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Things That Make You Go Hmmm - Such As The Spread Between Gold And Gold Miners

Tyler Durden's picture





 

From Grant Williams, author of Things that Make You Go Hmmm

Newmont Mining currently trades near a 52-week low and has a dividend of just over 3%. Newmont’s dividend is indexed each quarter to the average price of the gold it sells in that quarter with step-up provisions of a further 7.5c if the average gold price exceeds $1,700 in a given quarter and a further 2.5c should those sales average in excess of $2,000. The company has a cash cost of gold mined of around $650/oz and is working hard to lower that figure. Analysts figure that earnings will hit an all-time high this year of close to $5 per share. The P/E ratio? That would be 11x. The same metric in 2008? 30x.

Newmont Mining is currently trading roughly $20, or 40% below the average analyst target price of $67.23 with a yield 50% higher than that of the S&P500 and a P/E ratio 30% lower, while its price-to-book ratio, at 1.8x, is also extremely close to the 2008 lows.

If we revisit the performance of NEM, GDX and GDXJ when priced in ounces of gold, it becomes apparent just how beaten up this particular sector has become.

NEM and GDX are at levels comparable to the very depths of 2008 (chart, previous page) and, when comparing the state of the world now versus then, it is incredibly difficult to understand just why that would be.

Remember, in the Autumn of 2008, panic was at its zenith and good stocks were being thrown out along with bad as deleveraging took hold of the world.

Since then, a number of key metrics that directly affect the price of gold and gold miners have changed so it makes sense to see  where we stand:

Now, with that as a backdrop, and with the understanding that, as we approach the endgame for Europe, the choice facing those empowered to make decisions about how it ultimately plays out is actually a fairly simple one—allow massive, widespread sovereign defaults and a continent-wide bank-run or print unlimited amounts of Euros—is anyone still confused about how this will all play out?

Europe’s ‘leaders’ will NOT arbitrarily choose to inflict the pain necessary to deal with the current debt crisis when they have the means to print free money at their disposal and the only impediment to doing so is an as-yet undetermined percentage of 81 million German citizens. If Germany has to leave the EU in order for the moneyprinting to happen, then mark my words, they will leave—either because they choose to or because the ‘Latin-bloc’ (which now includes France) force them to. Either way, the end will come in a shower of confetti paper money.

There may well be a period of deflation or deleveraging prior to inflation taking hold, but with inflation the central bankers’ firehose of choice, we can be fairly certain that inflation is in our future and inflationary environments are good for gold. As for the period of deflation/deleveraging which we are seeing now, using the greatest deflationary period in history as our example would seem to suggest that gold stocks will perform extremely well under those conditions also.

The fact that gold stocks are behaving so poorly seems to be as a result of both misunderstanding and inadequate knowledge of history on the part of the vast majority of investors and, as we have seen with subprime, Greece, Spain, Italy and, one day, Japan, the UK and the US, nothing matters to anybody until it matters to everybody.

More in the Full report

 

 


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Sun, 06/03/2012 - 14:54 | Link to Comment ACP
ACP's picture

Don't misunderestimate gold, bitchez!

Sun, 06/03/2012 - 14:59 | Link to Comment Future Tense
Future Tense's picture

It is sentiment that is keeping gold mining shares down, not fundamentals. Everyone is expecting another 2008 style crash and for the miners to once again get crushed. The following provides an excellent view at how sentiment is impacting all asset classes and what that means for the second half of the year:

http://www.ftense.com/2012/06/2012-second-half-outlook-introduction.html

Sun, 06/03/2012 - 15:02 | Link to Comment SHEEPFUKKER
SHEEPFUKKER's picture

Dear gold manipulators(and you know who you are)- if you force the price of gold down, the miners cannot be as profitable, and if they cannot be as profitable, they will not spend money on new projects, and if they do not spend money on new projects, there will not be as much supply, and when there is not as much supply, the price will go up.  So get fucked manipulators, you will lose in the end. 

Sun, 06/03/2012 - 15:08 | Link to Comment Manthong
Manthong's picture

Who would be so uncivilized as to invest in a bunch of barbarians scratching for relics?

The "smart money" is much too wise for that.

Sun, 06/03/2012 - 16:50 | Link to Comment Dr Benway
Dr Benway's picture

LOL. It is a new world, and 3% yield denominated in paper money that depreciates faster than that is not great, mmkay???

 

 

move on

Sun, 06/03/2012 - 17:17 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

 

 

They can pull a Hugo on miners at any time.  And IMO they eventually will.

Sun, 06/03/2012 - 18:14 | Link to Comment Cadavre
Cadavre's picture

Article says :Europe’s ‘leaders’ will NOT arbitrarily choose to inflict the pain necessary to deal with the current debt crisis when they have the means to print free money at their disposal and the only impediment to doing so is an as-yet undetermined percentage of 81 million German citizens.

.... NOT arbitrarily choose to inflict the pain necessary to deal with the current debt crisis

They have 3 choices - it is beyond arbitration or the count of the "yeahs":

1) Either repudiate all debt, ...

2) Or, force the banks, bond holders and CDS writes to settle without claiming sovereign assets, ...

3) Or, (and this is the fun one), they learn there are fates worse than being seated next to the bathroom at a 200$/plate Manhattan "All the Pork You Can Eat" yuppie dining parlor. Maybe ghost busters can raze the ghost of Mussolini , and allow him to explain  the kinds of things that are less enjoyable than a table for two next to the "John"!

It has always worked, or always not worked, depending on what side of the Shadow Bankers' 3 Card Monte Kiosk one is positioned.

.... as-yet undetermined percentage of 81 million German citizens.

When choosing sides always go with the numbers. Is societal matters, 99 individuals will always trump 1 individual in a contest of power.

Accept it. Pain comes in all sorts of flavors and colors. So choose, at your own peril,  muth'a f*cka's!

Sun, 06/03/2012 - 21:37 | Link to Comment Augustus
Augustus's picture

You might be interested to know that the 3% can be used to buy more shares or even physical gold.  I have never located gold in physical form which increased in ounces, no matter how long it has been held in the family.

HTH.

Sun, 06/03/2012 - 17:43 | Link to Comment Treeplanter
Treeplanter's picture

I'm expecting the bullion banks will do the naked short thing one more time.  I'm buying juniors like NG and EXK like crazy on the next bottom.  Things will soon get too shaky for them to smack prices down very soon, the buying  pressure would destroy them.

Sun, 06/03/2012 - 18:29 | Link to Comment Cadavre
Cadavre's picture

 

I'm expecting the bullion banks will do the naked short thing one more time

Question is, do they have enough liquidity to meet that fat margin requirements?

The FED needs to un-hypothocate it's "dark pook" liens on the "other peoples" precious in their custody. The demands for repatriation are getting louder and beginning to hint undertones of extreme prejudice.

