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Monday
Dec072009

Busy Times for OPTIONTRADER!

Recently market action has made things very busy at OPTIONTRADER, our premium options trading service. Since our last update we have closed another 7 trades, with an average gain of 51.17% in an average of 37 days per trade, and in the last two months our subscriber base has more than doubled.


For those interested in subscribing, below is a list of the closed trades since the last OPTIONTRADER update:



Bought GLD JAN-11 $100.00 CALLS @ $14.00 on the 6/10/09
Sold for $20.05 on the 18/11/09
43.21% Profit 43 days.

Bought GLD JAN-11 $100.00 CALLS @ $12.70 on the 29/10/09
Sold for $20.05 on the 18/11/09
57.87% Profit in 20 days

Bought SLV JAN-11 $18 CALLS @ $2.20 on the 29/10/09
Sold for $3.40 on the 23/11/09
54.55% Profit in 25 days.

Bought SLV JAN-11 $20 CALLS @ $1.70 on the 29/10/09
Sold for $2.30 on the 4/12/09
35.29% Profit in 36 days.

Bought GLD JAN-11 $105 CALLS @ $10.80 on the 29/10/09
Sold for $18.00 on the 4/12/09
66.66% Profit in 36 days.

Bought GLD JAN-11 $110 CALLS @ $10.60 on the 29/10/09
Sold for $15.90 on the 4/12/09
50% Profit in 36 days.

Bought GLD JAN-11 $105 CALLS @ $12.00 on the 6/10/09
Sold for $18.00 on the 4/12/09
50% Profit in 59 days.

OPTIONTRADER prides itself on being versatile and adaptable to suit market conditions. We do not buy and hold and hope, we are prepared to go long or short on any entity if we believe the opportunity is there.

Also, one does not need a comprehensive understanding of options trading to use this service, all signals are clearly explained and easy to follow. Also although options trading does carry risks, by keeping a close watch on the markets and combining our expertise and experience together with ongoing research, we are able to limit the downside of any trade. Although we of course do incur losses from time to time, our winning trades far outweigh our losers and we place a large emphasis on limiting risks involved in any options trade.



We use a balanced portfolio and suggest weightings with each trade as to give a realistic representation of how subscribers would've performed with the recommendations.



All paid subscribers to OPTIONTRADER can email us questions or comments anytime, and we will respond as soon as possible, using within 24 hours. All this is just $99 for 6 months, or $179 for one year!


We are currently formulating our trading plan for the coming months and expect to be placing a number of new trades in the coming weeks, so subscribe now to ensure you do not miss out on our trading signals!


Subscribe for 6 months - $499

 

Subscribe for 12 months - $799

 




If you have any questions regarding OPTIONTRADER or would like more information, please email skoptionstrading@gmail.com or visit www.skoptionstrading.com









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Thursday
Dec032009

High River Gold Update 04 Dec 09

HRG Chart 04 Dec 09.JPG


Apart from the above chart the data contained below has been very kindly provided to us by Chris Charlwood:


To High River Gold Minority Shareholders,
 
Shortly after I sent my communication this afternoon, the below press release came out confirming that the Troika/Polenica Investment will close shortly. As I said in my communicaton, we have more than enough shares to beat any future amalgamation proposal as long as we stick together and don't sell our shares.

Polenica Investments Limited: Proposed Acquisition of High River Gold Shares
TORONTO, ONTARIO--(Marketwire - Nov. 30, 2009) - Polenica Investments Limited ("Polenica"), an investment company and affiliate of the Troika Dialog Group, one of Russia's leading private investment banking group, entered into a subscription agreement with High River Gold Mines Limited ("High River") dated as of October 29, 2009 to acquire 150,000,000 common shares of High River (the "Shares") from treasury on a private placement basis at a price of CDN$0.38 per share, representing gross proceeds to High River of CDN$57,000,000 (the "Private Placement").
The Shares to be acquired by Polenica represent approximately 23.1% of High River's issued and outstanding common shares as at the date hereof. After giving effect to the Private Placement, Polenica will own and control a total of 150,000,000 common shares of High River representing approximately 18.77% of the issued and outstanding common shares of High River. As High River has obtained the conditional approval of the Toronto Stock Exchange with respect to the Private Placement and the personal information form relating to Polenica has cleared, it is expected that the Private Placement will close shortly.

