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Wednesday
May042011

Yamana Gold Inc Good Results, But!

AUY Chart 04 May 2011.JPG

Going back a few moons we were fans of Yamana Gold Incorporated (AUY) but our patience ran out and we reduced our exposure to this stock. As we can see from the above table AUY did well until 2008, however since then it has failed to make a new high despite gold setting new records. Maybe this set of results will provide the catalyst to give this gold producer a boost and better days are ahead. We apologize for not being more enthusiastic about Yamana Gold, but that is how we feel at the moment.

The first quarter results for 2011 are as follows:


PRODUCTION INCREASED 11%, REVENUES INCREASED 37%, CASH FLOW INCREASED 73% AND ADJUSTED EARNINGS INCREASED 110%


YAMANA GOLD INC. (TSX:YRI; NYSE:AUY; LSE:YAU)

HIGHLIGHTS FOR THE FIRST QUARTER 2011

- Production of 267,368 per gold equivalent ounce (GEO)(1)(3)at cash
costs of $14/GEO(1)(2)
- Gold production of 221,489 ounces
- Silver production of 2.3 million ounces
- Generated cash margin of $1,373 per ounce(4)

- Significant financial and operational increases over the first
quarter of 2010
- Production increased 11% to 267,368 GEO with record production
from El Penon
- Revenues up 37% to $476 million
- Net earnings up 11% to $0.20 per share
- Adjusted earnings(1) up 110% to $0.21 per share
- Cash flow generated from operations(1) up 73% to $0.38 per share

- Cash balance increased to $460 million from $330 million, a 39%
increase since 2010 year end

- Announced value enhancing deal with respect to Agua Rica with Xstrata
and Goldcorp

"Yamana's first quarter results continued to demonstrate our commitment to, and focus on, the delivery of predictable and reliable production and costs. We delivered production growth in the first quarter and record production from El Penon. Our cash costs continued to be one of the lowest in the industry" commented Peter Marrone, Chairman and CEO. "We continue to advance our new projects, the first of which, Mercedes, is expected to start production by the middle of 2012. C1 Santa Luz and Ernesto Pau-a-Pique will begin contributing by the end of 2012 and Pilar is expected to be in production in early 2013. All of the projects can be fully funded directly from our cash flow. These projects will contribute to our 60% production growth expected in the next three years."

To read this news release in full please click this link.


…............................

Yesterday we reported that www.skoptionstrading.com had closed another two trades for profits of 108.52% and 116.67% respectively, well today we closed two more profitable trades and have updated the chart and stats 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
May032011

Despite recent events gold prices remain a dollar play

gold chart 03 May 2011.JPG

The dash from $1425/oz to $1563/oz came to a halt today on news that is perceived to be good for the USD. The technical indicators are firmly in the overbought zone so a breather was on the cards. Note that the RSI had peaked well above the '70' level and has now come back slightly, to sit at 73.50, still oversold, so this correction may continue for a few more days.

Apart from the chart status of gold prices there have also been not one, but two events that have played their part in capping golds progress. The first is the announcement by President Obama, that Osama Bin Laden has been killed. This initially gave the US Dollar a much needed boost with the oscillations continuing as we write. The bounce by the dollar had a negative effect in gold and so gold prices have corrected by around $20/oz, which is nothing to write home about. This news item is a one off event and will soon pass with the spotlight being re-focused on the plight of the dollar.

The second event was market intervention by the powers that came in the form of a rule change regarding the purchase of silver as follows:

Investors in the standard '5,000 Ounce Silver Futures Contract', had the initial deposit required to purchase a contract increase to $12,825 from $11,745.

This rule change is in effect a margin call for for those investors who own silver futures contracts, so they had to either put up more cash or reduce their exposure by selling some of their contracts. This is not a one time event as the rules can be changed at a moments notice as we have experienced in the past. However, the effect on silver prices, a $4.00/oz correction, also casts a shadow on gold prices as any market intervention creates an air of uncertainty for all concerned.

For now we will allow the dust to settle and look to see if there is a bargain of a buying opportunity out there somewhere.

…............................

Today we are pleased to report that www.skoptionstrading.com has closed another two trades for profits of 108.52% and 116.67% respectively.

Over in the Options pit, our model portfolio has achieved an average return of 42.10% per trade, 76 closed trades, 74 closed at a profit, or a 97.36% success rate. Average trade open for 45.30 days.


sk chart 03 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
Apr282011

Agnico-Eagle Mines Ltd: Net income $0.27 per share Qtr One

AEM Chart 29 April 2011.JPG


Agnico-Eagle Mines Limited (AEM) has had a few difficulties this year which has hampered the stock price in our view. Now that they appear to have been solved we are looking forward to a better second half performance from this quality gold producer. Highlights of today's results are followed by an update on their 'expanded mineralization' and finally an interview with Sean Boyd, the CEO.



Agnico-Eagle Mines Limited today reported quarterly net income of $45.3 million, or $0.27 per share for the first quarter of 2011.  This result includes a non-cash foreign currency translation loss of $14.1 million, or $0.08 per share, stock option expense of $18.5 million, or $0.11 per share, an expense of $3.1 million, or $0.02 per share related to the March 10, 2011 Meadowbank fire, and a gain on sale of investments of $4.4 million, or $0.03 per share.  Excluding these items would result in adjusted net income of $76.5 million, or $0.45 per share.  In the first quarter of 2010, the Company reported net income of $22.3 million, or $0.14per share.

First quarter 2011 cash provided by operating activities was $171.0 million ($146.9 million before changes in non-cash components of working capital), up from cash provided by operating activities of $74.5 million in the first quarter of 2010 ($92.5 million before changes in non-cash components of working capital).

The higher net income and cash provided by operating activities in 2011 was primarily due to 34% higher gold production and significantly higher metal prices when compared to the first quarter of 2010.

"Thanks to a quick response by the team at Meadowbank, the damage caused by the recent fire was limited and we are already back running at full capacity at the mine," said Sean Boyd, Vice-Chairman and Chief Executive Officer.  "On the back of record production quarters at our Pinos Altos and Kittila mines, and with the expected commissioning of the permanent secondary crusher at Meadowbank in the third quarter, we expect to have all six of our mines operating at a steady state as we head into the second half of the year.  It is expected that gold production in the second half of this year should be approximately 20 percent higher than in the first half of 2011," added Mr. Boyd.

First quarter highlights include:

Record Quarterly Gold Output at Kittila - record quarterly recovery of 86.4%, and gold production of 40,317 ounces

Record Operating Quarter at Pinos Altos - record quarterly gold production of 48,001 ounces at total cash costs of $312 per ounce1.  Commercial production declared at Creston Mascota at March 1, 2011

Strong Cash Generation - record quarterly cash provided by operating activities of $171 million, or $1.01 per share

Gold Mineralization Extended at Kittila, Goldex, Lapa and Meliadine - details in today's separate exploration news release

Payable gold production2 in the first quarter of 2011 was 252,362 ounces compared to 188,232 ounces in the first quarter of 2010.  A description of the production and cost performance for each mine is set out further below.

The higher level of production in the 2011 period was largely due to production at the Meadowbank mine, which achieved commercial production in March 2010 and therefore only contributed one month to the first quarter total last year.  The increase in gold production in 2011 was in spite of the fire which destroyed the Meadowbank kitchen complex and also in spite of unusually severe winter conditions.  These factors negatively impacted production and costs, as disclosed in the Company's news releases of March 10 and March 28, 2011.

Total cash costs for the first quarter of 2011 were $531 per ounce.  This compares with $441 per ounce in the first quarter of 2010.  The higher cost in 2011 was largely attributable to the issues at Meadowbank which more than offset the positive impact of higher byproduct metals prices.




AGNICO-EAGLE ANNOUNCES EXPANDED MINERALIZATION AT KITTILA, GOLDEX AND MELIADINE



Agnico-Eagle Mines Limited is pleased to provide an update on its 2011 exploration program to date, as well as the plans for its exploration activities for the rest of 2011.

The Company's largest-ever exploration program of $145 million will include approximately 400 kilometres of drilling employing approximately 40 rigs.  This dollar amount includes a major exploration-related infrastructure program of $27 million at Meliadine.

During the first quarter of 2011, significant extensions of gold mineralization at Kittila, Goldex and Meliadine were discovered.  At Kittila, mineralization has been extended at depth and north of the Roura zone.  At Goldex, the latest deep drill holes indicate that D Zone mineralization extends well beyond the current resource envelope over large thicknesses, with grades similar to the current reserve grade. At Meliadine, drilling has continued to infill the Wesmeg zone and extended it westward.

This year's exploration program is on track to achieve the 2011 goal of more than 22 million ounces of gold reserves, representing organic growth of at least 8%, net of production.
Highlights of the 2011 exploration program include:

Deepest High-grade Mineralization Found to Date at Kittila - Hole ROU-10-037 returned 9.5 grams per tonne ("g/t") gold over 6.0 metres true width at 1,200 metres below surface approximately 150 metres below current reserve envelope Goldex's D Zone Growing Significantly - Hole 76-014 intersected 192 metres (core length) grading 2.2 g/t gold approximately 150 metres below the current D Zone resources. 

New exploration ramp for D Zone will accelerate delineation of this growing deposit Mineralized Envelope Grows at Meliadine's Wesmeg Zone - North and South Trends of Wesmeg indicate satellite open pit potential.  Hole M-11-1014 yielded 8.2 g/t gold over 5.4 metres High-grade Intercepts at Depth and to the East of the Lapa Orebody - goal is to extend mine life

"These latest exploration results show that several of our gold deposits extend beyond the currently known mineral resource and demonstrate the potential of our newly built mines to continue to grow" said Sean Boyd, Vice-Chairman and CEO. "These results also support the next phase of our program to build value at our mines through the acceleration of underground infrastructure so we can delineate of our growing gold deposits more quickly" added Mr. Boyd.



April 28 (Bloomberg) -- Sean Boyd, chief executive officer of Agnico-Eagle Mines Ltd., talks about the company's first-quarter earnings, forecast and the outlook for gold production. He speaks with Pimm Fox on Bloomberg Television's "Taking Stock." click here to hear the discussion.


