Friday, November 18, 2011

Gold Mining Stocks Looking Set to Rally

Another article underlining the potential for gold stocks to catch-up to this year's rise in the price of gold. Long term this is quite true and virtually inevitable in my opinion. When it will happen is the only question. This not to say that gold will not continue to correct. Indeed the continuing divergence in gold equities may indicate further selling.

As an investor it is clear we are seeing continuing opportunity to accumulate gold stocks. Gaining the greatest leverage for the return of the uptrend in gold equities is, for me, to be found in junior gold stocks with assets—especially those ones still in the penny to two dollar range. See my recent picks in the 'Gold' tab above.


From Seeking Alpha

Expect Gold Mining Stocks To Rally

By Robert Hallberg

The gold mining business has been a tough industry for investors over the last couple of years, despite skyrocketing gold prices. Gold has outperformed most other asset classes but the mining shares have not kept up with gold’s performance.

There are many theories why the shares are lagging behind, some say that frightened investors prefer the safety of gold bullion, and others say that newly launched gold derivatives and ETFs has been competing with the shares for capital.

Until recently, many gold equities had been in a multiyear trading range with flat stock performance despite increasing revenues and substantially higher profits. The gold bugs index (HUI) is a good benchmark to see whether gold stocks in general are outperforming or underperforming gold. It is composed of the 16 largest and most widely held public gold production companies.

The chart below compares gold’s (GLD) performance against the HUI. Both gold and the HUI were neck-to-neck until the financial crisis of 2008, when gold pulled away. Until this day gold has been a far better investment than most gold stocks.

click to enlarge

HUI versus Gold

Although the shares have been lagging behind, there are a number of developments that suggest that the mining companies might be ready to catch up and outperform physical gold and silver. First, margins between the gold price and cash costs of production per ounce have been growing steadily. This has led to vastly increased profitability. The increase in margins has been a result of higher gold prices as production cost has been increasing at a much lower rate. This chart below shows the average industry margins between the gold price and cash costs of production per ounce.

The next chart compares the price of gold and the operating costs of production. The price of gold has been increasing at a much higher rate than the production cost and as long as gold remains at present levels the gold mining companies will remain highly profitable.

Read full article here

Tuesday, November 15, 2011

Let's look at a couple of Gold Stocks: CBJ-V AND LAD-V

I've been looking at gold juniors—well actually all gold stocks. I think gold juniors have the the greatest potential for the greatest return given their position in the bull cycle. AND we are nearing M&A season in the cycle—time for the bigger to swallow the smaller in a drive to build add to their reserves.

On the bottom edge of the juniors I have a two I am looking at today.

CB Gold (CBJ-V: TSX)
Excerpts from Stockwatch Business Reporter:

"Two weeks after revealing impressive assays from a drill hole at its Las Vetas gold property in Colombia, CB Gold Inc. has toned down the excitement with, as requested by the British Columbia Securities Commission, restated assays including a top cut. A top cut reduces (or cuts) an uncommonly rich assay, usually a short intersection, to a lower assay -- say from several hundred grams per tonne gold to 50 g/t -- and then the average of it and other assays is recalculated.

"In its earlier news release of Oct. 24, CB Gold reported a 114.98-metre interval of 7.57 g/t gold, including 2.09 metres of 316.67 g/t gold, but used no top cut in its calculation. There is no suggestion the company tried to conceal the narrow intersection of extraordinarily high gold."

"...With a 60 g/t top cut, CB Gold's 114.98-metre intersection drops to 2.54 g/t gold, and with a 15 g/t top cut, it falls to 1.2 g/t gold, as stated in the company's Nov. 8 press release. The company says it has not explored the property enough to define a mineral resource, and investors will have to wait for more drill results. "

From their website:

"The Vetas Gold Project is a combination of small producing mines and detailed exploration over adjacent areas. Although historically there have been a number of small underground mines producing gold near the village of Vetas, District of Santander, the project is at an early stage of development. Prior to CB Gold's acquisition of the properties, at least eleven small underground mines were in production, but no systematic underground exploration and development, or surface exploration, was carried out on the property by previous owners.

