For those interested in gold stocks

[JBmurc]

http://rs6.net/tn.jsp?e=001U8KvBethN...WHUZeePScUHdM=

Some much imfo out their these days with the internet(word will spend quick if the big US shorters default) ,IMHO PGM's will go through the roof there's just going be to much demand esp. silver to hold the price down for much longer.

[Aussie]

Good article JBmurc, thanks for posting.

Couldn't agree more. Keynesian economics has killed us all. Keynes, when questioned about the ultimate outcome of his deficit spending theology, actually said "in the end, we're all dead". Well, he's dead, we're not!

Of course the Austrians were right.

'07 was the awakening, '08 was the panic and '09, '10 and '11 will be the ultimate years of decline as the derivative bombs and insolvent banks and corporations around the world detonate one by one. There will be significant bear market rallies - starting with the coming "Obama" rally, but IMO the overall trend will be down. PM's will go to the moon.

The criminal enterprise that is the nexus of Wall St. Banks, the US Fed and US Treasury will hopefully be exposed for what it is - the ultimate organized crime outfit - the international banking cabal that has controlled world events for the past 250 years.

[JBmurc]

Hi arco
I currently hold CXC, OGC and CQT

CXC is a silver miner (it's the only silver producer listed on ASX)
Once paljamaro is on line early nexy year CXC will be a genuine low cost silver producer - will be quite prfitable at $10-11/oz with gold credits.
They seemed to have scraped enough money together to complete the project.

OGC - main operations in NZ (GOLD), doing about 275000 ozs per yr
They should have been making big money at this point but they put in place some terrible hedges in NZD. They have half of next two yrs production hedged at NZD$775 while by my reckoning they have cash costs of NZD$900/oz
So with current hedging and current gold price they are a marginal producer - but I'm assuming that they will survive. I expect gold to go to US$1500-2000 in 2010 in which case OGC will fly

CQT- silver , gold and copper exploration co (OPEN PITTABLE)
Proving up what appears to be a large deposit - have about 3m ozs (gold equivilent) of proven, probable and infferred so far. They have $28m cash which will be enough to see them through to development phase

Personally I fell more comfortable putting money into cashed up explorers like CQT than marginal producers like OGC

Yeah been looking for a another share that had some decent silver exposure CQT 25c sp does look very nice any Idea when they will look to produce the goods

Conquest Mining is a Perth-based mining exploration company focused on discovering low cost
gold and silver resources. Exploration at Mt Carlton has delivered resources at a cost of $10 per
ounce of gold compared with an Australian average of $60 to $70 per ounce for grass-roots
exploration. Conquest Mining has $28 million cash reserves, and a backing of 10 cents per share

[Aussie]

Gold Producers May Exploit Share Rally to Boost Cash Reserves

Jan. 23 (Bloomberg) -- Gold producers are likely to follow the lead of Kinross Gold Corp. and take advantage of their rising shares by selling new stock to bolster cash reserves as the global economy slows, investors say.

"Whoever can raise equity capital, even if it's expensive, is going to do it," Tom Winmill, manager of the $75 million Midas Fund, said in a telephone interview from New York.

Gold prices had their eighth straight annual gain last year as fears the economy would melt down fanned investors' demand for bullion as a safe-haven investment. While debt markets remain frozen, Kinross, Yamana Gold Corp. and Agnico-Eagle Mines Ltd., all based in Toronto, have announced plans to raise as much as $810.6 million since November to replenish capital reserves.

Kinross, Canada's third-largest gold producer, said Jan. 21 it would raise as much as $414.6 million to shore up its balance sheet. That followed share sales late last year that generated about $110 million for Yamana and about $286 million for Agnico.

The 16-member Philadelphia Stock Exchange Gold & Silver Index, a measure of the world's largest bullion producers, has jumped 61 percent in the past three months. In that period, the benchmark Dow Jones Industrial Average declined 4.7 percent, while the Standard & Poor's 500 Index fell 7.7 percent.

"There's an opportunity for gold companies in particular to raise capital," Bill Hunter, managing director of Jefferies Group Inc.'s mining investment-banking unit, said in an interview. Gold "has unique qualities -- its store-of-value properties have real appeal to money managers."

