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Monday
May032010

Agnico-Eagle Mines Limited: Update 04 May 2010

AEM on BNN 04 May 2010.jpg


Agnico-Eagle Mines Limited (AEM) one of our favourite gold producers has seen its stock price trade in a lacklustre way recently, Sean Boyd, CEO, Agnico-Eagle explains the company's mining projects and future prospects.

The recent blip in the stock price is attributed to the fact that the Agnico have built and commissioned five new mines which has resulted in the capital expenditures of around two billion dollars over the last three years. This expenditure has hit the bottom line significantly, however, it now declines to a fraction of what it was, so hopefully we will see the dividends improve as the profits roll in.

The acquisition of Comaplex should be all done and dusted shortly, enabling the company to concentrate on optimizing their mining operations to once again improve the bottom line and also to further explore and expand their properties. The cash costs are forecast to come in at $400/oz, so we have another reason to smile.

Sean also notes that the EFTs have been outperforming the stocks of late, however, he expects that this situation is about to change in favour of the mining industry. This is something that we have wrestled with for some time as the HUI, for instance has not been offering the returns that we believe are necessary for taking such risks which are inherent in the mining industry.

If you can find the time this clip is worth watching on BNN, please click here.

Sean Boyd AEM 04 May 2010.jpg

Now, turning to our recent options trade on Agnico we made the purchase of the MAY 2010 series Call Options at a strike price of $60.00 on Agnico-Eagle Mines Limited, for which we paid a price of $4.64 per contract. These contracts are currently under water at the moment having closed today with the bid at $3.75 and the ask at $3.85 for a loss of around 19.00%.

We made the purchase on the 11th February 2010 when Agnico-Eagle was trading at around $58.00 area, when we purchased both the stock and the Call Options. The stock has rallied a little and then fell back and rallied again to close at $62.79 today. We should note that these contracts expire on 22nd May 2010, so we really need to dispose of these contracts fairly soon. Today was a disappointment as both silver and gold prices trended up but the stocks did not respond. We will look to sell into the next rise hopefully at small profit, if not then will just have to take it on the chin and sell at a loss.

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 $9.84 billion, a 52 week trading range of $43.29 - $74.00, an EPS of 0.54 and rather high P/E ratio of 116.08.

Over on our sister site, silver-prices.net we have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.




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.


If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.


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.

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
May022010

Greek Austerity for European Aid

Lifesaver 03 May 2010.jpg


The numbers are huge, the lenders are reluctant and the recipients are hostile, just how successful can this proposal be? We turn to the Wall Street Journal for the latest update on the rescue package for Greece:

Euro-zone countries and the International Monetary Fund, seeking to halt a widening European debt crisis that has threatened the stability of the euro, agreed to extend Greece an unprecedented €110 billion ($147 billion) rescue in return for Draconian budget cuts.

Under the three-year agreement announced here late Sunday, Greece would receive €80 billion in loans from other euro-zone members and €30 billion from the IMF. The planned rescue is the largest ever attempted by the IMF and a first for the 16-member euro zone. It still requires final approval from national governments.


So, this package still needs final approval from the individual governments who are expected to front up with the funds, well that could be easier said than done so we will wait and see just what shape the final package takes.

On the other side of this deal are the Greek people who as far as we can ascertain are none to pleased with the proposed austerity package which they will have to live with for years to come.

Greece's major unions, already vocal critics of the IMF, have vowed to take to the streets to protest the austerity measures. "We will start our new struggle with protests on Monday, Tuesday and the strike on Wednesday," said Spyros Papaspyros, president of the public-sector umbrella union ADEDY, referring to a general strike set for Wednesday. "We will fight for as long as it takes against this giant injustice."

However, the current Prime Minister is a supporter of this deal and wants the Greek people to embrace it.

The bailout removes the worry that Greece won't meet its immediate funding needs—€8.5 billion in borrowings due May 19. But it introduces fresh questions, among them whether the country can bear the harsh budget-cutting measures that are the price of the aid.

"We have no other choices and no time," Greek Prime Minister George Papandreou said in a televised speech on Sunday. He vowed that his government won't "allow the country to become bankrupt."

In conclusion the rescue package could be approved by this coming Friday, however, acceptance of it in Greece is another major hurdle to be overcome.

Politicians like it, but they think that big is beautiful and they are not the ones under the gun. We are still of the opinion that Greece should have backed out of the European currency and started again with their own currency, albeit a devalued one.

Watch this space, the fat lady isn't singing yet.

To read the article in full please click here.


Footnote: The US Dollar has opened brightly in Sydney, Australia, this morning and as we write it stands at 82.202, up 0.336 on the US Dollar Index and gold prices were steady at $1178.10/oz.

