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Thursday
Feb032011

Newmont takes out the Fronteer Gold Incorporation

FRG Chart 04 Feb 2011.JPG

The hot news today is that Newmont Mining Corporation (NYSE: NEM) (and Fronteer Gold Incorporation (FRG) have announced that they have entered into an agreement by which Newmont will acquire all of the outstanding common shares of Fronteer Gold by way of a Plan of Arrangement.
 
Under the Plan of Arrangement, shareholders of FRG will receive Cdn $14.00 in cash and one  common share in a new company ("Pilot Gold"), which will own certain exploration assets of Fronteer Gold, for each common share of Fronteer Gold.  The cash consideration represents a premium of approximately 37% to the closing price of the common shares of Fronteer Gold on the TSX as of February 2, 2011 and equates to a value of approximately Cdn $2.3 billion for Fronteer Gold (excluding Pilot Gold). 

We draw your attention to the premium paid which around is 37% above the stock price and wonder will this serve as a bench mark by which other target companies will set the floor for any negotiations regarding the takeover of their organization. There are any number of candidates out there which no doubt appeal to the bigger players who are finding it enormously difficult to grow the resources organically and must therefore hit the acquisitions trail in earnest.

No doubt the rumour mill will go into over drive and names will be forthcoming with almost certainty that they are the next one to be devoured at a spectacular premium. The news should give a boost to the mining sector in general and especially to those companies who are sitting on substantial reserves. On the down side the danger is that we get sucked in by the chatter or white noise and chase prices higher of certain companies, who are not on the wanted list, so take care out there.

Fronteer Gold owns a 100% interest in the development-stage Long Canyon project, which is located approximately one hundred miles from Newmont's existing infrastructure in Nevada.  The proximity of Long Canyon to Newmont's Nevada operations provides the potential for significant development and operating synergies.  Fronteer Gold also owns a 100% interest in the Northumberland project and a joint venture interest with Newmont in the Sandman project in Nevada, among other assets.  Fronteer Gold has total attributable Measured and Indicated gold resources of 4.2 million ounces and Inferred resources of 1.7 million ounces at Long Canyon, Northumberland and Sandman.

Good bye FRG, we wonder who will be next.....

......................................

Over in the options trading pit we have just closed 3 more winning trades, so we now have 62 winners out of 64 trades, or a 96.87% success rate.


If you have any questions regarding these trades please address them through their site where they will be handled quickly and I hope efficiently.


sk chart Jan 2011.JPG


The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today, before we decide to cap membership.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

Tuesday
Feb012011

Gold and silver prices look to have bottomed

Gold Chart 02 Feb 2011.JPG


We kick off with a quick look at the chart where we have included the 150dma as gold prices have bounced off the 150dma once again, as they did in August 2010. The technical indicators, RSI, MACD and the STO look to have bottomed and are now heading north with plenty of open water ahead of them. Also note that the US Dollar had a bad hair day today, slipping down to the '77' level before stabilizing, well at least for now.

Richard Russell of the Dow Theory Letters in an interview on King World News had this to say regarding the dollar:

Ironically, the media seldom attacks the dollar or fiat currencies. The media never mentions that fact that most fiat currencies have died within 40 years of their original creation.

Yes, it's a strange, strange world we live in. And I expect the year 2011 will be a year when a great many questions will be answered. Stock market, the dollar, gold, interest rates -- we await your verdicts.

In the meantime, I believe the surest bet is as follows -- the US dollar will continue to lose purchasing power. All else will stem from that phenomenon.”


The historical inverse relationship of the dollar down and gold up may be about to re-commence as the transparency of fiat currency becomes more widely understood by the masses. Debt continues to rocket, politicians continue to pacify, the printing presses rumble on endlessly through the night, social unrest shows its face as capital cities are marched on by the worlds poorer people. The state of affairs in Egypt is almost a mirror image of what took place in Iran some years ago when the people ousted the Shar and the existing government. We suspect that the Egyptians will settle for nothing less than the immediate removal from office of President Mubarak as their disenchantment gathers momentum. However, this issue appears to have been largely overlooked by the investment community as the manufacturing figures took centre stage and the DOW gained 148 points in todays trading session.

Moving on to the silver space, the volatility continues with silver prices putting on half a dollar today, boosting the share price of many of the producers as the table below shows:

silver producers table 02 feb 2011.JPG

This may indeed be the turning point as both gold and silver form a base from which to catapult to higher ground filling the coffers of the producers in the process. As this happens and balance sheets begin to glow we may well see the HUI make spectacular gains, however, it remains uncertain in our humble opinion that the stocks are ready to outperform the metals.