What will the Ben do when Maurice drains the lizard throttling his fundio and finally pulls out (without the usual offer of a complimentary reach around)? It will get sticky - mighty sticky - and that be for sure.

One word Ben - FEAR - I'd buy front row center tickets to that for a dollar!.

Sun, 06/03/2012 - 15:32 | Link to Comment Bay of Pigs
Bay of Pigs's picture

"the miners to once again get crushed"?

They have gotten crushed. Gold/XAU ratio at historical highs, and its been that way for months on end. Since 2008, the miners have never come back to 'normal' levels with respect to the price of metal.

Sun, 06/03/2012 - 18:35 | Link to Comment Cadavre
Sun, 06/03/2012 - 14:59 | Link to Comment resurger
resurger's picture

word!

Sun, 06/03/2012 - 14:54 | Link to Comment bankonthebust
bankonthebust's picture

The spread exists because those who realize the value of gold want the metal. Not some digital piece of paper.

Sun, 06/03/2012 - 14:57 | Link to Comment A Lunatic
A Lunatic's picture

Physical gold is what's in the safe.......not some potentially bullshit promise that a company in Korea is going to dig it out of the ground at a profit and give me a percentage of the take. I'll take physical at any cost. The spread does not make me go Hmmm.

Sun, 06/03/2012 - 15:02 | Link to Comment scatterbrains
scatterbrains's picture

or the threat of seizure/nationalization.

Sun, 06/03/2012 - 18:01 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Riiiggghht.  At which point it simply becomes "what gold?"  Moron.

Sun, 06/03/2012 - 16:22 | Link to Comment disabledvet
disabledvet's picture

What's your opinion of "meteor mining"? I'm thinking of going "all in" when Space X IPO's.

Mon, 06/04/2012 - 02:11 | Link to Comment Cadavre
Cadavre's picture

Meteors beget meteorites. Perhaps a SpaceX that could deploy a butterfly net (of sorts), would be used to harvest meteors.

"Like" the idea of SpaceX. Lot's of patents financed and held by the commons have come out of NASA. What's the revenue stream? The few holding companies that control the market and almost all the industrial and services sectors are busting at the seams with "stuff". It seems that the only marketing "plan" these days has nothing to do with competing on innovation and value and "growing a market base". Sure, on paper the plan feigns some kind of argument to finance product placement, but the reality is that startups, these days anyways, are more interested in marketing themselves as an investment than a revenue producer.

Can SpaceX launch rendezvous and return more cheaply than Soyuz? Russians got a knack for delivering the same, or better outcomes at infinitesimally smaller fractions of the costs consumed by US funded projects. Read an old issue of "Omni" published during Reagan's "star wars" extortion era. Both countries were looking to build particle accelerators that could be deployed in orbit. US built a 50 mile circumference "donut" shell (guessing the idea was to build a really big really expensive one first and to be followed by a series of more and more miniaturized "proof of concept" projects - lot's o-bucks in the world of cost plus for those kinds of state projects.

Meanwhile, back in the CCCP, in a sooty one time machine shop and nothing but pencils, slide rules, paper copper tunes and brazing material, a couple of wild and crazy guys built a working 15 ft linear accelerator right off the f*cking bat, for less than the annual cost of one full time Mickey-D burger flipper!

No money to be had from efficient reliable outcomes that don't cost much back in the US, back in the US, back in the USA!

Soyuz has seating capacity for 3. Russia bills the US about 63 Million a round trip seat. Cost of a space shuttle :: space station rendezvous (for 7) was over 200 Million a seat (total launch 1.5 Billion)

Soyuz could deliver 3 US astronautic and return autonomously (like those systems planning inc. devices installed on those planes them Micro$oft Flight Simulator trained pilot trainee box cutter pirates managed to usurp their way into the stuff legends and lies are made of).

SpaxeX is all over the board with per seat costs - 20 Million - 60 Million. But total launch costs are not always implied in the "seating" cost. SpaceX is advertised to launch 7 people (at some later date). SpaceX is a cost plus NASA project. The boosters sure look like them commons financed delta IV boosters NASA uses. SpaceX is also subsidized with taxpayer funded launch and mission control assets.

It sounds like SpaceX is a NASA project garnished to appear as a self-made enterprise  - but in reality is almost totally paid for out of the pockets of the commons. A lot of the promises ("you can believe in ") in are nothing more than concepts and "artist rendering". A boondoggle for insiders feeding at the commons credit trough, like Solyndra was to solar panels, so is SpaceX "the future of space flight - real change you can believe in". When the budget knife hits the cutting board how much of any foreseen outstanding SpaceX IPO equity will go into the slop bucket with everything else?

What about the X-Plane? Supposedly launched into a successful year long orbit (huh?). Does that mean they couldn't make it "land"?

If an endeavor is sold as "private", then why is the commons paying for all of it? Sounds like collective, instead of private, enterprise to my pet gerbil.

Seen some really innovative technology - like infrared voltaic material reported  800% more efficient than current photo voltaic technology that could be applied to an  existing roof simply by "spraying" a batch of the stuff on the shingles - and haven't heard nary a' since initial PR - the promise disappeared (again), probably, into the same warehouse Indiana's Arc of the Covenant was stashed away in. Then, ta-da-daaaa, the one, the only:  Bloom Servers, breadbox sized solid state natural gas electric generators that could power your entire house really cheap. A brief one day sis-boom-baa, and then silence.

Some how, it just seems, to the gerbil anywaze, mind ya, that technology that would significantly reduce end user costs never seem to make it beyond the initial PR. The ones that do increase costs to end users get stamped "APPROVED", even, like recent pharmaceuticals, the delivered outcomes endanger, and sometimes kill, the end user.

Why is that?

Guess someone else has a better idea than we of what is good for us, and what ain't ....

Sun, 06/03/2012 - 16:47 | Link to Comment chinaguy
chinaguy's picture

" A gold mine is a hole in the ground with a liar at the top."

Sun, 06/03/2012 - 14:58 | Link to Comment Yellowhoard
Yellowhoard's picture

Gotta love NEM. Gold with yield.

Sun, 06/03/2012 - 15:05 | Link to Comment urbanelf
urbanelf's picture

But but but gold is unproductive Munger Buffett and stuff!!!

Sun, 06/03/2012 - 14:59 | Link to Comment Stuck on Zero
Stuck on Zero's picture

Miners face: extreme environmentalists, strong political forces, overseas government takeovers by crackpots, 10 year development cycles, escalating energy costs, massive CapEx's, loss of sentiment, and gawdawful mine accidents.  Since they can only add 1-2% to the world's stockpiles every year, anyway, why bother?

Sun, 06/03/2012 - 15:04 | Link to Comment Yellowhoard
Yellowhoard's picture

These are all good reasons to own a geographically diversified miner with relatively low costs per ounce.

The fact that the amount produced in a given year cannot affect the current price materially is a plus.

What other commodity industry can do this?