Still one of our favourite stocks but as with this sector in general, stocks remain under valued in our view. Some of our peers are looking for a serious 'pop' in stock prices, however, we remain a tad skeptical at the moment as their are other vehicles enticing investors away from the miners, ETFs, physical metal, coins, options, futures trading, et al.

We are tempted at these price levels but perturbed that they have not responded better to the move in gold prices.

We will observe for now.

…............................

(4 more profitable trades have now been closed, so far, this week.)

Over in the Options pit, our model portfolio has managed an average return of 40.19% per trade, 74 closed trades, 72 closed at a profit, or a 97.29% success rate. Average trade open for 44.89 days.

sk chart 28 April 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
Apr282011

Are You A Smart Money Investor?

Inflation casey 29 April 2011.JPG




By Jeff Clark, BIG GOLD

You’ve probably heard the term “smart money” used by various pundits, a reference to those investors and institutions that are consistently better at making money than the uninformed masses. Which begs the question: are you one of them?

To answer that query, let’s first describe smart money (not to be confused with the magazine by that name) so we have an idea of what makes this group of investors successful…

Smart money buys when others are fearful. A good example of this is last year’s Gulf oil disaster. Wild speculation of British Petroleum’s ultimate demise caused panicked bouts of selling. The stock lost roughly half its value in less than two months. To use a classic idiom, there was blood in the streets – and that, of course, was the time to buy. The investor who did so is currently up 50%, and that’s not even measuring from the stock’s absolute bottom.
Smart money sells when others are greedy. My colleague Doug Hornig is a perfect example of selling when others are greedy. In the Nasdaq hysteria of the late 1990s, Doug had accumulated a number of Internet stocks and watched his brokerage account swell to a level he’d never seen before. The greed around him was palpable; everyone was talking about the latest stock pick, the classic sign of a mania in full bloom. “But I’d had enough,” he told me. “My positions had logged spectacular gains, and bottom line, I knew this couldn’t go on forever.” He sold his Internet stocks prior to the 2000 top, just as the greed reached a pinnacle.

Smart money sees trends others don’t. Doug Casey urged readers in 1999 to buy gold, convinced from his own research and study that a bull market was about to get underway. But he couldn’t get an audience; no one wanted to talk about the metal or mining stocks. It goes without saying that he and many of his readers have since profited enormously, with many stocks earning doubles on top of doubles.

Smart money ignores the headlines. Beyond the traditional advice of “Buy the rumor/sell the fact,” smart money largely ignores the blather from mainstream media and instead focuses on the factors that ultimately drive headlines. When it reaches mainstream coverage, the smart money is already invested. And is looking at what will be tomorrow’s headlines.

Smart money plays the big trend, not the gyrations. What do Jim Rogers, Marc Faber, Rick Rule, Doug Casey, and Warren Buffett have in common? None of them “traded” their way to riches. They identified the fundamental factors driving the trend, bought big, and held on. No technical analysis, no trend lines on a chart, no fancy signals from moving averages. And they didn’t get scared out at the first drop in price.

Smart money doesn’t count its money before it’s made. These investors understand there are no sure things, and further, that no one is going to bail them out if their analysis turns out to be wrong. They keep a realistic expectation – and an eye – on their investments. And if they take a loss, they learn from it and refuse to let it keep them from investing again.
And the one that’s becoming increasingly critical to businesses and investors…

Smart money ignores official government reports and relies on its own research.There are copious examples of government reporting that is patently off base. The best current example is the Department of Labor’s CPI number. It claims that core inflation is a mere 1.1%. When looking at all your expenses over the past year, have they risen just 1.1% since last spring?
Here’s what real inflation looks like compared to what the U.S. government reports.

Costs in every major area of our lives have risen greater than what the government states in its core figure. The smart money ignores the official report and instead focuses on its own research and data.

With that description of smart money, the next logical question to ask is, what are they looking at now?

To answer that question, understand the time horizon they have in mind. They’re not looking at next week or next month like a trader would, nor so far out that it will take the rest of their life to realize a profit. The smart money is looking at the likely trends over the next few years.
Therefore, I think they’re asking themselves questions like these:

Is real inflation likely to rise or fall over the next few years?
Is it more probable that interest rates will remain depressed or move higher?
Is the U.S. dollar likely to be stronger or weaker in the next few years?
What is the best way to hedge against egregious debt and runaway government spending?
Which assets are most likely to make money over the next few years? Which should be avoided?
Is it time to invest in real estate again, or will it take the rest of my life to see big profits?
Will the global economy be on solid footing during the next few years?
Is oil – or something else – the best energy investment?
Are gold and silver in a bubble, or will they push higher in the coming years?
The answers to those questions will dictate how the smart money invests for the next few years.

When it specifically comes to gold and silver, they ignore the bubble talk and instead focus on facts and trends. While they acknowledge that precious metals have risen tremendously over the past decade, they’re analyzing the factors that will either continue to drive prices higher or take them lower. So they’re looking at supply and demand trends; fiat currencies and if they’re likely to be further diluted; the logical outcome of too much debt and too much deficit spending; the direction of inflation; gold’s role as a store of value and if there are reasons for it to remain; and just as important, how the greater masses are likely to react to all this.

Once you address those topics, you can determine if we’re in a true gold bubble. And your answer to those questions will determine the action you should take at the next correction.
How does Doug Casey answer the question as to whether we’re in a gold bubble? Here’s what he told me:

“The peak is not going to be here until you hear the money-honeys talking about gold on television and all your friends are talking about the latest silver stock. Don’t worry about charts. Don’t worry about statistics, lines on charts, supply and demand figures, or any of that. The best indication of where the market is at any moment isn’t mathematics. It’s psychology. Watch the public’s psychology.”

While new investors are beginning to enter our sector, the psychology of the gold market is not like the crazed hysteria with the Internet stocks in late 1999. Yes, gold is not cheap, but if we were in a bubble, those shouting “Bubble!” would be buying gold, not bashing it. By Doug’s definition, it’s when their psychology has turned from negative to giddy that will mark the top.
If your own research tells you this isn’t a true bubble in precious metals, then you might embrace the next correction instead of fearing it.

What is the smart money doing with bets on interest rates, energy, commodities, and real estate? And what do they think about the economy and the likelihood of another recession? Is a global currency war about to erupt? And with the anticipated change in the Fed’s quantitative easing policy, how big and long of a correction do they see coming with gold and silver?

None of us can be smart money in every aspect of investing – but you can find out what they’re thinking and how they’re positioning their own portfolios. Our sold-out spring Casey Summit "The Next Few Years" will be a truly blockbuster event that includes detailed investment recommendations from a whopping 35 of the most successful experts. They will cover all facets of precious metals, energy, interest rates, the economy, real estate, and more.

It's the single best way to prepare both your finances and family for what's ahead. You can catch every minute of the entire Summit with a full 20-hour audio CD set – but hurry, our early-bird discount is available only till April 29.

…............................

(4 more profitable trades have now been closed, so far, this week.)

Over in the Options pit, our model portfolio has managed an average return of 40.19% per trade, 74 closed trades, 72 closed at a profit, or a 97.29% success rate. Average trade open for 44.89 days.

sk chart 28 April 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
Apr272011

Ben Bernanke: Gold Up, Silver Up, DOW Up, Dollar Down

gold chart 28 April 2011.JPG

Gold prices closed up $20.80/oz at $1526.80/oz or 1.38% and silver prices went one better closing up $2.35/oz at $47.81 or 5.18%. The DOW gained 95.59 to close at 12,690.96 or up 0.76%. However, the much troubled dollar was down 0.72% to close at 73.31 on the US Dollar Index.

Many in this sector had opted to take profits and who could blame them as it has been a terrific run for gold and silver bugs. Our 'take' on the Federal Reserve was along the lines of the same stance being continued, no rate rise just yet and stimulus being the order of the day and so we did nothing but sit on our hands and wait. The result being that we were clobbered yesterday, but today's bounce more than made up for yesterdays losses.

Ben Bernanke did recognize that the US debt was still a major problem, however, we didn't detect any real action to reduce it. Hence gold and silver responded accordingly giving our account a very nice boost.

The following is an update as provided by the business section of the BBC which is useful as a summary of today's play.



US Federal Reserve Chairman Ben Bernanke says the country's high debt levels are "the most important long-term economic problem facing the US".

Speaking at a news conference, Mr Bernanke said he hoped the recent move by international ratings agency Standard & Poor's to put the US on a negative outlook would be an incentive for polictal leaders to address the problem.

He said the current deficit was not sustainable, and had "significant consequences for financial stability, for economic growth and our standard of living".

The US Federal Reserve has cut its economic growth forecast for this year, citing weaker growth than expected in the first three months of the year.

Chairman Ben Bernanke said he expected growth for 2011 to be between 3.1% and 3.3%, compared with the previous forecast of 3.4% to 3.9%.

He also hinted the Fed would not pump more money into the economy after June.
Mr Bernanke also called on the government to tackle the country's "very serious" debt problems.

At his first press conference, the world's most powerful central banker also lowered the Fed's unemployment rate forecast for this year, to between 8.4% and 8.7% from 8.8% to 9%.
But he raised significantly its inflation forecast to between 2.1% and 2.8% from 1.3% to 1.7%.
Mr Bernanke said annual growth would be lower largely due to weaker first quarter growth, which would probably be under an annualised rate of 2% due to lower defence spending, weaker exports, a weak construction sector and bad weather.

The January-to-March GDP figures are published on Thursday.

Apart from construction, these were all "transitory" factors, he said, which meant the Fed's longer-term growth projection remained unchanged at between 2.5% and 2.8%.
Mr Bernanke's comments and performance were generally well-received by the markets, with the Dow Jones index closing up 95.6 points, or 0.8%, to 12,690.96.

Monetary stimulus

Earlier, the Fed kept interest rates at between zero and 0.25%.

It also said it would continue with its monetary stimulus policy, known as quantitative easing, and would complete its second round of purchases totalling $600bn (£363bn) as scheduled by the end of June.

Mr Bernanke said the end of this stimulus was "unlikely to have a significant effect on financial markets or the economy".