..............................................................

Over in the options trading pit we have just closed 3 more winning trades, so we now have 62 winners out of 64 trades, or a 96.87% success rate.


If you have any questions regarding these trades please address them through their site where they will be handled quickly and I hope efficiently.


sk chart Jan 2011.JPG


The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today, before we decide to cap membership.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

Sunday
Jan302011

Gold and Silver are on the starting blocks

Eric Sprott 25 Jan 2011.JPG

A strange start to the year and a strange end to a volatile week, so we take a whiz across the air waves in order to get a 'feel' of whats going on, so this will be a mixed bag of data. The first eye catcher is this:

Eric Sprott - Expect $50 Silver, Gold Possibly $2,150 by Spring.

What follows is brief summary of an interview that he gave to King World News.

Eric Sprott recently launched a silver fund and so entered the market to acquire 15 million ounces of physical silver, to his surprise it wasn't readily available and in fact it took 10 weeks to get his order filled. Another order placed for 1 million ounces has been given a delivery period of around 2 months. The silver that he received looks to have come directly from the refiners as it is so new. This again tells us that that the supply side is indeed very tight. On the subject of China Eric drew the listeners attention to this interesting dynamic; In 2005 China exported 100 million ounces of silver, fast forward to 2010 and China imported 100 million ounces of silver, thats a 200 million ounce turnaround in an 800 million ounce market.

Other influential factors included:

One of China's major banks has offered their customers a facility whereby they can save a portion of their savings in gold, they then had to open one million accounts which required 10 tones of gold to satisfy the demand. He then ponders the outcome if this idea were to spread throughout China and further afield, say to India. What is the effect if we get an extension to QE2 or even a QE3? The current meeting at Davos were the possibility of a 100 trillion dollar fund is being considered. The UK, where economic confidence remains rather weak. (The Bank of England supremo, Mervyn King talks of the UK being in a depression.) Over in the United States the social security department has announced a 45 billion dollar overspend for 2011.

There appears to no hiding place as the currencies via for pole position in a race to the bottom. Rallies are no longer based on an individual currencies merits, but rather just how slowly the other fiat currencies are falling apart.

In India,China, Asia and many other countries throughout the world the concept of receiving money for doing nothing is laughable. For the western world to remain remotely competitive, welfare, social security, bailouts, handouts, freebie benefits are existing on borrowed time, you have been warned. Securing your own financial independence has now reached a critical stage, think, plan and implement new ways to supplement your income.





Now, just what was the reason for gold prices taking a dip recently, we take a quick look at a possible scenario as proffered by Zerohedge from an original piece by the WSJ, as below:

Over the past several weeks there had been rumors that the reason for the precipitous drop in gold was primarily driven by a hedge fund liquidating its futures positions. This has now been confirmed: "Yeah, that was just me liquidating my spread position," Mr. Daniel Shak, [of SHK Asset Management] 51 years old, said in an interview. "I had a significant, fully margined position. The dollar amount of the gold liquidation was very small, it was just a lot of contracts." Of course in the extremely jittery gold market, the kind of persistent marginal gross selling of contracts was all that was needed to spook weak hands into a consistent dump of the precious metal, which as we pointed out was beyond overdone. Judging by this morning's jump in the PM complex, SHK's liquidation is now not only over but about to promptly reverse as daytrading momos realize they were duped by one single guy. Look for gold to resume its upward advance as investors realize that the gold dump was nothing more than an ongoing futures position liquidation.

A huge trade by a tiny hedge fund has sent shudders through the gold market.

Thanks to the nature of futures trading, Daniel Shak's $10 million hedge fund held gold contracts valued at more than $850 million, more than 10% of the main U.S. futures market, and the equivalent of South Africa's annual gold production.

It just goes to show how sensitive this market can be when the above action has such an impact. No doubt there are other contributing factors that also lent weight to the movement in gold prices but this will suffice for now.


Finally, you might want to catch the UKIP leader Nigel Farage - interviewed about the EURO on Russia Today, where he expresses his views regarding the lack of compatibility of some of the member states with the one size fits all currency. Italy could be the next candidate for a bailout, despite the soothing words from the Eurocrats.

Nigel Farage 31 Jan 2011.JPG

Please click here to watch the clip.

For disclosure purposes our political support lies with UKIP, even though they have yet to get one candidate elected to the British Parliament.

And finally, yes we are almost done, for New Zealand readers, the movie Inside Job is being released across the country at selected cinemas, so take your partner for a surprise evening out, otherwise you will have no-one to explain it to you later.

Have a good un.




............................................................................