Sun, 06/03/2012 - 16:30 | Link to Comment disabledvet
disabledvet's picture

I've always had my doubts about Canadien...ahem..."government"...if you know what I mean. I mean "the history of corruption from our Northern neighbors" is legendary. I'll never forget that one scandal...that one where the guy...did that thing. Remember that? And of course mining companies have always been mistreated up there ever since. Heck you can't even get a permit to drill for water up there anymore from what I hear.

Sun, 06/03/2012 - 16:47 | Link to Comment A Lunatic
A Lunatic's picture

I too remember what that bastard did. And those other guys..........holy shit. I'm glad you brought that up so other posters here can stay the Hell away from that place.

Sun, 06/03/2012 - 15:11 | Link to Comment Jack Sheet
Jack Sheet's picture

There were good profits to be made from miners as a group from 2009 up to the last gold peak of 2011 as the HUI index demonstrates. 

http://www.bloomberg.com/quote/HUI:IND/chart

check the 5 year chart. There is no reason to believe that similar gains cannot be made in the next leg up in physical gold.

I see a good case for diversification from physical metal via  a small position in a fund like the Tocqueville that spreads the risk over >70 majors and juniors. Or in a group of dividend-paying individual producers.

At least you can't lose the shares in a boating accident.

 

 

 

Sun, 06/03/2012 - 17:30 | Link to Comment Jack Sheet
Jack Sheet's picture

And skeptics might benefit by listening to this interview (all of it- it is short)

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2012/6/3_Donald...

Sun, 06/03/2012 - 15:14 | Link to Comment grey7beard
grey7beard's picture

>> extreme environmentalists,

Now that's funny.  And Obama's a Marxist.

Sun, 06/03/2012 - 15:46 | Link to Comment toothpicker
toothpicker's picture

add naked shorting to that list

Sun, 06/03/2012 - 16:10 | Link to Comment delacroix
delacroix's picture

the mining shares and etf's are mercilessly shorted, as a component of the overall suppression policy. although I believe price control, is the main objective.

Sun, 06/03/2012 - 21:15 | Link to Comment jekyll island
jekyll island's picture

Stuck,

If you think gold is going higher, the mining stocks will eventually overtake the price of gold to the upside, in some cases by many multiples.  If you have a good position in physical, mining shares are a tool to create wealth, where gold functions more as a store of value. 

Sun, 06/03/2012 - 15:01 | Link to Comment CvlDobd
CvlDobd's picture

I'm more concerned about the spread that STILL REMAINS between US equities and every other risk asset since October 2011. Treasury Yields, Copper, EAFE, Emerging Stocks, etc are all suggesting the 500 needs to be at least 150 points lower IMO.

Sun, 06/03/2012 - 15:06 | Link to Comment gwar5
gwar5's picture

I've been watching the spread. The spread is incredible and a once in a lifetime buying opportunity. 

 

It's going to change PDQ when the panic sets in when they will be seen as one of the few real safe havens.  They will go up multiples faster than physical. But in a true TEOTWAWKI, nothing will beat a lumpy mattress that can't get nationalized.

Sun, 06/03/2012 - 15:07 | Link to Comment El Oregonian
El Oregonian's picture

"Whats that baby?" "It's my over-sized Gold Finger just waiting to place it in your secure vault for safe keeping, Do you mind?" "I like this Odd Job, James..."

Sun, 06/03/2012 - 15:08 | Link to Comment yabyum
yabyum's picture

I try to use miners as a tool to get fiat, fiat begates phyzz. My scorecard in the last year has been dismal at best.

Sun, 06/03/2012 - 15:14 | Link to Comment Jim B
Jim B's picture

Me too, but I bought some Newmont a couple of weeks ago.  Gold has to go down "a lot" (which I doubt) or Newmont is going to have a good run eventually.  Plus it pays 3%! LOL

 

Sun, 06/03/2012 - 15:10 | Link to Comment Arnold Ziffel
Arnold Ziffel's picture

I dumped my miners when I saw the CEO of a major gold miner taking a massive bonus while not sharing the bountiful profits with shareholders in the way FCX did; i.e., dividends. I don't know if he later did but I do know many people were complaing when I sold.

I still hold FCX but avoid the others since management at many stink imo...too greedy. If management feels they have no place to invest the profits then hand it out to shareholders...that's the way it used to be before greed saturated most companies.

 

Sun, 06/03/2012 - 15:31 | Link to Comment Jim B
Jim B's picture

And the other gangster CEOs are any better?  

 

Ceo pay in general is out of control

 

http://www.forbes.com/lists/2012/12/ceo-compensation-12_land.html

Sun, 06/03/2012 - 20:28 | Link to Comment LeonardoFibonacci
LeonardoFibonacci's picture

Yes but will they be safe in their mansions when they come

Sun, 06/03/2012 - 19:32 | Link to Comment ThisIsBob
ThisIsBob's picture

If management is getting away with lining their own pockets with the profits, what do they care what the stock price is?

Sun, 06/03/2012 - 15:13 | Link to Comment CommunityStandard
CommunityStandard's picture

Didn't realize that gold stocks were underperforming as much as this.  It does make sense though.  If you're betting on the economy, you are long the market.  If you are betting against the economy, you are long physical PMs.  Gold stocks seem to be a half-assed middle bet.  But who knows, a long timeline for can-kicking might make this a good play for a long time.

Sun, 06/03/2012 - 15:16 | Link to Comment Pumpkin
Pumpkin's picture

Nationalization would be my guess for the spreads.

Sun, 06/03/2012 - 15:18 | Link to Comment The Axe
The Axe's picture

Tyler my crazy gold bug friend...somebody wants the other side of your trade...http://online.wsj.com/article/SB10001424052702304821304577440841899953710.html?mod=djemheard_t

Sun, 06/03/2012 - 20:28 | Link to Comment Al Huxley
Al Huxley's picture

No, somebody's setting up the dumbest of the dumb money, trying to get them sell (or short) at the absolute bottom.  This when the commercials have cut their own short positions in the metals to record lows.

Sun, 06/03/2012 - 15:26 | Link to Comment Tirpitz
Tirpitz's picture

If Germany has to leave the EU in order for the moneyprinting to happen, then mark my words, they will leave...

Highly doubtful. Why should Germany leave, after all? The currency union played well out for the international corporations calling the shots in Germany. While the screwed taxpayer will be stuck with the growing bill for the ongoing bailouts - of the international banks, mind you - , corporate Germany can reap all the benefits such a straitjacket for the PIGS will offer her. From cheaply imported labor to efficiently destroyed foreign competition to exchange rates an independent Germany could only dream of.

Germany, as the major beneficiary of this doomed project, will rape her taxpayers to the breaking point before giving up the currency union.

Sun, 06/03/2012 - 15:29 | Link to Comment Uncle Remus
Uncle Remus's picture

I am pretty sure they haven't shut down the bear halls in Germany yet.

