Despite the exploration results, shares in Geologix Explorations are trading in the bottom end of their 52-week trading range at about C$1.55. The problem overhanging its shares, alongside a weak junior market generally, is the payment due to Silver Standard to exercise the option. Based on the results to date and the continuing strength in gold and silver prices, one has to wonder if Silver Standard might instead take a big equity stake in Geologix as payment, or perhaps some combination of cash and stock. The 576 hectare property lies only 85 kilometres north of Durango City and national power lines run six kilometres east of the property. In other words, infrastructure is excellent. Silver Standard chief executive Robert Quartermain is one of the smartest guys in the mining game, so rest assured he is watching and running the numbers as the San Agustin resource grows.
Well, under the 2006 deal with Silver Standard Resources, Geologix had to issue one million shares and spend US$2 million on exploration drilling within two years. The junior also had to prepare a resource estimate based on 15,000 metres of drilling and pay Silver Standard based on the amount of contained gold and silver in the estimate. With this in mind, Geologix confined its drilling to only the known Main Zone and to Zone II, in an effort to limit the payout. Still, the new resource came in at nearly 60.8 million tonnes grading 0.49 grams gold and 11.7 grams silver per tonne, with 0.51% zinc in the indicated category, and nearly 53.4 million tonnes running 0.42 grams gold and 14.6 grams silver, with 0.59% zinc in the inferred category.
Based on current metals prices, the option deal calls for Geologix to pay US$15 per ounce of gold, and US$1 per ounce of silver in the measured, indicated and inferred resource categories. That means that about US$23.92 million is payable to Silver Standard for the gold credits, and US$41.69 million is due for the silver credits. In other words, Geologix needs to come up with approximately US$65.61 million to hold San Agustin outright, less a 2.5% net smelter return royalty capped at two million ounces of gold equivalent.
In order to work out a strategy to exercise the option, Geologix appointed Cynthia Thomas, and her company Conseil Advisory Services, as its Financial Advisor. Cynthia has the right background and credentials to complete the job, including a stint as Director, Mining Group, Investment Banking for Scotia McLeod in the late 1990s. She’s also on the board of Victory Nickel. She’s now exploring a wide range of alternatives for funding the exercise price, which may or may not include equity.
Not ones to sit on their hands, and with the San Agustin option agreement drilling now complete, the management of Geologix are moving full steam ahead on expanding the resource base on this low grade but favourably located project. The idea is also to test targets on strike 800 metres northeast, and 200 metres southwest.
So far, the new drill holes have more than doubled the width of Zone II to 425 metres, with intercepts of 312.9 metres grading 0.49 grams gold per tonne, 23.12 grams silver per tonne, 0.15% lead and 0.81% zinc from 44 metres depth. Other strong results from the new round of drilling include: hole 179, which returned 0.24 grams gold, 19.75 grams silver, 0.14% lead and 0.48% zinc over 366 metres from surface in Zone II; and hole 177, which cut 23 metres grading 0.49 grams gold, 27.37 grams silver, 0.16% lead and 0.76% zinc from eight metres depth in a hole in the southwestern corner of the current prospective area.
Meanwhile, step out drilling to the northwest in Zone II returned a 317.75 metre section running 0.32 grams gold and 19.1 grams silver per tonne, plus 0.15% lead and 0.89% zinc, as well as a second zone down to depths of nearly 417 metres averaging 0.5 grams gold, 13.3 grams silver per tonne, plus 1.47% zinc over 58.95 metres.
Overall, company President Dunham Craig likes what he sees. “Phase III drilling continues to expand mineralization beyond the outline used to calculate the June 2008 resource estimate at a rapid rate with no end in sight as drill holes continue to end in mineralization”, he says. “Our deep drilling is now underway and, coupled with the current flank drilling, we expect our second resource estimate this fall to be significantly larger. Considering the project's excellent infrastructure and size increase, we are excited that this is becoming one of the larger polymetallic bulk tonnage projects in Mexico.”
Despite the exploration results, shares in Geologix Explorations are trading in the bottom end of their 52-week trading range at about C$1.55. The problem overhanging its shares, alongside a weak junior market generally, is the payment due to Silver Standard to exercise the option. Based on the results to date and the continuing strength in gold and silver prices, one has to wonder if Silver Standard might instead take a big equity stake in Geologix as payment, or perhaps some combination of cash and stock. The 576 hectare property lies only 85 kilometres north of Durango City and national power lines run six kilometres east of the property. In other words, infrastructure is excellent. Silver Standard chief executive Robert Quartermain is one of the smartest guys in the mining game, so rest assured he is watching and running the numbers as the San Agustin resource grows.
Vote pits economics of mining, salmon
On Tuesday, Aug. 26, Alaska voters will decide weather to pass Ballot Measure 4, also called the Alaska Clean Water Initiative.
Organizations both for and against the measure claim a vote for their side will protect one industry without harming the other, making a vote either way sound like a win-win situation.
But framing the debate as salmon vs. mining, each camp also claims a vote falling on the opposition’s side of the ballot will hurt the Alaska economy.
And while Alaska mining in general has been sucked into the whirlwind of public relations one-liners and campaign zingers surrounding Ballot Measure 4, the center of the vortex, both sides say, is undoubtedly the controversial proposed Pebble mine project near Lake Iliamna.
Proposed mine or prospect?
Both sides agree the intended effect of Ballot Measure 4 is to prevent the Pebble Partnership from building a mine.
A potential mine at the site has been controversial because of its location at the headwaters of the Upper Talarik Creek and Koktuli River, which is a portion of the watershed where Bristol Bay salmon go to spawn.
Spokespersons for the Pebble Partnership, owned half each by Canada-based Northern Dynasty and United Kingdom-based Anglo American, caution there is no proposed Pebble mine project as of yet.
Rather, the company is exploring a mining prospect.
The Pebble Partnership is drilling exploration wells and collecting environmental data but points out it has not yet proposed any particular mine. The company is in the pre-permitting phase for the site, and until it applies for permits — expected sometime in 2009 — it has not proposed any mine for the area.
John Shively, CEO of the Pebble Partnership, said that’s because they don’t know yet whether a mine will be economically feasible.
“What we are asking is for an opportunity to look to see if we have a project, and then make that public,” he said. “That’s assuming we come to the conclusion that we have a project that meets the high environmental standards we set for ourselves and that others expect for us, and the project is economically feasible.”
Bruce Spitzer, senior technical adviser for Alaskans for Clean Water, which campaigns for Ballot Measure 4, said he thinks Pebble Partnership knows more about what its plans are for the site than it’s telling.
The researcher-turned-environmental-consultant has worked with a handful of mining companies over the years and worked as an environmental consultant for Cominco, the original owners of the Pebble mining rights.
“They keep saying they don’t have a mine plan yet,” Switzer said. “That is a total crock. I’ve done so many mines, of course they have preliminary plans. It’s like somebody who has a property wants to build a house on it, and they say they don’t have plans for a house. Well, they might not know where the plumbing for the master bedroom will be, but they know what kind of house they’re going to build.”
Sean Magee, public affairs director for the Pebble Partnership, said the west side of the Pebble site, where the mineral resource is near the surface, “would be amenable to open-pit mining,” and that the east side of the Pebble site, where minerals are deeper, would require underground extraction.
He said the company is looking at a type of extraction called block-caving, in which a vertical shaft runs adjacent to the mineral reserve, and a horizontal shaft runs extends it.
But, he said, at this point the Pebble Partnership doesn’t know which, if any, mine it will construct, as it is still collecting data.
Fisheries vs. mining?
Whether one calls Pebble a proposed mine or a prospect, the fight over the ballot measure crafted to stop it has widened to what sounds like a battle between miners and fishermen.
Each side, however, claims to want to protect an industry without harming the other.
In support of Ballot Measure 4 is Alaskans for Clean Water.
Switzer, senior technical adviser with the organization, said the measure would simply return Alaska’s mining regulations to their former state of prohibiting mining companies from dumping pollutants where salmon spawn.
“Prior to Frank Murkowski becoming governor, the Alaska Department of Environmental Conservation had a regulation prohibiting discharge of mine waste into salmon spawning streams,” Switzer said. “Murkowski rolled that regulation back and replaced it with a mixing zone, which is a portion of a stream or river where they can dump mine waste into.”
He said the measure “restores protection to salmon spawning streams and prohibits discharge of mine waste into them.”
Against the measure is Alaskans Against the Mining Shutdown. Its campaign director, Lyford Willis, said the measure will burden mining operations with unnecessary limits and regulations.
“Alaska already has strong rules for water quality and regulating pollutants,” Willis said. “We have other industries, other industrial facilities in Alaska that do have water quality issues — fish rendering plants, sewage treatment — there are folks violating water quality standards there. But in the measure they put forth, they singled out mining.”
And, he said, the wording of the measure is so vague that it would open up the mining industry to litigation.
“It’s poorly written. We can’t know the impact long term,” Willis said. “There’s a vast amount of uncertainty about what this will do.”