Over in the options trading pit we have just closed 3 more winning trades, so we now have 62 winners out of 64 trades, or a 96.87% success rate.


If you have any questions regarding these trades please address them through their site where they will be handled quickly and I hope efficiently.


sk chart Jan 2011.JPG


The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today, before we decide to cap membership.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

Thursday
Jan272011

Before You Shoot Your Next Arrow

Zen Archer.JPG


By David Galland, Managing Director, Casey Research

While I have read certain works on the life and ponderings of Buddha, I claim no deep knowledge of his philosophy. Note I didn’t use the word “religion,” because Buddha himself claimed no supernatural powers and even begged his followers not to deify him after his death. Hardly had he drawn his last breath, however, when the deification began – though most Buddhists won’t claim it as such.

Even so, there are Buddhist practices I think useful in this hectic world of ours – practices that don’t involve dressing in robes and refusing to swat flies. For example, I rather like to meditate from time to time. Nothing too involved, just ten or fifteen minutes of quiet deep breathing as part of calming the mind and all that.

I also find a lot of wisdom in the training of the Zen archers, who seek to clear their minds of all internal dialogue not related to the simple process of releasing the arrow at the target. Simply, they strive for only one goal – perfect form. Thus they clear their minds of all others, even those that might be considered complementary to the task at hand – for example, getting a pat on the back from the instructor, or plopping the arrow closer to the bull’s-eye than the next person down the line.
 
Of course, as humans are wont to do, Buddha’s successors have taken the man’s simple approach to life and wrapped it in gaudy and self-important rituals, in the process turning it into a livelihood for predatory priests. But that’s another story and shouldn’t take away from Buddha’s core beliefs.  

Especially the bit about simplifying and focusing your goals. That idea has always seemed to me to have relevance for a wide range of pursuits, from the putting green to the stock market.

Based on my many interactions with investors over the years, I have concluded that there are really just two sorts. There are those that have clear goals, and those who don’t. Those who do make the money. Those who don’t provide the money to those who do (investing in a zero-sum game – for every winner, there is a loser).

This thought was made more tangible to me in recent days, based on a personal experience. Long story short, I had invested in a pre-public company years ago. It wasn’t a big investment, and it took longer than anticipated to ultimately go public. When it did, it had a fairly good run, but as the reason I bought it in the first place was still ahead of it, I hung on. Well, as is so often the case, the company’s missed a hurdle and came tumbling back to earth. With the stock trading hardly at all, and for just a few pennies a share.

Lo and behold, the company’s management reinvented the company as targeting rare earths and managed to acquire a project of merit. The investment that I had written off as worthless soared on high volume.

Now, if there is one thing that anyone with experience in the small-cap resource stocks will tell you, is that the time to sell is when there is someone to sell to – because absent volume, getting out of a decent-sized position is not easy.

So, there was the dilemma – hold on in the hope that the surprise home run turns into the sort you bestow on your grandchildren? Or secure your gains by selling and moving on?

At the point of such a decision, the mind gets very un-Zen-like. Visions of untold riches dance in the head, followed by fits of fretting as the stock pulls back. Next thing you know, you are tossing and turning in the night, conflicting thoughts chasing each other around like cats.

In the final analysis, I recalled the old adage that pigs get fat but hogs get slaughtered. I sold enough to take my initial investment off the table, and a healthy profit – holding on to a modest position to enjoy any further upside. And, having done so, the internal dialogue came to an abrupt halt.

Now, the funny thing is that after a brief pause, the company is again moving up – but I have no intention of second guessing my decision to sell when I did. On a percentage basis, my returns were in the moon shot category – the sort that only the junior resource sector can produce – so it would be just plain churlish to gripe.

More to the point, the stock could just as easily have peaked and once again collapsed, in which case I would really feel like a dolt had I not taken an exit.

All of which delivers me to the point. Namely that it is very important, especially for the resource investors among you, that you actually have a firm goal in mind for each investment you make – and that you remain single-mindedly focused on that goal.

Do you own gold or silver as a protection against inflation? If so, then why even bother checking the price on a daily basis, let alone every few minutes?

Or do you own it as a speculation? If so, what is your specific profit target? Don’t have one? If not, then it seems to me a bit like setting off on a journey without knowing where you want to actually go.

Do you know exactly why you own the resource stocks you do? What hurdle are you betting they will clear next, and by doing so ratchet the price higher? Is your goal to get your original investment off the table on a double? Or do you have a specific price target in mind, at which point you will close the position entirely and move on to more fertile ground?