"CB Gold has acquired interest in nine mining titles, of which six are registered in the name of the Company. All nine properties host quartz veins containing high grade gold and have historical production. In total, the project covers a total area of more than 1,000 hectares in Northeastern Colombia"

So we know there is gold there. Question is: How much? For me the simple fact that there is a lot of historical activity and that the property has has no systematic exploration makes this one a definite watch and wait—wait for opportunities to accumulate. IMO this one would rise in value significantly if their next drill holes continue to produce higher grades. Ultimate value though will depend on the cost of production. You can find their Fact Sheet here.

New Carolin Gold Corp. (LAD-V: TSX)

Another company which owns a property with a history of gold mining. New Carolin Gold Corp. is a company who's share price makes it look like a long shot, until you look at its fact sheet (downloadable here). So I like it—I'm all about looking a couple of these potential multi-baggers!

New Carolin Gold Corp. is a new company with a historic gold mine on a known trend, the Coquihalla Gold Belt. The original Carolin Mine still has its sign on British Columbia's Coquihalla Highway and a road that leads into the mine property. Their Fact Sheet sums up their starting position for my numbers quite well and speaks volumes about the people behind this deal IMO.

Just looking at its recent NI 43 101 on the tailings from the original Carolin Mine gives it 29,000 ounces of gold which gives a share value of between .42 and .85. Historical drilling inside the mine shows the resource to be open at depth.

It is my belief that there is very little risk to the downside for shares of this company, in my opinion. Therefore this one for the watch list and in the interest of disclosure I have bought shares in this company.

As always do your own due diligence put them on your watch list and then review any buying decision it with a qualified professional before investing in either of these companies.

Trade well and prosper.


Why Gold Stocks Are So Cheap Right Now!

For months now gold stocks have lagged the market. There are a number of reasons for this. While the reason's matter for investors the reason I want to know is so that I can invest effectively. The article excerpt below outlines the reality of this present moment in the markets.


Gold Stocks Are Cheap – Dirt Cheap

By Alena Mikhan and Andrey Dashkov

Despite the pullback this fall, gold has been performing well this year. The price of the yellow metal is up 28% YTD, driven in large measure by strong demand in Asia and the dim economic outlook in the west. Gold miners are reporting good third-quarter bottom lines. In this ointment, however, there is a fly: gold stock performance, which has massively lagged the underlying commodity price surge over the year. This has been ongoing for months, now bringing us to the point where gold mining stocks look notably undervalued.

Technically, we might say, they look dirt cheap. Even Doug Casey, who's a serious bottom feeder, is admitting that compared to the metal itself, gold stocks are looking cheap again.

Consider these charts:

(Click on image to enlarge)

(Click on image to enlarge)

The average price/earnings ratio in the industry – a valuation ratio of a company's current share price compared to its per-share earnings (quarterly figures are used here) – is going down while the price of gold is increasing. This situation has persisted for several quarters; and now gold stocks look cheap on a P/E basis.

This big divergence between companies' earnings and the underlying commodity price won't last: Either gold will retreat or P/Es will catch up, or both. Since the fundamental trends driving gold upward are still very strong, the second scenario looks more probable, raising the prospect of a huge rally of mining stocks somewhere in the short- to mid-term. Comparing changes in the AMEX Gold Bugs Index against gold leads to a similar conclusion: in the second half of 2011, gold stocks have been lagging. See the chart below.

(Click on image to enlarge)

If they are on sale, why aren't we seeing a rush into these equities?

One opinion on why gold stocks are not recognized by the general investing public as being cheap is concealed in the way stocks are estimated. Most analysts prefer to use an unrealistically conservative gold price, which is far below what we have been observing for quite a while now. From Pierre Lassonde, in a Mineweb article: Read more here

Are Gold Stocks Set to Move Soon?

Though I don't know—I know gold stocks, having under-performed the metal will return to stronger pricing like 2010. The question is when and where can I see signals that help my timing.

The Seeking Alpha article by Bruce Pile below attempts to do just that. Personally I am not trying to time the market but as I believe quite strongly that the opportunity is real I am already positioned and will look to add more as I am able and I plan to trade the up cycle once the trend change is confirmed.


Gold Stocks Are Ready to Reignite

by Bruce Pile

Investors seem to be fretting about a weakening recovery as the numbers continue to disappoint and stocks are showing signs of fizzling. And then there's the looming end of QE, a huge fuel source for money going into the stock market. So what's a gold fan to do regarding gold and silver stocks? There is a school of thought that says all "risk-on" speculation positions are vulnerable. And that includes miners of anything - even gold, and especially silver with its heavy industrial use. Gold stocks have been a dog lately, so is now the time to sell or buy?