He said that at the Alaska Supreme Court hearing on whether the Alaska Clean Water Act could go before voters, one of the justices questioned the act’s clarity to Alaska voters after an hearing an hour of debate on the meaning of the act.
Switzer said the claim that Ballot Measure 4 is on legally fuzzy ground is false and a ruse to confuse voters into thinking they can’t understand the measure and that they should oppose it.
He said an act sends direction to legislators and regulators, and that the ballot measure would make it illegal for mining companies to dump toxic pollutants that will “adversely affect human health or the life cycle of salmon.”
The battle continues
Alaskans for Clean Water says that if Alaska votes “no” on Ballot Measure 4, Alaska’s fisheries will be vulnerable to destruction.
Alaskans Against the Mining Shutdown says that if it votes “yes,” mine development will be impeded throughout Alaska.
Both sides are deploying advertising campaigns via television, radio and print in the last month of the battle for Alaskans’ votes. When the dust settles Aug. 26, the side on Ballot Measure 4 with the most votes will win.
But what the winner will claim is also an issue of contention.
Switzer said the legislature could “sit on the bill for two years and it’ll go away,” if it wants, and that passing the measure would in large part send a message to the state legislature that the public supports Ballot Measure 4 and it’s now safe to publicly oppose Pebble Mine.
Shively said that if the act is passed new laws or regulations will be written that the Pebble Partnership and mines in general will have to abide by and that, moreover, it could “make people with capital think twice about investing in Alaska.”
Organizations both for and against the measure claim a vote for their side will protect one industry without harming the other, making a vote either way sound like a win-win situation.
But framing the debate as salmon vs. mining, each camp also claims a vote falling on the opposition’s side of the ballot will hurt the Alaska economy.
And while Alaska mining in general has been sucked into the whirlwind of public relations one-liners and campaign zingers surrounding Ballot Measure 4, the center of the vortex, both sides say, is undoubtedly the controversial proposed Pebble mine project near Lake Iliamna.
Proposed mine or prospect?
Both sides agree the intended effect of Ballot Measure 4 is to prevent the Pebble Partnership from building a mine.
A potential mine at the site has been controversial because of its location at the headwaters of the Upper Talarik Creek and Koktuli River, which is a portion of the watershed where Bristol Bay salmon go to spawn.
Spokespersons for the Pebble Partnership, owned half each by Canada-based Northern Dynasty and United Kingdom-based Anglo American, caution there is no proposed Pebble mine project as of yet.
Rather, the company is exploring a mining prospect.
The Pebble Partnership is drilling exploration wells and collecting environmental data but points out it has not yet proposed any particular mine. The company is in the pre-permitting phase for the site, and until it applies for permits — expected sometime in 2009 — it has not proposed any mine for the area.
John Shively, CEO of the Pebble Partnership, said that’s because they don’t know yet whether a mine will be economically feasible.
“What we are asking is for an opportunity to look to see if we have a project, and then make that public,” he said. “That’s assuming we come to the conclusion that we have a project that meets the high environmental standards we set for ourselves and that others expect for us, and the project is economically feasible.”
Bruce Spitzer, senior technical adviser for Alaskans for Clean Water, which campaigns for Ballot Measure 4, said he thinks Pebble Partnership knows more about what its plans are for the site than it’s telling.
The researcher-turned-environmental-consultant has worked with a handful of mining companies over the years and worked as an environmental consultant for Cominco, the original owners of the Pebble mining rights.
“They keep saying they don’t have a mine plan yet,” Switzer said. “That is a total crock. I’ve done so many mines, of course they have preliminary plans. It’s like somebody who has a property wants to build a house on it, and they say they don’t have plans for a house. Well, they might not know where the plumbing for the master bedroom will be, but they know what kind of house they’re going to build.”
Sean Magee, public affairs director for the Pebble Partnership, said the west side of the Pebble site, where the mineral resource is near the surface, “would be amenable to open-pit mining,” and that the east side of the Pebble site, where minerals are deeper, would require underground extraction.
He said the company is looking at a type of extraction called block-caving, in which a vertical shaft runs adjacent to the mineral reserve, and a horizontal shaft runs extends it.
But, he said, at this point the Pebble Partnership doesn’t know which, if any, mine it will construct, as it is still collecting data.
Fisheries vs. mining?
Whether one calls Pebble a proposed mine or a prospect, the fight over the ballot measure crafted to stop it has widened to what sounds like a battle between miners and fishermen.
Each side, however, claims to want to protect an industry without harming the other.
In support of Ballot Measure 4 is Alaskans for Clean Water.
Switzer, senior technical adviser with the organization, said the measure would simply return Alaska’s mining regulations to their former state of prohibiting mining companies from dumping pollutants where salmon spawn.
“Prior to Frank Murkowski becoming governor, the Alaska Department of Environmental Conservation had a regulation prohibiting discharge of mine waste into salmon spawning streams,” Switzer said. “Murkowski rolled that regulation back and replaced it with a mixing zone, which is a portion of a stream or river where they can dump mine waste into.”
He said the measure “restores protection to salmon spawning streams and prohibits discharge of mine waste into them.”
Against the measure is Alaskans Against the Mining Shutdown. Its campaign director, Lyford Willis, said the measure will burden mining operations with unnecessary limits and regulations.
“Alaska already has strong rules for water quality and regulating pollutants,” Willis said. “We have other industries, other industrial facilities in Alaska that do have water quality issues — fish rendering plants, sewage treatment — there are folks violating water quality standards there. But in the measure they put forth, they singled out mining.”
And, he said, the wording of the measure is so vague that it would open up the mining industry to litigation.
“It’s poorly written. We can’t know the impact long term,” Willis said. “There’s a vast amount of uncertainty about what this will do.”
He said that at the Alaska Supreme Court hearing on whether the Alaska Clean Water Act could go before voters, one of the justices questioned the act’s clarity to Alaska voters after an hearing an hour of debate on the meaning of the act.
Switzer said the claim that Ballot Measure 4 is on legally fuzzy ground is false and a ruse to confuse voters into thinking they can’t understand the measure and that they should oppose it.
He said an act sends direction to legislators and regulators, and that the ballot measure would make it illegal for mining companies to dump toxic pollutants that will “adversely affect human health or the life cycle of salmon.”
The battle continues
Alaskans for Clean Water says that if Alaska votes “no” on Ballot Measure 4, Alaska’s fisheries will be vulnerable to destruction.
Alaskans Against the Mining Shutdown says that if it votes “yes,” mine development will be impeded throughout Alaska.
Both sides are deploying advertising campaigns via television, radio and print in the last month of the battle for Alaskans’ votes. When the dust settles Aug. 26, the side on Ballot Measure 4 with the most votes will win.
But what the winner will claim is also an issue of contention.
Switzer said the legislature could “sit on the bill for two years and it’ll go away,” if it wants, and that passing the measure would in large part send a message to the state legislature that the public supports Ballot Measure 4 and it’s now safe to publicly oppose Pebble Mine.
Shively said that if the act is passed new laws or regulations will be written that the Pebble Partnership and mines in general will have to abide by and that, moreover, it could “make people with capital think twice about investing in Alaska.”
NDM - State official says Pebble exploration not a threat
DESPITE ALL THE flapdoodle about risks to the Bristol Bay fishery from development of the huge Pebble ore deposit, state regulators overseeing mine operations say there is no reason to block the ongoing exploration drilling at the ore body.
They aren't ready to sign off yet on approving the actual mining and development operations. That's no surprise since the Pebble people haven't decided how the mine would be developed. The two primary possibilities appear to be open pit mining or underground tunneling.
Ballot measure 4, the item on the Aug. 26 primary ballot that has everybody stirred up, isn't specific about which type of mining its sponsors would hate most. And Tom Crafford, large mine project manager for the Department of Natural Resources, said the operating rules for development will be written once a development proposal is received.
Obviously a lot is at stake with Pebble. It appears to be one of the largest copper, gold and molybdenum deposits in the world. Developing it would make the mine a major employer for the region and a force in the Alaskan economy. The worrisome aspect is that the waterways near and below the mine eventually run into Bristol Bay, perhaps the greatest salmon fishery in the world.
Those two great resources — the mine and the fishery — need not conflict with each other. Whether they do or not depends on how the mine is developed, but make no mistake — it should be developed in an environmentally sound manner in the interests of the people of the region and all Alaskans.
When the time to make development decisions comes, it will be absolutely crucial that tailings be disposed of in a way that makes it all but impossible for the potentially toxic materials to be exposed to the air and released into the waterways.
Keeping the tailings from being exposed to the air is critical and quite possible. The expected method will be to cover them with water behind an earthen and rock dam, one not susceptible to earthquakes. Built properly, such a dam would not break but simply shake in an earthquake, settling down to continue its job of holding back the water and keeping the tailings from being exposed to the atmosphere.
Such water impoundments are often stocked with trout, a sure sign that the water is not harmful to fish. The trout are the fishy equivalent of the canary in the coal mine.
Making sure that Pebble development does not harm the Bristol Bay fishery will be a high priority for both regulators and the mine operators. That is very much an achievable goal, one worth pursuing.
