Since our last update of the 10th March 2009 gold has moved up to $957.90/oz, silver up to $14.70/oz and the US Dollar has declined from '89' down to '80' on the US Dollar Index, lifting the stock price of most gold producers. The dollar now looks oversold and a short term bounce could be on the cards thus capping the progress in gold prices. Gold is technically close to the top of its range so it too could experience some short term consolidation or a slight pull back.
If you are a short term trader or have some good profits on the table you may want to reduce your exposure and buy back in a little later at cheaper prices. Randgold (GOLD) and Yamana (AUY) appear to be ahead of themselves at the moment with the RSI currently above the '70' mark.
Its a difficult call to make so we are holding tight to our core position as we believe it is better to be invested rather than have lots of cash as we just don't know when gold will take a run at the $1000/oz. In our humble opinion the stage is set for gold prices to challenge previous highs and make new highs before the years end.
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 trade as low as $27.70, Randgold closed at $66.74 yesterday, so a good recovery with a paper profit of 77.26%..
Agnico Eagle Mines (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 $57.81 yesterday.
Kinross Gold (KGC) we originally acquired Kinross at $10.08, Kinross then went through a bit of a pull back so we signaled 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 yesterday at $19.18.
Silverado Gold Mines (SLGLF) we bought at $0.08 and it now stands at $0.0125 up from $0.0079 at the last update. 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.
Silverado (OTCBB: SLGLF) has managed to arrange a line of credit of up to a staggering $US100 million as detailed in a news release by the company recently, which came as a surprise to us considering their recent performance. Click here for details.
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 $10.69 yesterday, having traded as low $3.99 not so long ago.
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 was a victim of this recent sell off, which has dragged the price down. 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. HRG closed at $0.185 on Friday, having traded as low as $0.04. In a recent news release the company had this to say:
Following an independent analysis by High River of its liquidity position and a review of financing and strategic alternatives, on May 19, 2009 Severstal indicated to the Board of High River, by way of non-binding expression of interest, that it proposes to make a cash offer of C$0.18 per share to minority shareholders in High River.
There can be no guarantee that such an offer will ultimately be made at this stage. The Board of High River has formed a special committee consisting of independent directors to oversee discussions with Severstal and evaluate any proposal that may be made.
Severstal has already provided significant financial support to High River (including the November 2008 private placement of US$45 MM and the April 2009 reassignment of loans-in-default totalling US$27 MM), and absent further support as suggested above, the Board of High River believes that outlook for the Company remains uncertain. Sadly uncertainty is the order of the day for this stock.
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$3.48 up from US$1.51 recently, Our original purchase was made on the 15 July 2006 at around the $4.70 level, which is now showing a large lose. Hopefully FRG established a bottom at $1.25 and will continue to make progress. Fronteer Development Group Inc. announced that it has acquired all of the remaining common shares of Aurora Energy Resources Inc. So this investment is well and truly a two pronged attack via both gold and uranium.
We have had only one options trade in this period which was as follows:
On the 03/24/09 at precisely 03:58:26 PM EDT we purchased a short position on the financials, via buying April 2009 $100.00 call options on ProShares UltraShort Financials (SKF) for $16.49, the leveraged inverse financial ETF. At 03:02:02 PM EDT in the next day of trading, we sold these contracts for $19.90, making a profit of 20.06% in just 23 hours.
Trading decisions belong entirely to you as your circumstances are different from ours and we trade to suit our investment criteria and cash position.
Have a sparkling week and please feel free to share your comments with our readership.
Conventional wisdom suggests having 5% or so of your portfolio in precious metals with some commentators upping this figure to around the 15% mark. We however are far more cavalier in our approach to investment and only invest in the precious metals sector such is our enthusiasm for it.
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