This was because the move has been well flagged, and because the overall stock of assets held by the Fed would remain the same - it would continue reinvesting maturing assets.
He said a fresh round of stimulus was looking less attractive given the recent rise in inflation.
He refused to give any indication of when the Fed would actually start its exit strategy from quantitative easing, which would effectively involve stopping reinvesting its maturing assets.

'Top priority'

Mr Bernanke gave strong views on what he called the country's high debt levels - what he called "the most important long-term economic problem facing the US".

He said the current deficit was not sustainable, and had "significant consequences for economic growth and our standard of living".

He added that addressing the long-term deficit should be the "top priority" for the government.
Mr Bernanke was addressing a question about the recent move by international ratings agency Standard & Poor's to put the US on a negative outlook.

The agency said the US could lose its top-level credit rating due to the lack of a plan to bring down its growing deficit and tackle its debt.

Open discussion

Despite reducing the Fed's unemployment forecast, the chairman said the jobless rate was falling at a relatively slow rate due to modest economic growth.

The labour market, he said, was "not in good shape" and long-term unemployment was "a significant concern".

He said the high unemployment rate, currently 8.8%, was one of the main reasons for having "highly accommodative monetary policy", by which he meant record low interest rates and monetary stimulus.

He also said inflation, which jumped to 2.7% last month, was being boosted by high commodity prices, but said he remained confident that underlying inflation remained stable.

He admitted, however, that there was not much the Fed could do about rising oil prices, hence raising the inflation forecast for this year.

The introduction of regular press conferences by the chairman of the Fed is seen as a way for the bank to explain its decisions and address criticisms of its handling of the financial crisis, and even its inability to prevent it in the first place.

Mr Bernanke said the conferences were part of a wider move by the Fed to become more transparent.

So there we have it, in our very humble opinion gold will carry on heading north to say $1600.00/oz and silver prices will soon be flirting with $60.00/oz. The big picture hasn't changed so our strategy remains the same. Hold onto the physical metals, hold onto quality producers, editing where necessary and select a few well thought out options trades and that's it in a nutshell.

Smile you are a gold bug!

…............................

(4 more profitable trades have now been closed, so far, this week.)

Over in the Options pit, our model portfolio has managed an average return of 40.19% per trade, 74 closed trades, 72 closed at a profit, or a 97.29% success rate. Average trade open for 44.89 days.


sk chart 28 April 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
Apr262011

QE2 and the Fate of the U.S. Economy

c1 27 April 2011.JPG





By David Galland, Casey Research

In the last few weeks, I’ve become particularly “attentive” to the intentions of Fed policy makers following the scheduled June end date for QE2.

This is no small matter; an actual shift in Fed policy – as opposed to the smoke and mirrors sort – could temporarily play havoc on equities and commodities markets alike. How could it be otherwise, when under QE2 the Fed has been writing checks to the Treasury in amounts of upwards of $100 billion a month since last November?

As a point of reference, at the end of April 2007, the monetary base of the U.S. was $822 billion. At the end of April 2011, it will be $2.5 trillion, a three-fold increase. Call it what you want, “quantitative easing,” “stimulus,” “political payola,” “madness,” but monetary inflation is the correct term. And monetary inflation on this scale invariably leads to price inflation on a similar scale.

It is this “money,” steadily ginned out of thin air, that provides the fuel to keep the spendthrifts in Washington spending and props up the wounded economy.

It is also this “money” that sends equities and commodities soaring as investors look for higher returns and things more tangible to hold ahead of the rising inflation.

Removing the stimulus, therefore, will almost certainly have consequences.

Yet, because the politicos and their pets at the Fed have taken things so far beyond the pale at this point, so would a decision to keep the monetary pedal to the metal past June. As you can see in the chart below, technically speaking, the dollar is breaking down.

This steep downward slope of the dollar’s trend line over the last year begs for the Fed to attempt something to slow the dollar’s descent. Were they to signal a continuation of the same level of monetization now underway, past June, can anyone doubt that the dollar’s steep fall would only worsen, risking even collapse?

To my way of thinking, therefore, the logical starting point is for them to let QE2 expire in June, as planned, in order to show the world some monetary spine.

That is not to say that the Fed will leave its seat empty at Treasury auctions post-June – various members of the inscrutable institution have already made clear the intent to continue reinvesting the proceeds of maturing securities in the Fed’s portfolio back into Treasuries. Yet, even with that ongoing action – resulting in Treasury purchases to the tune of $17 billion a month – the net result will still be a monthly gap on the order of $80 billion.

All Eyes on Interest Rates

The dialing back of the Fed’s monetary machinations increases the possibility that interest rates will need to rise in order to attract buyers in sufficient quantities to fill the gap. And if there’s one thing we know, it is that rising interest rates would be devastating to an empire of debt such as the United States circa here and now.

One typically doesn’t like to see the empire in which one lives crumble into lesser states, as that is usually accompanied by a flagging quality of life and social unrest. Though there isbupkis that I, or any of us, can actually do at this point to rearrange things on the larger stage – it does behoove us to look after ourselves. Which, in the current case, requires a quick detour on the nature of interest rates.

We humans don’t really like change. And so we tend to embrace scenarios involving only gradual change – the soft sort that are easily coped with, with small and measured adjustments to the riggings.

The risk in such a passive perspective can be seen in the chart here showing the benchmark 10-Year U.S. Treasury rates from 1945 to 2010. While it is worth noting that over that entire 65-year period rates have never been lower than they are just now, a clear sign that today’s low, low rates are anomalous – and doubly so given the amount of outstanding debt – my primary purpose for presenting this chart is to narrow your focus to the period between 1975 and 1977.  

As you can see, in 1975 – a period associated with a temporary calm before heading into a final inflationary blow-off – interest rates were actually on the decline and had fallen below the levels of 1970. Then, in the blink of the proverbial eye, 10-year rates started accelerating upwards, moving from just over 6% to over 15%, driven by the raging inflation and, in time, a Fed policy shift designed to crush that inflation. While rates subsequently peaked and began to ease, in fits and starts, it took a full decade before they returned to the 1975 level.

c2 27 April 2011.JPG

Unfortunately, the situation today is worse, which is saying something. As you can see from the next chart here, in 1977, U.S. federal debt was a third of where it is today as percentage of GDP, and this doesn’t reflect the coming ramp-up of trillions of dollars in additional debt that is now baked into the federal government’s spending plans.

c3 27 April 2011.JPG

Should we see a similar spike in interest rates to, say, 15%, it would create a black hole that wouldn’t just suck in all the government’s revenues, but pretty much the entire economy. This is a very real risk.

But back to the Fed and the crossroads it is soon arriving at. In the absence of anysubstantial reduction in government spending – a reduction on a scale that isn’t even being whispered about in the halls of power – the Fed is damned if it dials back its monetization (jacking up the potential for rising interest rates), or if it doesn’t (dooming the dollar and in time triggering higher interest rates as well).

The politicians and their friends down at the Fed can pretend, as they do, that the overhang on the economy of some $14 trillion in debt, and another $50 trillion or so in longer-term entitlements, is much ado about nothing. This view of theirs is confirmed by the current budget discussions that talk of slashing $4 trillion out of federal spending over the next 12 years – but ignore that this slashing still anticipates annual deficits on the order of $1 trillion. There are facts and fictions in this universe of ours, and it’s a fact that the notion of spending our way to better days is a fiction.

And so, in my mind, there is no question that the Fed will ultimately be forced to unleash QE3, and that will be followed by QE4, QE5 and so on through QE15 – or whatever number is in force at the time of the dollar’s collapse.

In the meantime, though, given the current ill health of the dollar, I remain convinced that the Fed will pause in its blunt-force monetization, come June. And that is likely to provide a shot in the arm for the dollar – versus the equivalent of a shot in the head to the dollar, should they reverse themselves and attempt to continue monetizing at the same elevated levels, past June. Among other consequences, a rising dollar could spell trouble for overheated commodities, at least over the short term.

The big unknown, of course, is what will happen to U.S. Treasury rates. And for reasons discussed a moment ago, this is a really important unknown. We shouldn’t have to wait overly long for some answers. But while we wait, a few scenarios to ponder:

Best Case: For a time, post-June the Fed becomes a relatively less important player at the Treasury auctions, buying about $17 billion in Treasuries, vs. the $100 billion or so they are buying now, and the market responds favorably to the policy shift. The gap left by the Fed is filled in by institutions, and by friendly governments, looking to roll back their diversification into the euro and the yen – given the poor outlook for both. For a while Treasury rates remain relatively stable. And that encourages the U.S. government to continue spending willy-nilly and keeps the party for equities continuing for awhile longer, albeit with the participants on edge and watching the exits for any movement. 

A rebound in the dollar, one result of an inflow of renewed foreign buying, would hit the commodities, causing them to underperform until it becomes obvious to all down the road that the Fed will have to once again begin monetizing.
 
Medium Case: Post-June, participation at the Treasury auctions weakens, but not disastrously. Rates rise, but also not disastrously. The economy teeters on the edge, but doesn’t fall. Neither does the dollar rise overly much, and something akin to a twitchy status quo continues as people wait for the other shoe to drop, as it inevitably must given that the overarching problem of sovereign and household debt has not been resolved. Volatility in equities and commodities increases, but there is no sustained move one way or the other. Yet.
 
Worst Case: Post-June, auction participation falls significantly, and interest rates begin to accelerate to the upside, sending equities markets into a tailspin, dragging commodities down with them. The Fed quickly reverses course and begins writing the big checks to the Treasury, stabilizing interest rates but sending shock waves through FX markets as the dollar hits the floor and discovers the floor is made of glass.

The precious metals and other commodities soar. With nowhere else to run, investors begin bargain shopping for fallen equities – which are linked to tangible businesses, after all – and they bounce relatively quickly as well. Meanwhile, as the dollar collapses, the cost of everything begins to soar, crushing the unprepared and triggering real hardship. Unable to push interest rates higher to head off the price inflation, the Fed heads retreat to a hidden bunker and begin looking for friendly countries willing to give them sanctuary.

Of course, no one can see the future – but I think all three of those scenarios are likely to materialize in the relatively near future, one after the other from Best to Worst.

If I am right, then the way to play it is to expect a near-term rally in the dollar. While the U.S. dollar is toilet paper, it is of a better quality than the euro or the yen. Which is not to say that it doesn’t deserve its ultimate fate – the fate of all fiat currencies – but rather that, as long as the Fed shows some restraint here, it may be able to stave off that fate a bit longer.