In the meantime, Alaska voters would do well to vote against ballot measure 4 when the time comes. Let the Pebble prospect be thoroughly explored, take a look at how the mine operators propose to operate and let regulators make decisions then based on reality and not the hysteria being generated by Pebble opponents.
It would be the fair way, one good for the people of the region and for the state as a whole.
They aren't ready to sign off yet on approving the actual mining and development operations. That's no surprise since the Pebble people haven't decided how the mine would be developed. The two primary possibilities appear to be open pit mining or underground tunneling.
Ballot measure 4, the item on the Aug. 26 primary ballot that has everybody stirred up, isn't specific about which type of mining its sponsors would hate most. And Tom Crafford, large mine project manager for the Department of Natural Resources, said the operating rules for development will be written once a development proposal is received.
Obviously a lot is at stake with Pebble. It appears to be one of the largest copper, gold and molybdenum deposits in the world. Developing it would make the mine a major employer for the region and a force in the Alaskan economy. The worrisome aspect is that the waterways near and below the mine eventually run into Bristol Bay, perhaps the greatest salmon fishery in the world.
Those two great resources — the mine and the fishery — need not conflict with each other. Whether they do or not depends on how the mine is developed, but make no mistake — it should be developed in an environmentally sound manner in the interests of the people of the region and all Alaskans.
When the time to make development decisions comes, it will be absolutely crucial that tailings be disposed of in a way that makes it all but impossible for the potentially toxic materials to be exposed to the air and released into the waterways.
Keeping the tailings from being exposed to the air is critical and quite possible. The expected method will be to cover them with water behind an earthen and rock dam, one not susceptible to earthquakes. Built properly, such a dam would not break but simply shake in an earthquake, settling down to continue its job of holding back the water and keeping the tailings from being exposed to the atmosphere.
Such water impoundments are often stocked with trout, a sure sign that the water is not harmful to fish. The trout are the fishy equivalent of the canary in the coal mine.
Making sure that Pebble development does not harm the Bristol Bay fishery will be a high priority for both regulators and the mine operators. That is very much an achievable goal, one worth pursuing.
In the meantime, Alaska voters would do well to vote against ballot measure 4 when the time comes. Let the Pebble prospect be thoroughly explored, take a look at how the mine operators propose to operate and let regulators make decisions then based on reality and not the hysteria being generated by Pebble opponents.
It would be the fair way, one good for the people of the region and for the state as a whole.
Thursday, July 24, 2008
The Difference Between Trading And Investing
Author: Dan Norcini
Posted On: Thursday, July 24, 2008, 12:22:00 PM EST
Apparently some of our readers are confused as to the differences between investing in gold shares and trading in gold shares. Judging by some of the nasty grams I have received from a few of you, I thought it might be worthwhile to explain the differences in the two as to the manner in which they approach trading/investing.
Investors generally have a longer term view of the market, attempt to define a macroeconomic trend and position themselves properly for that trend as it develops and ride it until the trend is exhausted and the macroeconomic picture which gave rise to that trend is no longer valid. They do not try to trade in and out of stocks daily or weekly for that matter but look to add to their holdings only on price corrections as they slowly build a sizeable position to take advantage of the move that their macroeconomic view informs them is coming.
Traders are an entirely different lot and approach the markets much differently. Their goal is more one of market timing attempting to catch short term price movements both up and down and profit as they take advantage of those moves. They will move in and out of the market as frequently as they prefer. They are much more active in managing their holdings compared to investors who are generally more passive.
That being said, some of you seem angry with me because I counseled abandoning a trade that goes bad. The notion is that I am now advising selling out on weakness. Unfortunately, those who erroneously think this way do not understand that trading (note – I did not say INVESTING in ) gold shares involves buying them on subsequent price weakness AFTER they form a short term technical buy signal on the charts and SELLING them into a rally after they form a short term technical sell signal on the charts.
Sometimes a TRADE can move against you in which case, as a professional, I will get out of the trade with a small loss and immediately look to move back in after the market moves lower (assuming I am buying) after which it then provides another short term buy signal. I will then take that new trade again expecting it to move in my favor. If it does not, and the market violates a technical support level, I do not argue with the market, but get out with another small loss all the while anticipating yet another entry point at another level at which I get another new buy signal. If the trade then moves in my favor, I will ride it until I feel the current move up runs out of steam at which point I will exit the trade.
The entire point in this exercise is to KEEP MY LOSSES SMALL. Each and every trade I put on has a price point at which I know the trade is either good or bad. Trading discipline then informs me to either exit or maintain or even add to the position. Arguing with a market is a technique employed by losers who inevitably end up busted and broke, just another piece of road kill on the floor of the pit.
By moving into a market as soon as I get a technical buy signal, I am in at a point with a DEFINITE set risk which I define as small. The longer you wait to enter a trade, the more your risk increases because the market has moved further away from that price level at which you know the trade has soured. That is the key to successful trading. Some of you need to lose a lot more money before you learn to RESPECT the markets. Only fools and novices sit there and argue with the market over a losing position all the while their trading capital dwindles into oblivion. You must first learn how to keep your losses small if you are going to survive as a trader. If you can do that, the profits will take care of themselves.
Secondly, some of you are also confused over what it means to “BUY a FISHING LINE” or to “SELL A RHINO HORN”. Neither Jim nor I have ever counseled buying willy-nilly in some blind fashion into a falling market just because you think prices have fallen far enough. How do you know that they have? I can emphasize strongly enough that prices can always fall much further than you ever imagine is possible. As a matter of fact, they can fall far enough that they can wipe out the entirety of your trading capital. Again, learn to respect the market.
Nowadays there is a new phenomenon that did not exist 20 years ago in the same quantity or form that it does today – that phenomenon is the hedge fund.
I have repeatedly tried to inform our readers that hedge funds are almost exclusively technicians in their approach to markets and rely on their computer generated buy and sell algorithms to enter and exit markets. Such algorithms have them constantly chasing prices higher by buying strength or chasing markets lower by selling weakness as all they are interested in is momentum in either direction. IF IT MOVES, CHASE IT – is their motto. Hedge fund activity is of such size that even the commercial traders in the futures pits in which I ply my trade and make my living are fearful of stepping in front of them. Now, if some of the biggest players on the planet decide to unload on a particular market, are you going to be foolish enough to attempt to single-handedly step in front of them and cause them to halt their selling by your own force of will? Try it and see how long you last!
That is why you must have a point at which you know that a trade is not working in your favor and get out of the way of these players so that you do not end up buried by them. Keep in mind that the market could care less what yours or mine or anyone else’s opinion is. It will go where it wants to go when it wants to and will only stop when it is ready or in the case of a hedge fund selling orgy, when their sell programs stop issuing sell signals. That is the point you are attempting to catch when you enter a trade.
Sometimes, in spite of all the caution and research and analysis, the market simply does not cooperate. So what – that is life as a trader – just get out of the trade and wait for another opportunity. You will ALWAYS get another opportunity to trade that market but if you end up losing all of your capital in a hedge fund dump because you wanted to play the bold defender of the faith, you WILL NOT last long enough to get that opportunity. Keep that in mind and do not ever forget it. It is coming from more than 2 decades of trading experience.
Back to the issue at hand vis-à-vis Fishing lines and Rhino horns – in a falling market you DO NOT jump in and buy weakness because the market is falling. You buy it at a level in which you EXPECT support to develop or at which you have ascertained that downside momentum is ebbing. That level is determined by examining the price charts. When Jim states a level at which he is going to buy it is because he is making an informed decision based on an analysis of a price chart. I will do the same thing but I do not publicly state price levels. That is just a difference in our trading styles but we both mark our buy in points after careful analysis, not by arbitrarily picking some random number out of the air.
Before you buy in however, you should note a price point that you are willing to risk your trade to before exiting. That will vary for each and every trader depending on their temperament, their capital and their conviction. I personally HATE losses so I cut them short very quickly. That is why I get out of a trade that is not working and quickly forget about it and move on to the next trade. No one likes to lose money on a trade but how you handle a loss as a trader says a lot more about your potential to survive in this business than how you handle your winners. Anyone can do the latter (although some gloat entirely too much) but only a rare few can handle the former.
I will be the first to admit that there are times in which I will violate one of my trading principles and stick to a trade that has gone bad and even add to it but I only do that in those few cases that I KNOW BEYOND A SHADOW OF A DOUBT, that the technicians are simply wrong and that price is too cheap or too expensive. Keep in mind that knowledge comes from 2 decades of knowing the markets that I trade and even at that I rarely do such a thing so I do not recommend this as something that most should even think about doing. It should be noted that the futures world is completely different than the equity world. In the case of futures, one has to know the supply and demand picture and the nature of the particular product they are trading – in the case of the equity world a host of things could take place that could completely justify a stock sinking into the toilet. One of the cases that comes to my mind was the case with Crystallex a while back when the government of Venezuela announced that it was basically going to nationalize the mining industry in that country. I wonder how many traders ended their careers right then and there on account of that out of the blue occurrence. Taking a small loss in that would have been far preferable to getting wiped out, would it not?
