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Sunday
May222011

Shanghai Gold Exchange Planning to Start ETF

Shanghai Gold Exchange 23 May 2011.JPG

Another gold ETF needing to be fed with copious amounts of physical gold bodes well for the demand side of the gold equation. With $483 million raised in January the Chinese have signaled their support for such a product, so coupled with increasing demand for the metal of Kings, it will be worth watching how this one performs. The rise of the ETF as a investment/trading vehicle has been phenomenal and if the Chinese get the 'bug' then there is telling just how large this ETF could become.


The Shanghai Gold Exchange is planning to start exchange-traded funds, tapping rising demand in China, the biggest investment market for the precious metal.

There are some complexities, as the central bank is in charge of gold management, while we still need to go through the procedures for launching new exchange products,” Wang Zhe, chairman of the bourse, said at a Shanghai forum. There is no timetable and the exchange is working with regulators on the plan, Wang said. China is the world’s largest gold producer and second-largest in overall consumption.

Gold investment demand by China more than doubled in the first quarter, overtaking India to become the largest market for gold coins and bars, the World Gold Council said May 19. Bullion jumped to a record $1,577.57 an ounce this month as investors sought a store of value amid rising inflation and concerns about the strength of the global recovery.

China doesn’t have gold ETFs and investors usually choose to buy physical gold, or invest through contracts traded on the Shanghai Gold Exchange, the Shanghai Futures Exchange or through banks. Lion Fund Management Co. in January said it raised more than 3.2 billion yuan ($483 million) for China’s first gold fund to be invested in overseas exchange-traded products.

Demand Jumps

Investment demand in China jumped 123 percent to 90.9 metric tons in the first three months. Total consumption including jewelry gained 47 percent from a year ago to 233.8 tons, the council said. That still lags behind India’s 291.8 tons. China demand may double before 2020, the council said.

Global investment increased 26 percent to 310.5 tons in the quarter. While bar and coin purchases climbed 52 percent to 366.4 tons, holdings in exchange-traded products backed by the metal declined. ETP assets dropped 69.9 tons from December through March, according to data compiled by Bloomberg, after reaching a record 2,114.6 tons.

Billionaire investor George Soros sold 99 percent of his bullion-backed SPDR Gold Trust assets and all 5 million shares in the iShares Gold Trust in the first quarter, a government filing showed this week. John Paulson, the biggest investor in the SPDR Gold Trust, maintained his positions.



Regardingwww.skoptionstrading.com, we are pleased to report that we closed last week with two more profitable trades. The stats and the charts have been updated accordingly.


Our model portfolio is up 338.11% since inception
An annualized return of 128.07%
Average return per trade of 40.41%
81 closed trades, 78 closed at a profit
Average trade open for 46.27days


sk chart 22 May 2011.JPG



The above progress chart shows our performance when profits are re-invested, 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.

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
May182011

The White House: No Plan ‘B’

Timmy Geithner 19 May 2011.JPG
A tad higher please chaps!

Treasury Secretary Timothy Geithner apparently does not have a plan 'B' should the proposed lifting of the debt ceiling not come to pass. Maybe he is a good poker player, going full tilt for his solution and offering no alternative for consideration. A last minute compromise could be reached whereby both sides give a little, however, if there is no plan 'B' then things could become calamitous.

This piece found on The Huffington Post sums up the situation.






WASHINGTON -- The White House said on Wednesday that there is no “Plan B” if Congress does not vote to increase the debt limit by August.

The debt limit, which is currently set at $14.29 trillion, was reached on Monday, but Treasury Secretary Timothy Geithner told Congress the government can continue to pay its debts until about Aug. 2 by using "extraordinary measures."

If Congress does not raise the debt ceiling by then, there is no plan in place for dealing with the resulting defaults, a senior administration official said in a briefing with reporters.

“There is no alternative to raising the debt limit. It has to be raised,” the official, who spoke to the reporters on background, said. “There’s really no way around it.”

The White House is pushing back against a few Republicans -- including Sen. Pat Toomey (R-Penn.) and Rep. Paul Ryan (R-Wisc.) -- who hinted this week the government could default on its debts for a short time in pursuit of a broader deal to cut the deficit.

Republicans have overall agreed that the debt ceiling needs to be raised but have said they will not vote to raise the ceiling unless it is paired with major spending cuts and long-term debt reduction.

But some fear that talks to reach that deal, which are being facilitated by Vice President Joe Biden, will last beyond the Aug. 2 deadline for increasing the debt limit.

A few Republicans have said extending talks beyond that deadline could be done without serious harm to the markets as long as a deal was eventually reached to raise the debt ceiling. Toomey,speaking on Wednesday at the conservative American Enterprise Institute, pointed to a weekend interview in the Wall Street Journal with investor Stanley Druckenmiller, who said he would accept late payments on U.S. debts if it meant overall progress on the long-term deficit. Sen. Jon Kyl (R-Ariz.), who is representing Senate Republicans in the White House debt limit talks, also referenced the editorial when speaking with reporters on Tuesday.

Ryan made a similar remark Tuesday, telling CNBC the investors he speaks to would be willing to accept late payments “for a day or two or three or four.”

The White House firmly rejected such an idea in the Wednesday briefing, saying even short-term default would harm the government’s credit and its reputation in the markets.

“That’s not a plan; that’s default,” the official said.

As lawmakers continue to push for a deal on the debt, the Treasury will continue to function by taking steps to “buy head room” within the current deficit, said a senior administration official.
Earlier this month, the Treasury stopped providing State and Local Government Series Treasury securities, which help state and local governments to manage their debt.

After reaching the debt limit Monday, the Treasury began using additional measures to avoid default. Geithner declared a “debt issuance suspension period” on Monday to borrow from the Civil Service Retirement and Disability Fund. The fund will be made whole after the debt limit increase is enacted, according to law.

The Treasury will continue some business as usual, including maintaining its auction schedule to issue new bonds.

The administration rejected the idea of selling off assets to buy time for the debt ceiling deal, arguing it would amount to a “fire sale” where assets would likely be sold for less than their true value.

The idea of dumping gold on the market would be extremely damaging,” a senior official said, while another official added that most assets do not have enough value to buy the government much time.

Despite rhetoric over raising the debt ceiling by some lawmakers, Geithner is confident the debt limit will eventually be increased, an official said.

Click here to see the US Debt Clock.


Regarding www.skoptionstrading.com, please note that our winning streak of 59 profitable trades in a row came to an end last week when we closed a trade for a loss of 34%. The stats and the charts have been updated accordingly.


Our model portfolio is up 325.87% with an annualized return of 126.47% and has achieved an average return of 40.99% per trade, 79 closed trades, 76 closed at a profit, or a 96.20% success rate. Average trade open for 46.28days.

sk chart 16 May 2011.JPG


The above progress chart shows our performance when profits are re-invested, 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.

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
May182011

Market Vectors Junior Gold Miners ETF: How Junior?

