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« Why Gold Has a LONG Way to Go | Main | High River Gold (HRG) Financing Covers Debts, Has Downstream Implications! »

Agnico-Eagle Mines Limited: Bought a few Call Options

AEM logo 20 feb 09.JPG

On the 1st November 2009 we signaled our intention to acquire more of this stock and some Call Options when we posted an article entitled Agnico-Eagle Mines Limited (AEM) Buy, Sell or Hold following the hammering that the stock had just taken and concluded as follows:

In conclusion we think that the punishment does not fit the crime and that the selling has been overdone. So we see it as a buying opportunity. This week we will seriously consider making another purchase of the Agnico’s stock and may also buy a few of the longer dated Call Options.

Our approach was to wait until the carnage had settled and the panic selling had subsided with Agnico showing signs of recovery. The trading session started with Agnico looking a little sluggish so we low bid the Call Options with no luck. Then gold popped up and Agnico followed at a rattlingly good pace, we tried to be patient and reviewed the charts and our research again and decided that this stock should be trading at $75.00 or so so we took the plunge, rightly or wrongly and acquired some Calls.

We bought the JAN 2010 series at a strike price of $60.00, symbol AEMAL for an average price of $5.10. The series finished the day with a bid price of $5.50 and an ask price of $5.70, so not too bad a start. If you pop back to the 13th October 2009 these very same contracts were trading at $16.22 so they have fallen dramatically of late. Lets hope that they can bounce back to those levels and quickly.

For those of you bought on the strength of our recent article many thanks indeed for taking the time to email us the details of your purchase, you should be wearing a huge smile on your face today.

Back to it: The news of the day would be that the over hanging gold sales from the IMF of 403 tonnes was cut in half today when a central bank purchased 200 tonnes. All eyes were focused on China when first past the post with a cheque for approximately $7 billion dollars was India.

So there we go.

Heres a snippet from the Daily Reckoning who sent out this missive today:

--Well how about that! India pipped China at the post to walk away with 200 tonnes of IMF gold. Granted, India had to pay US$6.8 billion for the yellow metal. But with China steadily accumulating gold as a reserve asset (at the household AND central bank level), everyone thought China has this one in the bag. Not so!

--Something more than meets the eye is going on here. The IMF sale was part of a plan to unload 403.3 tonnes of gold. It's halfway there, and will use the proceeds to fund itself and loans to the developing world (or perhaps Britain and America when they go broke). But what else is going on?

--In the past, larges sales of gold - mostly by European central banks - swamped the gold price and kept it in check. The European CBs either felt like they had too much gold doing too little work on the balance sheet. Or, they were manipulating the price of gold down by increasing the supply to the market whenever the gold price began rendering its verdict on global fiscal and monetary policy.

--India's central bank is now the proud owner of 557 tonnes of gold. That gives it the tenth largest gold holdings among central banks. But it probably isn't finished. Gold makes up just six percent of India's foreign exchange reserves. There's plenty of room for that to grow.

--But don't forget China. China has $2.3 trillion in foreign exchange reserves. But 70% of those - or $1.6 trillion - are in U.S. dollars. It owns over just a 1,000 tonnes of gold. That makes up less than 2% of China's reserves and makes China the seventh largest holder of above ground gold. In fact the gold exchange traded fund (NYSE:GLD) owns more gold than China. France, Italy, the IMF, Germany, and the United States round out top five (from fifth to first).

To read the missive in full please visit their web site by clicking here, you might also want to sign up for their free email service – its well worth it.

Have a good one and stay calm.

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Reader Comments (1)


Thanks. I really enjoy your work.

November 4, 2009 | Unregistered CommenterP

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