Sun, 06/03/2012 - 15:36 | Link to Comment Tirpitz
Tirpitz's picture

How's that saying goin in Bavaria:

panem (et ursi) et circenses for the people...

Sun, 06/03/2012 - 15:43 | Link to Comment Uncle Remus
Uncle Remus's picture

Let me rephrase - it's history and it rhymes with Versailles, as in Treaty of.

Sun, 06/03/2012 - 15:59 | Link to Comment Rynak
Rynak's picture

I dont know if i want to call the multinationals who profit from this, "germany", yet considering the population "not germany"..... would you want me to call the FED the USA, and the population irrelevant?

But anyways, the problem is that the german population has a high inertia.... it isn't a sportscar but a train. "Thanks" to this high intertia, ridiculous stunts were performed on the population, starting with about 50% purchasing power devaluation in ONE year (yes, that for workers basically means slashing wages in half).... then there is the nice "reformation" of germany's social system, which thanks to mr shredder was designed to keep wages mostly flat, so that they wouldn't readjust.... going as far as implementing surveilance rules compared to which the ex-DDR looks harmless. The middleclass and domestic market is a wasteland, and the few left in the middle class are foaming around the mouth.

And even though the population "tolerated" this until now, it fully remembers what has been done to it - basically latent build up anger, that while there, hasn't reached a boiling point yet. And if the megalomaniac globalist powers think, that just they could do stuff before, they can do it again and again, then they'll be in for a very ugly surprise: The population hasn't forgotten, hasn't forgiven.... you're just charging it up with anger and frustration and there isnt much capacity left...... and THIS is why i am perplexed why merkel hasn't commited suicide yet... she is stuck in an impossible to solve dilemma between the demands of her overlords, and knowing just how much shit will hit the fan, if she pulls another mr. shredder.

Sun, 06/03/2012 - 17:15 | Link to Comment Treason Season
Treason Season's picture

You ever notice that guy is 60+ and still no gray hair. How does he do it?

Sun, 06/03/2012 - 17:47 | Link to Comment Tirpitz
Tirpitz's picture

Rynak, Merkel is a tool of the globalists and keeps selling the populace down the river as cheaply as the Shredder did. Power at any cost, puts even a feudal system ashame. And the American **people** are as shafted as the Greek, and the German, and the Irish, are.

Let's remember Guiseppe Stalin, who once explained so clearly: "It doesn't matter how the people vote. Important is, how their votes are counted." So the criminals can stay in power, halfway legally.

Sun, 06/03/2012 - 15:33 | Link to Comment gwar5
gwar5's picture

Forget re-hypothecation, we may be about to get Re-hymenated. Are we going to a Re-hymenation system by inserting gold in there? Is this even physically possible? Today there was this:

 

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/6/2_Don...

 

KWN: 'Coxe shocked KWN by saying that Europe is actively working to introduce gold backed bonds. 

He said, They (Europe) would have the security of gold.” Coxe stated we could see this take place “within the next three months ... because this crisis is developing so fast.” Coxe also discussed the possibility of an emergency Fed meeting...

This European gold bond is huge news.  When asked if this was bringing gold back into the financial system, Coxe responded, “Yes, exactly.  I did conference calls with people in our organization about this. I said, ‘Something like this could be unfolding because this crisis is developing so fast.’”

When asked if this event would begin to trigger a significant revaluation for gold, Coxe replied, “At this point, how they would do it, and whether there would be any revaluation, what it would be is security for issuing specific bonds.  But, of course, once you do that, what you do is you break the virginity of the system.

 

Mmmmm.....

 

Sun, 06/03/2012 - 17:05 | Link to Comment Peter Pan
Peter Pan's picture

Gold backed bonds have been reommended by a number of writers. The reasoning is that gold is not only something tangible but more importantly adopting gold will push up its value perhps to a point that it will allow even more bonds to be ssued with a view to recpitlising the system on a more stable basis.

The only problem is that once you have recapitalised the systm you must ensure that government spending, trade balances and fiscal policy are sustainable otherwise we are back to square one.

Sun, 06/03/2012 - 15:33 | Link to Comment Jim B
Jim B's picture

Greece should tell the unsecured bankers to piss off!  

Sun, 06/03/2012 - 15:35 | Link to Comment SDRII
SDRII's picture

http://www.ft.com/cms/s/0/13ede542-f41f-11df-886b-00144feab49a.html

Peter Munk, chairman of Barrick Gold, the world’s largest gold producer, first met Mr Rothschild in his mid-20s. His father was reportedly concerned about his son’s partying and asked Mr Munk to have a chat. “It began as a favour and yet I ended becoming an investor, a follower of his career,” said Mr Munk, who recently appointed Mr Rothschild to his own board. “He is the most mobile businessman I know. In resources success depends on international contacts – whether or not someone picks up the phone in Rio, Mumbai, Qatar and Beijing. Would you believe anyone not picking up the phone for Nat Rothschild?”

&

http://www.bloomberg.com/news/2011-04-25/barrick-gold-agrees-to-buy-equi...

http://www.ausenco.com/page/Our_Projects/Lumwana_Copper_Project/

http://en.wikipedia.org/wiki/Katanga_Province

Barrick would gain access to Equinox’s Lumwana project in Zambia, which processes about 20 million metric tons of ore per year into a copper concentrate. Equinox is aiming to produce 145,000 tons of copper this year, according to its website. Equinox also bought the biggest copper deposit in Saudi Arabia in January, and its first production is expected in 2012. Located in the North Western Province of Zambia, 220km west of the Copperbelt and 65km west of the town of Solwezi, the Lumwana Copper Concentrate Project (Lumwana Project) is set to be the largest copper project of its kind in Africa with inferred resources to be mined over a 37 year life-of-mine (LOM) on the basis of processing 20 Mtpa of ore to produce copper concentrates. Construction commenced at the Lumwana Project in early 2006 and practical completion and handover for the Project was completed to Equinox Mineral Limited (Equinox) in November 2008.

&

http://www.bbc.co.uk/news/magazine-14913456

Exactly 50 years ago, UN Secretary General Dag Hammarskjold died in a plane crash on a mission to prevent civil war in newly independent Congo. Suspicions that the plane was shot down, never fully laid to rest, are now again on the rise. Just after midnight on 18 September 1961, he was heading to negotiate a ceasefire in a mineral-rich breakaway region of Congo, where another of his peacekeeping missions was getting bogged down in the complex politics of decolonisation and Cold War rivalry. Congo, one issue was who should control the southern province of Katanga, rich in copper, uranium and tin. Belgium, the ex-colonial power, backed a secessionist movement led by Moise Tshombe, as did the UK and US who had mining interests in the region. But Mr Hammarskjold from the start backed Congo's elected central authorities - the Soviet-backed government of prime minister Patrice Lumumba, and later, after Mr Lumumba was deposed and murdered, Prime Minister Cyrille Adoula....

&

http://news.yahoo.com/imf-lauds-angolas-economic-stabilisation-efforts-2...