GDXJ Chart 18 May 2011.JPG


A number of our readers are fans of the junior section of the precious metals mining sector with the Market Vectors Junior Gold Miners ETF (GDXJ) forming part of their investment strategy. The mantra of juniors, juniors, is also alive and well in cyberspace, so we thought that it might be prudent to touch base with this ETF.

We will start with a quick look at the chart where we can see that having dropped below its 200dma GDXJ may be presenting us with a buying opportunity shortly. The technical indicators have been floored, the RSI is currently standing at 32.67 and the MACD and the STO have almost bottomed, suggesting a rally might be on the cards.

Since inception about eighteen months ago this ETF has grown considerably and now has a market capitalization of $1.99 billion. Its 52 week trading range has oscillated between $24.25 - $44.86 on a good trading volume of around 3.0 million shares per day.

What follows is a brief description of the fund and their interpretation of what constitutes, roughly, a junior mining company.


The Junior Gold Miners ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Junior Gold Miners Index.

The Index provides exposure to a global universe of publicly traded small- and medium capitalization companies that generate at least 50% of their revenues from gold and/or silver mining, hold real property that has the potential to produce at least 50% of the company’s revenue from gold or silver mining when developed, or primarily invest in gold or silver. The Fund will normally invest at least 80% of its total assets in companies that are involved in the gold mining industry. As such, the Fund is subject to, among others the risks of investing in international equities and small- and mid-cap mining companies. Many companies may not have begun to generate material revenues and operate at a loss, contributing to greater volatility, lower trading volume and less liquidity than larger companies.

A Dynamic Industry Segment

A dynamic and important subset of the global gold mining industry is a group of companies known as “juniors”. These are small- to medium-size market capitalization companies that are generally actively engaged in the development of new sources of gold either through green fields exploration or the use of new geologic models to prospect for gold in overlooked or abandoned properties. For investors, juniors may offer characteristics similar to an investment in venture capital—early stage, high risk, but with a potential for high growth.

While there is no strict definition of what constitutes a junior, they generally have market capitalization of up to $1.5 billion and/or production levels of less than 300,000 oz/yr. Juniors can be at different stages of development—some operate small-scale mines; some are developing large-scale operations, while others are in the process of defining gold or silver ore bodies through drilling. Many may not even be in the production phase yet. They tend to not have the operating track record of the larger producers and there are often uncertainties surrounding the size and potential of their properties. These features increase the risk associated with these companies and the sensitivity of a junior’s business to gold and equity markets.

We draw your attention to the size of a company they regard as juniors, 'market capitalization of up to $1.5 billion' which appears to us to be rather large for a junior, however, they have made it clear.

So now lets take a look at their list of juniors, as we can see the first four companies all exceeded the $1.5 billion mark and have a market capitalization of over $2.0 billion.

Allied Nevada Gold Corp. 
(Public, AMEX:ANV) 
Mkt cap 2.96B

Alacer Gold Corp 
(Public, TSE:ASR)
Mkt cap 2.27B

Silver Standard Resources Inc. (USA) 
(Public, NASDAQ:SSRI) 
Mkt cap 2.21B

Detour Gold Corporation 
(Public, TSE:DGC) 
Mkt cap 2.33B


We would have expected to see juniors with a much smaller market capitalization than those mentioned above and so we struggle with the concept that this ETF truly represents the junior gold mining sector, but that's just our opinion.

In our search to ascertain just who they have invested in we came across this list on their web site, however it does reference another list which we have placed below the first one. We believe this to be the true list as it has a date on it of 05/16/2011. However, it is a tad irritating that an organization of this size has conflicting data on its web site.

GLDX Table of shares 18 May 2011.JPG

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

GDXJ Detail Table of shares 18 May 2011.JPG

In conclusion, as an investment vehicle for exposure to the junior sector it is not for us at the moment. However, if the investment community perceives this ETF to replicate the junior sector then it could get some real traction once the junior sector takes off. For those who are more cavalier in their approach to investment, there is a fair amount of liquidity in this ETFs options market so a nimble trader should be able to get in and out of positions without too much hassle.

We will observe for now, with the view to snapping up a real bargain on a dip.



Regarding www.skoptionstrading.com, please note that our winning streak of 59 profitable trades in a row came to an end last week when we closed a trade for a loss of 34%. The stats and the charts have been updated accordingly.


Our model portfolio is up 325.87% with an annualized return of 126.47% and has achieved an average return of 40.99% per trade, 79 closed trades, 76 closed at a profit, or a 96.20% success rate. Average trade open for 46.28days.

sk chart 16 May 2011.JPG


The above progress chart shows our performance when profits are re-invested, 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.

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
May172011

Affluence is our Down fall

gold chart 18 May 2011.JPG

Many moons ago during our back packing phase, we were snorkeling off a lovely beach in Bali, Indonesia, when we turned a corner to find ourselves opposite a private beach belonging to a rather posh hotel. The high paying guests were somewhat surprised to see us bobbing around in the surf. There was one particular gent who was all the way up to his ankles in sea water, holding a cigar in one hand and large glass of what looked like whiskey in the other hand. He had neatly combed hair, was the colour of an unwashed milk bottle and rather portly, to be polite. Success in life had brought him to this place, a five star hotel, cigars and whiskey, why, because he could afford it. We observed each other and no doubt we thought the same thing of each other, what a weird way for someone to live.

The point is that the western world managed to get itself into a position where it was fat, happy and affluent and so enjoyed, rightly or wrongly, the excesses that accompanies success. Fast forward many moons and here we are still fat, not so happy, with affluence draining down the gurgler all the way to the eastern world. The policies of easy credit and a 'print and hope' currency have seduced us into a false sense of security, as we can always rely on a financial bailout for the large enterprises and a social security handout for individual households.

This state of semi-sedation and a 'devil may care' attitude is about to hit the wall. The game is up. The future is going to very hard indeed. Every job that you can imagine is now the subject of intense competition from a fitter, faster, cheaper and more determined aggressive competitor. Its not just the activities of the occasional call center that is now being carried out in a foreign land, its everything from major medical operations to the production of high tech gadgetry. As the influence and dominance of the east rises, the importance on the world stage of the western world will decrease.

This decade will see some us become tenants in our own countries with the ownership of companies, utilities and land being transferred to those with the cash. And that's not us, is it?

For an individual, self preservation is now high on the agenda, where possible find other avenues of income to supplement your main wage. Any part time or evening occupation that adds a few more bucks to your income will become more and more important as things unfold.

Commodities have already rocketed and are now in a roller coaster phase, however, the underlying trend is up as the worlds biggest ever industrial revolution continues unabated providing relentless demand. This will inevitably lead to rampant inflation scoring a direct hit to our wallets.

As you are well aware we are seeking refuge in the gold and silver space, however, just about any hard asset that you can trade at a later date will prove to be far more valuable then any paper currency, once disposal goes up a notch and the holders start a fire sale.

As we see it, the short term will be choppy with rallies and sell offs happening at the drop of a hat as investors run from one side of a sinking boat to the other, looking for safety. Come July we will know whether or not there more stimulus is to be injected into the system, which just may help to hold the fort for a little longer. However, by August we will see the continuation of the demise of the dollar with some speed and an upward trend form in gold prices resulting in a run to $2000/oz by the year end.