Got a comment then please add it to this article, all opinions are welcome and

Over on our sister site, silver-prices.net we have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.


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.

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
May012010

The Euro Is Screwed

Gold Prices in EUR oz 02 May 2010.jpg


By Kevin Brekke and David Galland, The Casey Report

On April 22, Eurostat, the statistical arm of the European Union, released figures on EU member states’ government deficits and debt for 2006-2009. The European Commission requires member states to report certain data every April.

The timing of the report’s release could not be more problematic for Greece, which has been in discussions with the IMF and other EU states over possible bailout assistance. In a note to the report, Eurostat expressed reservations about Greece’s accuracy in its numbers from last year, saying:

Eurostat is expressing a reservation on the quality of the data reported by Greece, due to uncertainties on the surplus of social security funds for 2009, on the classification of some public entities and on the recording of off-market swaps. Following completion of the investigations that Eurostat is undertaking on these issues in cooperation with the Greek Statistical Authorities, this could lead to a revision for the year 2009 of the order of 0.3 to 0.5 percentage points of GDP for the deficit and 5 to 7 percentage points of GDP for the debt. [emphasis mine]

If these “reservations” prove correct, it will catapult Greece into the debt-to-GDP leader at 122.1%, leap-frogging Italy, which is currently at 115.8%.

But perhaps most telling is the report’s title, “Euro area and EU27 government deficit at 6.3% and 6.8% of GDP, respectively.” Recall that the EU’s Stability and Growth Pact mandates a budget deficit ceiling of 3.0%, and we see that the 16 euro area members are, in aggregate, in gross violation of the pact. Even more alarming is the rate of change in the aggregate budget deficit figure from 2008 to 2009, growing 230%.

And lastly, the aggregate euro area debt-to-GDP ratio climbed from 66.0% in 2007 to 78.7% in 2009, a stunning rise. If this annual rate of growth continues, the euro area debt-to-GDP ratio will zoom past 100% in two years, a level at which many think it begins to exert significant strain on fiscal budgets and spending.

The report, on the whole, paints a picture of an experiment in currency sharing and cross-border “normalization” of fiscal order that has gone terribly wrong. The old saying that a camel is a horse designed by committee seems to be underway here. It will be amusing to watch into what sort of “animal” the EU morphs in the coming years.

As one would expect on reading news that is less than cheery for the eurozone, the U.S. dollar has been moving up, sending gold lower. So, perversely, you have gold and the euro moving together.

While the current rebound in the dollar may be discomfiting to some gold investors, especially in that gold has been facing headwinds again, in our scenario of a broad-based crisis in the global fiat currencies, the major currencies will come under pressure individually before coming under pressure collectively.

Today, safe-haven seekers reflexively run from the euro to the U.S. dollar, which in turn sends a signal to the trading community to sell gold for no better reason than the historical inverse connection between the dollar and gold. This is only temporary, as you can see in the following chart plotting the euro against gold over the last troubled year.

This is all just part and parcel of the secular trend that will lead to the end of the fiat currency experiment as the world wakes up to the full implications of the institutionalized monetary abuse engendered by a fiat system. As is so clearly evidenced in the drama now playing out in Greece, when a government is forced to solve its debt problem by issuing more debt, the end is nigh.

With the global economy still in the tank, concurrently layering on yet more taxes in order to try and keep the whole mountain of cards from blowing its top like Iceland’s Eyjafjallajökull* volcano will only prove counterproductive in the extreme.

This is no time to be complacent, or cavalier, about your financial affairs. Now is the time to be both cautious and, selectively, opportunistic. Because along with risk, big market moves also bring big opportunities.

And analyzing imminent, big market moves is the forte of David Galland, Doug Casey, and the other editors of The Casey Report. Every month, they investigate economic trends in the making and find the best investment opportunities arising from them. Learn more about their accurate predictions and how you can profit – click here.



Got a comment then please add it to this article, all opinions are welcome and

As a suggestion for those who do want leverage to the precious metals bull, the gold and silver funds together with the careful application of options trades could be a possible solution for you. This way we are exposed to any movement in gold prices which in turn is magnified by the effect of the option. Do remember that loses are also magnified in the same way so its not a strategy for the faint hearted. On the other hand the quality stocks are not performing as anticipated and a non-producing junior stock is a shot in the dark, however, its your money and its your call.


If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.


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.

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.














Friday
Apr302010

Fronteer Developments Group: Sold our Holdings

FRG Chart 01 May 2010.jpg


On Friday we decided to dispose of our position in Fronteer Developments Group (FRG) for an average price of $6.20 per share, taking the cash to sidelines for now. The stock price appears to be running a little ahead of itself at the moment and the divergence between the stock price and the 200dma looks a little too stretched so a breather may follow. We do like this stock very much and hopefully we will be able to re-purchase it at a slightly cheaper price in the not too distant future.