IMF forecasts Angola's economic growth will pick up to eight percent in 2012 on the back of reforms and rising oil prices. The praise follows an IMF report earlier in May that denounced a persistent lack of transparency in the Angolan budget. IMF economists last December discovered $31.4 billion (24.7 billion euros) in irregular spending between 2007 and 2012 -- a quarter of the country's economy in 2011. Most of the expenditures were identified after investigations, but $4.2 billion still needs to be accounted for, the IMF said. "The authorities and staff remain committed to continue the reconciliation of fiscal accounts until a full understanding of the relevant transactions is achieved," the IMF said. It warned Angola to keep diversifying its economy, ensure its banking sector stays robust and find a balance between public spending and fiscal reserves. The southwest African country is the continent's second-largest oil producer after Nigeria, and most of its revenues come from oil.

&

http://www.nytimes.com/2011/10/15/world/africa/barack-obama-sending-100-...

President Obama said Friday that he had ordered the deployment of 100 armed military advisers to central Africa to help regional forces combat the Lord’s Resistance Army, a notorious renegade group that has terrorized villagers in at least four countries with marauding bands that kill, rape, maim and kidnap with impunity.

&

http://www.imf.org/external/np/sec/pr/2012/pr12140.htm

Republic of South Sudan joined the International Monetary Fund (IMF) today when Finance and Economic Planning Minister Kosti Manibe Ngai signed the IMF’s Articles of Agreement at a ceremony in Washington D.C.

&

http://www.businessweek.com/news/2012-03-14/tullow-advances-in-10-billio...

Choosing Pipeline Route

Tullow plans to supply “a few thousand” barrels of oil a day starting from late 2012 to the domestic market from well flow tests, he said. The crude will be used by industrial users to replace some of the fuel imported into Uganda.

The partners and the Ugandan government will be discussing the future route for the oil export pipeline, which can cross either Kenya or Tanzania on the way to the Indian Ocean.

Choosing a path for pipelines “is very strategic regionally,” McDade said.

 

Sun, 06/03/2012 - 15:36 | Link to Comment G_T_A_44
G_T_A_44's picture

When phase III of Gold/Silver' secular trend arrives/begins, many of the miners will resemble that of tech' performance a la '99-'00....A Mania. The best lays ahead. That is all!

Sun, 06/03/2012 - 16:08 | Link to Comment Haole
Haole's picture

I hope you and others voicing this sentiment are correct and the reason I had to buy a few Canadian producers mining in Canada that have been beaten like red-headed stepchildren.  Up ~15% on average in a week and a half with broader markets flat or declining...

I also sent an e-mail to the admin of KWN suggesting that he pass-on the Eric King that the topic of nationalization risk be broached when interviewing his guests about gold and silver miners.  So far, nothing yet...

I figure it's a risk more than worth taking with a portion of my very limited stock holdings.

Green for positive thinking Sir.  ;)

GLTA

Sun, 06/03/2012 - 15:41 | Link to Comment radicall
radicall's picture

It is an acknowledgement of the fact that a lot of these gold mines are in politically unstable countries and could be taken over by their respective governments in case of a crisis.

Sun, 06/03/2012 - 15:56 | Link to Comment devo
devo's picture

I guess I should have read the comments before posting mine.

Agree 100%. Counter-party risk. It's why gold should outperform miners. Rightfully so.

Mon, 06/04/2012 - 06:06 | Link to Comment memyselfiu
memyselfiu's picture

Plus the fact that if you look at their cost per ounce ratio, their costs have risen by a factor of 3 when the price has risen by a factor of 2. Newmont has been notorious for making bad plays as well over the years on more than a few properties.

Sun, 06/03/2012 - 15:54 | Link to Comment devo
devo's picture

Personally, I'm afraid they'll be nationalized.

Sun, 06/03/2012 - 16:05 | Link to Comment kito
kito's picture

The fact that gold stocks are behaving so poorly seems to be as a result of both misunderstanding and inadequate knowledge of history on the part of the vast majority of investors.....

seems this author has a bit of inadequate knowledge...such as what happens when a precious commodity becomes the property of the country where said commodity is found...... should the monetary system break down entirely, i have a hard time envisioning russia, china, latin american countries, etc handing over their precious metals to a multinational miner......not gonna happen....... how are the spanish oil companies faring these days in argentina???.....


Sun, 06/03/2012 - 17:03 | Link to Comment augustusgloop
augustusgloop's picture

You're not wrong about nationalization risk or capital controls (argentina), super taxes (ecuador), indigenous protests over environental degradation (peru), islamist revolution (mali) coupled with bad management (kinross poster child, jaguar the bridesmaid, and let's not forget Fedi Dipenaar--born to be attacked ad hominem-- of GBG).

However, the chart of the HUI was a mirror image of AAPL from the start of the year, the frightful symmetry of those two charts with respect to the X axis does not betoken a random walk down wallstreet. Neither does slope downward drawn with a ruler (HUI, XAU, any miner) after the  Bernanke speech / takedown of R Paul (Gold is not money / read my lips, no QE) with no deviation: that makes it seem to me that it wasn't just sudden investor awareness that had the miners plummeting. 

Sun, 06/03/2012 - 16:29 | Link to Comment Jack Sheet
Jack Sheet's picture

Anything can be nationalized any time in any region with predatory governments - why not AAPL for example? I don't see the argument for singling out gold mining stocks for this fate.

Sun, 06/03/2012 - 17:19 | Link to Comment devo
devo's picture

Yes, that is true anything can be nationalized. I think they'd nationalize scarce natural resources before gadgets, though. Especially if it's rising vs the dollar and could be a way to pay down debt.

Sun, 06/03/2012 - 17:53 | Link to Comment Tirpitz
Tirpitz's picture

Anything can be nationalized any time in any region with predatory governments - why not AAPL for example?

Just wondering what a government would do with a few million of overpriced iCrap devices... Confuse any potential attacker in case of war? Or maybe keep the unemployed half of its youngsters busy, preventing any riots?

 

Sun, 06/03/2012 - 16:51 | Link to Comment TheCanadianAustrian
TheCanadianAustrian's picture

Not really a good reason to avoid buying the stocks. The vast majority of producers are located outside of the USA, and in countries like Canada and Australia, the price of gold (and presumably the stocks) would explode in value long before the possibility of annexation would cross any politician's mind.

Sun, 06/03/2012 - 15:58 | Link to Comment Stoploss
Stoploss's picture

It's another miner pump piece. Any fool knows the first thing to happen is they get nationalized, either before, or after the oil companies.

Sun, 06/03/2012 - 17:55 | Link to Comment Tirpitz
Tirpitz's picture

The charts look like anything golden has bottemed out for now. Long GDXJ.