So, we could have two months or so to formulate a plan and then execute it.

If you have not started down this road then try and set up a monthly purchase plan to acquire both physical gold and silver and take possession. Secondly, look to acquire a few quality producers and finally, if you have the nerves for it, a few well thought out options trades.


The chart above compares gold with both the US Dollar and the Dow Jones Industrial Average and as we can see the gold has outperformed in spectacular fashion. Further more it is screaming a warning message to us all, in that fiat currency and the market in general are not to be trusted. Unless you a super stock picker and managed to identify a few real winners an investment in the stock market has robbed you of your spending power. Holding dollars has also diluted your wealth considerably when you look at what you could purchase with a dollar ten years ago compared with what it will buy nowadays.

We have waited a long time for this situation to develop and we believe that we are at the start of some exponential moves in this sector. There is no time lose, so get into position with some solid holdings before prices run away from us. Avoid the daily chatter that surrounds minor events and focus on the big picture where is the economy is not well and the dollar is heading for oblivion, along with all the other paper that promises to pay the bearer nothing.





Regarding www.skoptionstrading.com, please note that our winning streak of 59 profitable trades in a row came to an end last week when we closed a trade for a loss of 34%. The stats and the charts have been updated accordingly.


Our model portfolio is up 325.87% with an annualized return of 126.47% and has achieved an average return of 40.99% per trade, 79 closed trades, 76 closed at a profit, or a 96.20% success rate. Average trade open for 46.28days.

sk chart 16 May 2011.JPG


The above progress chart shows our performance when profits are re-invested, 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.

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
May152011

Glass Earth Gold Limited: Promising Drill Results

GEL Logo 16 May 2011.JPG

It is often said that the best place to build a gold mine is next to an existing gold mine, which leads us to looking at this countries history of mining. It can be soon ascertained that New Zealand has a rich history in gold mining with the Martha gold mine on its own yielding over 7 million ounces of gold and about 50 million ounces of silver since the 1880s.

GLASS EARTH LIMITED is a gold exploration company in New Zealand. It trades on the New Zealand stock exchange as NZAX: GEL and on the TSX.V as GEL and has just released some promising drill results.

Glass Earth holds the Waihi West exploration permit adjacent to the 10 million ounce Martha Gold Mine. Exploration is being undertaken by Glass Earth’s Joint Venture partner and Martha mine operator, Newmont Waihi Gold, in order to determine the strike extensions of the gold vein systems, which are interpreted as extending into Glass Earth’s permit. Glass Earth and Newmont are also advancing exploration on GEL's prospects in the wider Hauraki the Martha Gold Mine at Waihi Region, also under JV with Newmont.

Here is a snippet from their latest news release.

Simon Henderson, President and CEO commented that

“The success of the 2010 drilling results on holes WKP 24, 25 and 26 demanded further drilling examination. Both Newmont and Glass Earth have been very keen to press forward with additional drilling and we are confident that this exploration phase will provide further substantial insight into the characteristics of WKP West and the overall WKP prospect."


Wellington, New Zealand, Thursday, 12 May 2011
GLASS EARTH GOLD ANNOUNCES SIGNIFICANT HIGH GRADE GOLD
RESULTS FROM ‘WKP-WEST’, WAIHI, NEW ZEALAND.

DDH WKP 27 intersected 1.4 m @ 30.7 g/t Au and 77.7 g/t Ag within
152.4m @ 1.16 g/t Au and 2.22 g/t Ag.


Glass Earth Gold Limited reports completion of a further two drill holes on the WKP West gold – silver project near Waihi, New Zealand.

Results from the first hole (WKP27) are tabled below with the results from diamond drill hole (“DDH”) WKP 28 pending. Drill testing is planned on other targets during the course of 2011 as influenced by successive results (the WKP Gold-Silver Prospect is a joint venture with Newmont Mining - Newmont 65%, Glass Earth 35%).

DDH WKP 27, a two hundred metre step-out southwest confirms the previous significant intersections of gold mineralisation consistently greater than 150m, with narrow high-grade zones in the one ounce to two ounce gold range (see 25th August 2010 news release).

GEL Photo 16 May 2011.JPG



To read the report in full please click here.


Glass Earth Gold Limited a small exploration company with market capitalization of $14.10 million with a 52 week trading range of $0.17 to $0.44, volume is thin at the moment varying between 10,000 to 52,000 shares traded. However, we will see how the market reacts when it opens later today.

GEL Map 16 May 2011.JPG



Regarding www.skoptionstrading.com, please note that our winning streak of 59 profitable trades in a row came to an end last week when we closed a trade for a loss of 34%. The stats and the charts have been updated accordingly.


Our model portfolio is up 325.87% with an annualized return of 126.47% and has achieved an average return of 40.99% per trade, 79 closed trades, 76 closed at a profit, or a 96.20% success rate. Average trade open for 46.28days.

sk chart 16 May 2011.JPG


The above progress chart shows our performance when profits are re-invested, 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.

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
May152011

The Gold-Silver Ratio – Another Look

c1 14 May 2011.JPG

by Andrey Dashkov, Casey International Speculator

The gold-silver ratio (GSR) measures how many ounces of silver one can purchase for an ounce of gold, on a certain date.

Reference to the ratio has a long history. One of the first mentions was that upon the death of Alexander the Great, the ratio was 12.5 to 1. During the Roman Empire, the ratio was set at 12. By the late 19th century, the ratio had risen to 15.

Interestingly, these historical ratios roughly reflect geologists’ estimates that silver is 17 times more abundant than gold in the earth’s crust. This gives many investors a reason to believe that 17 is the natural balance between these elements, and that eventually the GSR will return to it.

Monitoring the GSR is quite popular among gold and silver investors. It seems that whenever it makes a big move, many start drawing conclusions about the direction of the prices of its underlying metals.

Here at Casey Research, we stick to the dictum that the GSR “suggests a lot but proves nothing.” Indeed, the GSR is determined by the price action of gold and silver; the price action of gold and silver is not determined by the GSR. Rather, each metal’s price is influenced by various fundamental factors. What complicates any analysis of interactions between gold and silver prices is that the two metals have different markets, each with peculiar supply and demand structures.

Briefly reviewed, the gold market is characterized by a large above-ground supply as the vast majority of gold ever mined still exists in refined form, and annual mine supply represents only a small fraction of that volume. Demand is mostly for jewelry and investment. Gold is not widely used for industrial purposes.

Silver demand, by contrast, is mainly for industrial fabrication of things like electronics and batteries. The metal is consumed during the process and removed from above-ground stocks. The other major areas of demand are jewelry, investment, photography, coins and household silver, in that order. Supply comes mainly from mining and scrap recycling.

From this picture comes one conclusion: over time, supply and demand for the two metals has been fluctuating in response to industrial and technological advancements, shifts in monetary systems and market turbulence. Today, as investment and jewelry are the primary sources of gold demand and most of the silver goes into industrial and related applications, it is no surprise that the gold-silver ratio is different than the historical average of 17. The above chart shows how the ratio has fluctuated since 1968.