I hope this clarifies some things for you all. I wish I could answer all of your emails but I simply cannot. Those of you who write to me in a civilized fashion can expect a civilized answer if I do find the time. Those of you who write to me in the spirit of a horse’s ass, can expect an appropriate reply, assuming I want to waste time answering your email.
Lastly, please do not blame Jim, myself or Monty for that matter because you might happen to own some junior mining shares that are going down. If you are looking to blame someone, blame the naked short sellers or the management that does nothing to protect its shareholders’ interests or whatever. Even better, look at the shares of the mining companies that are the leaders in the sector and move some of your money into those stocks at the appropriate points.
Do not get married to a stock. Successful traders learn to optimize their trading capital and move it where they can get the best return on their money. Some of you are still pining away at the poor performance of some of the South African miners. Try to be objective – if they are not moving up as gold moves higher and there are other issues that are, then get rid of them and buy the better performing issues. At the very least, if you still think that they will turn around, then at least lighten up on them and move some of that money into the sector leaders. The name of the game is to make money – to do that you need strong performers that maximizes your investment. There is a reason why some of those stocks are not performing. We may not ever know what it is but the blunt truth be told – who cares? You will be much happier and self-fulfilled to see a stock that you have purchased moving strongly higher in a favored sector than sitting there mumbling, frustrated, angry and bitter because yours is going nowhere, especially after doing all the research and analysis that convinced you to own a gold mining company to protect and grow your wealth. Besides, your wife will think you are a veritable genius especially when you can buy her a new car or take her to a fancy restaurant with your earnings! In the case of you gals, you can always remind your husband that you treating yourself to a shopping binge or the works at the local beauty salon with your own money so he can leave off nagging you about going overboard spending.
I sincerely wish you all the very best of success.
Dan
Posted On: Thursday, July 24, 2008, 12:22:00 PM EST
Apparently some of our readers are confused as to the differences between investing in gold shares and trading in gold shares. Judging by some of the nasty grams I have received from a few of you, I thought it might be worthwhile to explain the differences in the two as to the manner in which they approach trading/investing.
Investors generally have a longer term view of the market, attempt to define a macroeconomic trend and position themselves properly for that trend as it develops and ride it until the trend is exhausted and the macroeconomic picture which gave rise to that trend is no longer valid. They do not try to trade in and out of stocks daily or weekly for that matter but look to add to their holdings only on price corrections as they slowly build a sizeable position to take advantage of the move that their macroeconomic view informs them is coming.
Traders are an entirely different lot and approach the markets much differently. Their goal is more one of market timing attempting to catch short term price movements both up and down and profit as they take advantage of those moves. They will move in and out of the market as frequently as they prefer. They are much more active in managing their holdings compared to investors who are generally more passive.
That being said, some of you seem angry with me because I counseled abandoning a trade that goes bad. The notion is that I am now advising selling out on weakness. Unfortunately, those who erroneously think this way do not understand that trading (note – I did not say INVESTING in ) gold shares involves buying them on subsequent price weakness AFTER they form a short term technical buy signal on the charts and SELLING them into a rally after they form a short term technical sell signal on the charts.
Sometimes a TRADE can move against you in which case, as a professional, I will get out of the trade with a small loss and immediately look to move back in after the market moves lower (assuming I am buying) after which it then provides another short term buy signal. I will then take that new trade again expecting it to move in my favor. If it does not, and the market violates a technical support level, I do not argue with the market, but get out with another small loss all the while anticipating yet another entry point at another level at which I get another new buy signal. If the trade then moves in my favor, I will ride it until I feel the current move up runs out of steam at which point I will exit the trade.
The entire point in this exercise is to KEEP MY LOSSES SMALL. Each and every trade I put on has a price point at which I know the trade is either good or bad. Trading discipline then informs me to either exit or maintain or even add to the position. Arguing with a market is a technique employed by losers who inevitably end up busted and broke, just another piece of road kill on the floor of the pit.
By moving into a market as soon as I get a technical buy signal, I am in at a point with a DEFINITE set risk which I define as small. The longer you wait to enter a trade, the more your risk increases because the market has moved further away from that price level at which you know the trade has soured. That is the key to successful trading. Some of you need to lose a lot more money before you learn to RESPECT the markets. Only fools and novices sit there and argue with the market over a losing position all the while their trading capital dwindles into oblivion. You must first learn how to keep your losses small if you are going to survive as a trader. If you can do that, the profits will take care of themselves.
Secondly, some of you are also confused over what it means to “BUY a FISHING LINE” or to “SELL A RHINO HORN”. Neither Jim nor I have ever counseled buying willy-nilly in some blind fashion into a falling market just because you think prices have fallen far enough. How do you know that they have? I can emphasize strongly enough that prices can always fall much further than you ever imagine is possible. As a matter of fact, they can fall far enough that they can wipe out the entirety of your trading capital. Again, learn to respect the market.
Nowadays there is a new phenomenon that did not exist 20 years ago in the same quantity or form that it does today – that phenomenon is the hedge fund.
I have repeatedly tried to inform our readers that hedge funds are almost exclusively technicians in their approach to markets and rely on their computer generated buy and sell algorithms to enter and exit markets. Such algorithms have them constantly chasing prices higher by buying strength or chasing markets lower by selling weakness as all they are interested in is momentum in either direction. IF IT MOVES, CHASE IT – is their motto. Hedge fund activity is of such size that even the commercial traders in the futures pits in which I ply my trade and make my living are fearful of stepping in front of them. Now, if some of the biggest players on the planet decide to unload on a particular market, are you going to be foolish enough to attempt to single-handedly step in front of them and cause them to halt their selling by your own force of will? Try it and see how long you last!
That is why you must have a point at which you know that a trade is not working in your favor and get out of the way of these players so that you do not end up buried by them. Keep in mind that the market could care less what yours or mine or anyone else’s opinion is. It will go where it wants to go when it wants to and will only stop when it is ready or in the case of a hedge fund selling orgy, when their sell programs stop issuing sell signals. That is the point you are attempting to catch when you enter a trade.
Sometimes, in spite of all the caution and research and analysis, the market simply does not cooperate. So what – that is life as a trader – just get out of the trade and wait for another opportunity. You will ALWAYS get another opportunity to trade that market but if you end up losing all of your capital in a hedge fund dump because you wanted to play the bold defender of the faith, you WILL NOT last long enough to get that opportunity. Keep that in mind and do not ever forget it. It is coming from more than 2 decades of trading experience.
Back to the issue at hand vis-à-vis Fishing lines and Rhino horns – in a falling market you DO NOT jump in and buy weakness because the market is falling. You buy it at a level in which you EXPECT support to develop or at which you have ascertained that downside momentum is ebbing. That level is determined by examining the price charts. When Jim states a level at which he is going to buy it is because he is making an informed decision based on an analysis of a price chart. I will do the same thing but I do not publicly state price levels. That is just a difference in our trading styles but we both mark our buy in points after careful analysis, not by arbitrarily picking some random number out of the air.
Before you buy in however, you should note a price point that you are willing to risk your trade to before exiting. That will vary for each and every trader depending on their temperament, their capital and their conviction. I personally HATE losses so I cut them short very quickly. That is why I get out of a trade that is not working and quickly forget about it and move on to the next trade. No one likes to lose money on a trade but how you handle a loss as a trader says a lot more about your potential to survive in this business than how you handle your winners. Anyone can do the latter (although some gloat entirely too much) but only a rare few can handle the former.
I will be the first to admit that there are times in which I will violate one of my trading principles and stick to a trade that has gone bad and even add to it but I only do that in those few cases that I KNOW BEYOND A SHADOW OF A DOUBT, that the technicians are simply wrong and that price is too cheap or too expensive. Keep in mind that knowledge comes from 2 decades of knowing the markets that I trade and even at that I rarely do such a thing so I do not recommend this as something that most should even think about doing. It should be noted that the futures world is completely different than the equity world. In the case of futures, one has to know the supply and demand picture and the nature of the particular product they are trading – in the case of the equity world a host of things could take place that could completely justify a stock sinking into the toilet. One of the cases that comes to my mind was the case with Crystallex a while back when the government of Venezuela announced that it was basically going to nationalize the mining industry in that country. I wonder how many traders ended their careers right then and there on account of that out of the blue occurrence. Taking a small loss in that would have been far preferable to getting wiped out, would it not?
I hope this clarifies some things for you all. I wish I could answer all of your emails but I simply cannot. Those of you who write to me in a civilized fashion can expect a civilized answer if I do find the time. Those of you who write to me in the spirit of a horse’s ass, can expect an appropriate reply, assuming I want to waste time answering your email.
Lastly, please do not blame Jim, myself or Monty for that matter because you might happen to own some junior mining shares that are going down. If you are looking to blame someone, blame the naked short sellers or the management that does nothing to protect its shareholders’ interests or whatever. Even better, look at the shares of the mining companies that are the leaders in the sector and move some of your money into those stocks at the appropriate points.