For the record, as stated in our portfolio, Fronteer was originally bought as both a uranium and gold play as FRG owned the lion’s share of Aurora Energy Resources making it a gold/uranium play. On the 24th September 2007 we sold 50% of this stock for an average price of $10.44, banking a profit of 122%. By selling Fronteer now at US$6.20 we are able to lock in a small profit of around 32% with this portion of the purchase as our original purchase was made on the 15 July 2006 at around the $4.70 level, overall Fronteer has been good to us.

Fronteer Development Group Inc., acquired all of the remaining common shares of Aurora Energy Resources Inc. So this investment is well and truly a two pronged attack via both gold and uranium.

We will now place FRG on the Watch List and monitor its progress.

Over on our sister site, silver-prices.net we have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit. We are looking for similar opportunites in the gold space at the moment and will post as soon as we are ready.

Got a comment then please add it to this article, all opinions are welcome and

As a suggestion for those who do want leverage to the precious metals bull, the gold and silver funds together with the careful application of options trades could be a possible solution for you. This way we are exposed to any movement in gold prices which in turn is magnified by the effect of the option. Do remember that loses are also magnified in the same way so its not a strategy for the faint hearted. On the other hand the quality stocks are not performing as anticipated and a non-producing junior stock is a shot in the dark, however, its your money and its your call.


If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.


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.

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
Apr292010

Gold Prices Update 30 April 2010

Bankruptcy 30 April 2010.jpg
Courtesy of www.thepoliticalclass.com


No doubt about it we live in very interesting times as the speed of change does appear to be accelerating right before our very eyes. The European credit based party is coming apart at the seams as Spain gets the thumbs down from the S&P.

The Sydney Morning Herald had this to say:

SPAIN became the third European country in two days to have its bonds downgraded by credit ratings agency Standard & Poor's, as contagion from Greece's debt crisis spread through the euro region.

The risk premium investors demand to hold Spanish bonds surged to the highest in more than a year and the price of insuring Spanish bonds against default reached a record as concerns about Greece's ability to pay its debt spilled over into Spanish and Portuguese markets.

S&P's move on Spain follows downgrades of Portugal and Greece on Tuesday. Greece became the first euro region country rated less than investment grade since the start of the euro.

The growing fear is that the troubles in those two countries - which together compose just 5 per cent of European economic activity - could be a mere sideshow if Spain has difficulty repaying its debt.



We draw your attention to the words a 'mere sideshow' which tells us to head for the bunker or at least to wear a hard hat. The spot light is in the hands of the rating agencies at the moment as the investment community sucks air through its tightly clenched teeth and braces itself for the next bad news hammer to come thundering down. After Spain there is the possibility that Italy could be the one in the firing line and the UK is not looking too clever. Talking of the UK why would any political party want to win the general election in the UK, a poison chalice if ever we saw one. It would appear that the attraction of power is more magnetic than the dangers to ones reputation of taking on such a daunting challenge. Its akin to wanting to be a sea captain on the Titanic, never mind the ship, its the captains cap that counts.

Over in the oil patch WTI crude is trading at $85.32/barrel, the spillage in the Gulf of Mexico now appears to be much larger then first anticipated. Having spent twenty odd years working in the oil space I start to twitch a little when the solution involves burning the oil, lets hope the powers that be can get a grip on this problem and soon.

Fire Fighting the gulf oil slick 30 April 2010.jpg

The latest snippet on this disaster comes from Reuters:

The leak, after a rig leased by BP exploded last week, is spewing five times more oil than previously estimated and heightened fears of severe damage to fisheries, wildlife refuges and tourism in Louisiana, Mississippi, Alabama and Florida.

The U.S. military began mobilizing for a major effort to try to prevent environmental damage to Gulf coast states, notably Louisiana, which is still recovering from the ravages of Hurricane Katrina in 2005.

Louisiana Governor Bobby Jindal warned the slick "threatens the state's natural resources," declared a state of disaster and asked the U.S. Defense Department for funds to deploy up to 6,000 National Guard troops to help clean up.

Janet Neopolitano, head of the Department of Homeland Security, declared it "a spill of national significance," meaning that federal resources from other regions could be used to try to fight it.



The other major player in the global economy is of course the US Dollar, which having jumped on the back of the plight of the Euro is now easing back a tad to trade at 82.04, down from its high of 82.60 yesterday. However, as the rain clouds gather in the euro zone, the dollar, along with gold and silver will be seen as places of safety and a place to run to. Even though the euro story will run and run, sooner or later the spot light will will land on the dollar, which is not a pretty sight. Eventually, the penny will drop and gold prices will push relentlessly higher, a position that we have held since starting this site.