Economic Slowdown

U.S. builders broke ground on the fewest houses in December since record-keeping began in 1959, unemployment is rising and concerns remain about the solvency of some of the world's largest banks. Gold producers, meanwhile, are enjoying a period of stable metal prices and falling costs as prices tumble for crude oil, steel and chemicals used to process ore.

Gold futures for February delivery climbed $8.70, or 1 percent, to $858.80 an ounce yesterday on the New York Mercantile Exchange's Comex division. Gold rose 5.5 percent last year as the S&P index fell 38 percent.

"Everybody wants to buy gold, and these have been very healthily subscribed issues," Michael Pento, who helps oversee $1.5 billion at Delta Global Advisors in Holmdel, New Jersey, said in an interview. "If you're a bank, you have to go to the government for funding; if you're a gold company, you have no trouble raising cash."

[BAPP]

For anyone interested in gold stocks... this is worth a read

http://www.investorsdailyedge.com/Article.aspx?Id=1840

... and check out the 'Demand For Gold' link also!

Cheers
BP

[Aussie]

For anyone interested in gold stocks... this is worth a read

http://www.investorsdailyedge.com/Article.aspx?Id=1840

... and check out the 'Demand For Gold' link also!

Cheers
BP

Yes, great article BAP. Peak gold combined with slowing or no central banks sales in the future and the physical metal will be harder and harder to get.

IMO, in the near future, most people who want exposure to gold will have no other options besides shares in gold mining companies and proxy vehicles like ETF's. This will drive share prices sky high. The physical metal will be too expensive and too hard to come by.

[Aussie]

The Ongoing Manipulation of the Gold Shares

Gold today is very slightly below the price it was last year on Jan 26/08 when it closed at $910. The Gold shares, you would assume, would be trading higher benefiting from a 50% drop in the Oil price over the year given that fuel is a major cost. However the HUI is struggling to stay above the 300 level compared to 461.58 a year ago. There were comments at the time about how poorly the Gold shares were trading. They were not exhibiting their usual leverage to the then new record high bullion price. This, it was said, was due to the Oil price which was rising faster than Gold.

So here we are a year later the Gold shares are trading at a 34% loss. The juniors are down double that if not more. The Dow was 12,400 a year ago. Today it is just above 8100, a 35% loss. The HUI is tracking the DOW rather than the Gold price. Understanding the Purpose of the Manipulation

The Gold shares are exhibiting negative leverage even though input costs are much lower. Why is this? The answer is easy. The Gold cartel does not want to give us a way out. As Greenspan said "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold."

Dan Norcini writes a daily wrap-up of the Gold market for Jim Sinclair at http://www.jsmineset.com

Today he said this about the Gold shares (my underline):

“Both of the mining indices, the HUI and the XAU faded well off their highs after punching through horizontal resistance near the December highs and triggering buy stops in the process. A close above those levels would generate buy signals on many of the technical charts particularly the old Point and Figure style charts that were once widely used by longer-term oriented investors. I sometimes wonder if anyone even uses those things anymore since they were primarily trend identifying charts and today’s crowd of money throwers are momentum oriented. I must say that I do not like what I see taking place in these indices today as it shows a potential short term buying exhaustion pattern. Tomorrow’s session will be important in determining what we get in there.”

In other words Dan the Trader is becoming cautious because the Gold shares are not confirming bullion’s advance. Once again a breakout has been thwarted. Dan also commented on trading Gold on the COMEX

“You cannot hope to beat opponents who never have to meet a margin call nor have trading practices put in place that would force them to liquidate losing positions to prevent major losses as most responsible commercial firms currently have in place.”

Gold bullion is the safest place to store one’s wealth. By buying Gold one exits the System. The Gold cartel, to protect their money printing monopoly, cannot allow this to become common knowledge. So today, to prevent too much excitement building in the Gold market after Friday’s dramatic rally they attacked the shares which initially shot higher. At noon with Gold still up almost $14 or 1.5% the Gold shares had already given up most of their 5% gain. So we saw Agnico Eagle give up a 5.3% gain and lose 2.4% on the day. Newmont was up 2.2% and ended down 2.4%. Kinross was up 4.6% and lost 3.5%. Goldcorp was up 5.1% and lost 1.2%. This drained any enthusiasm out of Gold which ended $15 off its high of the day.