Do not get married to a stock. Successful traders learn to optimize their trading capital and move it where they can get the best return on their money. Some of you are still pining away at the poor performance of some of the South African miners. Try to be objective – if they are not moving up as gold moves higher and there are other issues that are, then get rid of them and buy the better performing issues. At the very least, if you still think that they will turn around, then at least lighten up on them and move some of that money into the sector leaders. The name of the game is to make money – to do that you need strong performers that maximizes your investment. There is a reason why some of those stocks are not performing. We may not ever know what it is but the blunt truth be told – who cares? You will be much happier and self-fulfilled to see a stock that you have purchased moving strongly higher in a favored sector than sitting there mumbling, frustrated, angry and bitter because yours is going nowhere, especially after doing all the research and analysis that convinced you to own a gold mining company to protect and grow your wealth. Besides, your wife will think you are a veritable genius especially when you can buy her a new car or take her to a fancy restaurant with your earnings! In the case of you gals, you can always remind your husband that you treating yourself to a shopping binge or the works at the local beauty salon with your own money so he can leave off nagging you about going overboard spending.
I sincerely wish you all the very best of success.
Dan
Gold, silver will rebound again on further financial troubles
A sharp fall in the oil price and a consequent recovery in the US dollar brought a sharp retrenchment in precious metal prices this week as gold approached the $1,000 barrier for a second time and silver closed on $20.
This is an excellent buying opportunity for anybody who missed out on earlier buying opportunities in this bull market. It can only be a matter of weeks or at most a couple of months before gold breaches $1,000 decisively and then heads to $1,200 before the end of the year.
Why can I be so confident? As Bill Clinton once argued ‘It’s the economy stupid!’ You would have to be a real fool to think the financial sector is out of the woods now and that all will be well.
The US government may agree a rapid bail out for Freddie Mac and Fannie Mae, the two mortgage underwriting agencies, but what comes next? If these agencies have gotten themselves into a mess what other disasters have yet to emerge? How much will it cost next time?
This autumn we are far more likely to see a series of banking failures in the US than a meaningful recovery. How can the banks recover while house prices are still falling and not showing any sign of bottoming out! In this climate a full scale Wall Street Crash is in prospect.
In a frenzied effort to support the economy the Fed will have to cut interest rates from two to one per cent, just as it did in the dot-com crash. That will send the dollar lower and gold and silver much higher.
Anybody who believes the current rally on Wall Street is anything except a brief trading window is stupid. Even a big downswing in oil prices will not be sufficient to prevent the financial crisis that is ongoing and barely one year into a three year cycle.
In that cycle gold and silver will be the winners – and virtually all other asset classes the losers. This last happened in the 1970s and we are seeing history repeat itself all over again.
The Normalcy Of Violence In Gold
Posted On: Wednesday, July 23, 2008, 10:23:00 PM EST
Author: Jim Sinclair
Dear Friends,
I apologize for the late email and postings, but corporate responsibilities took up the day. I had an important meeting in the Sharon, CT office today.
My job here on www.JSMineset.com is to speak my opinion on a daily basis to the substance of gold as a certain medium of insurance against the unstoppable forces of a financial system that is broken.
Dan speaks as a man who supports himself and his family by trading markets.
Dan uses charts to make his point, but please do not assume that just because he charts a gold share for you that he is making any specific recommendation of investment in that issue.
I have been asked if the gold securities that Dan charts are his favorites. The answer is hell no. They are simply situations from different groups within the definition of gold shares.
Now let’s look at today’s gold market. My take is that today was nothing new. Gold is a currency. It reacts in a direct relationship now to the euro. All other ingredients that are assumed to create the gold price work into the dollar vs. euro relationship.
Because of this we could and many are tonight writing tomes on energy prices, the equity market, interest rates and other commodities.
I like simplicity. That means I look At THE EURO TO KNOW WHAT THE GOLD PRICE IS DOING AS THE DISTILLENT OF EVERY OTHER FACTOR OUT THERE.
Reactions happen in every market. When it comes to gold violence is its name.
This is a forced reaction because when the euro hit $1.5980 the panic alarm sounded in the dollar vs. euro relationship. A freefall was destined to occur.
Crude to gold works only via its impact on the dollar vs. euro action.
If we must speak about crude it is a black box barf reaction, and not the end of a major bull. The worst-case scenario under $125 is major, major buying interest that will wait for $110 to $115, but not for long before it steps up.
Nothing has changed fundamentally for the key element in gold, the dollar. The panic alarm went off as the dollar threatened a free fall. The greatest show on earth went to maximum TV exposure at maximum volume. The margin traders bailed and the rest of the public gamblers were sold out the next day in commodities.
Nothing whatsoever has changed. Gold is headed to $1200 this year and $1650 on or before January 14th, 2011. The euro will trade above $1.60 on its way to $2 plus.
Gold buyers now are at $910 to $915 and they will move up if not satisfied this week. My next buy is at $912.
The odds do not favor a gold price under $900.
I have traded gold backwards to how you should do if speculating in general commodities. In gold I have bought every reaction in a stepladder fashion, selling exactly the same way. It has worked ever time even though I have seen my life pass through my eyes on a few occasions.
The only selling that should be done is if you approach a margin call. Cover the call yourself before the session close. Do not wait for a margin call, and once you have covered, stay away from margin! If you have upcoming other needs for your funds, make sure you have completed the necessary actions to deal with them.
Other than margin or other financial needs, jump back into the hole we dug years ago, pull the same rock over your head and peak out in a week to see where we are.
Respectfully yours,
Jim
Author: Jim Sinclair
Dear Friends,
I apologize for the late email and postings, but corporate responsibilities took up the day. I had an important meeting in the Sharon, CT office today.
My job here on www.JSMineset.com is to speak my opinion on a daily basis to the substance of gold as a certain medium of insurance against the unstoppable forces of a financial system that is broken.
Dan speaks as a man who supports himself and his family by trading markets.
Dan uses charts to make his point, but please do not assume that just because he charts a gold share for you that he is making any specific recommendation of investment in that issue.
I have been asked if the gold securities that Dan charts are his favorites. The answer is hell no. They are simply situations from different groups within the definition of gold shares.
Now let’s look at today’s gold market. My take is that today was nothing new. Gold is a currency. It reacts in a direct relationship now to the euro. All other ingredients that are assumed to create the gold price work into the dollar vs. euro relationship.
Because of this we could and many are tonight writing tomes on energy prices, the equity market, interest rates and other commodities.
I like simplicity. That means I look At THE EURO TO KNOW WHAT THE GOLD PRICE IS DOING AS THE DISTILLENT OF EVERY OTHER FACTOR OUT THERE.
Reactions happen in every market. When it comes to gold violence is its name.
This is a forced reaction because when the euro hit $1.5980 the panic alarm sounded in the dollar vs. euro relationship. A freefall was destined to occur.
Crude to gold works only via its impact on the dollar vs. euro action.
If we must speak about crude it is a black box barf reaction, and not the end of a major bull. The worst-case scenario under $125 is major, major buying interest that will wait for $110 to $115, but not for long before it steps up.
Nothing has changed fundamentally for the key element in gold, the dollar. The panic alarm went off as the dollar threatened a free fall. The greatest show on earth went to maximum TV exposure at maximum volume. The margin traders bailed and the rest of the public gamblers were sold out the next day in commodities.
Nothing whatsoever has changed. Gold is headed to $1200 this year and $1650 on or before January 14th, 2011. The euro will trade above $1.60 on its way to $2 plus.
Gold buyers now are at $910 to $915 and they will move up if not satisfied this week. My next buy is at $912.
The odds do not favor a gold price under $900.
I have traded gold backwards to how you should do if speculating in general commodities. In gold I have bought every reaction in a stepladder fashion, selling exactly the same way. It has worked ever time even though I have seen my life pass through my eyes on a few occasions.
The only selling that should be done is if you approach a margin call. Cover the call yourself before the session close. Do not wait for a margin call, and once you have covered, stay away from margin! If you have upcoming other needs for your funds, make sure you have completed the necessary actions to deal with them.
Other than margin or other financial needs, jump back into the hole we dug years ago, pull the same rock over your head and peak out in a week to see where we are.
Respectfully yours,
Jim
Wednesday, July 23, 2008
Gold Finished much lower!!!
I should note here that whenever you hear pundits pronouncing the death of the commodity bull, go and take a look at the longer term weekly and monthly charts. That will put things in perspective. Corrections occur in every market and provide opportunities for those who have a firm fundamental view. Those are who late to the party inevitably get caught holding the bag and end up paying the price as they get taken out to the woodshed and given a beating that they will not long forget. Meanwhile, the grains are beginning to look like the selling frenzy in there might be abating. Corn in particular has gotten the stuffing knocked out of it having basically gone straight down for the last month without even a pause. Once the grains stabilize, the CRB and the CCI will as well although the excessively heavily energy weighted CRB will struggle a bit more until energy prices level off. The long term demand for commodities is not going to go anywhere and once end users feel that the excessive hedge fund and index fund holdings have been purged out, they will move back in and secure long side coverage.