Polenica will be acquiring the Shares for investment purposes. Polenica and its joint actors may in the future increase or decrease their respective ownership of securities of High River from time to time depending upon the business and prospects of High River and future market conditions.

Polenica's address is: 7 Perdica Street, Strovolos, P.C. 2057, Nicosia, Cyprus.
An early warning report (the "EWR") will be filed on SEDAR and will be available for review at www.sedar.com under High River's profile. A copy of the EWR can be obtained from the contact below.

About Troika Dialog
Founded in 1991, Troika Dialog Group is the leading independent full service investment bank and asset management firm in Russia. The Group's business consists of securities sales and trading, investment banking, private wealth and asset management, retail distribution and alternative investment. Troika Dialog's operations are located in 25 cities across Russia plus offices in London, New York, Kyiv, Almaty and Nicosia. In March this year, Troika Dialog Group announced a strategic alliance with Standard Bank under which Standard Bank acquired a 33% stake in Troika Dialog.

About High River
High River is unhedged gold company with interests in producing mines and advanced exploration projects in Russia and Burkina Faso. Two producing mines, Zun-Holba and Irokinda, are situated in the Lake Baikal region of Russia. Two new open pit gold mines, Berezitovy in Russia and Taparko-Bouroum in Burkina Faso, are also in production. Finally, High River has two advanced exploration projects with NI 43-101 compliant resource estimates, the Bissa gold project in Burkina Faso and 50% interest in the Prognoz silver project in Russia.
For more information, please contact
Troika Dialog Group Press Office
Maria Zhog
+7 (495) 258-05-19
pressa@troik


****************************************************************************************


Nov. 30, 2009                                                        
 
To HRG Minority Shareholders,
 
(All numbers below are approximate and in C$)
 
Management at HRG has improved operations significantly. Following shows HRG's state of affairs since the beginning of the year:
 
Financial Performance for first 9 months of 2009 
1)     $263M revenues vs. $123M in first 9 month of 2008 – a 114% increase
2)     82% increase in Gold production to 241,781 from 133,130 in first 9 months of 2008.
3)      $86M positive cash flow from operations – an increase of 12 times over first 9 months last year. (HRG potentially on track to over $130M in cash flow for 2009).
4)      $67M of debt paid down to a balance of $121M at end of Q3. (Severstal debt to be retired in Q4 with Troika proceeds -  thereafter, HRG debt  at approx. $91M).
5)     $18.5 million in working capital, up from a $42.1 million deficit at 2008 year-end.
6)     25% and 38% decrease in Q3 direct mining costs (cost per ounce produced) compared to Q2 2009 and Q3 2008, respectively.
 
Risks Alleviated
7)    Loan payments are all current.
8)    HRG meets all TSX listing requirements.
9)    Nearly 90% of minority did not tender to Severstal’s latest take-private bid of $.30.
10) Severstal’s debt to be cleared, thereby eliminating the risks of breached loan covenants.
 
Prospects
11) HRG says 300,000 oz to be  produced in 2009
12) Bankable Bissa feasibility study to be completed in 2010 with goal to advance resource to multi-million oz level.
13) Prognoz has 102M oz indicated and 103M oz inferred silver.
14) Many analysts predict gold prices to trade in the $1200-1300/oz range in 2010. This could increase 2010 cash flow from operations by $60-90M.
15) Enticing investment opportunity with Q3 cash flow multiple of 2.7 times (post Troika closing).
 
Based on the Q3 numbers and upon completion of the Troika investment of $57M, HRG is debt free on a net basis. At the end of Q3 the total debt was $121M plus $23M in payables for a total of $144M. To counter this, there was $39M in cash (and equivalents) at end of Q3, $64M in third party stock investments (at latest share prices) plus the $57M from Troika -  bringing the total to $160M. Hence, HRG will have a surplus of $16M on a net basis. The impressive piece of the Q3 results is the $33M in positive cash flow from operations. With gold moving close to $1200/oz, we can likely expect a minimum average of $1100/oz in revenues for Q4. If HRG produces at the same rate as in Q3, this could add another $11M to cash flow bringing Q4 cash flow to $44M.  Although some investors are discouraged by the write-downs of the last 2 quarters,  there could be write-ups in future for other HRG assets once an increase in reserves is established through more exploration and drilling.
 