The Cumulative Effect and Unintended Consequences

I first noticed these patterns about six years ago. Norcini says that “today’s crowd of money throwers are momentum oriented”. Not so in the Gold market where breakouts are sold and the shares always seem to know when Gold is going to be hit. This counter intuitive action must be a very profitable trade for those who have advance knowledge. It is certainly discouraging for those who buy the breakouts. This manipulation has made the Gold shares too volatile for the average investor. Many have left the sector for good.

Last September I wrote an article about Bob Moriarty which included the chart below. I wrote this at the time:

“This chart plots the ratio of the XAU Gold Index and the Gold Price. The chart is divided into high and low zones and is useful for those who like to switch back and forth between holding Gold or Gold Shares. So when the ratio is very high you sell shares and buy bullion and vice versa."

Moriarty presented this chart to show his readers how cheap the shares are. He points to the low of .1561 which was hit on Sept 5th 2008 and correctly states that it is a new record going back 25 years.

Attachment 1219

“However Moriarty misses the most important information I see in this chart. Take a look at the period 1993 to 1998 and compare that to the current bull market 2001 to present. Notice the blue line showing the 25 year average. Why is it that the Gold shares, except for three brief periods, have been below the 25 year average during Gold’s best years? Earlier this year Gold hit its highest price ever yet the ratio could not even get into the Average Zone.”

In other words, the cumulative effect of the manipulation of the Gold shares has been a lower and falling XAU/GOLD ratio. There are two important consequences that I’m sure were unintended. The first is that it makes no sense to take the extra risk that the shares entail. Those who avoided the miners and instead sold their shares to buy bullion saw their Gold portfolios rise 5% last year compared to the 30-50% loss the shares made. So the manipulators, by hitting the shares, unintentionally increased demand for bullion. Secondly, the lack of capital in the Gold mining sector has postponed the development of new mines, unintentionally decreasing the amount of Gold that will be mined in the coming years.

Well a lot has happened since Moriarty created that chart In September. For one thing the 25 year low of .1561 was smashed in October when the ratio hit a new record low of .0866. The Gold shares were trading at just over half their previous all time low. Since then both the XAU and HUI have doubled but the ratio (today at .1378) is still well below the low of .1561 that Moriarty highlighted.

I’ve brought the Moriarty chart up to date:

Attachment 1220

Ending the Gold Manipulation

The manipulations of Gold and the Gold shares are linked. We understand why Gold is controlled. It must be to maintain the fiat monetary system. Why the shares are manipulated is less clear. It may have started to discourage investors in the sector or it may have been simply motivated by a quick profit based on inside information ahead of a an official sale of bullion. Stealing candy from babies is hard work compared to what these guys are doing. The result is that the Gold shares are trading at half where they ought to be given the current bull market.

All manipulations eventually end and these will be no different. It all depends on the availability of Official sector Gold. When that flow stops the Gold price will quickly rise and most likely overshoot to the upside. The shares would first have to double to where they should be today and from there the increases could be quite spectacular as all those momentum traders Norcini mentioned join the Gold Rush. Imagine Gold at $2000/oz and Kinross or Goldcorp or Newmont with $2 Billion or $3 Billion or $5 Billion in extra profits.

Cheers from Auckland, Ed Wener ed.na@xtra.co.nz

[peat]

i find it pretty hard to swallow all the manipulation/conspiracy theories

perhaps its just simply that there is no 3rd party or business risk in owning
the physical metal compared with owning the shares, and that currently theres a huge amount of resistance to risk.

[stevo1]

i find it pretty hard to swallow all the manipulation/conspiracy theories

perhaps its just simply that there is no 3rd party or business risk in owning
the physical metal compared with owning the shares, and that currently theres a huge amount of resistance to risk.

et the deflation bogeyman
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There is a lot of fear in the market, and certainly a lot of that fear is justified. Markets have tanked and the recession call is looking all too real. Yet one of the fears flying around – specifically the talk of deflation – is perhaps less justified.

Put simply, the probability of a broad based fall in prices is minuscule. That’s not to say that deflationary forces can’t build, they certainly can – yet under a fiat currency system it is theoretically impossible for deflation to take hold.