It goes without saying that the short term technical damage done in gold is quite severe at this point. It will now have to get back above $950 basis August to entice new momentum longs and spook the plethora of brand new shorts who once again have been selling into weakness chasing it lower. That has not been a profitable strategy in gold since 2002. Please see the chart as I have marked some of the support and resistance levels. On any potential test of support near the $916- $920 level, gold will need to find strong buying or it will slip back to $900 once again. I might mention that gold is trading exactly at the 50% retracement level of the last move up from $860 to $990. Many traders like to move into a market at that level to increase their exposure or to add new longs after missing the first ride up. Open interest readings indicate that we have an entire party room full of brand new shorts in the gold market who are eager to see an end to the bull run. They have been piling in as fast as the longs have been running for the hills. We will see with what success they meet.
It goes without saying that the short term technical damage done in gold is quite severe at this point. It will now have to get back above $950 basis August to entice new momentum longs and spook the plethora of brand new shorts who once again have been selling into weakness chasing it lower. That has not been a profitable strategy in gold since 2002. Please see the chart as I have marked some of the support and resistance levels. On any potential test of support near the $916- $920 level, gold will need to find strong buying or it will slip back to $900 once again. I might mention that gold is trading exactly at the 50% retracement level of the last move up from $860 to $990. Many traders like to move into a market at that level to increase their exposure or to add new longs after missing the first ride up. Open interest readings indicate that we have an entire party room full of brand new shorts in the gold market who are eager to see an end to the bull run. They have been piling in as fast as the longs have been running for the hills. We will see with what success they meet.
Big hit on gold price as oil slumps and dollar strengthens
What a difference a few days makes. A little over a week ago the oil price was strengthening by the minute dragging gold upwards with it as the dollar was seen to plough. Platinum too was in demand with predicted shortages keeping the price near record levels. Now the oil price has slumped losing over $20 a barrel from its peaks, gold has moved down in sympathy, although not as much in percentage terms, the dollar has strengthened in its reverse correlation, while platinum and palladium have dived too amidst tales of car manufacturing output being cut back in line with continuing doubts on the global economy.
Of all the above the fall in oil price surely was the most predictable? The only question was when would the bubble burst as there really was no shortage of oil output, U.S. consumption was seen to be falling and the Saudis were pumping more product. Mineweb called this well in a prior article in mid-June -" Is gold too low compared with oil - or is it that oil is just too high?" - admittedly a few days before oil peaked, but to us it was apparent that the oil price was unsustainable at these levels despite other experts predicting $150 or even $200 oil this year. Commodity prices can be a little unpredictable though and the situation could change should there be a major interruption to supply, in the Middle East or elsewhere, as oil is very much a commodity and thus subject almost wholly to supply/demand balances - and assumptions of this by speculators.
How much of the fall in gold and in pgms and the rise in the dollar is just a knee-jerk reaction to the oil price dive is anybody's guess. Our view is very much that oil and gold will decouple, and probably find their way back to a more historic price balance ratio between the two of 10:1. This could mean, in the short to medium term, say $90 oil and $900 gold or $100 oil and $1000 gold longer term.
As for the dollar, the US economic situation is unchanged and the currency has to continue to be seen as weak on the world stage. Once that reality is understood again by the markets, gold should revive a little as the gold price remains the ultimate indicator of the strength or otherwise of the dollar.
As for pgms, the dive here may also have been overdone. Even with automobile manufacturing cuts, if they take place, it is likely platinum production in particular will remain in deficit keeping prices relatively strong. Palladium may be a different story though as here there is a production surplus, assuming Russia continues its current sales pattern without interruption and prices could correspondingly remain relatively weak for the foreseeable future.
Meanwhile reports that billionaire investor George Soros went short on oil and long on gold suggests that Mineweb's views on the matter are not unique.
Of all the above the fall in oil price surely was the most predictable? The only question was when would the bubble burst as there really was no shortage of oil output, U.S. consumption was seen to be falling and the Saudis were pumping more product. Mineweb called this well in a prior article in mid-June -" Is gold too low compared with oil - or is it that oil is just too high?" - admittedly a few days before oil peaked, but to us it was apparent that the oil price was unsustainable at these levels despite other experts predicting $150 or even $200 oil this year. Commodity prices can be a little unpredictable though and the situation could change should there be a major interruption to supply, in the Middle East or elsewhere, as oil is very much a commodity and thus subject almost wholly to supply/demand balances - and assumptions of this by speculators.
How much of the fall in gold and in pgms and the rise in the dollar is just a knee-jerk reaction to the oil price dive is anybody's guess. Our view is very much that oil and gold will decouple, and probably find their way back to a more historic price balance ratio between the two of 10:1. This could mean, in the short to medium term, say $90 oil and $900 gold or $100 oil and $1000 gold longer term.
As for the dollar, the US economic situation is unchanged and the currency has to continue to be seen as weak on the world stage. Once that reality is understood again by the markets, gold should revive a little as the gold price remains the ultimate indicator of the strength or otherwise of the dollar.
As for pgms, the dive here may also have been overdone. Even with automobile manufacturing cuts, if they take place, it is likely platinum production in particular will remain in deficit keeping prices relatively strong. Palladium may be a different story though as here there is a production surplus, assuming Russia continues its current sales pattern without interruption and prices could correspondingly remain relatively weak for the foreseeable future.
Meanwhile reports that billionaire investor George Soros went short on oil and long on gold suggests that Mineweb's views on the matter are not unique.
Tuesday, July 22, 2008
Hourly Action In Gold From Trader Dan
Dear Friends,
You can almost set your watch by the completely expected parade of talking heads which graced our ears and eyes this morning. The reason for the “sudden appearances” of Paulson and Plosser are obvious. The Dollar made its LOWEST CLOSE in two months in yesterday’s session and was sitting barely a half a cent above an ALL TIME LOW in the USDX chart. Having no other weapon in their bag of recent tricks to support it, they resorted once again to the tried and not-so-true method of currency manipulation, aka, verbal intervention. What a tragic scene to witness – the world’s premiere superpower resorting to spin to prop up Humpty Dumpty.
Paulson reiterated how a “strong dollar” is in the interest of the US and repeated that the government is attempting to get the GSE reform package put in place. As the old saying goes, “If I had a nickel for every time I heard the phrase – ‘a strong dollar is in our interests’ – I could have retired by now and bought several nice islands in the South Pacific”. Actually, it is not an old saying – I just made it up – but it underscores the comical scene we are regularly treated to each and every time the Dollar threatens to fall off a cliff never to be seen again.
I am reminded of that scene in the hit movie, “The Mummy”, in which the followers of Imhotep are seen walking through the streets chanting in a zombie-like fashion, “Imhotep, Imhotep, Imhotep”. Only in our case we could substitute the zombies for our monetary authorities and parade them around the streets mumbling “Strong Dollar, Strong Dollar, Strong Dollar”. It is evidently an incantation of some sort, a bewitchment, that has afflicted our illustrious monetary leaders- what else could explain this regularly occurring phenomenon in which grown men act like fools, babbling utter nonsense that they themselves do not believe but are convinced that the lemmings that run the hedge funds will.
The problem for our zombies is that the actions they are taking are anything but bullish for the Dollar in the long term as they bail out one failing financial entity after another. Folks talk about billions of dollars as if those are large sums of money but compared to what? Compared to trillions of dollars, which is what we have out there in derivative la-la land, billions are chump change.
As if to back up Paulson, Philadelphia Fed President, Plosser, was trotted out this AM as well. Plossser had no choice but to issue more statements saying that the rise in prices is worrisome to the Fed which stands ready to a hike rates if necessary to contain it. What did anyone expect him to say- “The Fed could care less about rising prices”? Gimme a break already! And yet we have Forex participants rushing like mad to buy the Dollar on that “bullish news”! Scotty beam me up – there is no longer any intelligent life on this planet!
What I find most disturbing are the comments floating around this AM that a government led bailout of the GSE’s will restore confidence in the US financial system and is therefore bullish for the Dollar. Confidence – perhaps – but at what long term cost? That is the question that never seems to be answered by so many of these “experts” nowadays. They remind me of the mob ignorantly applauding the broken window in Bastiat’s famous analogy. Perhaps we are looking at the product of our failed education system here in the US which produces people incapable of deep or serious thought. To think a few months ahead or a few years ahead instead of the moment requires the ability to concentrate and analyze cause and effect. How can that be done when thinking is something that even the investment class has left to their black boxes?
Of course, it goes with saying, that the attack on gold immediately commenced driving it substantially off its overnight highs, highs I might add that took it through the upside resistance zone and put in back into form to take on $990 once again. That was obviously a No-No here in the US and had to be summarily dealt with. I can hear the pundits now:
“Gold is moving lower because the market is voting that the crisis of confidence is over”. Sure it is – makes me want to sell all of my gold and immediately rush out and buy shares in Washington Mutual as a safe haven play.