The GSR was extremely volatile over the past five decades and averaged 53.5 from 1968 to April 2011; during the last ten years (since April 2, 2001), the ratio averaged 61.8.

The ratio has been falling for several months, however, as shown on the chart above. Counterintuitively, however, rumors that a low GSR signals undervalued silver started spreading. We say counterintuitively here since it is unclear why a falling GSR should signal undervaluation after silver gained over 80% within a year. Appeals to the mega-long-term GSR of 17 alone do not seem to provide enough basis to think that silver will continue to soar indefinitely.

As of April 1, the GSR stands at 37.7. We, however, do not think that it is going to fall to 20 or 15 from this point: history shows that high volatility is the ratio’s essence. After a plunge, there usually follows a rapid surge. That happened in 1980 when gold reached its inflation-adjusted peak, and in 1987 and 1997. We don’t know how steep the current plunge in the ratio will be, of course, but using history as a guide, we do not expect the ratio to continue its decline for much longer.

Uncertainty about the economic recovery in the Western world and the growth of developing countries can result in slowing industrial output and hence falling demand for silver that would hinder the price. These conditions also create a favorable environment for gold driven by safe-haven demand. In such circumstances, the ratio may climb.

History shows that the GSR tends to rise significantly during a recession and create an interim peak on the way. See the chart below.


c2 14 May 2011.JPG

We believe that the measures taken by the current administration to battle the recession are largely counterproductive, temporary, and will be unable to prevent the onset of another major economic decline. It is difficult to judge when the turmoil might start, but the odds of it happening soon get higher as the levels of government debt increase and the dollar is debased. When push comes to shove, the GSR can react quickly and create a fluctuation of an unpredictable magnitude.

In times of recession, as we discussed above, gold and silver behave in a quite different manner. Have a look at the following charts.

c3 14 May 2011.JPG

c4 14 May 2011.JPG






Note that it is not quite statistically sound to plot a ratio against one of its components, but for the purpose of illustration we find it quite useful.

As you can see, in 1980 gold and silver both peaked on a historically low GSR. This may imply that a low ratio can take place not only when silver appreciates faster than gold (as it did in 2010 and so far in 2011), but also when fundamental and speculative conditions influence both metals. Of course, the 1980 silver peak happened while the infamous Hunt brothers were massively accumulating the metal.

Conventional opinion attributes silver’s rise to the Hunts, but we are skeptical. It cannot be determined to what degree the metal would have otherwise risen absent the Hunts in the market. In any case, attempts to influence markets are nothing new – today, major investment banks are accused of manipulating the silver market by holding huge short positions that cause artificial price suppression.

Returning to the charts and how gold and silver behaved in the last recession, we can see that silver moved counter to the GSR while gold moved in a mixed, sideways pattern. Because of this, many see a lot of upside potential for silver, but we should not forget that silver is the denominator in the ratio. So absent strong fluctuations in gold – and gold was on an ascent since the beginning of 2009 – the GSR would to some extent simply mirror silver price movements.

The silver price was also influenced by hopes that the global economy is reviving and that industrial demand is going to last. In 2010, silver gained more than 80% while gold added less than 30%. The difference resulted in the GSR falling throughout 2010. Will that performance be repeated? We cannot say. Speculators should remember that the GSR is merely a ratio of two prices often driven by different forces. It has limited, if any, predictive power.

With that in mind, we will finish by juxtaposing the ratio against the Toronto Venture Exchange (TSX-V) index, and it reveals an interesting picture: it seems that the TSX-V has been negatively correlated with the ratio for the last ten years. Again, statistically it’s arguable if a ratio should be compared to an index, but looking at various combinations of time series, and the stunning correlation, we couldn’t help ourselves.

c5 14 May 2011.JPG

It would be easy to conclude that there is a strong – and negative – correlation between the index and the ratio. However, this correlation does not provide any sort of guidance on whether the metals themselves look expensive or not, or where mining stocks are headed. An interesting image, that’s all it is.

Conclusion

The gold-silver ratio attracts a lot of attention nowadays, but it is not a reliable tool in an investor’s toolbox, and we don’t think it can predict future price movements. But the reality is that nothing does. Those who look at GSR charts, including ours above, should not forget to analyze all the fundamentals behind the price movements of both gold and silver. We advise you to be extremely cautious and not get caught in the trap of believing that a single number or ratio, or a set of them, can provide you with a crystal ball.


Identifying an opportunity for future profit based on facts and a reasonable amount of risk is another thing. This is what we do day in and day out – just not based on the GSR.
Ed. Note: Since this article was first drafted, there has been a significant correction in gold and silver that has affected the GSR. As of May 12, it stands at 45.8, having increased as predicted in this article.

[Developed by Doug Casey, the “8Ps of Resource Stock Evaluation” – People, Property, Price, Politics, Promotion, Paper, Phinancing, and Push – are the Casey Metals Team’s best tool for discovering small-cap mining companies with outstanding profit potential. And with great success: in 2010, the International Speculator portfolio beat the S&P 500 by an incredible 8.4 times. Read more about the “gold nuggets” Senior Metals Analyst Louis James keeps finding in flyblown corners of the world… and how you can cash in on them.]


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

Regarding www.skoptionstrading.com, please note that our winning streak of 59 profitable trades in a row came to an end this week when we closed a trade for a loss of 34%. We will update the stats and the chart shortly.

Over in the Options pit, our model portfolio has achieved an average return of 41.92% per trade, 78 closed trades, 76 closed at a profit, or a 97.43% success rate. Average trade open for 46.45 days.


sk chart 04 May 2011.JPG




The above progress chart shows our performance when profits are re-invested, 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.

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
May122011

The Fall of the U.S. Empire and the Breakup of the Geopolitical Matrix





Casey Report Interview with Richard Maybury

With everything going on in the world today, we thought it a good time to catch up with the views of longtime friend Richard Maybury, a low-key but highly respected author, lecturer and analyst. In addition to his work consulting with businesses and high net worth individuals on strategic planning, Richard is the editor of the U.S. & World Early Warning Report, a monthly service that helps readers see the world as it is, versus how the media and the officialdom would like you to see it. Richard is widely regarded as one of the finest free-market writers in America today. His articles have appeared in the Wall Street Journal, USA Today and other major publications.

David Galland: You’ve been steadily warning your readers for years about the coming chaos in what you call “Chaostan,” yet another forecast of yours that is coming true today. Before we get to current events, could you define Chaostan for readers who aren’t familiar with it.

Richard Maybury: In Central Asia, the word "stan" means "land of." Therefore Kazakhstan is the land of the Kazakhs, Kurdistan is the land of the Kurds, and so forth. I coined the word Chaostan in 1992, the land of chaos, to refer to the area from the Arctic Ocean to the Indian Ocean and Poland to the Pacific, plus North Africa.