And that could put some serious pressure on commodity-related investments, especially the more thinly traded junior exploration stocks. The chart here shows the relative performance of the Toronto Stock Exchange Venture Index – the index offering the best proxy for micro-cap resource stocks – against the price of gold.

c4 27 April 2011.JPG

As you can see, there can be quite a divergence in the performance of these small stocks over the price of bullion. While gold’s rise has been remarkably orderly, the rise in the stocks has occurred in fits and starts, with some breathtaking setbacks along the way. Of late, the stocks have had a substantial run-up, which again gives me pause. I think it is a fairly safe bet, therefore, that if gold were to correct 15% or so, the juniors would again go on sale. 
In time, however, because interest rates are so low and the sovereign debt problems so acute, the worst-case scenario – of rates spiking – followed by the Fed quickly reversing course, is a certainty.

Which is to say that, in the now foreseeable future, all things tangible will do the equivalent of a moon shot.

Again, you have to make your own decision as to which scenario we are most likely to see. In my view, from a risk/reward perspective, as long as you have a core portfolio in precious metals and other tangibles (including energy), then selling some of your more speculative positions (you know the ones) to raise cash can make a lot of sense. That way you’d have the ready funds available to snap up the bargains that will be created during the Fed’s brief attempt at slowing the dollar’s current fall. 

The way I figure it, at this point you can find all manner of analysis that will tell you it’s all blue sky from here for the commodities. Thus, a cautionary note seems justified.

Be careful, at least for the next couple of months. If I’m right, then there is a helluva buying opportunity right around the corner.

[If David's right about what's coming next, then cashed-up investors will be positioned to capture some truly exceptional profit opportunities, maybe as soon as within the next month. Which makes this the perfect time to take advantage of the 3-month, 100% money-back-guaranteed, no-risk trial to the Casey International Speculator – dedicated to well-managed junior gold and silver companies with triple-digit upside potential. More here.]





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sk charts 19 April 2011.JPG


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Thursday
Apr212011

Debunking Anti-Gold Propaganda

Gold and gold mining shares in 5 of global assets 22 April 2011.JPG


By Doug Casey

A meme is now circulating that gold is in a bubble and that it's time for the wise investor to sell. To me, that’s a ridiculous notion. Certainly a premature one.

It pays to remain as objective as you can be when analyzing any investment. People have a tendency to fall in love with an asset class, usually because it’s treated them so well. We saw that happen, most recently, with Internet stocks in the late ‘90s and houses up to 2007.

Investment bubbles are driven primarily by emotion, although there's always some rationale for the emotion to latch on to. Perversely, when it comes to investing, reason is recruited mainly to provide cover for passion and preconception.

In the same way, people tend to hate certain investments unreasonably, usually at the bottom of a bear market, after they've lost a lot of money and thinking about the asset means reliving the pain and loss. Love-and-hate cycles occur for all investment classes.

But there’s only one investment I can think of that many people either love or hate reflexively, almost without regard to market performance: gold. And, to a lesser degree, silver. It’s strange that these two metals provoke such powerful psychological reactions – especially among people who dislike them. Nobody has an instinctive hatred of iron, copper, aluminum or cobalt. The reason, of course, is that the main use of gold has always been as money. And people have strong feelings about money. Let’s spend a moment looking at how gold’s fundamentals fit in with the psychology of the current market.

What Gold Is – and Why It’s Hated

Let me first disclose that I’ve always been favorably inclined toward gold, simply because I think money is a good thing. Not everyone feels that way, however. Some, with a Platonic view, think that money and commercial activity in general are degrading and beneath the “better” sort of people – although they’re a little hazy about how mankind rose above the level of living hand-to-mouth, grubbing for roots and berries. Some think it’s “the root of all evil,” a view that reflects a certain attitude toward the material world in general. Some (who have actually read St. Paul) think it’s just the love of money that’s the root of all evil. Some others see the utility of money but think it should be controlled somehow – as if only the proper authorities knew how to manage the dangerous substance.

From an economic viewpoint, however, money is just a medium of exchange and a store of value. Efforts to turn it into a political football invariably are a sign of a hidden agenda or perhaps a psychological aberration. But, that said, money does have a moral as well as an economic significance. And it’s important to get that out in the open and have it understood. My view is that money is a high moral good. It represents all the good things you hope to have, do and provide in the future. In a manner of speaking, it’s distilled life. That’s why it’s important to have a sound money, one that isn’t subject to political manipulation.

Over the centuries many things have been used as money, prominently including cows, salt and seashells. Aristotle thought about this in the 4th century BCE and arrived at the five characteristics of a good money:
It should be durable (which is why, say, wheat isn’t a good money – it rots).
It should be divisible (which is why artwork isn’t a good money – you can’t cut up the Mona Lisa for change)
.
It should be convenient (which is why lead isn’t a good money – it just takes too much to be of value).

It should be consistent (which is one reason why land can’t be money – each piece is different).
And it should have value in itself (which is why paper money leads to trouble).

Of the 92 naturally occurring elements, gold (secondarily silver) has proved the best money. It’s not magic or superstition, any more than it is for iron to be best for building bridges and aluminum for building airplanes.

Of course we do use paper as money today, but only because it recently served as a receipt for actual money. Paper money (currency) historically has a half-life that depends on a number of factors. But it rarely lasts longer than the government that issues it. Gold is the best money because it doesn’t need to be “faith-based” or rely on a government.

There’s much more that can be said on this topic, and it’s important to grasp the essentials in order to understand the controversy about whether or not gold is in a bubble. But this isn’t the place for an extended explanation.

Keep these things in mind, though, as you listen to the current blather from talking heads about where gold is going. Most of them are just journalists, reporters that are parroting what they heard someone else say. And the “someone else” is usually a political apologist who works for a government. Or a hack economist who works for a bank, the IMF or a similar institution with an interest in the status quo of the last few generations. You should treat almost everything you hear about finance or economics in the popular media as no more than entertainment.

So let’s take some recent statements, assertions and opinions that have been promulgated in the media and analyze them. Many impress me as completely uninformed, even stupid. But since they’re floating around in the infosphere, I suppose they need to be addressed.

Misinformation and Disinformation

Gold is expensive.

This objection is worth considering – for any asset. In fact, it’s critical. We can determine the price of almost anything fairly easily today, but figuring out its value is as hard as it’s ever been. From the founding of the U.S. until 1933, the dollar was defined as 1/20th of an ounce of gold. From 1933 it was redefined as 1/35th of an ounce. After the 1971 dollar devaluation, the official price of the metal was raised to $42.22 – but that official number is meaningless, since nobody buys or sells the metal at that price. More importantly, people have gotten into the habit of giving the price of gold in dollars, rather than the value of the dollar in gold. But that’s another subject.

Here’s the crux of the argument. Before the creation of the Federal Reserve in 1913, a $20 bill was just a receipt for the deposit of one ounce of gold with the Treasury. The U.S. official money supply equated more or less with the amount of gold. Now, however, dollars are being created by the trillion, and nobody really knows how many more of them are going to be shazammed into existence.

It is hard to determine the value of anything when the inch marks on your yardstick keep drifting closer and closer together. 
The smart money is long gone from gold.
This is an interesting assertion that I find based on nothing at all. Who really is the smart money? How do you really know that? And how do you know exactly what they own (except for, usually, many months after the fact) or what they plan on buying or selling? The fact is that very few billionaires (John Paulson perhaps best known of them) have declared a major position in the metal. Gold and gold stocks, as the following chart shows, are only a tiny proportion of the financial world’s assets, either absolutely or relative to where they've been in the past:

Gold is risky.

Risk is largely a function of price. And, as a general rule, the higher the price the higher the risk, simply because the supply is likely to go up and the demand to go down – leading to a lower price. So, yes, gold is riskier now, at $1,400, than it was at $700 or at $200. But even when it was at $35, there was a well-known financial commentator named Eliot Janeway (I always thought he was a fool and a blowhard) who was crowing that if the U.S. government didn’t support it at $35, it would fall to $8.

In any event, risk is relative. Stocks are very risky today. Bonds are ultra risky. Real estate is in an ongoing bear market. And the dollar is on its way to reaching its intrinsic value.

Yes, gold is risky at $1,400. But it is actually less risky than most alternatives.

Gold pays no interest.

This is kind of true. But only in the sense that a $100 bill pays no interest. You can get interest from anything that functions as money if it is lent out. Interest is the time premium of money. You will not get interest from either your $100 or from your gold unless you lend them to someone. But both the dollars and the gold will earn interest if you lend them out. The problem is that once you make a loan (even to a bank, in the form of a savings account), you may not even get your principal back, much less the interest.

Gold pays no dividends.

Of course it doesn’t. It also doesn't yield chocolate syrup. It’s a ridiculous objection, because only corporations pay dividends. It’s like expecting your Toyota in the driveway to pay a dividend, when only the corporation in Japan can do so. But if you want dividends related to gold, you can buy a successful gold mining stock.

Gold costs you insurance and storage.

This is arguably true. But it’s really a sophistic misdirection to which many people uncritically nod in agreement. You may very well want to insure and professionally store your gold. Just as you might your jewelry, your artwork and most valuable things you own. It’s even true of the share certificates for stocks you may own. It’s true of the assets in your mutual fund (where you pay for custody, plus a management fee).

You can avoid the cost of insurance and storage by burying gold in a safe place – something that’s not a practical option with most other valuable assets. But maybe you really don’t want to store and insure your gold, because the government may prove a greater threat than any common thief. And if you pay storage and insurance, they’ll definitely know how much you have and where it is.

Gold has no real use.

This assertion stems from a lack of knowledge of basic chemistry as well as economics. Yes, of course people have always liked gold for jewelry, and that’s a genuine use. It’s also good for dentistry and micro-circuitry. Owners of paper money, however, have found the stuff to be absolutely worthless hundreds of times in many score of countries.
In point of fact, gold is useful because it is the most malleable, the most ductile and the most corrosion resistant of all metals. That means it’s finding new uses literally every day. It’s also the second most conductive of heat and electricity, and the second most reflective (after silver). Gold is a hi-tech metal for these reasons. It can do things no other substance can and is part of the reason your computer works so well.