Some instructive comparison can perhaps be drawn by looking at the last time we had an obvious slowing economy coming at us. This was over the last half of 2007. So how did gold and silver and the associated stocks behave in '07 as the weak economy started taking hold?

First, let's look at how well the discounting of the market was working during this period by looking at Dr. Copper, the commodity with the PhD in economics:

(Click to enlarge)

Here we see that the doctor was right in seeing the approaching recession coming as usual. The key 140/200 day ema (blue and red lines) broke out of its bull mode with collapsing divergence in November. So if you had the same angst about all economy sensitive commodities, you perhaps would have been a seller of silver at this time with its usage being primarily industrial. Gold during this period moved up sharply. So silver had a choice to either follow its monetary partner, gold, with a historical R squared correlation of something like 0.9, or to follow its economic partner, copper. Which did it do? Here is the silver chart for that period:

Read full article here

Friday, November 11, 2011

Gold Is Becoming the Sole Safe Haven

Unafraid to pointedly call out the creators of the world's financial mess—the leaders, banksters and their 'owners'—Max describes the monetary terror unfolding before our eyes its sources and the undeniable and sole safe haven of gold as the titans of our destruction dance the light fantastic on our economic futures.


Max Keiser and co-host, Stacy Herbert, discuss European gold wars and the brokers at the Chicago Board of Trade telling others to get a job while they can't even do the one job they have. In the second half of the show, Max Keiser interviews James G. Rickards about his new book - Currency Wars: The Making of the Next Global Crisis.

Tuesday, November 8, 2011

Falling Inflation Bullish for Gold?

The idea is that gold is not merely a hedge—it is a currency. A world of fiat currencies and political expediencies and greedy masters of banking and business trying to out-profit each other has lead to disintegrating confidence and currency fear. Confidence is everything for fiat currency but gold is an agreement of value that everyone shares.


Excerpt reposted from 24hGold

The Most Bullish Sign For Gold: Falling Inflation
Published : November 08th, 2011

Whilst many may argue that gold is an inflation hedge and therefore inflation is bullish for gold, in reality the dynamics at play here are not that simple.

In our view, gold is a currency. Therefore fluctuations in its price are largely based on its perceived value relative to other currencies. We would not suggest that its role as an inflation hedge is a primary reason for being long gold, since there are far more direct and efficient ways to hedge against inflation risk in this modern financial environment. We do however see currency devaluation as a primary reason to own gold. If one thought the Yen was going to strengthen against the dollar, then one would move USD holdings into JPY. If one thought the Yen was going to weaken against sterling, then one move JPY holdings into GBP. This environment is unique as across the world governments and central banks are trying to lower the value of their currencies. Therefore there is nowhere to go, except for gold which cannot be printed in an attempt to erode its value.

The US Federal Reserve has a dual mandate to both maintain price stability and full employment. This means their job is to prevent deflation and keep inflation in a tolerable range, plus ensure that unemployment is not too high.

Clearly the employment side of this mandate is not being met at present, with the latest US payroll data showing unemployment still at 9%. However the one thing holding the Fed back from further easing is inflation. We can therefore deduce that a drop in inflation would be very bullish for gold prices, as it would increase market expectations of more large scale asset purchases (LSAPs) by the Federal Reserve.

the most bullish sig

Consequently a drop in CPI inflation would be the most bullish signal for gold that we could think of. ... Read full article here

Friday, November 4, 2011

Gold Stocks: The Buying Opportunity 1

This from an article found on The Gold Chronicle South Africa's Harmony Gold Mining is another indication that, in my opinion, the window is open for acquiring gold stocks before they lead the way back up for the gold bull market.



"Gold stocks haven't rallied in line with the gold price in the last few months. In fact many gold equities have remained range bound despite the precious metal's break through to record levels," said Harmony Gold Mining (HAR) financial director Hannes Meyer. ...

Almost all gold companies, both local and international, have either reported or are expected to report a significant increase in profits in the three months to end September thanks to the run in the gold price. ...

"We believe that the gold price will continue to strengthen as the fundamentals that drove the gold price up are still in place," the company said in its September quarter results statement.

Read source here


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