To understand why I call this area Chaostan, you have to first understand the two fundamental laws that make civilization possible. The first being “You should do all you have agreed to do,” which is the basis of contract law. The other is “Do not encroach on other persons or their property,” which is the basis of tort law and some criminal law.  

Where you find these laws most widely obeyed, especially by government, you find the most peace and prosperity and economic advancement, especially peace. In areas where they are less obeyed, you find chaos.

The area that I refer to as Chaostan never developed legal systems based on those two laws, at least not legal systems that the governments feel obligated to follow. I should point out those two fundamental laws provide the foundation for the old British common law, which was the basis of our Declaration of Independence and Constitution – essentially the legal documents that make America what it is or, rather, what it was.

So that's the essential thing, that Chaostan is the primary area that never developed rational legal systems, or at least not rational legal systems that governments are required to obey. As a result, throughout history they have suffered, and will continue to suffer, political, economic and social upheaval… chaos.

DG: Which brings us to the present, with a real flare-up going on in Chaostan. As Doug Casey has often said, "The thing that gets you is the thing you don’t see coming." Other than you and Doug, no one else I’m aware of anticipated the current trouble in places like Tunisia, Egypt and Libya. One day, things are quiet, the next we've got all sorts of major oil-producing countries – countries that people believed would never really change – up for grabs. What are your general thoughts on the situation?

RM: Since you’ve read Early Warning Report for so many years, you know that there is nothing going on today that surprises me or my readers. That's the direction I thought Chaostan would go. I'm just surprised that it took as long to get to this point as it did. In that regard, I have often used a quote from Doug…

DG: "Just because something is inevitable doesn’t make it imminent”?

RM: That too, but I was thinking of this quote to the effect of, "The nasty things that you think are coming always take longer to arrive than you think they will, but once they get here, they make up for their tardiness by being worse than you thought they’d be."

I think that's a fantastic observation, and it sure does apply here. I've always been convinced that this mess was going to happen, but will confess to being amazed that it is all happening at the same time, and that it's occurring in such a short period of time.

DG: What do you attribute the upheaval to?

RM: There are two big things going on: One is the fall of the U.S. Empire, and that is leading to the second, which is the breakup of the geopolitical matrix. In the case of the latter, I am referring to the many relationships the governments of the world have with each other and with their own people.

This matrix of relationships and political structures are called countries, most of which have existed for a long time, but that's breaking up now, in part because, in most cases, the borders between these countries were drawn a long time ago by people who knew nothing about the local populations.

While the breakup is starting in North Africa, I think it's going to spread across most or all of Chaostan. And it will have effects even in North America and South America. While it's almost impossible to predict exactly how, it’s my view the world that we grew up in is going away, and it will be replaced by some new political matrix.

These changes will only be exacerbated by the fact that the U.S. Empire that we grew up with is crumbling very fast. As the U.S. Empire collapses, all sorts of relationships will die, leading to yet more chaos. You can see this with Obama calling up Mubarak and ordering him to resign, so I think chaos is the only word that fits.

As far as I know, nothing on this scale has ever happened before in world history, and for people who don’t understand it and are not paying close attention, it's going to be hell. But for those who do understand it, it's going to be one of the biggest money-making opportunities in all of world history.

I don’t know what to say other than just look out.

DG: We'll get back to the money-making opportunities momentarily. First, however, a bit more on the crumbling U.S. Empire, an assessment we agree with. The administration was clearly caught flat-footed by what happened in Egypt. First it supported Mubarak’s regime and then, as you noted, it flipped and Obama demanded he go. It seems like right now the U.S. government really doesn’t even know whom it should be talking to, let alone supporting, in these various countries. 
This is no small matter seeing that for decades much of U.S. foreign policy has been directed at ensuring a steady supply of oil by creating relationships in the Middle East, including setting up and supporting various despots. With these relationships now at risk, the U.S. government has to be seriously concerned that it will see a steep degradation of its influence in the Middle East. Would you agree?

RM: Yes, I think U.S. government influence in the area is probably almost completely gone. The only real influence they have is within, let's say, a hundred miles of any given aircraft carrier. I don’t think Washington is taken seriously by anybody anymore, except for its military power.
The simple fact is, and you saw this in the Bush administration as well as in the Obama administration, it's clear to everybody that they don’t know what they’re doing. They have absolutely no understanding of the things that they’re meddling in.

I remember watching a television interview with Condoleezza Rice right after 9/11, when she said "Nobody in the White House knew where Afghanistan was." And that after the Twin Towers came down, they all gathered in the Oval Office and had somebody bring in a globe so that they could all find out where Afghanistan was.

DG: Of course the region really only matters to the U.S. because of its oil, and I think right now something like half of Libya's production is off line. Do you see the situation region-wide affecting supplies on a sustained basis?

RM: Let me push back a bit on your comment that "The only reason it's important to the U.S. is because of the oil." I would modify that a little bit by saying, "The only reason the region is important to you and me is because of the oil."

But to the U.S. government, the region is a place they have exerted their power, and that is what drives the U.S. government – a lust for power. You have a whole lot of people who spend their adult lives trying to acquire power, and once they get it, they want to use it on somebody, and one of the groups of people that they have used it on are those in the Mideast.
The American founders understood that. It’s why they created the Constitution as they did, as an attempt to limit the use of power, but the Constitution stops at the border. So U.S. politicians, almost right from the beginning, have gone outside the country to exert their power because it's a whole lot easier to do it in other countries than it is to do it in this country, and we have to keep that in mind.

While the oil is definitely a big factor, more of an excuse, for the U.S. government’s involvement over there, it's the exercise of power that they draw satisfaction from and that's the reason they have meddled in these countries for so many decades.

Now as far as what's going to happen with the oil, my guess is that there will be more uprisings, and Washington will try to establish new relationships with whatever regimes rise up out of that. In the end, as you know, fundamentally whoever owns the oil can't do anything with it except sell it, and so they will sell it and we will buy it.

DG: Might the Chinese, for example, move in there and take these opportunities to redirect more oil in their direction?

RM: Sure, but you’ve got to pay for the cost of the extraction, and there will be all sorts of governments, probably already are, sending agents in there to try to steer things in directions favorable to them, and they will try to use whatever oil they get control of as a weapon against their enemies.

I'm not talking about anything that hasn’t, in essence, been going on for centuries. That's how governments behave. I have no idea how it's going to shake out in the end, other than to say that ultimately whoever owns the stuff is going to sell it to somebody. They may not sell it directly to the United States or to U.S. oil companies, but they’ll sell it somewhere in the world, and that will increase the general world supply, and the U.S. will then buy oil from somebody.
I think that a whole lot of politics will be tangled up in these transactions, but I guess maybe the main factor to keep in mind is how much of the oil infrastructure is going to be destroyed while these governments are maneuvering against each other over there. While it’s too early to say, if a lot of that infrastructure isn't destroyed, I'll be very surprised.

DG: With the U.S.'s long relationship with Israel and support for all sorts of despots in the region, is the guy on the streets in the Middle East anti-American at this point?
RM: I've heard of a few incidents here and there, but the impression I get is that people around the world generally like the individual American, because we are a personality they have never run into before.