Some of you have been around these markets for a long time as I have. One of the things that strikes me is that we are supposedly in a new era in which investors are extremely sophisticated. I would pooh-pooh that entire notion for I must say, this is undoubtedly one of the dimmest group of “investors” I can recall. They can be run in and out of markets with ease merely by pushing prices through critical support or resistance levels. I would go so far to say that today’s markets are far easier to manipulate than at any other period in history because of the lack of fundamentalists that are left manning the turrets of the investment houses and money management firms. These modern day technical junkies can be pushed around easier than one-legged man in a butt kicking contest. That is their Achilles heel and is the ONLY REASON government manipulation of the markets is possible. Take away the technical buy and sell algorithms, and our markets would be free once again. The reason is obvious – the feds would attempt their interventions and would be thwarted because fundamentalists, who are not fooled by short-term gimmicks, would lie in wait and pounce on the opportunity presented by obvious distortions of price induced by government led forays into the marketplace such as what we are witnessing today. Such actions taken by a large percentage of the trading/investing community would completely negate the attempts of the Plunge Protection Team which would eventually just go away and leave the markets to themselves. In the long run, that would actually be much more beneficial to our system than these cynical ploys that we are now experiencing.
I have no doubt in my mind that future historians will look back at this time period and marvel at the brazenness of our monetary authorities and the lengths they went through in order to keep the public deaf, dumb and blind about the true condition of the US’s financial system. Sitting here watching the stock market completely erase every single bit of its overnight losses with its move into the plus column supposedly occurring because oil prices moved lower is breathtaking for its naivety. The news from Apple and Texas Instruments was shockingly distressing. Coupled with the woes of Washington Mutual and Wachovia, it served to emphasize how tenuous is the condition of some of the leading financial companies. Yet we are to believe that all of this can be fixed because crude oil prices move lower and gasoline comes down $.10/gallon?
We continue to read verified reports that sovereign wealth funds are divesting themselves of the Dollar and moving more towards the Euro. Yet, some of these new gigantic forces are supposedly the ones who are going to provide the capital that US cash starved firms needs to stay in business. That will be an interesting feat of magic.
Back to gold for the moment – we are now moving into the time frame on a seasonal basis in which gold tends to bottom out before moving higher into the end of the year. I suspect that today’s bear raid is going to be the last hurrah for the perma shorts in gold. We have support coming in at $940 in the August contract followed by $935. Below that is $920 - $915. Resistance is $955.
Truth has an uncanny method of circumventing deception and always triumphs in the end.
You can almost set your watch by the completely expected parade of talking heads which graced our ears and eyes this morning. The reason for the “sudden appearances” of Paulson and Plosser are obvious. The Dollar made its LOWEST CLOSE in two months in yesterday’s session and was sitting barely a half a cent above an ALL TIME LOW in the USDX chart. Having no other weapon in their bag of recent tricks to support it, they resorted once again to the tried and not-so-true method of currency manipulation, aka, verbal intervention. What a tragic scene to witness – the world’s premiere superpower resorting to spin to prop up Humpty Dumpty.
Paulson reiterated how a “strong dollar” is in the interest of the US and repeated that the government is attempting to get the GSE reform package put in place. As the old saying goes, “If I had a nickel for every time I heard the phrase – ‘a strong dollar is in our interests’ – I could have retired by now and bought several nice islands in the South Pacific”. Actually, it is not an old saying – I just made it up – but it underscores the comical scene we are regularly treated to each and every time the Dollar threatens to fall off a cliff never to be seen again.
I am reminded of that scene in the hit movie, “The Mummy”, in which the followers of Imhotep are seen walking through the streets chanting in a zombie-like fashion, “Imhotep, Imhotep, Imhotep”. Only in our case we could substitute the zombies for our monetary authorities and parade them around the streets mumbling “Strong Dollar, Strong Dollar, Strong Dollar”. It is evidently an incantation of some sort, a bewitchment, that has afflicted our illustrious monetary leaders- what else could explain this regularly occurring phenomenon in which grown men act like fools, babbling utter nonsense that they themselves do not believe but are convinced that the lemmings that run the hedge funds will.
The problem for our zombies is that the actions they are taking are anything but bullish for the Dollar in the long term as they bail out one failing financial entity after another. Folks talk about billions of dollars as if those are large sums of money but compared to what? Compared to trillions of dollars, which is what we have out there in derivative la-la land, billions are chump change.
As if to back up Paulson, Philadelphia Fed President, Plosser, was trotted out this AM as well. Plossser had no choice but to issue more statements saying that the rise in prices is worrisome to the Fed which stands ready to a hike rates if necessary to contain it. What did anyone expect him to say- “The Fed could care less about rising prices”? Gimme a break already! And yet we have Forex participants rushing like mad to buy the Dollar on that “bullish news”! Scotty beam me up – there is no longer any intelligent life on this planet!
What I find most disturbing are the comments floating around this AM that a government led bailout of the GSE’s will restore confidence in the US financial system and is therefore bullish for the Dollar. Confidence – perhaps – but at what long term cost? That is the question that never seems to be answered by so many of these “experts” nowadays. They remind me of the mob ignorantly applauding the broken window in Bastiat’s famous analogy. Perhaps we are looking at the product of our failed education system here in the US which produces people incapable of deep or serious thought. To think a few months ahead or a few years ahead instead of the moment requires the ability to concentrate and analyze cause and effect. How can that be done when thinking is something that even the investment class has left to their black boxes?
Of course, it goes with saying, that the attack on gold immediately commenced driving it substantially off its overnight highs, highs I might add that took it through the upside resistance zone and put in back into form to take on $990 once again. That was obviously a No-No here in the US and had to be summarily dealt with. I can hear the pundits now:
“Gold is moving lower because the market is voting that the crisis of confidence is over”. Sure it is – makes me want to sell all of my gold and immediately rush out and buy shares in Washington Mutual as a safe haven play.
Some of you have been around these markets for a long time as I have. One of the things that strikes me is that we are supposedly in a new era in which investors are extremely sophisticated. I would pooh-pooh that entire notion for I must say, this is undoubtedly one of the dimmest group of “investors” I can recall. They can be run in and out of markets with ease merely by pushing prices through critical support or resistance levels. I would go so far to say that today’s markets are far easier to manipulate than at any other period in history because of the lack of fundamentalists that are left manning the turrets of the investment houses and money management firms. These modern day technical junkies can be pushed around easier than one-legged man in a butt kicking contest. That is their Achilles heel and is the ONLY REASON government manipulation of the markets is possible. Take away the technical buy and sell algorithms, and our markets would be free once again. The reason is obvious – the feds would attempt their interventions and would be thwarted because fundamentalists, who are not fooled by short-term gimmicks, would lie in wait and pounce on the opportunity presented by obvious distortions of price induced by government led forays into the marketplace such as what we are witnessing today. Such actions taken by a large percentage of the trading/investing community would completely negate the attempts of the Plunge Protection Team which would eventually just go away and leave the markets to themselves. In the long run, that would actually be much more beneficial to our system than these cynical ploys that we are now experiencing.
I have no doubt in my mind that future historians will look back at this time period and marvel at the brazenness of our monetary authorities and the lengths they went through in order to keep the public deaf, dumb and blind about the true condition of the US’s financial system. Sitting here watching the stock market completely erase every single bit of its overnight losses with its move into the plus column supposedly occurring because oil prices moved lower is breathtaking for its naivety. The news from Apple and Texas Instruments was shockingly distressing. Coupled with the woes of Washington Mutual and Wachovia, it served to emphasize how tenuous is the condition of some of the leading financial companies. Yet we are to believe that all of this can be fixed because crude oil prices move lower and gasoline comes down $.10/gallon?
We continue to read verified reports that sovereign wealth funds are divesting themselves of the Dollar and moving more towards the Euro. Yet, some of these new gigantic forces are supposedly the ones who are going to provide the capital that US cash starved firms needs to stay in business. That will be an interesting feat of magic.
Back to gold for the moment – we are now moving into the time frame on a seasonal basis in which gold tends to bottom out before moving higher into the end of the year. I suspect that today’s bear raid is going to be the last hurrah for the perma shorts in gold. We have support coming in at $940 in the August contract followed by $935. Below that is $920 - $915. Resistance is $955.
Truth has an uncanny method of circumventing deception and always triumphs in the end.
Today's Frequently Asked Questions
The wave of phone calls from all over the world overwhelmed me once again today.
Here are your answers:
- As gold rose and the dollar slipped once again into the .7200 area a poor picture was being painted as legislative action neared for Fanny and Freddie.
- It seems that the key panic point is .7200 on the USDX.
- The Fed's perma-hawk spoke loudly about what will not happen - Fed increases of the discount rate.
- Crude came down today, blamed on the apparent hurricane fear fading. Major support starts at $125, and if that is not the bottom it will not be far below.
- All the dollar bulls and energy bears were pulled out of the closet as talking heads.
- Fancy accounting footwork is the entire reason why some bank earnings look better. They are not. In fact many of the best looking ones are the worst off.
- $25 billion for Fanny and Freddie will not cover a $5 trillion problem. It isn't even worth being called a bandage.
After all the substance-less noise used to paint the day better passes, we return to face the 3rd attempt at $1000 and the euro moving past $1.60.
Gold is headed to $1650 and the euro to $2. That is only for starters.