This idea of keeping an easily understood, single goal in mind for each of your investments is hugely important, because without it you are going to be susceptible to the fears, fantasies, and folly that ultimately cause investors to end up on the losing side of the equation… by selling good companies on pullbacks, holding on to positions well past the point of reasonableness or chasing stocks after they’ve spiked.

Probably the most successful investor I know – I won’t say his name, because he might not like my pointing out that he has tucked away close to a billion dollars, thanks primarily through investments in the resource sector – has a well-deserved reputation for selling too early.

While it is remarkable that he has made so much money in this sector, what is more remarkable is how he did it. Which I would sum up as follows…
 
First and foremost, he follows a process – almost mechanically.
He buys low, with a specific objective in mind. Both in terms of hurdles he expects the company to clear, but also in terms of the returns he expects to get on his investment.
When his return objectives are met, he sells. Maybe enough to get his original investment off the table, maybe the entire position – depending on his reassessment of the company’s potential to clear the next hurdle. But he always sells at least enough to get his original investment off the table, no matter how much exciting news there is and how much optimism others may feel about the stock.
He only buys on his own terms. If invited to participate in a private placement, he will do so only if he is completely comfortable with the terms. If the company is offering a warrant with a one-year expiration term and he thinks the development work will take two years, he’ll ask for a two-year warrant. If the company won’t budge, he moves on, confident in the knowledge that there will always be another deal coming down the pike.
He’s careful with his money. As he likes to say, if you spend your dollars, they can’t mate and make you more dollars.
He’s not afraid to concentrate investments, but again on his terms, and only when he has done the due diligence needed to be confident that the potential reward warrants the level of risk involved.

If those principles and practices sound simple, it is because they are. But following that process is also incredibly effective.

Interestingly, this process rhymes with the finely honed investment methodologies of the late great Benjamin Graham, author of The Intelligent Investor and mentor to a small cadre of close associates that included Warren Buffett, Jean-Marie Eveillard, William Ruane and Irving Kahn – all of whom used what they learned from Graham to become billionaires, or close to it.

Let that sink in for a moment. One man, Graham, developed a methodology for investing – and it’s actually a pretty simple methodology – that the people working with him were able to duplicate in building their own fortunes. Following a proven process works.

And while Graham wouldn’t have touched a junior resource stock with a twenty-foot pole – his methodology was focused on balance sheet analysis, not a strong point for junior exploration stocks that have no E in their P/E – the principle of following a specific process that mitigates the odds of a loss holds up well. The proof in the pudding is the success of my aforementioned friend, and many others I know who are similarly disciplined.

With all of that said, do you know why you own what you own? Do you have a clear goal in mind for each of your positions? Do you know how much of your portfolio is allocated to speculative resource plays, and are you comfortable with the idea that those stocks have historically suffered extreme sell-offs?

Warren Buffett, whose investment acumen is hard to argue with, likes to quip that the two most important rules for investment success are, Rule #1 – Never lose money. Rule #2 – Never forget rule No. 1.

While it is almost impossible not to lose money along the way while investing in resource shares, it is equally true that once you have scraped your original investment off the table, it is impossible to lose money. Sure, you can give back your profits – but you can’t lose money.

 All of which is, I think, worth reflecting on as you aim your next arrow.

[And if you aim your arrows just right, small-cap resource stocks can give you great leverage to the underlying commodities – such as the precious metals. Louis James, senior editor of Casey’s International Speculator, is a master at market archery, beating the S&P 500 by an incredible 8.4x in 2010. Subscribe today and get $300 off the retail price… plus one full year of Casey’s Energy Report FREE. But hurry, this offer ends soon. More here.]




..............................................................................

Over in the options trading pit we have just closed 3 more winning trades, so we now have 62 winners out of 64 trades, or a 96.87% success rate.


If you have any questions regarding these trades please address them through their site where they will be handled quickly and I hope efficiently.


sk chart Jan 2011.JPG


The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today, before we decide to cap membership.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

Wednesday
Jan262011

John Embry on that old relic Gold

John Embry.JPG

Just in case you missed this article, as we know that are all busy with your day jobs etc, but one of the sites we ask you to visit from time to time is the jsmineset hosted by Jim Sinclair. If you scroll down to an article called


A Decade Of Gaining 18% A Year — "Some Relic"

It appeared in the Investor's Digest of Canada, the author is John Embry and well worth the read, here are a just a few snippets to wet your appetite:

The lows of this manufactured correction will be the lowest prices we will see in 2011; take advantage of this opportunity




Amongst the drivel included were

1.) The mistaken idea that jewelry demand is at all relevant when gold is re-establishing itself in its historical role as money.

2.) The misguided suggestion that gold supply is going to rise because of large increases in mine production.