Gold prices 30 April 2010.jpg

A quick look at the above chart captures gold prices on the rise after the close of trading in New York, which hopefully can follow through to the European Stock Exchanges and hit the New York Stock Exchange in a bullish mood.

Finally some good news, over on our sister site, www.silver-prices.net, we have just closed out one our options trades placed on Silver Wheaton with a profit of 106% made in just over two months.

Keep smiling you're a precious metals bug!




Got a comment then please add it to this article, all opinions are welcome and appreciated.


As a suggestion for those who do want leverage to the precious metals bull, the gold and silver funds together with the careful application of options trades could be a possible solution for you. This way we are exposed to any movement in gold prices which in turn is magnified by the effect of the option. Do remember that loses are also magnified in the same way so its not a strategy for the faint hearted. On the other hand the quality stocks are not performing as anticipated and a non-producing junior stock is a shot in the dark, however, its your money and its your call.


If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.


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.

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
Apr282010

Agnico-Eagle Mines Limited Call Options Update 29 April 2010

AEM Chart 29 April 2010.jpg


Just a quick note to update the team on the purchase of the MAY 2010 series Call Options at a strike price of $60.00 on Agnico-Eagle Mines Limited, for which we paid a price of $4.64 per contract. These contracts closed today at $4.89, for a rise of 4.82%.

We made the purchase on the 11th February 2010 when Agnico-Eagle was trading at around $58.00 area. The stock has rallied a little and then fell back and rallied again to close at $63.62 today so these contracts are now ‘in the money’

As we can see from the above chart a 4% jump in the stock price today helped to place are Call Options in positive territory, if gold prices can show a little more strength over the coming two weeks or so, then Agnico should move higher in a convincing fashion with the resulting boost for the Call Options.

The following is snippet from Market Intellisearch

NEW YORK (Market Intellisearch) -- AEM options saw interesting call activity today. A total of 3,997 put and 15,668 call contracts were traded raising a low Put/Call volume alert. Today's traded Put/Call ratio is 0.26. There were 3.92 calls traded for each put contract.

Unusual volume provides reliable clues that the stock is expected to make a move. Investors can use the Put/Call ratio statistics to measure trader sentiment. A high Put/Call ratio suggests that the overall investment sentiment is bearish and that investors expect the underlying stock to decrease in value. Conversely, a low Put/Call ratio implies that the overall investor sentiment is bullish based on the large amount of call options.


These are interesting statistics but do not bet the ranch on any one indicator just add it to the pot of things to think about when evaluating your next move. For instance, it could be argued that the investors who sold the Call Options are as convinced that Agnico is going down as the purchasers are that it is going up, just a thought.

Over on the silver prices site we have two options positions in Silver Wheaton Corporation that are doing very well at the moment and closed today showing paper profits of 88.25% and 81.52% respectively, click here to take a peek.



As a suggestion for those who do want leverage to the precious metals bull, the gold and silver funds together with the careful application of options trades could be a possible solution for you. This way we are exposed to any movement in gold prices which in turn is magnified by the effect of the option. Do remember that loses are also magnified in the same way so its not a strategy for the faint hearted. On the other hand the quality stocks are not performing as anticipated and a non-producing junior stock is a shot in the dark, however, its your money and its your call.

Got a comment then please add it to this article, all opinions are welcome and appreciated.


If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.


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.

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
Apr282010

High River Gold Update 29 April 2010

HRG Logo 31 July 2009.jpg

Chris Charlwood has very kindly sent us this missive updating us on the current state of play over at High River Gold Mines Limited (HRG) which we hope that you find interesting and informative.


The Olma Investment report has been amended with a lower price target of $1.76. Therefore, I am re-sending this communication edited for the change. 
 
HRG’s 2009 audited financial results (linked below) show cash flow from operations of $125M.  This is comprised of approx. $29M in cash flow for Q1, $22M for Q2, $33M for Q3 and $41M for Q4. HRG had EPS of almost $.05 in Q4. The company ended the year with 81.2M in cash and equivalents -  almost matching its $84M of debt. In addition, HRG’s third party investments currently stand at $65.5M.  At the current market cap of $631M, HRG is trading at 3.9 times annualized Q4 cash flow. The Olma Investment report (linked below) shows a new target price of $1.76/share – an upside potential of 120%. Nicolai Zelensky, CEO of the gold division, recently stated in a Bloomberg article that Severstal Gold is worth a similar value to OAO Polymetal. Polymetal’s market cap is $4.2B. Since HRG makes up 57% of total Severstal Gold production, this could suggest that HRG’s value is $2.4B or $2.99/share.
 