But all these reasons are strictly secondary, because gold’s main use has always been (and I’ll wager will be again) as money. Money is its highest and best use, and it’s an extremely important one.

The U.S. can, or will, sell its gold to pay its debt, depressing the market.

I find this assertion completely unrealistic. The U.S. government reports that it owns 265 million ounces of gold. Let’s say that’s worth about $400 billion right now. I’m afraid that’s chicken feed in today’s world. It’s only a quarter of this year’s federal deficit alone. It’s only half of one year’s trade deficit. It represents only about 5% of the dollars outside the U.S. The U.S. government may be the largest holder of gold in the world, but it owns less than 5% of the approximately 6 billion ounces above ground.

From the ‘60s until about 2000, most Western governments were selling gold from their treasuries, working on the belief it was a “barbarous relic.” Since then, governments in the advancing world – China, India, Russia and many other ex-socialist states – have been buying massive quantities.

Why? Because their main monetary asset is U.S. dollars, and they have come to realize those dollars are the unbacked liability of a bankrupt government. They’re becoming hot potatoes, Old Maid cards. But the dollars can be replaced with what? Sovereign wealth funds are using them to buy resources and industries, but those things aren’t money. And in the hands of bureaucrats, they’re guaranteed to be mismanaged. I expect a great deal of gold buying from governments around the world over the next few years. And it will be at much higher dollar prices.

High gold prices will bring on huge new production, which will depress its price.
This assertion shows a complete misunderstanding of the nature of the gold market. Gold production is now about 82.6 million ounces per year and has been trending slightly down for the last decade. That’s partly because at high prices miners tend to mine lower-grade ore. And partly because the world has been extensively explored, and most large, high-grade, easily exploited resources have already been put into production.

But new production is trivial relative to the 6 billion ounces now above ground, which only increases by about 1.3% annually. Gold isn’t consumed like wheat or even copper; its supply keeps slowly rising, like wealth in general. What really controls gold’s price is the desire of people to hold it, or hold other things – new production is a trivial influence.
That’s not to say things can’t change. The asteroids have lots of heavy metals, including gold; space exploration will make them available. Gigantic amounts of gold are dissolved in seawater and will perhaps someday be economically recoverable with biotech. It’s now possible to transmute metals, fulfilling the alchemists dream; perhaps someday this will be economic for gold. And nanotech may soon allow ultra-low-grade deposits of gold (and every other element) to be recovered profitably. But these things need not concern us as practical matters in the course of this bull market.

You should have only a small amount of gold, for insurance.

This argument is made by those who think gold is only going to be useful if civilization breaks down, when it could be an asset of last resort. In the meantime, they say, do something productive with your money…

This is poor speculative theory. The intelligent investor allocates his funds where it’s likely they’ll provide the best return, consistent with the risk, liquidity and volatility profile he wants to maintain. There are times when you should be greatly overweight in a single asset class – sometimes stocks, sometimes bonds, sometimes real estate, sometimes what-have-you. For the last 12 years, it’s been wise to be overweight in gold. You always want some gold, simply because it’s cash in the most basic form. But ten years from now, I suspect that will be a minimum. Right now it’s a maximum. The idea of keeping a constant, but insignificant, percentage in gold impresses me as poorly thought out.

Interest rates are at zero; gold will fall as they rise.

In principle, as interest rates rise, people tend to prefer holding currency deposits. So they tend to sell other assets, including gold, to own interest-earning cash. But there are other factors at work. What if the nominal interest rate is 20%, but the rate of currency depreciation is 40%? Then the real interest rate is minus 20%. This is more or less what happened in the late ‘70s, when both nominal rates and gold went up together. Right now governments all over the world are suppressing rates even while they’re greatly increasing the amount of money outstanding; this will eventually (read: soon) result in both much higher rates and a much higher general price level. At some point high real rates will be a factor in ending the gold bull market, but that time is many months or years in the future.

Gold sentiment is at an all-time high.

Although gold prices are at an all-time high in nominal terms, they are still nowhere near their highs in real terms, of about $2,500 (depending on how much credibility you give the government’s CPI numbers), reached in 1980. Gold sentiment is still quite subdued among the public; most of them barely know it even exists.

Some journalists like to point out that since there are a few (five, perhaps) gold dispensing machines in the world, including one in the U.S., that there’s a gold mania afoot. That’s ridiculous, although it shows a slowly awakening interest among people with assets.

Journalists also point to the numerous ads on late-night TV offering to buy old gold jewelry (generally at around a 50% discount from its metal value) as a sign of a gold bubble. But this is even more ridiculous, since the ads are inducing the unsophisticated, cash-strapped booboisie to sell the metal, not buy it.

You’ll know sentiment is at a high when major brokerage firms are hyping newly minted gold products, and Slime Magazine (if it still exists) has a cover showing a golden bull tearing apart the New York Stock Exchange. We’re a long way from that point.

Mining stocks are risky.

This is absolutely true. In general, mining is a horrible business. It requires gigantic fixed capital expense to build the mine, but only after numerous, expensive and unpredictable permitting issues are handled. Then the operation is immovable and subject to every political risk imaginable, not infrequently including nationalization. Add in continual and formidable technical issues of every description, compounded by unpredictable fluctuations in the price of the end product. Mining is a horrible business, and you’ll never find Graham-Dodd investors buying mining stocks.

All these problems (and many more that aren’t germane to this brief article), however, make them excellent speculative vehicles from time to time.

Mineral exploration stocks are very, very risky.

This is very, very true. There are thousands of little public companies, and some are just a couple steps up from a prospector wandering around with a mule. Others are fairly sophisticated, hi-tech operations. Exploration companies are often classed with mining companies, but they are actually very different animals. They aren’t so much running a business as engaging in a very expensive and long-odds treasure hunt.

That’s the bad news. The good news is that they are not only risky but extraordinarily volatile. The most you can lose is 100%, but the market cyclically goes up 10 to 1, with some stocks moving 1,000 to 1. That kind of volatility can be your best friend. Speculating in these issues, however, requires both expertise and a good sense of market timing. But they’re likely to be at the epicenter of the gold bubble when it arrives – even though few actually have any gold, except in their names.

Warren Buffett is a huge gold bear.

This is true, but irrelevant – entirely apart from suffering from the logical fallacy called “argument from authority.” But, nonetheless, when the world’s most successful investor speaks, it’s worth listening. Here's what Buffett recently said about gold in an interview with Ben Stein, another goldphobe: "You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all – not some, all – of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?"

I’ve long considered Buffett an idiot savant – a genius at buying stocks but at nothing else. His statement is quite accurate, but completely meaningless. The same could be said of the U.S. dollar money supply – or even of the world inventory of steel and copper. These things represent potential but are not businesses or productive assets in themselves. Buffett is certainly not stupid, but he’s a shameless and intellectually dishonest sophist. And although a great investor, he’s neither an economist or someone who believes in free markets.
Gold is a religious statement.

Actually, since most religions have an otherworldly orientation, they’re at least subtly (and often stridently) anti-gold. But it is true that some promoters of gold seem to have an Elmer Gantry-like style. That, however, can be said of True Believers in anything, whether or not the belief itself has merit. In point of fact, I think it’s more true to say goldphobes suffer from a kind of religious hysteria, fervently believing in collectivism in general and the state in particular, with no regard to counter-arguments. Someone who understands why gold is money and why it is currently a good speculative vehicle is hardly making a religious statement. More likely he’s taking a scientific approach to economics and thinking for himself.    

So Where Are We?

So these are some of the more egregious arguments against gold that are being brought forward today. Most of them are propounded by knaves, fools or the uninformed.

My own view should be clear from the responses I’ve given above. But let me clarify it a bit further. Historically – actually just up until the decades after World War I, when world governments started issuing paper currency with no relation to gold – the metal was cash, and it was used as money everywhere, on a daily basis. I believe that will again be the case in the fairly near future.

The question is: At what price will that occur, relative to other things? It’s not just a question of picking a dollar price, because the relative value of many things – houses, food, commodities, labor – have been distorted by a very long period of currency inflation, increased taxation and very burdensome regulation that started at the beginning of the last depression. Especially with the fantastic leaps in technology now being made and breathtaking advances that will soon occur, it’s hard to be sure exactly how values will realign after the Greater Depression ends. And we can’t know the exact manner in which it will end. Especially when you factor in the rise of China and India.

A guess? I’ll say the equivalent of about $5,000 an ounce of today’s dollars. And I feel pretty good about that number, considering where we are in the current gold bull market. Classic bull markets have three stages. We’ve long since left the “Stealth” stage – when few people even remembered gold existed, and those who did mocked the idea of owning it. We’re about to leave the “Wall of Worry” stage, when people notice it and the bulls and bears battle back and forth. I’ll conjecture that within the next year we’ll enter the “Mania” stage – when everybody, including governments, is buying gold, out of greed and fear. But also out of prudence.
The policies of Bernanke and Obama – but also of almost every other central bank and government in the world – are not just wrong. These people are, perversely, doing just the opposite of what should be done to cure the problems that have built up over decades. One consequence of their actions will be to ignite numerous other bubbles in various markets and countries. I expect the biggest bubble will be in gold, and the wildest one in mining and exploration stocks.

When will I sell out of gold and gold stocks? Of course, they don’t ring a bell at either the top or the bottom of the market. But I expect to be a seller when there really is a bubble, a mania, in all things gold-related. There’s a good chance that will coincide to some degree with a real bottom in conventional stocks. I don’t know what level that might be on the DJIA, but I’d think its average dividend yield might then be in the 6 to 8% area.

The bottom line is that gold and its friends are no longer cheap, but they have a long way – in both time and price – to run. Until they're done, I suggest you be right and sit tight.


[If you take the time to learn more about gold and silver, you’ll realize quickly that both still have a long way to go in this bull market. And with China – and other countries – ready to dump the flailing U.S. dollar, it’s imperative to protect yourself with precious metals. Learn more about China’s secret plot here.]