3.) The old canard that central banks stand ready to flood the market with their vast re-serves (we’ve already seen that act, it’s over).

4.) The popularity of gold ETFs which could lead to massive selling if gold enthusiasm waned (I wouldn’t worry about that given the amount of paper gold that is in these vehicles).

5.) The under performance of gold stocks in relation to bullion (only true if you confine your analysis to the seniors) indicating that investors questioned the sustainability of the gold bull market.


“Gold is money. Everything else is credit.”
J.P. Morgan

..............................................................................

Over in the options trading pit we have just closed 3 more winning trades, so we now have 62 winners out of 64 trades, or a 96.87% success rate.


If you have any questions regarding these trades please address them through their site where they will be handled quickly and I hope efficiently.


sk chart Jan 2011.JPG


The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today, before we decide to cap membership.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

Tuesday
Jan252011

Inverse Relativity has deserted us, for now

USD Gold Silver Moving in unison 26 Jan 2011.JPG




We can vaguely detect from the above chart that the USD, Gold and Silver have been moving in unison over last three months. Instead of continuing with their inverse relationship they would appear to have adopted a strategy on hand holding over recently. In November all three were more less rising, followed by December when consolidation was the order of the day and now into January were all three have headed south.



The next chart shows how volatile the USD has been as it continues to oscillate wildly as each new event, such as the Euro strengthening, a money printing scare, a negative comment from someone perceived to be knowledgeable, etc, has a knock on effect. The effect works both ways with the dollar moving up for short stints and then back again. At this point the dollar is looking oversold and as has happened in the past it can stage a mini rally just when it appears to be at deaths door.

USD Chart 26 Jan 2011.JPG

The question is will gold and silver prices rally with it or will they remain in their own mini down trend. They have both had a good run and investors are taking profits and moving to the sidelines. Also add in that it is expiry week for options on the COMEX, so lower metals prices will see a lot of Call Options expire worthless. After that little event we have the upcoming FOMC meeting, where the rock stars of the administration meet for two days to deliberate and prepare their own monumental summary of the economic health of America. We expect the order of the day to be one of no change and would be stunned if rates were to rise at what is considered to be a fragile phase of the recovery. Assuming that you believe that the recovery is underway, we think not and wonder just what happened to all the talk of green shoots etc. This is a very tough time for the United states and will remain so for at least the near future.

When these two events have passed us by we will survey the landscape once again before recommending any trades. However, if you cast your mind back a few months the technical indicators of your favourite stocks were hard up against their own respective ceilings and during discourse with fellow colleagues you would have wished that you had acquired a few more of their shares. Well, that buying opportunity is quickly approaching, in fact it could be here right now. Pull up a chart of the producer that you are interested in and note just where the RSI is sitting, most are around the '30' level which suggests that the stock is oversold and should be bought. After all this is a bull market and at the moment it remains intact, so these opportunities should be grabbed with both hands. You don't need to go 'all in' but you could acquire a few now and maybe a few more a little further down the line. If you believe, as we do, that the year will end with much higher silver and gold prices then a small investment now could look simply sparkling come New Years Eve.


...............................................................................

Over in the options trading pit we have just closed 3 more winning trades, so we now have 62 winners out of 64 trades, or a 96.87% success rate.


If you have any questions regarding these trades please address them through their site where they will be handled quickly and I hope efficiently.


sk chart Jan 2011.JPG


The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today, before we decide to cap membership.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

Tuesday
Jan252011

State of Denial

casey 26 Jan 2011.JPG


By David Galland, Managing Director, Casey Research

Does the price action of gold of late make you scratch your head, falling as it has from its recent high of $1,420 to $1,359 as I write? Hard not to make one wonder, considering the nature of so much recent breaking news…
Consumer prices in December exceeded forecasts, up 0.5%, with core inflation up 1%.
 
Producer prices rose 1.1% in December.
 
China’s inflation, at over 5%, is beginning to cause problems.
 
Import prices into the U.S. are on the rise.
 
The European Central Bank is now warning of inflation, and interest rates there continue to rise.
 
Back in the U.S., the rise in interest rates is becoming persistent, with 10-year Treasury rates moving from 2.57% in November to 3.31% today – something that Bernanke is trying to spin as a positive, but given the amount of debt sloshing about, it is very much not.
 
Oil – the stuff that makes the world go ‘round – appears stuck at around $90, no matter whether the news is good, or bad.
 