With the recent closing price at $.44, HRG’s market cap would be approx. 2.7 times cash flow from operations (post Troika deal closing). Since Russian companies only report every half year, for this communication, a different Global mid-tier peer group is used for the Q3 comparison. Historically, the numbers have been in the same ballpark as the West Africa-Russian peer group. HRG’s Global peer group of mid-tier public gold companies (Randgold Resources, Northgate Minerals, Centerra Gold, Golden Star Resources, Red Back Mining, Eldorado Gold, Semafo Inc., Gammon Gold, New Gold Inc., Alamos Gold, Aurizon Mines, Jaguar Mining) is trading at an average of approx. 18.2 times Q3 Operating Cash flow on an annualized basis. If HRG were trading at this average multiple, the share price would be C$3.00 (after Troika dilution). HRG was trading at $3.40 early last year.
 
It seems to be taking some time for the Troika investment in HRG to be completed. Perhaps the many complaints sent in are causing the TSX/OSC to carry out extra due diligence. Although minority shareholders are hopeful that the shares issued to Troika won’t carry votes in an amalgamation transaction, this communication assumes the deal will be approved as announced. When the Troika investment completes, there will be approx. 798.9M shares outstanding. Severstal will own approx. 400.7M shares (50.16%). Minority will own approx. 398.2M  shares (49.84%) including Troika and approx. 248.2M shares (31.06%) excluding Troika. If Severstal were to propose an amalgamation, only minority shareholders are able to vote and majority of the minority wins. Severstal’s ability to vote its approx. 28M shares (purchased by way of tender to its bid this summer) for an amalgamation expires on Dec. 8. The rules state that they were able to vote these shares as long as the vote occurred within 120 days from their last offer date of August 10. The Articles of Incorporation state that they need to give shareholders 21 days notice for a special meeting. The timing now precludes Severstal from voting these 28M shares (or any of its shares) for amalgamation. Therefore, even if Troika is  friendly to Severstal and votes all its 150M shares for an amalgamation, it should be relatively easy to get more than 150M minority shares (out of 248.2M) voted against such a proposal. For instance, during Severstal’s bid this summer, minority holding approx. 173M shares stated in writing  they would not tender for less than an average of $1.41. In total, almost 90% of minority did not tender their shares. The institutions confirmed last week that they currently hold approx. 115M shares and would vote against any amalgamation proposal for under $1. It is likely that even more than 173M shares worth of  minority will come out to vote against an amalgamation due to increased minority’ organization’. Based on this information, it would seem a wasted effort for Severstal to attempt such a transaction.
 
Many believe the reason for HRG’s low multiple is that potential investors are holding off buying this stock due to the perception that Severstal still intends to buy out minority shareholders at a low price. If some of the rumours are true and Severstal intends on selling its entire gold division next year, the sooner HRG trades to its potential value, the higher the price for the whole division. Therefore, Severstal ought to consider announcing that they no longer intend to buy out minority -  possibly resulting in HRG trading towards its peer multiples. Severstal’s approx. 50.16% ownership (after the Troika deal completes) could be worth more in a shorter time frame than attempting to buy 100% and losing  the next vote. Also, as the gold price continues to rise,  so will the share price that minority are willing to sell at.
 
Hopefully, this HRG story catches the attention of new funds or institutions that see an opportunity of investing with the goal of creating momentum in the share price with Severstal possibly paying a premium to whatever the price moves to. Clearly, there is potential for a fund to make a decent return in short order if there is another Severstal buyout offer. If minority defeat an amalgamation attempt, then the upside may be 7 times the current share price. All efforts are being made currently to contact such new funds/institutions. As we await HRG’s next announcements, the more shares minority own, the more votes we will have against an amalgamation proposal. Some of the friendly institutions are currently buying in the market, however, so may be Severstal and/or Troika.
 