Sun, 06/03/2012 - 16:01 | Link to Comment Apostle of Unknown
Apostle of Unknown's picture

IMHO the long-term underperformance of the mining stocks quite simply reflects fundamentals. It's there because the sector really IS in a rotten state. High production costs, high risks, little deposits, some overhang of forward selling but most important of all: the staggering managerial incompetence and complete lack of respect for shareholders, time and time again diluting the stock at the worst possible times. Of course, there is a level of undervaluation at which all sins can be forgiven. But unless a great tidal wave of bankruptcies and takeovers comes and wipes out the hacks and clowns in the sector, gold mines will continue to underperform. Simply because investors will continue to get burned. In the meantime you'll be able to ride the short-term speculative rollercoaster that occasionally outperforms gold dramatically. Mainly, you'll join the sector in fleecing the constant influx of newly converted gold bugs. (This constant influx is probably why the rottenness in the sector has never been really purged over the past 10 years.) Probably now is once again a good time for that. But in terms of real investments, the kind where you can put big amounts of your money to work for at least a decade in an honest company that actually has a plan to dig out gold cheaply, sell it dearly and reward its shareholders, you're still better off waiting in physical gold. Or in some very selected stocks that have a proven track record of not screwing over their investors.

Sun, 06/03/2012 - 16:26 | Link to Comment Jack Sheet
Jack Sheet's picture

I hold small amountts of selected gold mining stocks for diversification purposes (see above) but I give your comments more credence as arguments against than the nationalization paranoia voiced by the other commentators.

Sun, 06/03/2012 - 17:05 | Link to Comment Apostle of Unknown
Apostle of Unknown's picture

Well, if gold ever becomes an asset of national strategic importance, then why not nationalize gold mines? But anyways, all of that is way out there. The gold mining sector as it stands before us today has plenty of more mundane problems.

Mon, 06/04/2012 - 06:31 | Link to Comment BigDuke6
BigDuke6's picture

Paranoia ... here?  Surely not.

;)

Sun, 06/03/2012 - 16:07 | Link to Comment jimmyjames
jimmyjames's picture

Gold miners have a lot of catching up to do-if past ratios come back into sync-

http://bit.ly/L6654g

Sun, 06/03/2012 - 16:30 | Link to Comment cowpatty10
cowpatty10's picture

From the article: "Newmont Mining is currently trading roughly $20."

Quote NEM: Newmont Mining Corp.

Prev Close: 47.16

Open: 49.20

 

 

Sun, 06/03/2012 - 17:09 | Link to Comment boom goes the d...
boom goes the dynamite's picture

Actually closed at $50.30 on Friday and that makes me go Hmmmm.

52wk Range: 43.23 - 72.42
Sun, 06/03/2012 - 17:27 | Link to Comment wee-weed up
wee-weed up's picture

@cowpatty10

You didn't read the whole sentence...

Newmont Mining is currently trading roughly $20, or 40% below the average analyst target price of $67.23 with a yield 50% higher than that of the S&P500 and a P/E ratio 30% lower, while its price-to-book ratio, at 1.8x, is also extremely close to the 2008 lows.

Sun, 06/03/2012 - 18:16 | Link to Comment cowpatty10
cowpatty10's picture

My bad...you're right.

 

Sun, 06/03/2012 - 17:48 | Link to Comment Amish Hacker
Amish Hacker's picture

Cowpatty10, I think he meant  "$20 below, (that is, 40% below) the average analyst target price of $67.23. So, $47 and change (we can believe in).

Sun, 06/03/2012 - 16:35 | Link to Comment Floodmaster
Floodmaster's picture

 Oil is at 2 grams, about the same as it was in the early 1950 !

Sun, 06/03/2012 - 16:40 | Link to Comment goforgin
goforgin's picture

Hedgies said that Japan was a buy in: 1992,1993,1994,1995,1996,1997,1998,1999,2000,2001,2002,2003,2004,2005,2006,2007,2008,2009,2010,2011, ?.

 

Sun, 06/03/2012 - 16:50 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

[Paste}The fact that gold stocks are behaving so poorly seems to be as a result of both misunderstaning and inadequate knowledge of history on the part of the vast majority of investors and, as we have seen with subprime,Greece, Spain, Italy and, one day, Japan, the UK and the US,nothing matters to anybody until it matters to everybody{]

rilly?  nope!  things are N0T what they seem and this guy is pretending to be uninformed here because...???

the prices of which he speaks and behaving so poorly were neither behavingBadly due to misunderstandings nor historical blindness, but are due to bankster manipulation, pure and simple: involving the crimex, the cBs, theCity, the ETFs, the individual stocks, options, warrants, prefeerd converts, and probably mutual funds as well as leasing rates and practices and straw man plays galore!

of course, that is just my totally uninformed opintion... i don't play in these markets (?) any longer;  you guys go ahead and give the jpMorgue you orders, your accounts, yer stops, yer hedges and yer ETF and option plays, ok?

...buying these stocks and bullish entry from all the guys whom this author sez to trust!  while they're buying (?) too! 

sounds like a complete chickenFukinLickin!  and:  the bottom is IN!  have fun!

people who follow this advice around this analysis?  priceless!

Sun, 06/03/2012 - 17:21 | Link to Comment Againstthelie
Againstthelie's picture

IMO the PM-ETFs are the main reason, why gold miners have been dramatically underperforming. Additionally the rapidly rising cost of energy also has an impact, but i think the main reason are the ETFs: institutional investors can buy big amounts of gold without the additional risk of a mining company. Look what Soros' fund ist buying: the SPDR-ETF not miners.

Therefore, as long as the ETF-business is seen as trustworthy, the miners will not reach their performance from the '80s.

But i also believe, once the financial system will be disintegrating more and being widely recognized as unsolvable defective, i'm sure the ETFs will be seen with more scpeticism, because of the counterparty risk and especially that most of them do NOT guarantee to hold the pysical stuff and that they do not need to deliver it physically to the customer.

I think we would need to enter this (very late) phase of the financial system, until the cannibalizing effect from the ETFs on the miners will vanish.

But this doesn't mean, that with falling oil prices and strong PMs, the PM-miners couldn't have very nice rebounds and good bullish phases (just maybe like now one is developing), but overall i think the ETFs will continue to cannibalize them and they will not outperform like they used to do.

Sun, 06/03/2012 - 17:25 | Link to Comment Lokking4AnEdge
Lokking4AnEdge's picture

"NEM" broke above $50 on Friday (finally...)-there is still good premiums in the put options...actually you can short the September/38/39/40/41/42 puts (all below this year's low for the stock) and get paid nicely......

Sun, 06/03/2012 - 17:41 | Link to Comment CEOoftheSOFA
CEOoftheSOFA's picture

Aren't the gold miners lagging because some of them mine copper? Hmmm...

Sun, 06/03/2012 - 18:01 | Link to Comment Tirpitz
Tirpitz's picture

Could well be. Just -- this year they expect another sizable deficit in the copper supply, while gold production seems to be more in line with demand.

Sun, 06/03/2012 - 18:18 | Link to Comment Mark123
Mark123's picture

Likely due to the fact that this is the only sector of the stock market that is not supported by the plunge protection team.