In most countries, if you tell an insulting joke about the government, everybody looks over their shoulders to find out if somebody overheard. An American never looks over his shoulder when he tells a political joke, and they find that fascinating. We speak with confidence and openly and about subjects that they will never talk about in public. So they’re captivated with our personalities as individuals, but they really hate and fear our government, just like many Americans do.

To illustrate that point, just think about the sick feeling you get in your gut when you go to your mailbox and find a letter with a return address for the IRS. Now imagine what it's like being, let's say an Iranian, and looking out your kitchen window and seeing an American guided missile cruiser sitting out there in the water.

DG: I remember when I lived in Chile being shocked to see U.S. soldiers jogging in double lines up the roads. This was a regular sight. It doesn’t take much imagination to figure out how people in the U.S. would react if Iraqi troops were a regular sight in their towns.

Back to the question of oil, the big players in the region are Iraq, Iran and Saudi Arabia. Do you think Saudi Arabia, in particular, will be in play before this is over?

RM: They already are in play in the sense that they’re trying to steer events in directions that are favorable to them. Maybe we should explain to the readers where Saudi Arabia came from. This is not a natural country. It is a country created by the government of Britain. Britain went into Arabia and picked the Saudi tribe as the one that ought to run the place as a surrogate of the British government. They supported the Saudi tribe so the Saudi tribe could conquer the other tribes, and that's essentially what Saudi Arabia is today.

It's as if someone went into Texas and picked the Jones family to run Texas and renamed the place Jones Texas. That's what Saudi Arabia is, and the other tribes don’t enjoy being dominated by the Saudi tribe, so there is inherent tension in that country all the time. The way the Saudi tribe tries to avoid violence is by buying off the population. They just keep pumping money into the population in an attempt to keep them fat, dumb and happy, but the population is getting tired of the whole scam, and that ancient hatred of the Saudi tribe is always there, just under the surface. There is a horrible resentment in the population.

When the ocean of oil is poured into the mix, yielding unimaginable riches for the Saudi rulers, it’s a nitro and glycerin combination that people have been writing about for decades. I'm one of them. I'm amazed Saudi Arabia is still there. I thought it would have blown up a long time ago, but it could be the uprisings spreading all across the Islamic world now that light the fuse on their overthrow.

Saudi Arabia is the big prize, and this means a lot of people want it and they’ll be likely to fight over it – and where it is going to go, I don’t know. This may be the greatest level of uncertainty since World War II.

DG: It would be logical that the U.S. military-industrial complex is going to use all this instability as an excuse to rationalize continuing with the huge levels of military spending, which is a big problem in terms of reducing the deficit. Do you see the U.S. military remaining as big as it is, or is there a change coming as the empire continues to dwindle down?

RM: I think there will be some token cuts to the military, but I can't see anything serious because all you need to do to get the American people to support a larger military is to just scare them a little bit. And that's easy to do – in this present situation it is very easy to do.
So I would tend to think that all you’ve got to do is announce that we need more aircraft carrier battle groups, because the oil supply is threatened, and the typical American on the street is going to say fine, build more aircraft carriers.

A point here to keep in mind is that, yes, the U.S. has by far the largest military force in the world, but Washington has taken unto itself the largest military obligation in the world – namely the responsibility of policing the whole planet. There is no other country that thinks it has the obligation to police the earth, so in terms of fire power versus territory that is being controlled, Washington is actually very weak and its enemies know this.

DG: Recently the U.S. Secretary of Defense Gates told cadets at West Point that we may never fight another large ground war. Do you believe that? I mean, if Saudi Arabia gets really unstable, do you think we are going to put boots on the ground there?

RM: Yes, definitely. This idea that you can fight a war without the use of ground forces is ridiculous. It shows a lack of understanding of what government is. A government is an organization that has control over a given piece of territory, and to control it you’ve got to have infantry standing on the ground. The phrase "boots on the ground" is a very good one for that.

The place has to be occupied by soldiers with rifles, and if you don’t have the ability to do that, then you can't control the place. You can just bomb the heck out of it, but eventually you’ve got to put troops on the ground.

DG: Yet in his speech to the cadets, Gates said that wars like Afghanistan are not likely and in fact he would advise against it. I have a copy of the article here, and I quote; "In my opinion, any future defense secretary that advises the president to again send a big American land army into Asia or into the middle of Africa should have his head examined."

RM: What he's saying is absolutely true, that you should not get involved in foreign wars, but I think it's a naïve idea to assume that they won't do it, because after all it's a government. It wants to use its power. It's going to use its power on somebody, and it will get into more wars, because the people who run the government are power seekers and they want to use their power. Until there is an amendment to the Constitution that says the U.S. government can't meddle in other countries, we're going to have wars in other countries.

DG: Speaking of foreign entanglements, Israel has got to be watching all this stuff with great concern.

RM: Yes, if I were the Israelis, I'd be pretty scared, and certainly they are also working secretly to try to steer events in directions favorable to them. I don’t know what to say about it other than the old phrase, "The situation is fluid."

It sure is fluid, no doubt.

DG: Returning just for a moment to your contention that governments need to exercise power. Is this just a psychological aberration amongst power seekers, or is there more to it than that?

RM: I regard it as a mental illness. People such as you and me and our readers are generally wealth seekers. We want to live a prosperous, comfortable life and we seek wealth in order to do that. By contrast, people who rise to the top in government are power seekers. They get their satisfaction from forcing other people to do what they want. They are essentially bullies.
Let's offer a little proof here. Practically every piece of legislation enacted in the last 100 years has involved the use of force on persons who have not harmed anyone. Anybody who wants that privilege has to have something wrong with them, so I think it's a given that when you're dealing with a high-level politician or a high-level bureaucrat, you're dealing with somebody who likes to push other people around, and that's the fundamental factor that the American founders were looking at when they created the Constitution. They understood that political power corrupts the morals and the judgment.

DG: A moment ago, you mentioned that one way the government can get people to go along with its schemes is to scare them, and history supports that this isn’t a new tactic. Yet, a lot of Americans look at 9/11 as proof that Muslim extremists are after us and we have to defend ourselves, and see that as sufficient rationale for the U.S. military to take action in the Middle East. Even from our readers, we hear things like "Kill them all and let God sort them out." How would you respond to that?

RM: I know a lot of people that seem to need somebody to hate, and when the government gives them somebody to hate, they’re grateful. I've known a lot of people like that. They enjoy despising whole classes of people, painting them all with the same brush, even the children.
DG: Yet people would argue that the U.S. government did not give us the Arabs to hate. They blew up the World Trade Center. There is clear evidence that in fact somebody does hate us, and so we should hate them back.

RM: Yes, well, as Ron Paul has pointed out, and I think this is a direct quote from Ron, "They didn’t come over here until we went over there."

DG: And we've been over there an awfully long time at this point.

