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« Gold at $600.00? | Main | The Federal Reserve was never envisioned to be the lender of last resort! »
Nov192008 Portfolio Update 19 November 2008

HUI Chart 19nov08

A quick look at the gold bugs index chart and we can see that gold stocks have been decimated over the last few months. The technical indicators of the RSI, MACD and STO do not tell us very much as this climate of de-leveraging continues regardless of the quality of the stock being sold in order to generate cash.

We now need the de-leveraging to come to an end and the US Dollar to u-turn to bring these stocks back into favour. Oil has retreated from around the $148/barrel level to trade at around $54/barrel recently, which has reduced some of the inflationary pressure on gold. The US dollar has rallied to challenge and overcome its resistance level of ‘80’ and currently sits at 87.20, which we believe reflects the move to cash rather than the popularity of the dollar. However there are a number of dollar bulls out there and margin calls are still being made so we could see further strengthening of the dollar in the short term. President elect Obama is still an unknown quantity however his election has not been greeted well by the markets in general as evidenced by the DOW losing ground since his victory. If doing whatever it takes means the printing of more and more dollars then monetary inflation will be upon us shortly and the precious markets should respond accordingly.

Our portfolio as been updated as follows:

Randgold Resources Limited (GOLD) On the 18th of June we bought Randgold Resources Limited for $37.65. This stock quickly rallied to $55.00 before being caught in the ensuing sector sell off to close at $27.70 yesterday.

Agnico Eagle (AEM) we originally paid $30.88 and it now stands at $31.15. On 31st January 2008 we reduced our exposure to this stock and sold about 50% of our holding for an average price of $63.27, locking in a profit of 104.8%. On the 24th July 2008 we bought again at $59.17 doubling our position with the average cost now standing at $45.03. Agnico Eagle closed at $31.15 on Friday.

Kinross Gold (KGC) we originally acquired Kinross at $10.08, Kinross then went through a bit of a pull back so we signalled to our readers to “Add To Holdings” at those discounted levels of around $11.66. We also gave another ‘Kinross Gold BUY’ signal when we purchased more of this stock on the 20th August 2007 for $11.48. On 31st January 2008 we reduced our exposure to this stock when we sold about 50% of our holding for an average price of $21.96 locking in a profit of about 93.60%. On the 24th July 2008 we doubled our holding with a purchase at $18.28 giving us a new average purchase price of $14.50. Kinross closed on Friday at $12.03.

Silverado Gold Mines
(SLGLF) we bought at $0.08 and it now stands at $0.013. We are disappointed in the poor performance of this stock. The B.C. Securities Commission had issued a cease-trade order against the company, citing a host of filing deficiencies. On the 5th August 2008 this order was revoked the B.C. Securities Commission. However this stock continues to limp along and closed yesterday at $0.013.

Yamana Gold Incorporated
(AUY: NYSE) we paid $9.37 on 27 September 2006, and we bought again at $12.89 on the 7th December 2007 and so our average price moved up to $11.13. On 31st January 2008 we reduced our exposure to this stock and sold about 50% of our holding for an average price of $16.50 locking in a profit of about 49.41%. Then on the 3rd April 2008 we bought our Yamana position back at $14.43 in expectation of a bounce, which arrived on The 23rd May 2008, and we sold for $16.00. On the 11th July 2008 we bought again at a price of $14.95 taking our average purchase price up to $13.04. This stock closed at $3.99 per share yesterday, for a loss that we cannot explain.

High River Gold Mines: (HRG: TSX) We bought this at $2.49 and we increased our position in the company on December 7th, 2007 when we wrote;
We strongly believe in the company’s long-term fundamentals, especially with rising gold prices. However it has been a victim of this recent sell off, which has dragged the price down to $0.09 yesterday, rendering another hammer blow to our portfolio. HRG is a small gold company and so its stock price is very volatile, but this pullback has been devastating. Production last year of 140,000 ounces, this year 280,000 ounces, next year 350,000 ounces going to an estimated 600,000 ounces by 2012. We will hold and watch for now.

Fronteer Developments Group (FRG) Fronteer was originally bought as both a uranium and gold play as FRG owns the lion’s share of Aurora Energy Resources making it a gold/uranium play. On the 24th September 2007 we sold 50% of this stock for an average price of $10.44, banking a profit of 122%. Fronteer is currently trading at US$1.51, which shows the importance of taking profits in a bull market. Our original purchase was made on the 15 July 2006 at around the $4.70 level, which is now showing a large lose. Again we are looking for FRG to establish a bottom and make some progress.