If you received this communication by e-mail, you are already on the communication list. If not and you would like to be on the list, please e-mail to my address below. It is important to be on the list  in the event of another minority buyout proposal.
 
References:
 
HRG Q3 press release:
http://finance.yahoo.com/news/High-River-Gold-Reports
-Third-ccn-1899805673.html?x=0&.v=1   
 
HRG 2008 yr end press release:
http://finance.yahoo.com/news/High-River-Gold-Reports
-2008-ccn-15066370.html?x=1&.v=1  
 
HRG Q3 2008 press release:
http://finance.yahoo.com/news/High-River-Gold-Reports
-Third-ccn-13873092.html?x=1&.v=1
 
Chris Charlwood
Retail Investor
Rainerc7@gmail.com
604-718-2668 office
604-718-2638 fax


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Wednesday
Dec022009

Agnico-Eagle Mines Limited Call Options Up 81.46%

AEM Chart 03 dec 09.JPG



On the 4th November 2009 we bought the Agnico-Eagle Mines Limited (AEM) Call Options, JAN 2010 series at a strike price of $60.00, symbol AEMAL for an average price of $5.10, today they ended the session at $9.30 for an increase of 81.46%

Agnico-Eagle closed at $67.69 putting on $2.23 for a gain of 3.41% on the stock price, with volume at a healthy 4.9 million shares traded.

We did mention earlier that we had placed sell orders at double the purchase price so its fingers crossed that the old Buzzard can hit $10.20 in the next day or two, which would give us a return of 100% in one month.

It would be nice to register a 'win' tomorrow following yesterdays success with Randgold Resources Limited when we closed our position with a 100% profit.

Sean Boyd, CEO, Agnico Eagle Mines appeared on BNN today and looked to be his usual confident self despite the monumental challenge of managing five new mines, worth a watch if you are an Eagle fan, just click here.



As always go gently as options trading is highly speculative and dangerous to our financial health, but for now enjoy the ride and keep smiling.

Any thoughts or comments on how we could do better are always welcome so please let us know.


Have a sparkling day.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

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

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


Wednesday
Dec022009

Buy Gold, Be Smart, Diversify

War Tax.JPG


How the government tries to fleece you and what you can do about it By David Galland, Managing Director, Casey Research.

After a relaxing Thanksgiving break, I anticipated to return to work in a lighter frame of mind. However, the following item from FOX News crushed that hope right away:

Lawmakers Propose 'War Surtax' to Pay for Troop Increase in Afghanistan

Two top Democrats say they want to impose a new tax on the wealthy to finance any increase in U.S. troops for the Afghanistan war

Rep. David Obey, D-Wis., chairman of the purse string-controlling House Appropriations Committee, is calling the idea a "war surtax." He said that just as the federal government is expected to pay for its proposed intervention in the health care sector with new taxes, any escalated involvement in Afghanistan should come with a payment plan. 

"If we have to pay for the health care bill, we should pay for the war as well ... by having a war surtax," Obey told ABC News in an interview that aired Monday. "The problem in this country with this issue is that the only people that has to sacrifice are military families and they've had to go to the well again and again and again and again, and everybody else is blithely unaffected by the war." 

Readers of my free missive, Casey’s Daily Dispatch, know I’m vehemently opposed to the doomed adventure in Afghanistan. On that front alone, the idea of a war tax is like a shard of glass in my eye.

But it’s even worse than that. It shows just how degraded this country has become – picking the pockets of the productive is now pretty much the only remaining source of funding the administration and its allies can imagine.
 
Just to be sure we keep this in perspective: At this moment, if you earn more than $250,000 a year (which isn’t what it used to be, given the steady erosion of inflation over the last 30 years), you will pay federal income taxes of about 35%, no estate taxes, and a 15% capital gains tax should the money you put at risk in the market return a profit.
 
As soon as next year – if the government moves up the expiration of the Bush tax cuts, as I very much expect them to – the top tax bracket will go to 39%. On top of that, the current healthcare legislation will add a 5.4% surcharge. Then, add in the Democrats’ proposed 5% war tax. So straight up we’re talking 49%.