Respectfully yours,'Vital' buys: A trio of gold favorites
"Gold is the only financial asset that isn't someone else's liability and it's the only asset that's reliably held its value over time," notes global investor and resource expert Yiannis Mostrous.
In his Vital Resource Investor, he adds, "Indeed, gold has held its value for millenia. An ounce of gold still buys a quality men's suit, just as it did in the days of ancient Greece." Here, he reviews a trio of ideas, each for investors with various levels of risk tolerance.
Mostrous explains, "To date, Americans have never had to experience the society-wrenching events that have affected much of the world for centuries. But most of the globe's population hasn't forgotten the value of gold in times of extreme strife and social turmoil.
"And with incomes rising in many of these countries, beneficiaries have used their newfound savings to beef up their holdings. That's a trend with serious legs, particularly as Asia continues to grow.
"Then there's inflation, the ultimate debaser of all paper currencies. Despite surging energy and food prices, core inflation remains at elevated -- but still relatively moderate -- levels in most of the developed world.
"Developing world inflation, however, is a far different story. And many countries have seen sharp price acceleration across the board, including China.
"So far, the slowdown has been relatively mild by historical standards. But truly aggressive action to curtail inflation could tip the balance into a deep recession, pushing up the cost of currencies dramatically as the prices of basics -- such as food and energy -- soar on often subsidized demand overseas.
"Trying to figure out what central bankers are going to do in advance is not what we're about. But given the extreme risks of igniting a major recession, it seems like the Fed and its counterparts have little choice but to continue to live with at least creeping inflation.
"As long as that's the case, currencies will debase, and the stage will be set for a renewed surge in gold in the coming months. And if they do act dramatically and the worst occurs, the yellow metal is nearly certain to go higher still amid the economic chaos that ensues.
"Gold's greatest selling point is that it's still well off its highs in inflation-adjusted terms. By that standard, setting a new high would imply a move to at least $3,000 an ounce. As we've said here before, that's not a prediction. But it is a pretty good indication that this market can run a lot further.
"The most conservative play is SPDR Gold Trust (NYSE: GLD), an exchange traded fund that represents a position in gold bullion. We continue to rate a buy at the current market price.
"Next is Goldcorp (NYSE: GG), a large and growing producer that still rates a buy up to 45. Finally, our leveraged bet and turnaround story is Lihir Gold (NASDAQ: LIHR), a small, more leveraged Austrlian player. The stock is a buy only for those who can handle higher volatility.
"Overall, gold is a huge, volatile market traded on a global scale, and it's affected by myriad pressures over both the long and short term. Playing it right means being willing to take these moves in stride. Patience is the biggest challenge when it comes to cashing in on what's likely to come for gold.
"The biggest near-term risk to our profits now is the possibility of further strength in the US dollar in coming weeks. The key is that the potential reward from gold's next leg up is well worth the risk. The bottom line: If haven't bought gold positions already, now's a good time to pick some up."
In his Vital Resource Investor, he adds, "Indeed, gold has held its value for millenia. An ounce of gold still buys a quality men's suit, just as it did in the days of ancient Greece." Here, he reviews a trio of ideas, each for investors with various levels of risk tolerance.
Mostrous explains, "To date, Americans have never had to experience the society-wrenching events that have affected much of the world for centuries. But most of the globe's population hasn't forgotten the value of gold in times of extreme strife and social turmoil.
"And with incomes rising in many of these countries, beneficiaries have used their newfound savings to beef up their holdings. That's a trend with serious legs, particularly as Asia continues to grow.
"Then there's inflation, the ultimate debaser of all paper currencies. Despite surging energy and food prices, core inflation remains at elevated -- but still relatively moderate -- levels in most of the developed world.
"Developing world inflation, however, is a far different story. And many countries have seen sharp price acceleration across the board, including China.
"So far, the slowdown has been relatively mild by historical standards. But truly aggressive action to curtail inflation could tip the balance into a deep recession, pushing up the cost of currencies dramatically as the prices of basics -- such as food and energy -- soar on often subsidized demand overseas.
"Trying to figure out what central bankers are going to do in advance is not what we're about. But given the extreme risks of igniting a major recession, it seems like the Fed and its counterparts have little choice but to continue to live with at least creeping inflation.
"As long as that's the case, currencies will debase, and the stage will be set for a renewed surge in gold in the coming months. And if they do act dramatically and the worst occurs, the yellow metal is nearly certain to go higher still amid the economic chaos that ensues.
"Gold's greatest selling point is that it's still well off its highs in inflation-adjusted terms. By that standard, setting a new high would imply a move to at least $3,000 an ounce. As we've said here before, that's not a prediction. But it is a pretty good indication that this market can run a lot further.
"The most conservative play is SPDR Gold Trust (NYSE: GLD), an exchange traded fund that represents a position in gold bullion. We continue to rate a buy at the current market price.
"Next is Goldcorp (NYSE: GG), a large and growing producer that still rates a buy up to 45. Finally, our leveraged bet and turnaround story is Lihir Gold (NASDAQ: LIHR), a small, more leveraged Austrlian player. The stock is a buy only for those who can handle higher volatility.
"Overall, gold is a huge, volatile market traded on a global scale, and it's affected by myriad pressures over both the long and short term. Playing it right means being willing to take these moves in stride. Patience is the biggest challenge when it comes to cashing in on what's likely to come for gold.
"The biggest near-term risk to our profits now is the possibility of further strength in the US dollar in coming weeks. The key is that the potential reward from gold's next leg up is well worth the risk. The bottom line: If haven't bought gold positions already, now's a good time to pick some up."
Mining ballot measure tough to sort out
The friends and foes of Ballot Measure 4, the proposed state law seeking tougher pollution standards for large, new mines, can't seem to find much to agree on. Not only do they disagree about the effects of the initiative -- its sponsors say it won't hurt any projects except Pebble, but the mining industry and its supporters say it could shut down many Alaska mines -- they can't agree on basic matters about the mining industry. Such as how many people work in mining in Alaska, what its relative importance is in the state's economy and how much money it contributes in taxes. The two sides trotted out their disharmonious facts at a forum on Measure 4, dubbed the Clean Water Initiative, at an Anchorage Chamber of Commerce luncheon Monday. The public will vote on the proposed law in the Aug. 26 statewide election. A few audience members quizzed after the forum said they had made their minds up about the initiative beforehand. But, with the whirl of advertising on TV, radio and in print -- in which the two sides basically accuse each other of lying -- they think the general public is probably confused. Ralph Swan, an Anchorage businessman, said he was disappointed the forum didn't get into the gritty details of what the initiative would or wouldn't do if it passes. He said he suspects the initiative could have unintended consequences. The initiative was drafted by opponents of the proposed Pebble mine being explored in Southwest Alaska. Developing Pebble has blown up into a statewide controversy due to its massive size -- it would be one of the world's largest copper-gold mines -- and its location at the headwaters of two rivers that feed Bristol Bay's world-class salmon runs. The initiative would ban new metal mines over 640 acres in size from discharging harmful amounts of certain toxic pollutants into salmon streams or drinking water sources. But the mining industry says the initiative's wording is too vague and it might end up banning any discharges of those pollutants, no matter whether they are harmful, or prevent mines from getting new permits.
JOBS AND TAXES
At Monday's forum, a former mining industry executive, Bruce Switzer, told the chamber audience the initiative only targets Pebble and wouldn't prevent the state's gold, silver and zinc mines from getting new permits. He said the mining industry's statements about a possible shutdown are baseless propaganda. Rose Barr, an environmental coordinator for the Red Dog zinc and lead mine near Kotzebue, disagreed. She said the initiative will create more regulations and it's not clear yet what those regulations will say. The regulations would be created after the initiative becomes law. "We don't know what the outcome will be at the end of the day," she said. Switzer also accused the industry of inflating its importance in Alaska. For example, he said the mining industry is wrong to claim 3,523 mining jobs. He said a recent briefing to the Legislature showed only about 1,500 jobs. It turns out Switzer was tallying the numbers for jobs at metal-producing mines. Other mining jobs in Alaska include coal mining, placer mining, sand and gravel pits and working for mineral exploration companies, totalling 3,523 jobs in 2006, according to state records. He also said gold mines contributed only about $120,000 per year to state coffers, averaged out over the last decade. However, at least one new gold mine has opened in the past couple of years. Tax revenue from the mining industry was $152 million in fiscal year 2007, according to the Alaska Department of Revenue.
WHAT THE STATE SAYS
After the forum, Switzer said that only metal mines are relevant to Measure 4's consequences. But Steve Borell, executive director of the Alaska Miners Association, who attended the forum, was steamed. "(Switzer) is extremely loose with his phrases," he said. Later this week, state regulators from several agencies plan to issue their own joint statement about the initiative's consequences. That interpretation will be different from those of the mining industry and the initiative's sponsors. The regulators say the initiative will not directly result in any changes to their agencies' regulation of water quality at mines. But because the agencies believe the initiative has confusing language, they expect that if it passes "it will probably be litigated," said Ed Fogels, a division director at the Alaska Department of Natural Resources who was tasked to assemble the information. He said the state will unveil the information on a public Web site this week.
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