Fatalists will pipe up that the world is littered with deflationary episodes and that, indeed, is the truth. For instance, during much of the 19th century many nations experienced deflationary periods and prior to that, history shows that prices were just as likely to increase as decrease. Yet there is one fundamental difference between those periods and now – money isn’t backed by anything, such as gold or what have you. In other words, money has no intrinsic value and this is called a fiat currency system.

This is a crucial difference. Under the gold standard and similar systems, monetary authorities were constrained by how much they could expand the money supply without a serious devaluation of currency. That was a bad thing, because if people lost faith in the value of the currency they might start demanding something valuable – like actual gold – and that would never do because gold is finite – nations can run out of it and become bankrupt! Anyway, previously the constraint on money supply growth was the amount of gold at hand. The adoption of the fiat system removes that obstacle and allows central banks potentially an unlimited expansion of the monetary base.

The use of fiat currency isn’t new. Throughout history, many governments at one stage or another – typically during a war – would decouple from gold or silver or whatever was backing their currency, so they could pay their debts. This is why we often saw deflationary and inflationary periods – as governments first inflated their economies during a war by decoupling from gold and then imposed some discipline afterwards, bringing with it a bout of deflation.

So, fiat currency has provided policy makers with a lot of flexibility and, used wisely, is a great system. As an aside, the gold standard has been cited as one of the factors leading to the Great Depression, so I’m certainly not advocating it. The point I’m tying to make is that, freed from the shackles of backing our currency with anything valuable, governments can print money at will. If you doubt the truth of my argument, then I urge you to take a sabbatical to Zimbabwe.

In this current crisis, if the US monetary base was shrinking and the Fed was doing nothing about it, then deflation may have some credibility. Yet the Fed isn’t doing nothing – interest rates are at zero and ‘credit easing’ is in vogue. The US monetary base has consequently expanded at its fastest pace in modern economic history.

References to Japan at this point aren’t accurate. There are sizeable differences with that experience, such as Japan’s shrinking population, massive capital overhang and shambolic corporate sector etc.

Which brings me to the Australian response. With global monetary stimulus so exceptionally high, looking forward inflation is a much more probable scenario than deflation. Consequently, the global policy repose eases the pressure on small open economies like Australia to cut as aggressively. The stimulus provided by the major central banks is in effect a stimulus for Australia. In this environment, the greatest risk for domestic policy-makers is that they are caught short on any global inflationary pulse that we get over the next couple of years.

We need to realise that if a recession is inevitable, then cutting rates further won’t help. Think about this. If we do go into a recession, it’s because monetary and fiscal polices are not working. Not that they’ve been given any time to work. If business investment has collapsed in the face of a global slowdown, rate cuts aren’t going to stimulate it. Moreover, if rates at 4.25 per cent aren’t encouraging new lending and home building, then what makes people think that rates at 2.5 per cent will?

That being the case, it seems to me that the greatest error the RBA could make right now would be to cut too aggressively and so be ill-prepared should the economy (global and domestic) turn out to be stronger than everyone is forecasting.

Think back to the conversations we were all having this time last year. Everyone was forecasting a stronger-for-ever Chinese growth cycle and permanent inflation pressures. That consensus was wrong last year and while things are very uncertain now, it’s not beyond the realm of possibility that the consensus is wrong again. The consequences of this are very serious and would necessitate a destabilising series of rate hikes as the pendulum again swung to inflation hysteria.

Adam Carr is senior economist at ICAP Australia. See Business Spectator's glossary for definitions of technical terms used in SCOREBOARD articles.


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What even after the sub-prime,wall st. debacle? which was a gargantuan manipulation/conspiracy.
Central bankers now are attempting to manipulate currencies/economies.
Geez Peat your a hard man to convince.
(Is that a bullet in your head or have you just got a bit of a headache?)

[arco]

i find it pretty hard to swallow all the manipulation/conspiracy theories

perhaps its just simply that there is no 3rd party or business risk in owning
the physical metal compared with owning the shares, and that currently theres a huge amount of resistance to risk.

When everyones telling you to buy gold, its maybe the time to sell gold.