The U.S. government is trying to chase foreign depositors away from the dollar by broadcasting that the IRS wants to begin looking in to all foreign-held U.S. bank accounts. Trying to keep ahead of the curve, JP Morgan, among others, has told foreign account holders they have to close their accounts by March 31. The harder it becomes to do business with the U.S., the weaker the demand for dollars. The weaker the demand for the dollar, the weaker the dollar will be… interest rates will have to rise to offset the fall, and import prices will go up even further.
 
Following that thread, China and Russia have recently struck a deal to bypass the U.S. dollar in bilateral trade – the latest and most substantial act of foreign nations taking active measures to ditch the dollar.
 
Food prices are soaring – with corn contracts up over 90% from June lows, and wheat up 80%.
 

 

And, yet, gold goes down.

Doesn’t make much sense, does it?

In my firmly held opinion, what we’re seeing is nothing more than the consequences of Mr. Market’s confusion – about gold, about the dollar, about Europe, about Asia… and especially about the potential consequences of Uncle Sam’s massive meddling in all manner of markets. Thus Mr. Market desperately looks to the equally confused punditry for an explanation, and gets fed a lot of nonsense and hoo ha about “risk on” and “risk off,” and the benefits of the governments “quantitative easing,” and so on.

Don’t let yourself be confused in the slightest about what’s going on, and pay no attention to the punditry. The analysis they do is garden variety at best, and they have it dead wrong… just as they almost always do.

To make that point, I’ll share a quote from the excellent book When Money Dies, referring to the Vossische Zietung, one of Germany’s leading financial newspapers back in the 1920s as the inflation began to spin dangerously out of control:

The Chancellor would accept no connection between printing money and its depreciation. Indeed, it remained largely unrecognized in Cabinet, bank, parliament or press. The Vossische Zietung of August 16 declared that…

… the opinion that the flood of paper is the real origin of the depreciation is not only wrong but dangerously wrong… Both private and public statistics have long shown that for the last two years the interior depreciation of the mark is due to the depreciation of the rate of exchange… it should be remembered today that our paper circulation, although it shows on paper a terrifying array of millards, is really not excessively high… we have no ‘dangerous flood of paper’…

Another particularly telling quote from around the same time was from the Berliner Borsen Courier:

It has long been realized that the printing of notes is the result not the cause of depreciation, and that the amount of currency, as it increases in bulk, is really decreasing in value. A point has now been reached where the lack of money has a worse effect than the depreciation itself… Even should the quantity of paper money be three times its present size, it would constitute no real obstacle to stabilization.

Until such a time, therefore, let us print notes!

At the time of that quote, the money printing in Germany had pushed the mark from 5 to the dollar to over 1800. Yet, almost no one in a position of influence was connecting the dots.

That’s much as is the case today. Until there has been a fundamental shift in U.S. fiscal and monetary policy, I would like to strongly suggest you trust your own instincts about the relative value of holding gold versus dollars – or any of the fiat currencies, for that matter – and set your sails accordingly.

Or, you can listen to Bernanke, who said yesterday:

“Interest rates are higher, but I think that’s mostly because the news is better. It’s responding to a stronger economy and better expectations. So I think that the policy has helped.”

And, don’t forget: historically interest rates, gold, and inflation all rise together. Not until we see positive real interest rates – interest rates that clearly outstrip the depreciation of the currency – will gold stop being a good investment. We are nowhere near that point.
----

[The case for gold is getting stronger by the day – if you don’t have any yet, buy some today. For answers on where to get it, where to store it, and when to sell it, read BIG GOLD, the go-to advisory for gold, silver, and large-cap precious metals stocks. Subscribe today for only $79 per year, and you’ll also receive 12 FREE monthly issues of Casey’s Energy Opportunities. Details here.]








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Over in the options trading pit we have just closed 3 more winning trades, so we now have 62 winners out of 64 trades, or a 96.87% success rate.


If you have any questions regarding these trades please address them through their site where they will be handled quickly and I hope efficiently.


sk chart Jan 2011.JPG


The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today, before we decide to cap membership.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

Monday
Jan242011

Chinese Gold and Silver demand has been phenomenal

Panda Gold 25 Jan 2011.JPG

“Chinese gold and silver demand has been phenomenal ahead of the New Year holiday,”

said Adrian Ash, head of research at BullionVault.com, a leading online service for gold bullion trading and ownership, citing comments from dealers among others.

Shipments have been “heavy” and they began very early, in mid-December, he said.

This is an excerpt from an article by Myra P. Saefong, of MarketWatch in
San Fransisco (MarketWatch) — Gold prices have lost around $75 an ounce this year but analysts are unfazed by the drop, with many betting the slump in prices will soon be cut short as the Chinese New Year feeds an increase in global demand that’s destined to last.