RM: That's right. You can go back 200 years, if you want, which I do. The original war between the U.S. and Muslims was the Barbary Wars back in the early 1800s, and that was essentially an extension of the Crusades. The Europeans were fighting the Muslims, and the Europeans hoodwinked the American politicians into joining the war on their side.

When you hear the Marine Corps hymn "From the Halls of Montezuma to the Shores of Tripoli," to the shores of Tripoli refers to the Barbary Wars in which the U.S. came into the Crusades against the Muslims on the side of the Europeans.

So you can go back 200 years when the Europeans manipulated us into this thing, or you can count the modern onset as being in the 1940s when Roosevelt made an agreement to support the Saudis. There has never been a case where an Islamic government sent armies into the United States, but the U.S. has done it in the Mideast numerous times.

DG: Speaking of being manipulated, it is always remarkable to me how the British were up to their necks in Israel, as were the French in Vietnam, and presto chango, they’re out of the picture, replaced by the Americans. How we ended up as Israel's number one benefactor is amazing, just as it is amazing to me that we ended up losing 50,000 men in Vietnam after the French left. It makes no sense to me, but I guess it’s to be expected once you start getting drawn into foreign adventures. 

What else are you following for your readers? What sort of themes are you getting into?
RM: In terms of economics, we've been writing about the decline of the dollar for years now. But actually, as of the March issue, I'm making a turn and going back to a much deeper geopolitical orientation, because I think what's going on in the Islamic world now is going to be at least as dominant as the fall of the Soviet Empire was back in the 1990s.

Jim Powell has made an interesting point. He said that it won't be very long and we will all be looking back and referring to life before Tunisia and life after Tunisia, and I think that is true. The Tunisia uprising will be viewed akin to the attack on Pearl Harbor or the assassination of Archduke Ferdinand in 1914 where life was totally different after that incident happened. I think we're in that situation now.

DG: And I take it for granted that you think oil is going a lot higher.

RM: Yes, not that it isn’t going to have corrections along the way, but I've been predicting for a long time we are going to see oil at $300 a barrel. I don’t know when, but I'm sure it's coming.

DG: And gold is a core holding at this point?

RM: Absolutely, gold and silver. I think they still have a long way to go, which is to say the dollar still has a long way to fall.

DG: Any other quick investment ideas that you would share?

RM: I still like Fidelity Select Defense and Aerospace Fund. The symbol is FSDAX. I think the military industries are going to be selling a lot of weapons, and so why not invest in it?
Our newsletter is based on what I regard as the two carved-in-granite long-term economic trends; one of them being the decline of the dollar and the other one being war. I think those are locked in, and so I recommend people buy investments that do well during wartime or during periods of currency debasement, which we have. Those two trends – war and currency debasement – are essentially what Early Warning Report’s whole strategy is at this point. Buy whatever does well during war and currency debasement.

DG: A final question. Do you see the government pulling out of Afghanistan more or less on schedule?

RM: I doubt it, but given how fluid the situation is, who knows? Gates' comment was very revealing. It is amazing he would admit in public that it was a stupid thing to go into Afghanistan. If U.S. officials can divert the public's attention enough with what's going on in North Africa, maybe they can pull it off – maybe they can cut and run, and let the Afghan government fall without the American public noticing the lives that were wasted propping it up.
The one thing I can tell you for sure is that if you want to keep track of what's really going on in the world, you have to watch the aircraft carriers. The U.S. has 10 aircraft carriers – the big super-carriers – and they are always an indication of what Washington is really serious about.
DG: So when you read that a carrier is being moved into a certain area, then that's a tip-off that something’s about to go on?

RM: Yes. The position of carriers is a tip-off. Google “Positions of U.S. Aircraft Carriers.” Secondarily, Washington uses amphibious warfare ships as substitutes for the big carriers, so you want to keep an eye on those as well.

[Every month, The Casey Report dissects current U.S. and geopolitical events, economic and market trends – using in-depth, big-picture analysis to discover the best profit opportunities for investors. Learn all about crisis investing, and how to beat rampant inflation by acting smarter. Free report here.]




We recently reported that www.skoptionstrading.com had closed another two trades for profits of 108.52% and 116.67% respectively, this was followed with two more profitable trades so the chart and stats have been updated accordingly.

Over in the Options pit, our model portfolio has achieved an average return of 41.92% per trade, 78 closed trades, 76 closed at a profit, or a 97.43% success rate. Average trade open for 46.45 days.



sk chart 04 May 2011.JPG




The above progress chart shows our performance when profits are re-invested, 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.

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
May102011

Gold and Merino Wool as seen at a fashion show

Dr Kerstin Lucas models the dress dyed with gold nanoparticles.JPG
Dr Kirsten Lucas Tiffany Kong's Merino Gold design

One of our readers very kindly brought this item to our attention which is a use for gold that we have not seen before, a combination of Merino wool and gold through nanotechnology used as a fabric by fashion designers. The fashion show took place in February this year.

The talents of Victoria University chemists and Massey fashion designers combine to bring you the Merino Gold Fashion Show. Using wool fabric bonded with clusters of gold atoms, students are competing for the opportunity to visit the fashion houses of Italy.



MacDiarmid Institute

The 2011 International Year of Chemistry, in honour of Marie Curie, the first woman Nobel laureate, was launched in style at the Michael Fowler Centre on Wednesday night.

The launch event – a merino gold fashion show – was hosted as part of the MacDiarmid Institute’s international conference in Wellington this week.

A collaboration between MacDiarmid Institute chemists at Victoria University and fashion designers at Massey University resulted in a fashion collection based on the unique properties of pure merino wool coloured by bonded clusters of gold atoms.

The luxury wool has attracted interest and requests for samples from top fashion houses in Europe. The designer of the winning collection, Greer Osborne from New Plymouth, will have the opportunity to travel to the UK and visit and work with a number of leading fashion designers.

The visits have been organised by the British Society of Interior Design and Wools of New Zealand (UK).

The technique for forming and bonding the gold clusters to wool is just one of many applications of nanotechnology – working with material on tiny scales of one billionth of a meter – and illustrates the technical skills and creativity of New Zealand chemists and physicists working in the field. Nanotechnology is a meeting place of chemistry, physics and biology.

Well there we go, another useful application for gold to add to the list.



We recently reported that www.skoptionstrading.com had closed another two trades for profits of 108.52% and 116.67% respectively, this was followed with two more profitable trades so the chart and stats have been updated accordingly.

Over in the Options pit, our model portfolio has achieved an average return of 41.92% per trade, 78 closed trades, 76 closed at a profit, or a 97.43% success rate. Average trade open for 46.45 days.


sk chart 04 May 2011.JPG



The above progress chart shows our performance when profits are re-invested, 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.

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.

And something for the chaps!

Dr John Watt models Kerry Wong’s Merino Gold design.JPG
Dr John Watt models Kerry Wong's Merino Gold design




Tuesday
May102011

A Word on Corrections

By David Galland, Managing Director, Casey Research

David Galland 11 May 2011.JPG



Today I’d like to share a couple of thoughts on the matter of the correction in commodities about which we have been so vocally warning, and which has now occurred.