Investors are waiting to see if Severstal will buy back Troika’s 150M shares. Severstal had leaked to the media that  they may  buy back these shares at double the investment price or  $.76.  If Severstal Gold does intend to do an IPO, it makes sense for them to move to 70% ownership of HRG by buying these shares back. However, as we have not had any updates, perhaps Troika has decided to hold long term due to HRG's financial success. Either way, investors are eagerly waiting for a statement on this topic as the uncertainty of the potential transfer price could be holding the share price down.
 
Once investors see a strong signal that HRG and Severstal management will promote this story, there should be strong demand for the shares with few sellers. This statement below extracted from the HRG 2009 MD&A is management's most positive statement yet:
 
``Outlook
At the end of the year, the restructuring is mostly complete. The Company has cash in the bank and debt has been reduced to manageable levels, resulting in a stronger balance sheet. After making some necessary and sometimes painful adjustments, management believe that the restructuring was a success and that High River is positioned to benefit in 2010.`` 
 
Good news soon?  
1.    Q1 results should be reported on May 15th with significant cash flow and a net profit.
2.    News on the production tests for the Royal Gold loan should be out soon. If HRG passes the tests, then the third party investments of $65.5M are released as collateral.
3.    The Bissa feasibility study (Burkina Faso) is due prior to June 30th  -  with multi million ounce potential.
 
Disclosure: I own 5.5M shares of HRG
 
HRG’s 2009 Financials:
 http://finance.yahoo.com/news/High-River-Gold-Reports-2009-ccn-330669406.html?x=0&.v=1
 
Olma Invesment Research Report:
http://freepdfhosting.com/c2578fb7a1.pdf
 
Chris Charlwood
Retail Investor
604-718-2668
Rainerc7@gmail.com        
 

Got a comment then please add it to this article, all opinions are welcome and appreciated.



As a suggestion for those who do want leverage to the precious metals bull, the gold and silver funds together with the careful application of options trades could be a possible solution for you. This way we are exposed to any movement in gold prices which in turn is magnified by the effect of the option. Do remember that loses are also magnified in the same way so its not a strategy for the faint hearted. On the other hand the quality stocks are not performing as anticipated and a non-producing junior stock is a shot in the dark, however, its your money and its your call.


If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.


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.

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
Apr272010

Greek debt downgraded to junk

USD Chart 28 April 2010.jpg



Its been coming for some time now and today it arrived, the S&P has downgraded Greek debt to Junk and took Portugal down two notches to A minus. This news, although expected, hit the Euro and promptly sent the dollar and gold prices higher, nice to see them both going up together.

The broader markets also suffered with the DOW losing 213 points, the NASDAQ lost 51 points and the S&P lost 28 points.

As the market came to a close the Kitco Gold Index was showing gold down $15 due to dollar strength but up $33 due to gold buying, pushing gold prices through $1170.00/oz at one time.

A few snippets from the Wall Street Journal summarise the situation as follows:

"The downgrade of both Greek and Portuguese government debt by S&P is another indication that the eurozone's fiscal crisis is continuing to deepen ," Ben May, an economist with Capital Economics in London, said.

"In all, a stark warning that a Greek rescue package, if and when it finally appears, will not be the end of the crisis."

S&P slapped Portugal with a two-notch downgrade to A minus, with the ratings agency saying it expects the nation's government to struggle to stabilise its relatively high debt ratio until 2013.

S&P said that Portugal's deep budget deficit -- at 9.4 per cent of gross domestic product -- and its dependence on scarce foreign financing will make it necessary to introduce more budget cuts.


To read the article in full please click this link.

The Euro is down about 8% so far this year and the way things are shaping up we wouldn't be surprised to see it drop from today's one Euro to 1.32 dollars to around 1.20 dollars as the year unfolds.

Angela Merkel.jpg


The white knight in this pantomime is Angel Merkel, the German Chancellor, however, there are regional elections in Germany on the 9th April 2010 so an expensive bailout for Greece is not flavour of the month for German voters. So until they are out of the way, a certain amount of brinkmanship can be expected. The next date to make a note of is the 19th May 2010 when Greece has a large bond maturity and subsequent roll-over, who will buy it now its been rated as junk. The heat is on the European Union and the IMF to sort through the issues and put together a rescue package that satisfies many requirements and individual players.

As we see it the austerity to be shouldered by the Greeks will be crippling and the alternative of leaving the European Union and starting again with an albeit devalued currency might be a better way to go.