“We are entering a period of strong seasonal growth in gold demand and Chinese New Year is a big part of that,”

said Brien Lundin, editor of Gold Newsletter. “Physical demand has been supporting the gold prices on the downside even during the typical slack periods, and I expect that upcoming increase in demand will also support the price, but at higher levels.”

The Chinese New Year, also known as Lunar New Year, begins on Feb. 3 this year and ends with the Lantern Festival 15 days later.

“Chinese New Year is the time of year when the Chinese share gifts, usually money in little red envelopes,” said Mark Leibovit, chief market strategist for VRTrader.com. “Perhaps the little red envelopes will be a bit heavier this year.”

But the recent spike in China’s demand for gold goes well beyond providing gifts to celebrate the new year.

“It’s really simple,” said Cary Pinkowski, chief executive officer of Astur Gold,

“China banned gold ownership for most of the 20th century and that’s over. China has a savings rate of more than 30% … [and] has an official inflation rate of 10%.”

Well put!

To read this article in full please click this link.






................................................................................

Over in the options trading pit we have just closed 3 more winning trades, so we now have 62 winners out of 64 trades, or a 96.87% success rate.


If you have any questions regarding these trades please address them through their site where they will be handled quickly and I hope efficiently.


sk chart Jan 2011.JPG


The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today, before we decide to cap membership.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

Sunday
Jan232011

Agnico-Eagle Mines Limited: Buy, Hold, Sell

AEM Chart 24 jan 2011.JPG


Agnico has dropped around $20.00/oz since December and could be oversold at this point. The technical indicators suggest that AEM is now oversold, also note the widening gap between gold prices and the stock price. So we take a quick look at it to try and ascertain whether this stock is a Buy, a Hold or a Sell.

We do have to say at the outset that we do own this stock and it has been one of our favorites especially as we benefited from it the early stages of this bull market when the stocks clearly demonstrated good leverage to gold prices. However, our opinions are also clouded by the stocks inability to keep pace with gold prices over the last few years as we have brought to your attention from time to time. So we have one positive influence in terms of being fond of Agnico-Eagle and one negative influence in that the leverage to gold appears to have deserted the stocks in general and Agnico-Eagle is no exception.

Agnico's goal is to increase annual gold production to between 1.0 million and 1.1 million ounces in 2010 by building and exploring their own mines. Five internal expansions are expected to contribute to continued growth post-2010. They aim to grow gold mineral reserves to between 20 million and 21 million ounces by year-end 2010 through aggressive exploration on our 100%-owned properties in Canada (Ontario, Quebec, the Yukon and Nunavut), the United States (Nevada), Finland and Mexico (Chihuahua). Watch out for Fourth quarter 2010 results on Wednesday, February 16, 2011, after normal trading hours.

Agnico-Eagle is a Canadian-based gold producer with operations in Canada, Finland and Mexico, and exploration and development activities in Canada, Finland, Mexico and the U.S. Our LaRonde mine is Canada’s largest operating gold mine in terms of reserves. Agnico-Eagle has full exposure to higher gold prices consistent with its policy of no-forward gold sales, it does not hedge production. It has paid a cash dividend for 28 consecutive years.

Agnico-Eagle Mines Limited trades on the NYSE under the ticker symbol of AEM and on the Toronto Stock Exchange under the symbol of AEM.TO.

Agnico-Eagle has a market capitalization of $11.47 billion, a 52 week trading range of $49.64 - $88.20, a rather high P/E ratio of 38.43 on volume of 2-5 million shares traded per day.

BUY: For the short term trader or indeed an options trader Agnico looks oversold and a bounce could be on the cards. However, for the long term investor we would need to see a significant turnaround in the HUI and some rapid improvements in this sector before we would become buyers again.

HOLD: Yes, for now at least, as the chart suggests that the stock is oversold and if anything it is more of a buying opportunity, so to sell now might be somewhat of a give away.

SELL: No, not as Agnico is at a low point, better prices lie ahead when gold prices rally and stock moves higher, although we may well sell into such a rally.

With the mining sector being sluggish its hard to see just what the ignition will be for Agnico to be propelled higher and as we have stated in the past this is not 1980 and there are other attractions for the gold bugs investment dollar.

Before throwing the towel in we also need to consider just where our cash can be placed in order to get a better return than that is on offer with this stock. The mantra of the juniors springs to mind, however, if the large caps are not performing and the mid caps are not performing why do we expect investment dollars to buy into the junior story. Its highly speculative with a high percentage of failures so quality selections are vital to success in this area.

Something to sleep on, we would like to be more positive but we do need to see things as they are and not as we would like them to be.
................................................................................