Still, even if there is not great upside it is waaaayyyyy better to buy these beaten up stocks than say BAC etc....

Sun, 06/03/2012 - 18:36 | Link to Comment FranSix
FranSix's picture

Why? It's because most listed gold miners in North America are listed on Canadian exchanges. One variable people completely overlook is the 'no-down-tick-rule was abolished in the last year.

Gold miners, along with other companies in the mining space are having monies coming into the stock instead being parried against the rising trend in long dated treasuries.

Secondly, you might want to look at the strong inverse correlation between gold miners and the gold/silver ratio. This means that liquidity is bound to be flowing out of gold miners.

Sun, 06/03/2012 - 19:04 | Link to Comment KingOfMilwaukee
KingOfMilwaukee's picture

The reason miners are trading at lower valuation is simple.... people are betting gold is going to drop. Stocks trade further out than gold, usually 1 year ahead of the present and into the future. Gold is more affected by immediate events.

The fact is that, although I love this site and have read it daily for years, they have a VERY poor history of gold price prediction. I remember when it was at $1900 and they were saying $2500 was "weeks away." Wrong. They have many such instances of being 180 wrong on the price of gold over the short and intermediate term.

Gold's price reduction is reflecting the bet by the world we are going into deflation. In 2008, or when Greece was in riots a while back, or in 1983 in the USA during recession, gold retreated. Because people (incorrectly) assume the US Treasury is the safest investment when the world is in crisis, Treasuries are rising and gold has been flat to declining the last several months. If Greece goes under, gold will drop some more. If Spain threatens to go under, gold will take a very serious plunge, no matter how much the currency is inflated. 

In a deflationary environment, gold and oil and copper and silver all drop. If it looks like Spain is going under, I would get out.. wait until it is stabilizing, and then go very very long gold. But before it goes up, it will go down. If Greece exits the EU and Spain/Portugal/Italy survive, then it should do well.

Gold will eventually go way up... again... but if Europe is heading to economic recession, it will drop. Guaranteed.

Sun, 06/03/2012 - 19:22 | Link to Comment jimmyjames
jimmyjames's picture

In a deflationary environment, gold and oil and copper and silver all drop.

************

In the last deflation gold miners were the stocks to own-

http://bit.ly/KDbfHT

There were only about a half dozen major producers then and they all had +500% gains-

Gold does not go down in deflation-it goes up measured to buying power-

http://bit.ly/uiylsn

Sun, 06/03/2012 - 20:23 | Link to Comment KingOfMilwaukee
KingOfMilwaukee's picture

I'm sorry, but you are not correct. Newmont went from $62 before the 2008 crisis to $26 the week the Dow bottomed. AngoGold from $60 to $15 at the bottom and Barrick from $51 to $23. Go to Yahoo Finance and look at the charts. The went up 300-500% AFTER their initial drop. Barrick is still below its 2006 high.

As I said, gold drops and so do miners. As I also stated, the miners drop FIRST because stock holders are looking further to the future than gold holders and becaus miners are leveraged holders of the metal. 

Sun, 06/03/2012 - 21:14 | Link to Comment jimmyjames
jimmyjames's picture

As I said, gold drops and so do miners. As I also stated, the miners drop FIRST because stock holders are looking further to the future than gold holders and becaus miners are leveraged holders of the metal.

***************

Did you bother to look at the chart i posted?

Miners fell an equivalent amount from 1929-1932 and then gained 500+%

Money producers rocked in deflation and they'll likely do it again--no matter what you "say"

 

Mon, 06/04/2012 - 08:37 | Link to Comment Escapeclaws
Escapeclaws's picture

Is 1929 period a good comparison, given that the gold price was fixed by the government? I, for one, don't trust that particular comparison.

Mon, 06/04/2012 - 00:57 | Link to Comment Floodmaster
Floodmaster's picture

 Gold is a currency and the high-debt nations are deflationary relative to gold.

Mon, 06/04/2012 - 06:13 | Link to Comment memyselfiu
memyselfiu's picture

I agree about some of the gold pumping on this site but let's be realistic- miners have traded low vs gold this ENTIRE CYCLE- so your theory doesn't hold water.

Sun, 06/03/2012 - 19:19 | Link to Comment Henry Chinaski
Henry Chinaski's picture

Paradox. Bitchez!

Newmont Mining currently trades near a 52-week low and has a dividend of just over 3%. Newmont’s dividend is indexed each quarter to the average price of the MONEY it sells in that quarter with step-up provisions of a further 7.5c if the average MONEY price exceeds $1,700 in a given quarter and a further 2.5c should those sales average in excess of $2,000. The company has a cash cost of MONEY mined of around $650/oz and is working hard to lower that figure.

Sun, 06/03/2012 - 19:42 | Link to Comment SunBlaster
SunBlaster's picture

Huh?

"Newmont Mining is currently trading roughly $20, or 40% below the average analyst target price of $67.23 with a yield 50% higher than that of the S&P500 and a P/E ratio 30% lower, while its price-to-book ratio, at 1.8x, is also extremely close to the 2008 lows."

 

It's not trading at $20, it's currently @ $50, this ARTICLE IS INVALID!

Sun, 06/03/2012 - 19:46 | Link to Comment geewhiz190
geewhiz190's picture

some of NEM's discount may be due to politics with that problem in Indonesia. Others' like FCX may be tainted by the sagging commodity complex.  I prefer to buy this group when the p/e's are sky high-no earnings-no interest in the group. On the other hand, the low relative valutions may bring about a consolidation move. it would only  take one t/o bid to ignite the group.  not having tomorrow's paper, it's smart to own some of the group as a hedge.

Sun, 06/03/2012 - 19:50 | Link to Comment ItsDanger
ItsDanger's picture

Id recommend buying takeover targets in gold sector.  Bigger players will see the value and you will reap the rewards.  All stocks get beaten up fairly or not in bad markets.

Mon, 06/04/2012 - 06:24 | Link to Comment memyselfiu
memyselfiu's picture

http://www.rubiconminerals.com/

Either Goldcorp picks this puppy up or another big player wants to compete in this gold camp (most of the producing properties are Goldcorp owned & operated now)

 

http://www.clauderesources.com/index.cfm

Sun, 06/03/2012 - 20:30 | Link to Comment boogerbently
boogerbently's picture

Shortly after "the bottom", there was a HUGE gold VS miner disconnect....even allowing for USDollar/gold disparity.

http://www.google.com/finance?chdnp=1&chdd=0&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1338768987805&chddm=257169.00000000003&chls=IntervalBasedLine&cmpto=MUTF:FSAGX&cmptdms=0&q=NYSEARCA:GLD&ntsp=0

There is no better proof of the "intelligence" of the modern investor than the belief in the "strengthening" of the dollar by simply comparing it to weaker currencies. In a "normal" market, gold would be $5000/oz, by now.