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

Over in the Options pit, our model portfolio has managed an average return of 40.51% per trade, 70 closed trades, 68 closed at a profit, or a 97.14% success rate. Average trade open for 42.21 days.

sk charts 19 April 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
Apr192011

Major Policy Shift Ahead

(Interviewed by Louis James, Editor, International Speculator)

Editor’s Note: David Galland, Casey Research partner and managing editor of The Casey Report, sees a major shift in Federal Reserve policy ahead and has advice on how to invest accordingly. Time is short, so we’ve asked David to share his thoughts with us.

L: David, in recent editorials you’ve warned of what could be an important shift in Fed policy – can you fill us in?

David: Sure. The purpose of The Casey Report is to keep subscribers well positioned in powerful, long-term trends – the kind of trend that will keep giving and giving. The trend in precious metals – gold and silver – which we’ve been heavily recommending for ten years is a good example. The overarching goal of The Casey Report is first and foremost to identify those critical larger trends and then closely monitor them until they play out – which is another way of saying that we aren’t big about market timing or jumping in and out of trades. I mention this to set the context for the coming shift in Fed policy.

L: And that context is?

David: That the shift, and it is imminent, will not change the larger trend, but it has the potential to be quite disruptive over the short term.
L: Explain.

David: In terms of the larger trends, the fundamentals that have caused so much pain and economic woe over the last ten years or so remain intact. If anything, they’ve gotten worse. We’ve gotten currency debasement, not just in the U.S., but especially in the U.S. dollar, which is not just any currency, but the world’s reserve currency.

We’ve got a truly mind-boggling expansion of the reach of government into all aspects of society and the economy, with all that that implies in terms of regulation, taxation, controls over investments and finance, impact on personal liberty, and so forth. By recognizing this destructive trend for what it is, investors can position themselves to avoid the worst, and to profit by betting on things like the continuing debasement of the dollar.
So that’s the big picture.

There is growing evidence that in the next month or two, we will head into a very dangerous period. The Fed has been extremely supportive of the U.S. government’s insane spending, polluting its own balance sheet by buying up toxic loans by the hundreds of billions and by pumping enormous quantities of cash into the money supply.
You don’t have to look very hard to understand why we have seen some small recovery in the economy, much of which has been driven by the financial sector that has been the recipient of so much largess – it was bought and paid for by the government, working hand in glove with the Fed.

But there is about to be a fundamental change in this arrangement. It appears that the Fed has decided that it’s time to take a step back from its monetization – or quantitative easing (QE), as they now term it – in the hopes that the market will step in to fill the large gap it will leave.
They can’t know how that’s going to work out, but if they don’t stop pumping money into the economy, they never will know if the quantitative easing has worked.

Based on a lot of statements from a number of the voting members of the Federal Open Market Committee, the change just ahead is that they are serious about stopping QE in June.
As they won’t wait until the last minute to confirm the end of their Treasury buying, I would expect their intentions to be made clear following their end-of-April meeting, the full minutes of which should be released in early May.

L: To be clear, do you mean no QE3, or that they cancel the portion of QE2 they haven’t spent yet?

David: They may leave themselves a bit of wiggle room by holding back some of the funds slated to be spent as part of QE2, in the hopes of demonstrating a high level of confidence in their decision to stop the monetization.

That would also give them a bit of powder to use should the need suddenly arise, without exceeding the mandate of QE2. The important point is that I am increasingly sure they won’t just roll out QE3, and that will have consequences.

L: Are you saying, no QE3 at all?

David: No. I think there will be a QE3, but it won’t materialize until after a relatively lengthy period during which the Fed stands aside in order to give the market the opportunity to adapt and adjust to their exit from the Treasury auctions. In other words, once they stop, I wouldn’t anticipate them jumping right back in at the first sign of trouble – say, if the stock market crashes.

In time, however, as the ponderous problems weighing on the economy come back to the fore and return the economy to its knees, the Fed will be forced to reinstitute the monetization, though they will likely try to come up with a moniker other than quantitative easing to describe it.

L: You’re as cheerful as Doug. Why are you so sure there will be a QE3?

David: Because the problems that made the economy stumble in 2008 have not been solved. As I said before, most have gotten worse. Have the impossible levels of sovereign debt and trillions in unresolved bad mortgages embedded in the balance sheets of Fannie, Freddie, the Zombie Banks and even the Fed been resolved? Hardly.

Is there any real sign coming out of Washington that the deficits will be substantively tackled? You don’t have to be as active a skeptic as I to understand that the deepest spending cuts being discussed don’t even scratch the surface of the $1.5 to $2 trillion deficit. As for the $60 trillion or so in debt and unfunded obligations, forget about it.

The U.S. government and the governments of most large nation-states are fundamentally bankrupt. In time, they will have to default on their obligations. While there will be some overt defaults, I expect most of them to follow the path of least resistance, which is to try to inflate the problem away. And that means QE3.

For now, however, the Fed will claim victory over the economic crisis and follow suit with many other central banks – switching to a less accommodative monetary policy.

L: They’ve done their job and now it’s time for back-slapping and cigars.

David: Yes.

L: Consequences?

David: If you look at a chart of the dollar, you’ll see that it has been bumping along the bottom recently. Logically, if the Fed stops monetizing the Treasury’s spending, we should see a rebound in the dollar. The big traders – the big institutional money out there – are going to use the change in Fed policy as a clear signal that it’s safe to get back in the U.S. dollar.

It would be wrong to underestimate the amount of money that needs to find a home, and the liquidity advantages offered by the U.S. Treasury market. If the river of money redirects into Treasuries, it could – at least for a time – offset the Fed’s exit and push the dollar up, maybe significantly so. And if the dollar comes roaring back, commodities, including gold and silver, would likely take a fairly hard hit.

Again, this is a short-term view. The longer-term trend for the precious metals is absolutely intact, because the fundamentals are entrenched – namely that the sovereign debt and spending is out of control, and politically uncontrollable.
L: Let’s talk about that for a moment. These people – the big money – are financial types. Bankers. They know about all the bad debt they have, even if the ever-so-convenient new reporting rules allow them to keep some of their problems off the books. They must know that a so-called jobless recovery is not a recovery.

They are well aware of all sorts of dirt they don’t discuss in public – how could they be stupid enough to let the Fed convince them the economy is healthy when their own information tells them it isn’t?

David: First off, “they” are not one guy. They are a lot of people with a lot of different perspectives and a lot of different objectives. Right now, for example, people look at the lack of yields in bonds and the potential for inflation in bonds, so they’ve been easing back on bonds and getting into equities more, in the hope of generating some kind of return.

If you’re a fund manager or a large institutional trader, you’re not paid to sit on your hands. You’ve got to “do something,” even though there are times – and I think this is one of those times – when doing nothing is exactly the right thing to do. So, I wouldn’t say they are being stupid–
L: Doug would: “An unwitting tendency toward self-destruction.”
David: Yes, he would – but these guys are not stupid; it's rather that they’ve made their own calculations and concluded that U.S. equities are still safe – a position that is supported by the very low levels of volatility. Even the troubled financials have seen strong gains of late, even though nothing has been fixed. Of course, if you look under the hood, you find they’ve benefited substantially from the cheap money and rigged deals the government has orchestrated to bail them out.

While no one can say when the shift out of equities and back into Treasuries and lower-risk assets will begin, in my view the Fed’s exit from quantitative easing sets the stage for that to happen. After that, it will just be a matter of time before traders are going to wake up and decide equities are not safe, and they’ll start leaving in droves.

Remember, however, that the stock market and the economy are by nature very complex systems. There are so many variables, you just can’t know which variable is going to rule the day at any given time. But given the importance of the Fed’s intervention and the government spending that has helped engender, its policy shift is certainly a variable to keep an eye on.
L: I find the capacity of bankrupt financial companies to defy gravity truly amazing. Disbelief sustained for such lengths of time makes me dizzy.

David: You’re not alone. The vast ocean of bad debt out there is just as big as ever. Everything I hear from people in the financial industry is that the banks’ debt profiles are not getting any better. People are not getting on top of their debts. They are not paying down their mortgages. Default rates are still astronomical…

L: How could it be otherwise? Unemployment is still high.

David: Unemployment is still stubbornly very high, though if you buy into the government’s figures, it is moving steadily in the right direction. Of course, the government has no reservations about jiggering the data to suit itself. That makes it important – if you want to get a more realistic picture – to look at the topic from different angles.
One telling statistic is unemployment as a percentage of the employable population, which screens out many of the government’s self-serving adjustments to its official figures. Looked at that way, you can see that unemployment is continuing to rise, even though the government is reporting that it’s falling markedly.

L: No! You can’t be suggesting good old Uncle Sam would lie to us…

David: You could say we have another deficit, one in government accountability. Clearly, it’s very politically important that unemployment be perceived as declining, therefore, voilà, it is.
L: “Alas, Bartleby.” Okay, let’s back up a bit to the debasement of the dollar. You mentioned that as a given, almost in passing, but there are a lot of people who don’t see it. Inflation is low, Uncle Sam assures us, so the dollar has not been debased. Q.E.D.

David: Well, anyone who can see beyond the tip of their nose can see that inflation is going up. Just pull up a chart of the CRB Index for commodities – the real stuff required for life – and one can see it has been on a steep upwards trajectory. Inflation is very much here and alive.
L: John Williams’ Shadow Stats chart shows inflation at nearly 10%, while the Bureau of Labor Statistics is reporting 2.1%.

But even Williams’ statistics don’t report real inflation; they just report what it would be if the government reported inflation the way it used to, before it started “improving” its reporting in the 1980s. It’s still an incomplete view, because the government’s original reporting was flawed to begin with.

David: Right. And one of those flaws is the way they weigh housing. It plays a big, big role in CPI, and in 2008 housing was dealt, if not a death blow, at least a blow that put it in the hospital. And it will be there for a very long time, because government policies encouraged bad decisions on the part of both lenders and borrowers. This has left trillions of dollars of bad debt hanging out there.

The retracement of housing prices, as a component of official CPI, pulls the official inflation figures down, even though those figures don’t sync up with the actual cost of living. Of course, a low CPI gives the government cover for continuing to monetize its debt.

Inflation problem? What inflation problem?

L: The net of this for inflation is that the crushing of the housing sector makes the CPI drop, making it look like life is getting cheaper, whereas the reality is that people’s hard-earned wealth put into real property has taken a beating at the same time as the things they consume on a daily basis cost more. Life has gotten a lot more expensive even as savings have been wiped out. Not good.