Over in the options trading pit we have just closed 3 more winning trades, so we now have 62 winners out of 64 trades, or a 96.87% success rate.


If you have any questions regarding these trades please address them through their site where they will be handled quickly and I hope efficiently.


sk chart Jan 2011.JPG


The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today, before we decide to cap membership.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

Saturday
Jan222011

As Gold Falters, SK OptionTrader Banks Profits of 13%, 17% and 13%

Despite gold and silver undergoing a sizeable sell off in that past few weeks, our premium options trading service SK OptionTrader has just closed three trades and banked profits of 13%, 17% and 13% on each.

This brings our total number of closed trades to 64, with 62 of those being closed at a profit. Our average return per trade including losses is 42.40%, with our model portfolio being up 135.97% since inception, or an annualised return of 86.45% assuming profits are not reinvested.

SK OptionTrader Acc Profits 220111

With the reinvestment of profits $10,000 invested in accordance with SK OptionTrader signals and our model portfolio would now be worth $31,604.82.

On December 7th 2010 we sold out of all our GLD call option positions.

By mid December 2010, having taken huge profits on call options during the prior few months, (You can see some updates here: SK OptionTrader closes 5 trades for average profit of 94%, Yet More Profits Banked For SK OptionTrader and How have SK OptionTrade Recommendations faired after our Sell Signals) we decided that gold gains would be limited over the Christmas and New Year holiday period.

On the 12th December 2010 we wrote to our subscribers saying:

“... we are wary that we are entering the holiday season soon and trading will likely be thin, with big players not returning to the market until January. A large component of options trading is not only getting the direction of the underlying correct, but also the correctly timing when the move will happen. This is due to the decay of the time premium (Theta) that one is exposed to when purchasing an option... We are however in favor of taking out some bullish credit spread positions, where we would be short Theta, and holding them for a month or so. This allows us to benefit from an upwards or sideways move in gold over the coming weeks, with our position hopefully gaining value each day as the time premium decays, since we are of course short Theta. We are looking at taking these bullish credit spread positions in GLD January-2011 puts with strikes in the $129-$126...”


We then signalled for our subscribers to take a bullish vertical credit spread position on the 13th December, and to take two more on the 16th December. The following summaries how these trades played out:

Bullish Credit Spread - 13th December 2010
Sold GLD Jan 22 '11 $128 Puts for $0.68 and Bought GLD Jan 22 '11 $127 Puts at $0.55.
Both expired worthless on 22nd January 2011
13% Profit in 40 days

Bullish Credit Spread - 16th December 2010
Sold GLD Jan 22 '11 $128 Put @ $0.92 and Bought GLD Jan 22 '11 $127 Put @ $0.75.
Both expired worthless on 22nd January 2011
17% Profit in 37 days

Bullish Credit Spread - 16th December 2010
Sold GLD Jan 22 '11 $127 Put @ $0.73 and Bought GLD Jan 22 '11 $126 Put @ $0.60.
Both expired worthless on 22nd January 2011
13% Profit in 37 days

Essentially what these trades boiled down to is receiving a modest premium if GLD was above $128 on January 22nd, equivalent to a gold price of roughly $1315.

Since we were correct in our prediction, we gained $0.13, $0.17 and $0.13 for every dollar risked in each of the trades, profits of 13%, 17% and 13%.

If our view was incorrect, our losses were limited at $1.00 for every $1.00 risked in the trade, i.e. our losses were limited. So if GLD had been at $125 upon expiration we would have lost our $1.00, but if it was a $100 or $75 then we would have still only lost $1.00.

The reason we liked this type of trade at the time was that we had the view that gold was either going to go sideways, upwards or slightly down, but it would not fall dramatically. Usually such an ambiguous and unsure view cannot be profitable in trading stocks or futures, however with options trades they can be structured to reward the investor for such a view, as they rewarded us and our subscribers who decided to put on similar trades.

Options are one of the few instruments that can be used when one has a non-directional view. Whilst we would all love to be able to pick which way gold or another asset is going to go, the reality is that often we may not have a strong view, if any at all.

If you would like to add this type of versatility to your trading then we recommend that you consider options trading. There are many misconceptions that all options trading involves unlimited risk, but in fact although some positions do expose the holder to unlimited risks, if trades are structured in the right way one can limit the risk in any trade.

At SK OptionTrader we only recommend limited risk strategies, always telling our subscribers the maximum downside in a worst case scenario.

If this sounds like something you are interest in then feel free to check out our full trading record or contact us if you have any questions.

Alternatively you can subscribe below, for just $199 per 6 months or $349 for a year.

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