Then there’s a near doubling of capital gains taxes, from 15% to as high as 28%. And, of course, the return of the estate tax.

But that’s just for starters, because everywhere you look states and municipalities are raising taxes and fees, and attorney generals, taking a page out of Caligula’s playbook, are casting about for their next deep-pocketed victim.

At the end of the day, the top tax rate in the U.S., starting as early as next year, will soar way over 50% of income. While further number crunching is required, it is a very safe assumption that top income earners will soon be paying over 65% of their income in taxes.
Which is to say, if you are in a top tax bracket, every penny you earn between January 1 and August 25 will go straight into the coffers of one layer of government or another.  
And this while more than 40% of Americans pay no income taxes at all.

This is just another symptom of the single biggest problem now facing the U.S. (and for that matter, the world): the ballooning size and cost of government. And there are no speed bumps in sight.

Even so, endless complaining won’t really do anything other than raise the blood pressure. So, what can we actually do about it? Some ideas:

1. Buy gold. Unless and until there is an angry upwelling of popular discontent at the growing size of government – and it has to be far more substantive than just a few vocal talk radio jocks, or even 100,000 or so people peacefully gathering on the Mall in Washington DC – the government will continue to grow, or even just keep running at current levels, which means the destruction of the dollar. Many tangible assets will do well, but their intrinsic value as money means gold (and silver) will do best.

As I write, gold has again broken to a new, non-inflation-adjusted high. As with all markets, it will fall back now and again, but the trend is very much up.

2. Buy gold shares. The leverage in the high-quality gold shares can boost your returns by a factor of 2X to 10X, and more. Again, there will be setbacks, but shares in the right companies with the right projects will trend higher and higher until the Mania phase kicks in, and then things will get really interesting.

3. Be smart about taxes. Keep an eye on Pelosi’s tax trap – if you have appreciated assets that qualify for long-term capital gains, consider selling them before year-end to lock in the lower capital gains tax. Likewise, if you run a business and you can pull any income into this year, versus next, consider doing so.

4. Diversify globally. Why do it? The short version is that it’s a big world out there, and there are a lot of places that are incredibly beautiful, safe, and unbelievably inexpensive. For many non-U.S. citizens, expatriating means you’ll pay no income tax, but even if you are a U.S. citizen, there are substantial tax benefits in moving offshore. And what you can save in cheaper everyday living allows you to live like royalty, for a fraction of the cost. Which means you can save more.

Personally, I favor Argentina. Some years ago I went on a three-year quest to find paradise on earth, and Argentina was ultimately the hands-down winner.

5. Recognize the bureaucracy for what it is. These are not “public servants” but rather an entrenched interest group that is actively engaged in a systematic effort to look after itself, with no regard for the damage it’s doing to your family finances and to the country.

Now, there are two schools of thought as to how you deal with the bureaucrats. My dear friend and partner, Doug Casey, would tell you to take every opportunity to let the bureaucrats know you hold them in low esteem. For example, by asking airport security personnel how old they were before they realized they wanted to make a career out of pawing through people’s underwear.

The second approach is to accept that the bureaucrats, backed by the voting masses, hold most of the cards at this point. Poking at them with a stick risks unnecessary aggravation and worse. So, keeping a low profile and going about your business is certainly a rational choice.
Of course, there’s no better way of maintaining a low profile than moving to another country where you’ll be welcomed as a visitor and not viewed as a serf.

Is there no hope? One obvious scenario is for the Democrats to lose control of either the House or the Senate come next November’s elections, thereby returning the nation to some form of political gridlock. The best of all worlds, in my view. And the way things are heading, this is now a certainty.

But before you get overly excited about the prospects of a political solution, don’t forget the role the Republicrats have played in bringing the nation to this sorry state over the past several decades. If you’re holding out for an outbreak of capitalism or other signs of fiscal sanity once Republicans regain some modicum of political power, you are delusional. They may package their programs in different-colored paper, but when you rip away the wrappings, you’ll find the same statism and the same promises of a chicken in every pot.