HUI Chart 28 April 2010.jpg

As we can see from the above chart the jump in gold prices hardly effected the stocks, maybe they were held back by the general sell off in the broader markets. This is something that we have eluded to in the past, in that the precious metals stocks are failing to keep pace with the metals progress. We hold the mining stocks in order to gain exposure to the metals on a leveraged basis. Without the leverage there is very little point in holding mining stocks as they carry numerous risks so we really need to see a risk to reward ratio of about 3:1 to make it worth while. We will continue to monitor the investment landscape and hopefully position ourselves correctly in order to maximise our returns in this bull market, the only game in town.



As a suggestion for those who do want leverage to the precious metals bull, the gold and silver funds together with the careful application of options trades could be a possible solution for you. This way we are exposed to any movement in gold prices which in turn is magnified by the effect of the option. Do remember that loses are also magnified in the same way so its not a strategy for the faint hearted. On the other hand the quality stocks are not performing as anticipated and a non-producing junior stock is a shot in the dark, however, its your money and its your call.

Got a comment then please add it to this article, all opinions are welcome and appreciated.


If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.


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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.

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Monday
Apr262010

Gold-prices.biz portfolio Update 27 April 2010

Gold Chart 27 April 2010


Gold prices are currently standing at $1153.90/oz having been through a period of consolidation despite the US Dollar making good ground. We have warned in the past that this is a volatile sector and the first few months of this year have been turbulent, however the trend is still up so we are sticking with it.

As the above chart shows gold prices are making steady progress with both the 50dma and 200dma rising in parallel to add support, with the technical indicators more or less in the neutral zone.

The cast of performers who have featured in our articles over the past few months has included Ben Bernanke, Grandich, Soros, Nadler, Casey, Rule, Embry, Rogers, Yellen, all adding to the rich tapestry of the precious metals landscape. We have also looked at a few companies that we don't have an investment in but are taking an interest in, such as Lihir Gold, Centerra, Oceanagold Corporation, Iamgold Gold Corporation, etc. And, in response to requests from our readership we have started a premium options trading service which has been well received with new investors signing up everyday. The cost for this service is $99.00, however, the last 8 trades have all generated a good profit giving our subscribers reason to smile. The attrition rate, the number of investors who terminate their subscription, is less than 2% which tells us that they are happy to stay with us. Many thanks to those of you who have joined us on this little adventure we really do appreciate your support.


Our portfolio as been updated as follows:

Randgold Resources Limited (GOLD) On the 18th of June 2008 we bought Randgold Resources Limited for $37.65. This stock quickly rallied to $55.00 before being caught in the ensuing sector sell off to trade as low as $27.70, on the 28th May 2009 we sold our entire holding for an average price of $68.69 for a return of 82.44%. This is a quality gold producer so we waited patiently for a suitable entry point at cheaper price levels as per our post “ Randgold: As Good as it gets” when Randgold traded at $58.71 and we wrote the following:

If you made a purchase at this point then well done, however we held out too long and missed the buying opportunity by being too tight, rats! Randgold is now at $81.41.

Agnico Eagle Mines (AEM) we originally paid $30.88 and it now stands at $61.16. On 31st January 2008 we reduced our exposure to this stock and sold about 50% of our holding for an average price of $63.27, locking in a profit of 104.8%. On the 24th July 2008 we bought again at $59.17 doubling our position with the average cost now standing at $45.03. Due to mine commissioning/start up problems the stock was aggressively sold off and closed recently at $57.02, having suffered through dramatic oscillations, however, the old buzzard has started on the road to recovery and last traded at $61.16.

On the 25th January we bought some stock at $53.24 with the intention of making a short term trade, this move is currently up 15% but we had hoped for better. We may have to settle for a small profit shortly, but we are under no pressure to sell and we are expecting gold prices to move to higher ground.

Kinross Gold (KGC) we originally acquired Kinross at $10.08, Kinross then went through a bit of a pull back so we signaled to our readers to “Add To Holdings” at those discounted levels of around $11.66. We also gave another ‘Kinross Gold BUY’ signal when we purchased more of this stock on the 20th August 2007 for $11.48. On 31st January 2008 we reduced our exposure to this stock when we sold about 50% of our holding for an average price of $21.96 locking in a profit of about 93.60%. On the 24th July 2008 we doubled our holding with a purchase at $18.28 giving us a new average purchase price of $14.50. Kinross closed on at $18.13 yesterday, we had expected a better performance.

Silverado Gold Mines (SLGLF) We have a token amount of this stock in the event that one day they do find the elusive mother load but we are not holding our breath. The stock dilution is such that there are now 1.5 billion shares in the company, just a tad too many in our opinion.