David: Right. And the government is trying to get people to ignore the signs of inflation, saying everything is all right. But recently, several Fed governors have been saying outright that there is a problem and that they need to cool off the money creation and start dealing with inflation. This is why I think there isn’t going to be an immediate QE3.

L: So, what happens next?

David: Consider Japan as an example of an advanced economy that has been struggling to deal with the aftereffects of a collapsed bubble in real estate and stocks for many years – well before the recent earthquake.

If you look at what happened when they did their equivalent of QE after the initial stock market crash, the spending stimulated a fairly significant recovery in Japanese equities, taking the market back up about halfway to the bubble’s top; but the rally didn’t last.

Once the Japanese government put an end to its quantitative easing, the Nikkei plummeted. The government resisted reinstating quantitative easing for two years before throwing in the towel and once again cranking up the money engines in an attempt to break the economy out of the doldrums.

The long-term result is a Nikkei still well below the crash level (even before the earthquake), and all the spending has caused Japanese government debt to rise to 200% of GDP. While no two situations are identical, I think the U.S. is following a very similar script.

L: If the Fed decided to hold off on QE3, do you think it could take as long as two years for them to feel forced back to it, forced to do something?

David: It could. It would depend on how sharp the downtick is. There are so many factors at work here that it’s really unknowable at this point. Nearer-term, all the signals are that the Fed will hold off on QE3 at their next meeting. And, as I have tried to make clear, that will have consequences – for equities, for the dollar, for the commodities sector.

L: Can you give those readers not familiar with The Casey Report some reason to believe your crystal-ball gazing? What’s your track record with these sorts of predictions?

David: Well before the current financial storm hit, we were forecasting that the Fed would begin monetizing the government’s debt, and we were writing about a credit crisis leading to a currency crisis, which is exactly what’s happened. We absolutely nailed it, and our subscribers made a lot of money on some of our recommendations – and safeguarded a lot of their wealth with others.

L: That’s true, though back then, before The Casey Report separated out the big-picture writing from the International Speculator our portfolio did take a temporary beating – along with everything else at the end of 2008.

David: Yes, but everything we said about the debasement of the dollar and its consequences for gold was borne out. Further, we made a bold move, counseling people to go a third in gold and gold-related assets, a third in cash, and a third in other assets that could do well in an economic crisis. Subscribers who actually followed this allocation suffered very little in 2008.

L: Isn’t it a bit contradictory to recommend that people keep 33% of their wealth in cash, if you think the dollar is being destroyed?

David: The dollar is being destroyed, as one can see by how much gold, oil, wheat, cotton or any other number of things one can buy with it. However, while it’s not dropping day to day and the markets remain extremely volatile, cash is not a bad thing to hold – especially in relatively safer currencies, like the Canadian dollar and the Norwegian krone.

So, again, the big trends remain intact. Our question now is what’s going to happen next, in the short term. And in that context, the Fed’s switch in policy is a big deal. When you go from the Fed showing up every week and buying Treasuries, to the Fed stepping back and saying “No more,” it can send major shock waves through the economy.

L: So, if the Fed does what you think it will, by June, how do readers invest accordingly?
David: [Laughs] This may not be a popular answer, but I think the correct answer is that the best thing you can do in the near term is to increase your cash position. I would be very cautious about moving into any other asset class at this point, including gold.

L: You wound me.

David: I know. Listen, if you own high-quality gold stocks, such as those you recommend in the International Speculator – companies that have the goods and can weather the coming storm – you can certainly just ride right through what’s coming. But if you’re not quite confident enough to avoid panic selling in a correction, or if you have some mutts in your portfolio that haven’t performed and you’re not sure why you own them, I’d get rid of them fairly quickly.

Remember: the time line on the Fed’s decision is quite near-term. That doesn’t necessarily mean there would be an immediate stock market crash, but it certainly would have an effect on the commodities sector.

On the other hand, as I’ve said, markets are complex. Saudi Arabia could go up in flames, sending oil and gold both way up. So I’m not telling anyone to get out of the markets. There’s no way to predict such events – but what we do feel confident about predicting is that the Fed will not roll right into QE3.

L: Agreed. And if you’re wrong, having cash to deploy into new opportunities won’t be a bad thing. Anything else?

David: If you’re of a mind to play in the currency markets, you could take a leverage bet on the dollar rising against competitive currencies. But right now, personally, I’m inclined to do nothing, except maybe to lighten up on some investments and go to cash.

That sets you up for the real play. If I’m right, and commodities – including precious metals – sell off, and mining stocks sell off even more, there will be some fantastic opportunities to take advantage of. The people who are paying attention will be able to clean up.

L: Now you’re singing my song: short-term cash, and get your shopping list ready.
David: That’s the way I see it.

L: Okay then, thanks for your predictions – I look forward to seeing how they bear out.
David: It was fun. We should do this again sometime.

L: I’m sure Doug won’t mind, especially when you get a strong sense of where the markets are going, like this one.
David: Until next time, then.
-----
[David Galland is one of the editors of The Casey Report – a monthly advisory analyzing big-picture trends that every investor needs to know about. Try a one-year subscription todayfor 20% off the retail price… plus 3-month money-back guarantee. And don’t forget to sign up for FREE to have “Conversations with Casey” delivered to your inbox every Wednesday.]


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

Over in the Options pit, our model portfolio has managed an average return of 40.51% per trade, 70 closed trades, 68 closed at a profit, or a 97.14% success rate. Average trade open for 42.21 days.

sk charts 19 April 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
Apr192011

Gold prices nudge through $1500.00/oz

Gold futures closed at a record Tuesday after bouncing off $1,500 an ounce, getting a lift from a weaker dollar and longer-running worries about debt-strapped developed markets.

Copper and other metals, which started the day on firmer ground, held their gains after getting a boost from housing-starts data.

Gold for June delivery GCK11 +0.65% ended up $2.20 an ounce, or 0.2%, at $1,495.10 an ounce on the Comex division of the New York Mercantile Exchange.

Earlier, gold rallied as high as $1,500.50 an ounce, according to the CME Group website, an intraday record for the metal.

Prices had dipped in and out of the red before floor trading began and continued to waver early in the session.

But investors, particularly long-term buyers, have shown a tendency to take advantage of short-term pullbacks, noted Bill O’Neill, managing partner at Logic Advisors.

“On every dip, trade is consistently buying on weakness,” said O’Neill.

The session’s rise to a record came against a backdrop that’s proved nearly irresistible to gold buyers — threats against Europe’s shared currency as Portugal, Greece and Ireland seek financial aid; rising global inflation; and on Monday, Standard & Poor’s decision to cut its outlook on the U.S. sovereign rating.

For some buyers, a main reason to invest in gold is the fear that government debt is spinning out of control, lowering the value of the dollar or other major reserve currencies, such as the euro. On Monday, gold futures also closed at a record after S&P cut the U.S. credit-rating outlook, briefly weighing on the dollar.

“The dollar is vulnerable. It is in a precarious position. Oil is trading near $108 and the same worries over the economy are resurfacing,” said Charles Nedoss, a senior market strategist at Olympus Futures.

The dollar index DXY -0.58% , which measures the greenback against a basket of six currencies, fell to 75.078, down from 75.504 late Monday. Read about the dollar’s retreat weighing on the dollar, the euro recovered after sharp retreat Monday, when it was beset by speculation over a possible Greek restructuring and after an election in Finland showed strong support for an anti-euro political party.

Silver continued to rally to 31-year highs, with the May contract SIK11 +2.36% adding 96 cents, or 2.2%, to $43.913 an ounce.

Other metals traded higher Tuesday, helped by a Commerce Department report showing housing starts rising a more-than-expected 7.2% in March.

We didn't manage to hold above the $1500.00/oz level as gold prices slipped back a tad later in the trading session on the NYSE, but still another super day for gold bugs.

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

Over in the Options pit, our model portfolio has managed an average return of 40.51% per trade, 70 closed trades, 68 closed at a profit, or a 97.14% success rate. Average trade open for 42.21 days.

sk charts 19 April 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
Apr182011

51 CONSECUTIVE WINNING TRADES from SK OptionTrader

This week our premium options trading service SK OptionTrader closed its 51st consecutive profitable trading recommendation. The service has now closed 51 trades in a row at a profit.

In total SK OptionTrader has closed 70 options trading recommendations with 68 of those being closed for a gain. In other words, 97.14% of our trading recommendations closed to date have been profitable.

The average return per trade is now 40.51% and the return since inception on our model portfolio is now 256.04%.

Our full trading record is provided below, with no trades omitted and all closed trading signals included.






















































































































































































































































































































































































































































































































































































































































































































