Options Trades;

On the 24th July 2008 we re-purchased the KGC JAN09 Call options at a strike price of $20.00 for $2.50, they closed at $0.35 yesterday.

Also on the 24th July 2008 we purchased the Yamana JAN09 Call options at a strike price of $12.50 for $2.25, they closed at $0.05 yesterday, dead in the water.

On the 14th August 2008 we purchased the Agnico-Eagle JAN09 Call options at a strike price of $60.00 for $5.50, they closed at $0.60 on Friday.

As we can see our latest options have delivered to us a financial bath. It is worth noting that these contracts are extremely volatile and can move 50%, even double or halve in a single day, so take great care when buying them.

At the moment observation is the order of the day as we are still unclear about which direction the precious metals market is about to take.

Trading decisions belong entirely to you as your circumstances are different from ours and we trade to suit our investment criteria and cash position.

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Reader Comments (9)

Hi guys,

Do you still hold Endevour? It isn't in your listing,that I can find.


November 19, 2008 | Unregistered CommenterJohn Ell

Comendable honesty guys. That's why your opinions are also trustworthy.

A very loyal follower


November 19, 2008 | Unregistered CommenterKevin Merry

Everyday... lower lows with Auy. Has anyone spoken with anyone in the company besides the PR dept? WHich means little. I thought this was a premiere gold company with a 10 PE and great properties. Saying we don't understand why... just ain't cutting it...Sorry.

November 19, 2008 | Unregistered CommenterGAry


Yes we do hold Endeavour Silver - its covered on

November 19, 2008 | Unregistered CommenterGold Prices

Re HRG: you wrote that you still believed strongly in the company's fundamentals, especially with higher gold prices. What higher gold prices? When? I too commend you on your honesty. Neil

November 19, 2008 | Unregistered CommenterNeil Bishop

Gold Price..BOB,

What makes you think Gold won't go down to 450-500 and languish there for 25 years like it did from 1981-2004. We had several recessionary cycles during that period and gold did little. seem to run a very large fund and news letter. Why can't you get AUY management on the phone, and see what there're saying about Yamana, and what they are planning to do if anything, about this dramatic drop. My losses are huge and I am hearing little. Why aren't they buying stock back at these levels... This drop is out of the ordinary even in this market. THey won't take my calls. Just stock relations, and you get a machine..Maybe we should get the Hell out of all gold, and buy back at the 600 level. I see little that will rally gold in this market. You guys know more than me. What will rally this market. If we go to 6000 on the dow, gold is going with it.

November 19, 2008 | Unregistered CommenterGAry

GAry, We have been in touch with Yamana and as soon as we get an explanation we will post it.

We cannot advise what to do we can only tell you what we are doing and why. Our portfolio has been hammered so its our hard earned cash that is also on the line during this sell off, so we are hurting make no mistake about it.

November 19, 2008 | Unregistered CommenterGold Prices

Bob is right, every normal individual is hurt. You, Me...even Warren Buffet.

Gary, I'm a little surprised to see you keep focus on AUY decline. All markets and miners are down tremendously. The obvious reason that Yamana might fall a bit lower has got nothing to do with fundamentals in my view, except for the lack of historic shareprice stability. But at least that's their focus from now on if you hear them at Denver Gold Forum. See this webcast presentation;

The more proven miners like Barrick Gold, they will have the direct influence of recovering gold prices visible in their share price. Their top notch of the industry. Yamana is just coming to the established market place.

Think about this; If you had losses like we see today (when 40 - 70 percent declines are not unusual), where would you put your money in?
Look at the other valuations. Top quality companies, stable shareprices. Hoards of cash and low/no debt. Like Microsoft for instance, Coca Cola etc. etc. That is were the money is going nowadays, after rebalancing their (losing) portfolios.

November 20, 2008 | Unregistered Commenterde Graaf

De graf,,

I own a lot of auy. Too much. Which is my fault. I also on Gold corp-kinross-FRG-AEM-SLW...etc Oh well...At these levels. I will try and relax...and wait. Thanks for the link. Heading to work...Gary

November 20, 2008 | Unregistered CommenterGAry

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