Yamana Gold Incorporated (AUY: NYSE) we paid $9.37 on 27 September 2006, and we bought again at $12.89 on the 7th December 2007 and so our average price moved up to $11.13. On 31st January 2008 we reduced our exposure to this stock and sold about 50% of our holding for an average price of $16.50 locking in a profit of about 49.41%. Then on the 3rd April 2008 we bought our Yamana position back at $14.43 in expectation of a bounce, which arrived on the 23rd May 2008, and we sold for $16.00. On the 11th July 2008 we bought again at a price of $14.95 taking our average purchase price up to $13.04. This stock closed at $10.38 yesterday, so we are still looking for a significant increase in performance by Yamana.

High River Gold Mines: (HRG: TSX) We bought this at $2.49 and we increased our position in the company on December 7th, 2007 and we are still holding on to it despite the wrangle of attempted take overs by others. HRG closed at $0.81 yesterday, so we are still making progress, albeit slowly.

Fronteer Developments Group (FRG) Fronteer was originally bought as both a uranium and gold play as FRG owned the lion’s share of Aurora Energy Resources making it a gold/uranium play. On the 24th September 2007 we sold 50% of this stock for an average price of $10.44, banking a profit of 122%. Fronteer is currently trading at US$5.97 so we are now in positive territory with this portion of the purchase as our our original purchase was made on the 15 July 2006 at around the $4.70 level, so we are sitting on a small gain at the moment. Still expect this group to do a lot better and it is getting there slowly.

Fronteer Development Group Inc., acquired all of the remaining common shares of Aurora Energy Resources Inc. So this investment is well and truly a two pronged attack via both gold and uranium.

Options Trades:

We attempted two options trades since September (independent of the our premium options trading service) and they are as follows:

The first trade was with Randgold:

On the 9th February we purchased the June $75.00 Call Options for $5.50 per contract. On the 4th March these contracts were trading at $8.60 per contract for a paper profit of 55% so we placed a stop at $6.50 to protect our position. On the 10th March 2010 the stop was triggered so we were evicted with a small profit.

The second trade was with Agnico-Eagle:

On the 25th January 2010 we purchased the May 2010, $60.00 Call Options and again we were stopped out on the 11th February 2010 for a small profit. So we re-purchased them for $4.64 per contract. We are still holding these contracts and AEM is trading above $60.00 ($61.16 to be precise) however the time element is deteriorating fast so we will need to dispose of them during AEMs next rally.



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

Have a sparkling week and please feel free to share your comments with our readership.

Conventional wisdom suggests having 5% or so of your portfolio in precious metals with some commentators upping this figure to around the 15% mark. We however are far more cavalier in our approach to investment and only invest in the precious metals sector such is our enthusiasm for it. We are currently 85% invested and have about15% in cash.


As a suggestion for those who do want leverage to the precious metals bull, the gold and silver funds together with the careful application of options trades could be a possible solution for you. This way we are exposed to any movement in gold prices which in turn is magnified by the effect of the option. Do remember that loses are also magnified in the same way so its not a strategy for the faint hearted. On the other hand the quality stocks are not performing as anticipated and a non-producing junior stock is a shot in the dark, however, its your money and its your call.

Got a comment then please add it to this article, all opinions are welcome and appreciated.


If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.


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.

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
Apr242010

We’re All Comrades Now

US Government Spending 25 April 2010.jpg


By David Galland, Managing Editor, The Casey Report

To ascertain what move the government is most likely to take next, we must first assess the probabilities.

In order to do that, we start by restating the central question, “How does the U.S. government spend, spend, spend (a minimum of $10 trillion in red ink over the next decade) and yet maintain today’s historically low interest rates?”

Not to get all Freudian here, but we begin to answer that question by understanding that, despite evidence to the contrary, government officials are actually human beings. And so it is that, just as babies reflexively learn that a return trip to mother’s breast results in a reliable reward, politicians reflexively repeat actions that have previously produced the desired results.
So, how does a government spend like a drunken casino jackpot winner, without actually winning the jackpot?

And do so, while simultaneously having interest rates fall to the lowest level in 50 years?

10 Year Treas 25 April 2010.jpg


The answer?

China 21 April 2010.jpg

It was only due to the willingness of our foreign trading partners, most notably China, to recycle the dollars they earned selling us flat-screen televisions and disposable diapers into Treasury instruments that allowed the government to keep rates down while simultaneously spending up a storm. With artificially low rates, the U.S. consumer was able to buy pretty much any shiny thing his or her eyes came to rest on.

Given how well the symbiotic relationship between the U.S. government and its trading partners worked for all parties concerned, it should be no surprise to expect the bureaucrats to sign on for the sequel.

In that regard, I don’t think it’s a coincidence that there has been a sea change in the tenor of the diplomatic exchanges between the Obama administration and the Chinese in recent weeks. One minute it was all bared teeth and cracking knuckles, and the next we hear that the Treasury Department’s semi-annual report on global currencies, which was expected to condemn the Chinese as currency manipulators, may be toned down.