The interest earned on "their" $$$ is one quarter of inflation.

I'm flabbergasted, until I realize, these are the same people that voted for obama and bought FB.

With the weakening in EU, will gold ever take it's rightful place as the worlds "safe haven" ? OR

Will people keep buying the USD at ever DECREASING returns ?

I've recently had "another thought" about gold.

Physical can be confiscated, investments in foreign companies (Canadian, African, Australian), cannot.......just a thought.

 

Sun, 06/03/2012 - 21:08 | Link to Comment ItsDanger
ItsDanger's picture

I believe gold was at about 1400 USD when the EURUSD was last  at 1.17.  Currently the rate is 1.24 and gold is $1620 USD.  For gold to break down below 1400, it would likely take a drop to at least 1.10 maybe lower (very possible maybe even par before we're done).  This is a rough barometer of your gold value, still strong performance given the currency moves lately.  Once that move is over however, gold will just go up in value.  The problem with trying to get the low for new purchases or adding to current positions, is that the move up can happen at any time given whats going on in the world debt-wise.  Certainly if the move last week in gold is repeated, it would be extremely bullish for gold prices whatever happens in Europe.  I sold my gold near the top last time but am waiting for the right opportunity to get back in. 

Sun, 06/03/2012 - 22:12 | Link to Comment silverdragon
silverdragon's picture

Great comment sheepfukker

Mon, 06/04/2012 - 01:40 | Link to Comment Newager23
Newager23's picture

I think most of us KNOW that gold is going to $2,000 and beyond in the not to distant future. And when that event happens, the mining stock are going to be a lot higher than they are today. The only question is trying to catch the right entry price.

My take is that there are a few possibilities:

1) The bottom is in and we are on the precipice of a big move up in gold over the summer and through the fall.

2) The bottom is not in and we are going to see one of these bottoms: $1450, $1350, or $1250.

3) The bottom is basically in but we are going to see a tight trading range ($1550 and $1650) for a few more months.

I'm hoping for #2 because I would like to get some stocks on sale before the move to $2,000. This could happen if we get a stock market crash of say a 1,000 point drop in the DOW in a single day, and with it serious deflationary pressure.

I doubt that gold could withstand this kind of onslaught of selling. If this happens, my bet is that gold will bottom somewhere between $1435 and $1470. I would love to see this happen, as many stocks would reach their bottom. And create an ideal entry point.

While my hope is in #2, my gut says we are going to see #1. Why? A few reasons. First the technical charts are implying a big move up after a triple bottom in silver. The $27 level seems to be holding. If silver is going up, then so is gold. And gold has a solid reverse head and shoulders. Thus, technical charts are screaming, "here we go...UP!"

Another technical chart is the Gold/XAU ratio in this post. It is lower now than in 2008, and that was a brutal drop. I don't think the stocks can go any lower. The valuations are simply to good. I have over 80 gold and silver stocks in my best picks list (www.goldsilverdata.com)! That is an incredibly number of potential 5 baggers.

Lastly, I think that the breakdown in Europe and the slowdown in Asia is pointing to contagion that is ready to burst. Investors are going to flee bonds and buy gold this week. I'll be surprised if gold doesn't close over $1650 by the end of the week. And over $1700 by the end of June. I want to see $1450, but I don't think it is going to happen. We are getting very close to the run to gold, and the run to $2,000 and beyond.

We have been given an opportunity to buy some cheap stocks, but I think that window is closing. I hope I'm wrong and the window stays open at even lower prices, but last Friday seemed to point to the window closing.

Newager

 

 

Mon, 06/04/2012 - 02:53 | Link to Comment MeanReversion
MeanReversion's picture

"And over $1700 by the end of June."

Rest assured, if there is some prelude to a Eurozone exit by Greece later this month, gold will tank.

Also, you can also be sure that even if the above doesn't happen, gold will take a big hit if the Fed doesn't announce QE3 on the 19-20th.  I don't believe they will (yet).  Friday's big up move was ALL about QE3 hopes, let's face it.  If it were flight to safety then gold should break it's EURUSD correlation.  It's negatively correlated in today's trade but since September of last year gold has traded in tandem with the EURUSD.  That needs to change. 

Mon, 06/04/2012 - 07:51 | Link to Comment Disenchanted
Disenchanted's picture

 

 

 

“Kings largely became the mouthpiece and sword arm of those semi-secret societies that controlled the material of money as its outward and visible symbols came to be restricted to gold, silver, and copper,” Astle writes. “The fiat of the god in heaven which had been the decisive force behind that which brought about an equitable exchange, was replaced by the will of those classes controlling the undertones of civilization, leaders of the world of slave drivers, caravaneers, outcasts, and criminals generally, such as was to be discerned on the edges of the ancient city civilizations, and followed the trade routes between them... The instrument of this will was precious metal, whose supply was controlled by the leaders of these classes through their control of the slave trade, since mining was rarely profitable in the case of the precious metals, except with slave labour, even after the development of hardened iron tools and efficient methods of smelting.”

 

 

excerpt from The Babylonian Woe by David Astle

http://ia700302.us.archive.org/15/items/TheBabylonianWoe/Babylonian_Woe.pdf

http://archive.org/stream/TheBabylonianWoe/Babylonian_Woe#page/n0/mode/2up

 

bonus excerpts:

 

“The special international character of the outlook of these people, sprung as they undoubtedly were from the donkey caravaneers, born to be at home amongst all peoples, yet to always bear in mind the peculiar business of the caravan merchants, their trade and profit, may not have made for decisions as from a true and dedicated god-servant. Thus it may very well be that we must look to the professional caravaneers, from whom descended the Habiru, for widespread dissemination of the knowledge of the possibilities offered to merchants by development of the practices relating to private money creation deriving from a clear understanding of the meaning of accounting to a silver standard, and later the potentialities towards development of monopoly of trade inherent in the actual use of silver as the material on which the numbers of the abstract unit were stamped. The full extent of the possibilities towards the accumulation of wealth through exploitation of varying ratios between silver and gold in different parts of the world, and the possibilities of a private and secret expansion of the total monetary circulation which was open to those who were held in such esteem in the cities that persons were glad to deposit their valuables with them for safe-keeping, may also have been known to them.”

 

 

“In this time, as today, the people were almost entirely at the mercy of the private persons controlling their money, who then controlled the inflow of precious metals, silver and gold, the foundation of the people's money. The policies of these controllers from their standpoint as internationalists, were necessarily directed towards the stimulation of war against the well-being of mankind.”

 

Youtube presentation(audio with pic) by Gordon Comstock, The Babylonian Woe - Part 1

http://www.youtube.com/watch?v=AX9bZVsiIVE

Mon, 06/04/2012 - 09:02 | Link to Comment boogerbently
boogerbently's picture

Complete diversity in opinions about golds direction, and the reasons for it!!

That pretty much explains the price action.

Do NOT follow this link or you will be banned from the site!