Action



Option



Price Opened



Date Opened



Price Closed



Date Closed



Days Open



Profit/Loss



Buy



USO $40 Oct-09 Puts



$4.30



6-Aug-2009



$4.80



31-Aug-2009



25



11.63%



Buy



KGC $20 Sep-09 Puts



$1.10



7-Aug-2009



$2.10



18-Aug-2009



11



90.91%



Buy



IAG $12.50 Sep-09 Puts



$1.00



14-Aug-2009



$1.50



17-Aug-2009



3



50.00%



Buy



GLD $100 Mar-10 Calls



$7.60



8-Sep-2009



$10.25



4-Nov-2009



57



34.87%



Buy



GLD $100 Mar-10 Calls



$7.80



6-Oct-2009



$10.35



4-Nov-2009



29



32.69%



Buy



GLD $90 Jan-11 Calls



$16.10



3-Sep-2009



$22.35



4-Jan-2010



123



38.82%



Buy



GLD $100  Jan-11 Calls



$14.00



6-Oct-2009



$20.05



18-Nov-2009



43



43.21%



Buy



GLD $100 Jan-11 Calls



$12.70



29-Oct-2009



$20.05



18-Nov-2009



20



57.87%



Buy



SLV $18 Jan-11 Calls



$2.20



29-Oct-2009



$3.40



23-Nov-2009



25



54.55%



Buy



SLV $20 Jan-11 Calls



$1.70



29-Oct-2009



$2.30



4-Dec-2009



36



35.29%



Buy



GLD $105 Jan-11 Calls



$10.80



29-Oct-2009



$18.00



4-Dec-2009



36



66.67%



Buy



GLD $110 Jan-11 Calls



$10.60



29-Oct-2009



$15.90



4-Dec-2009



36



50.00%



Buy



GLD $105 Jan-11 Calls



$12.00



6-Oct-2009



$18.00



4-Dec-2009



59



50.00%



Buy



SLV $16 Jan-11 Calls



$1.81



5-Feb-2010



$2.18



22-Mar-2010



45



20.44%



Buy



GLD $120 Jan-11 Calls



$8.00



23-Dec-2009



$8.80



10-May-2010



138



10.00%



Sell



GLD $105 May-10 Puts



$0.09



7-May-2010



$0.05



11-May-2010



4



44.44%



Buy



GLD $110 Jan-11 Calls



$10.80



22-Jan-2010



$12.21



21-May-2010



119



13.06%



Buy



SPY $100 Dec-10 Calls



$7.15



1-Jul-2010



$3.78



26-Jul-2010



25



-47.13%



Buy



GLD $110 Sep-10 Puts



$1.62



20-Jul-2010



$1.33



26-Jul-2010



6



-17.90%



Buy



GLD $105 Jan-11 Calls



$17.05



10-Dec-2009



$17.45



25-Aug-2010



258



2.35%



Buy



SLV $20 Jan-11 Calls



$1.35



29-May-2010



$1.46



14-Sep-2010



108



8.15%



Buy



GLD $110 Jan-11 Calls



$14.40



10-Dec-2009



$15.30



14-Sep-2010



278



6.25%



Sell Spread



Bought GLD Sep-10 $110 Puts for $0.68 & Sold GLD Sep-10 $111 Puts for $0.80



$0.12



5-Aug-2010



$0.00



28-Sep-2010



54



12.00%



Buy



GLD $120 Dec-10 Calls



$7.60



20-May-2010



$9.50



28-Sep-2010



131



25.00%



Buy



GLD $115 Jan-11 Calls



$10.00



1-Sep-2010



$15.00



1-Oct-2010



30



50.00%



Buy



GLD $115 Jan-11 Calls



$14.00



25-Nov-2009



$15.00



1-Oct-2010



310



7.14%



Buy



GLD $130 Jan-11 Calls



$3.70



15-Sep-2010



$5.00



4-Oct-2010



19



35.14%



Buy



GLD $130 Dec-10 Calls



$2.70



16-Sep-2010



$3.68



4-Oct-2010



18



36.30%



Buy



GLD $125 Dec-10 Calls



$4.00



31-Aug-2010



$7.30



5-Oct-2010



35



82.50%



Buy



GLD $125 Dec-10 Calls



$6.70



25-Jun-2010



$7.30



5-Oct-2010



102



8.96%



Buy



SLC $24 Jan-11 Calls



$0.60



27-Sep-2010



$0.80



7-Oct-2010



10



33.33%



Buy



GLD $131 Jan-11 Calls



$3.55



17-Sep-2010



$7.10



15-Oct-2010



28



100.00%



Buy



GLD $131 Dec-10 Calls



$2.98



28-Sep-2010



$6.00



15-Oct-2010



17



101.34%



Buy



GLD $132 Dec-10 Calls



$2.68



28-Sep-2010



$5.40



15-Oct-2010



17



101.49%



Buy



GLD $135 Dec-10 Calls



$2.15



1-Oct-2010



$4.00



15-Oct-2010



14



86.05%



Buy



GLD $134 Dec-10 Calls



$2.37



1-Oct-2010



$4.30



15-Oct-2010



14



81.43%



Buy



GLD $133 Dec-10 Calls



$2.08



17-Sep-2010



$3.45



19-Oct-2010



32



65.87%



Buy



SLV $22 Jan-11 Calls



$1.10



27-Sep-2010



$2.20



19-Oct-2010



22



100.00%



Buy



GLD $135 Jan-11 Calls



$3.20



1-Oct-2010



$3.95



19-Oct-2010



18



23.44%



Buy



SLW $31 Mar-11 Calls



$2.98



1-Nov-2010



$5.75



9-Nov-2010



8



92.95%



Buy



GLD $135 Jan-11 Calls



$4.02



1-Nov-2010



$5.90



9-Nov-2010



8



46.77%



Buy



GLD $136 Mar-11 Calls



$4.55



22-Oct-2010



$7.65



9-Nov-2010



18



68.13%



Buy



GLD $138 Mar-11 Calls



$4.30



25-Oct-2010



$6.25



9-Nov-2010



15



45.35%



Buy



GLD $135 Mar-11 Calls



$4.90



22-Oct-2010



$7.75



9-Nov-2010



18



58.16%



Buy



GLD $145 Mar-11 Calls



$2.35



26-Oct-2010



$3.75



9-Nov-2010



14



59.57%



Buy



GLD $135 Mar-11 Calls



$4.55



28-Oct-2010



$7.75



9-Nov-2010



12



70.33%



Buy



GLD $140 Jan-11 Calls



$2.50



1-Nov-2010



$3.60



9-Nov-2010



8



44.00%



Buy



SLV $27 Apr-11 Calls



$1.40



1-Nov-2010



$2.40



9-Nov-2010



8



71.43%



Buy



SLV $28 Apr-11 Calls



$1.17



1-Nov-2010



$2.00



9-Nov-2010



8



70.94%



Buy



GLD $140 Jan-11 Calls



$1.80



3-Nov-2010



$3.60



9-Nov-2010



6



100.00%



Buy



GLD $140 Mar-11 Calls



$3.10



28-Oct-2010



$5.00



12-Nov-2010



15



61.29%



Buy



GLD $140 Mar-11 Calls



$3.55



22-Oct-2010



$5.00



12-Nov-2010



21



40.85%



Sell Spread



Bought SPY Dec 18 '10 $130 Calls for $0.31 & Sold SPY Dec 18 '10 $129 Calls for $0.43



$0.12



4-Nov-2010



$0.00



19-Nov-2010



15



15.00%



Sell Spread



Bought DIA Dec 18 '10 $121 Calls for $0.20 & Sold DIA Dec 18 '10 $120 Calls for $0.31



$0.11



4-Nov-2010



$0.03



19-Nov-2010



15



8.00%



Buy



SLV $28 Apr-11 Calls



$1.41



16-Nov-2010



$2.00



24-Nov-2010



8



41.84%



Buy



GLD $140 Mar-11 Calls



$4.50



15-Nov-2010



$4.95



7-Dec-2010



22



10.00%



Buy



GLD $145 Mar-11 Calls



$3.05



15-Nov-2010



$3.40



7-Dec-2010



22



11.48%



Buy



GLD $140 Mar-11 Calls



$3.65



16-Nov-2010



$4.95



7-Dec-2010



21



35.62%



Buy



GLD $145 Mar-11 Calls



$2.55



16-Nov-2010



$3.40



7-Dec-2010



21



33.33%



Buy



GLD $145 Mar-11 Calls



$2.43



16-Nov-2010



$3.40



7-Dec-2010



21



39.92%



Buy



GLD $140 Mar-11 Calls



$3.05



17-Nov-2010



$4.95



7-Dec-2010



20



62.30%



Sell Spread



Sold GLD Jan 22 '11 $128 Puts for $0.68 & Bought GLD Jan 22 '11 $127 Puts at $0.55



$0.13



13-Dec-2010



$0.00



22-Jan-2011



40



13.00%



Sell Spread



Sold GLD Jan 22 '11 $128 Puts for $0.92 & Bought GLD Jan 22 '11 $127 Puts for $0.75



$0.17



16-Dec-2010



$0.00



22-Jan-2011



37



17.00%



Sell Spread



Sold GLD Jan 22 '11 $127 Puts for $0.73 & Bought GLD Jan 22 '11 $126 Puts for. $0.60



$0.13



16-Dec-2010



$0.00



22-Jan-2011



37



13.00%



Buy



SLV $30 Apr-16-11 Calls



$1.31



7-Jan-2011



$1.42



8-Feb-2011



32



8.40%



Buy



SLW $40 Jun-18-11 Calls



$2.57



7-Jan-2011



$2.75



15-Feb-2011



39



7.00%



Sell Spread



Sold GLD Feb 19 '11 $128 Puts for $0.71 & Bought GLD Feb 19 '11 $127 Puts for $0.58



$0.13



19-Jan-2011



$0.00



19-Feb-2011



31



13.00%



Buy



SLV $40 Jul-11 Calls



$1.19



10-Mar-2011



$1.65



23-Mar-2011



13



38.66%



Sell Spread



Sold TBT Apr 16 '11 $35 Puts for $0.16 & Bought TBT Apr 16 '11 Puts for $0.01



$0.16



21-Mar-2011



$0.01



7-Apr-2011



17



16.00%



Sell Spread



Sold GLD Apr 16 '11 $131 Puts for $0.96 & Bought GLD Apr 16 '11 $130 Puts for $0.80



$0.16



15-Mar-2011



$0.00



14-Apr-2011



30



16.00%


     

Averages



42.21



40.51%






Not only does SK OptionTrader provide trading signals and market updates for its subscribers, but it also runs a model portfolio and suggests a capital allocation to each trade. For example, we may signal to buy a certain call option with 5% of the portfolio allocated to this trade, or sell a vertical put spread with 10% allocated to this position, thus providing a much more realistic indication of performance.

The model portfolio currently has an annualized return of 115.61% based on all of the closed trades that SK OptionTrader has recommended so far.

Our most recent trade was closed on Friday, where we made a 16% return in one month. We sold the GLD Apr 16 '11 $131/$130 Vertical Put Spread on 15th March 2011 for $0.16, with 10% of our capital allocated to this trade. The spread narrowed to zero and so the trade was closed for a 16% gain on the 15th April 2011.

With the average return per trade standing at 40.51%, one would have only needed to invest around $1000 in an average trade to have more than paid for the $349 annual subscription fee.

Alternatively one has the choice to subscribe for 6months at $199 and $1000 invested in the average trade in the past would have paid for that fee twice over.

So if you would like to join us then you can do so by clicking on one of the subscribe buttons below. With gold and silver breaking out to new highs we think there are some excellent trading opportunities at present.

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