Doing their part to reduce the heat, the Chinese have said they’ll adopt a more flexible currency regime and even follow the U.S. lead on sanctions on Iran. Meanwhile Timmy Geithner has been hopping on a plane for Beijing ahead of a meeting between that country’s president and The One.

It’s enough to make the head spin.

Unless, of course, you take a moment to understand that, as hedge fund manager James Chanos so succinctly put it, that China is on a “treadmill to hell.” (It’s the treadmill right next to the one that the U.S. is now laboring on.)

Or, to quote Ben Franklin’s oft-quoted remark to the continental congress, “We must, indeed, all hang together, or most assuredly we shall all hang separately."

One might imagine that the conversation now going on between Timmy and the Chinese is running along the following lines.

“Okay, what do you guys want?” Timmy asks nervously.

“We need access to U.S. markets, because if we can’t get all these empty factories humming, we’re going to get strung up by our collective heels. “

“And so you want us to do what?”

“For starters, pretty boy, tell your most esteemed party members to stop yapping like diseased dogs about our currency. And stop all this talk about tariffs. We got business to do, and that business is selling your peasants cheap stuff. ”

“We can do that. But in exchange, you have keep showing up at our Treasury auctions. Use that big pile of foreign reserves to buy a ton of Treasuries over the next couple of years. That way we can try to buy our way out of this damn recession while keeping rates low. That works out well for you guys, too, because it will mean that our peasants will still be able to afford the stuff made by your peasants. That’s what we Americans like to call a ‘win-win.’”

“But then we’ll end up with even more Treasury paper. Already it’s getting hard to find a place to stash all of it.  And if you keep cranking the stuff out like a noodle shop, then in time it will be worthless.”

“I hate to break it to you, but it’s already pretty much worthless. We’re so broke that I had to pass on the lobster last night. Your only hope is to keep the shell game going a little longer – you know, buy us some time to work this thing out.“

“Can’t you just invade Canada? They got lots of resources, but they don’t have no nukes. Kind of like Tibet.”

“Let’s just say that all options are on the table. But for now, all that’s required is that you just keep showing up at the Treasury auctions.”

“We are going to want some special considerations, starting with losing that whole currency manipulator thing. “

“Well make it go away. After all, we’re all comrades now.”

And it won’t be only the Chinese that the U.S. will begin rolling over for. The Russians, the oil sheikdoms, the Japanese – all are going to get calls, if they haven’t already. Given that the U.S. currently holds the title “Global Empire,” we have a lot to trade with.

(Of course, if your country doesn’t currently hold that title, or otherwise is lacking in trading chits, then your sovereign debt problems are very likely to go “Greek” in the near future. As the leaders of Thailand and Kyrgyzstan are now finding out, it’s a dog-eat-dog world; get used to it.)

How will we know if this scenario is coming to pass? First and foremost, watch foreign government participation in the U.S. Treasury auctions. If they show up in droves and keep buying at today’s low rates, you know the fix is in. And watch the language as it relates to China’s currency manipulation in the soon-to-be-released Treasury report.

Also, watch the level of China-bashing emanating from Democrats. Today it is high, but I suspect it will begin to moderate following Geithner’s trip, as China puts its financial reserves to the task of saving the U.S. economy while talking the talk (if not walking the walk) about letting its currency rise.  

Beyond that, watch as the concessions to other important Treasury buyers start to roll out. The long-term consequences of those concessions will be of no concern to the current administration, because at this point they are in full panic mode – panicked because they know if they can’t keep interest rates down, it’s game over – and not just for their political fortunes.
So, what’s the second move the government is most likely to make in its attempt to head off a debt-driven death spiral?

They’ll have to raise some revenue. However, once the Bush tax cuts expire next year (or are repealed this year), then further raising taxes on the affluent will be difficult – especially given that the top ten percent currently pay 73% of the nation’s income taxes, while the bottom 46% pay none.

Today’s economy and markets are as politicized as never before. That’s why David and the other editors of The Casey Report are keeping a close eye on the actions of the movers and shakers in Washington – analyzing budding trends and finding investment opportunities that arise from them. To learn more about their accurate predictions and how you can profit from them, click here.







As a suggestion for those who do want leverage to the precious metals bull, the gold and silver funds together with the careful application of options trades could be a possible solution for you. This way we are exposed to any movement in gold prices which in turn is magnified by the effect of the option. Do remember that loses are also magnified in the same way so its not a strategy for the faint hearted. On the other hand the quality stocks are not performing as anticipated and a non-producing junior stock is a shot in the dark, however, its your money and its your call.

Got a comment then please add it to this article, all opinions are welcome and appreciated.


If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click here.

For the analysis of a recent options trade that we have just closed please click this link.


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.

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.