After having written in early April about the possible market response to the end of QE2, specifically about it knocking the legs out from under the overbought precious metals and other commodities, the metals continued higher, causing some readers to express concern that we had led them astray. And any number of analysts opined that the market had already priced in the end of QE2 and thus, even after Bernanke's press conference, had decided it was go, go, go for higher commodity prices.

Yet, I think it is always a mistake to credit "the market" with any real predictive value.

Reactive, yes. Predictive, no. Benjamin Graham had it right when he first penned the profile of Mr. Market as being a maniac, as likely to overpay for an asset as he is to sell too soon.

Put another way, if Mr. Market were actually in possession of a crystal ball, then gold would already be at $2,000 and silver at $75, and higher – because that's where the underlying fundamentals of the economy will eventually drive them. Just not quite yet.

So, what do I think about the current sell-off? First off, it was way overdue, and anyone who wasn't leveraged to the wrong side of the sell-off and who had built some cash should be thrilled that it has happened.

Silver, in particular, has been hammered – down over 30% at one point. Now that's what I call a proper correction. Is it safe to go back into the water? I have to believe that the speed and depth of the sell-off makes it all the more likely that we'll see a pretty quick bounce back.

While no one can know when, or perhaps because no one can know when (and we still have yet to see the actual economic consequences of the end of QE2), my suggestion would be to start buying in weekly or bi-monthly tranches of somewhere between 25% and 33% of the total cash you intend to reinvest in the metals and related investments. Already, the metals appear to stage something of a comeback, but that doesn't mean it's all blue sky from here.
By buying in tranches, you might not hit the exact bottom – but trying to hit the bottom is a fool's game.

If you didn't raise cash as the metals spiked higher over the month of April, or even paid up for gold, silver etc., don't kick yourself (unless you were leveraged to the upside, in which case I can only empathize and wish you luck). Even if you paid $50 an ounce for your last ounce of silver, you will come out just fine in the end, because the monetary system of the U.S., and the world, is corrupt and degraded beyond redemption. It will falter and likely fail, and in time everyone will be scrambling to pick up their precious metals at substantially higher prices.

We'll have more on this topic, and on what the future holds, in the brand-new edition of The Casey Report, which will be released this week. Renowned financial experts like John Williams of ShadowStats, James G. Rickards, Mike Maloney and others give their take on what to watch for. You can read it fresh off the press with your risk-free 3-month trial, with full money-back guarantee.

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

We recently reported that www.skoptionstrading.com had closed another two trades for profits of 108.52% and 116.67% respectively, this was followed with two more profitable trades so the chart and stats have been updated accordingly.

Over in the Options pit, our model portfolio has achieved an average return of 41.92% per trade, 78 closed trades, 76 closed at a profit, or a 97.43% success rate. Average trade open for 46.45 days.


sk chart 04 May 2011.JPG



The above progress chart shows our performance when profits are re-invested, 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.

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
May092011

The Dead Cat Dollar

USD Chart 10 May 2011.JPG


This is a classic dead cat bounce by the US Dollar as it appears to fight desperately to avoid dropping below the much watched '72' level. We say fight, but the real situation is not a fight at all, its a managed decline by the United States to lower the value of their currency and ultimately inflate away the mountain of debt that it realizes is impossible to ever re-pay.

The difficulty in getting the value down is that just about all of the other major currencies are in the same race and are also hoping to inflate away their debts. The penetration of '72' lies just ahead of us and once a meaningful break through has been achieved, then the fall will be calamitous to say the least, as those who are holding dollars will battle to get through the exit with great haste. However, the 'managed' downward trend will resume shortly. Also of note on the chart above is that after only two days of trading, the dollar rose from an oversold position, where the RSI was sitting at sub '30' just days ago, to stand at 52.18 today. In our humble opinion those who are calling for a dollar bounce of some significance and going to be rather disappointed. The political will to do the hard yards is just nowhere in sight as the pressure mounts to raise the debt ceiling a tad in order to keep things sweet.

It is said that nothing goes down in a straight line and as we can see with the bounce by the USD it is also capable of generating small rallies from time to time, which is quite normal. We can also observe this behavior in the way that silver prices rose dramatically and then corrected severely. Again this correction is normal and short term corrections are par for the course in a bull market.

The main beneficiaries of weaker currencies are both gold and silver, both of which cannot be printed and therefore the supply is limited by the skills of the mining sector to find and mine these precious metals. Now, as a form of exposure to precious metals the mining sector offers the possibility of leverage to the underlying product. So let us take a quick look at the gold bugs index, the HUI, which consists of 14 major gold mining companies which mostly do not forward sell their product and as such offer exposure to metal prices.

HUI Chart 10 May 2011.JPG

Note that stock prices have returned to take tea with the 200dma, a correction that we have seen many times before. This recent pull back in the mining sector has taken around 80 points off the HUI or about 8.5% of its value, which is pretty good haircut. The technical indicators are still oversold, however, they are on the turn, suggesting higher prices ahead. With gold at $1500/oz and silver at $35/oz, the quality miners are in clover, as evidenced by the results which are headlining with record production, record profits, etc. They are operating in the right sector at the right time and as new all time highs are made by both gold and silver we should see this index take off in spectacular fashion. Why it hasn't done so already remains a bit of a puzzle, however, there are other distractions for the investment dollar such as the metal itself, the ETFs, futures trading and options trading. And so the tug of war continues.

One day a government with its head screwed on will turn their backs on the fiat currency system and convert to an asset backed currency whereby its paper is exchangeable for some sort of hard asset. It could be a mixture of gold, silver, oil, uranium, etc, the details are anyone’s guess. However, if the currency is big enough, the Chinese Yuan for example, then the rush would be on for one and all, to trade in that currency. Implausible! Well cast your mind back to the start of the banking crisis, just when all the European banks were trying to hold the line, Ireland stepped up and guaranteed bank deposits. This action saw billions of Euros emigrate to Irish banks in a matter of hours, forcing the rest of the banks to also guarantee their deposits. A case of the tail wagging the dog and China is longer a small time player, it is getting bigger and stronger by the day and they are capable of going it alone. However, as they hold the thick end of three trillion dollars in their reserves, they will no doubt do everything they can to transfer out of dollars and into the hard assets before contemplating such a move.

For now we can only conclude that we will stick with gold, silver, a few quality producers and some well thought out options trades. We will try hard to avoid the blather and the white noise that accompanies every event regardless of its importance or magnitude.

The year will end with much higher gold and silver prices, so will the year after and the year after that, so get into position and hold on tight it will be a white knuckle ride.

RIP: USD.


We recently reported that www.skoptionstrading.com had closed another two trades for profits of 108.52% and 116.67% respectively, this was followed with two more profitable trades so the chart and stats have been updated accordingly.

Over in the Options pit, our model portfolio has achieved an average return of 41.92% per trade, 78 closed trades, 76 closed at a profit, or a 97.43% success rate. Average trade open for 46.45 days.


sk chart 04 May 2011.JPG



The above progress chart shows our performance when profits are re-invested, 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.

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.