Look after yourself – no one else is going to do it for you.

Gold has just hit a new record-high… and the small-cap Canadian explorers with good-sized deposits are sure to be dragged along into the stratosphere. In the current issue of Casey’s International Speculator, Editor Louis James names eight junior gold miners that – due to their top-quality assets – are destined to become takeover targets for the big players in the gold industry.

Get in today and watch your investment double or triple tomorrow, completely risk-free with our 3-month, 100% money-back guarantee. Learn more here.

Have a sparkling day.

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.

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Tuesday
Dec012009

Randgold Resources Limited Options Trade Up 100%

Randgold chart 02 dec 09.JPG


We are pleased to report that today we closed our position in Randgold Resources Limited (GOLD) by selling our Call options at a profit of 100%.

On 8th October 2009 we purchased Call Options on Randgold Resources Limited (GOLD) they were the December 2009 series with a strike price of $80.00 (GUDLP) and we paid an average of $4.70 per contract for them. Today our sell order was triggered at $9.40 as gold prices traded as high as $1200/oz and Randgold gained over $3.00 per share.

This trade took almost two months to mature being hampered along the way by persistent calls for a rally in the dollar and also by the fallout from the Dubai property problems. However, we kept our sell orders in place, perspired a little and were finally rewarded today when our position was closed out.

We now have a little more cash in the trading account and will look to deploy it shortly so stay tuned as we search for another undervalued stock which is ready to move.

The week started very well with the New Zealand All Blacks rugby team thumping the French in Marseilles which bodes well for the upcoming Rugby World Cup in 2011.


As always go gently as options trading is highly speculative and dangerous to our financial health, but for now enjoy the ride and keep smiling.

Any thoughts or comments on how we could do better are always welcome so please let us know.

Have a sparkling day.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

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

For those readers who are also interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.
Monday
Nov302009

Gold Bullion ETF in Switzerland: SGOL

Canadian Gold Coin 01 Dec 09.JPG


With the overwhelming popularity of GLD as a physical gold bullion exchange traded fund, another fund has set up which provides a similar function, albeit with one key difference.

Back in September, ETF Securities launched SGOL, a physical gold ETF like GLD except the gold is stored in vaults in Switzerland, unlike GLD where the gold is in the USA.

During the 1930's President Roosevelt issued an executive order banning American's from owning gold and making it illegal to own gold in the USA. Although a repeat of such an order is unlikely to happen again, it still remains a possibility and therefore a threat to anyone with gold holdings in the US.

Therefore it would be prudent to hold gold outside of US borders, such as in Switzerland, just in case such an scenario should arise again.

However despite a “safe” reputation, Switzerland still has a government and any government cannot be fully trusted. Therefore rather than place all your eggs in one basket, a better idea would be to hold a portion of GLD and a portion of SGOL, so to split your risk. Both trade on American exchanges, and although GLD is more liquid and has a much larger market cap, SGOL still has good enough volume for the retail investor.

We are simply putting SGOL up as an alternative, or even more a complement to GLD. Physical gold ETF's still poise risks and would not work as well in an armageddon scenario as bullion under your bed so to speak!


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are new to this site and are interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

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Sunday
Nov292009

The US Dollar is Approaching a Major Support Level

Five day dollar 29 Nov 09.JPG

This chart shows the dollar over the last five days trying to cling to the '75' level. If this does not hold then '72' is the next major support, which if hit represents a double bottom for the dollar as the 71.34 was the previous low.

Taking a macro view of of the dollar, the chart below is courtesy of Jesse's Café Américain which may not be clear enough for you, if so, then just click here to see a full size version of it. The chart shows the dollars progress since the early 90s which has been a fairly volatile ride for the dollar.

US Dollar chart Long Term 29 Nov 09.JPG

It can be argued that the double bottom will be followed by a bounce by the dollar to higher ground which in turn would would cap any further progress in gold prices. This is not an opinion that we subscribe to as the move to gold is starting to gather momentum and the diversification out of dollars and most other paper currencies is also on the move albeit at a slow pace for now. The next year or two will see the dollar trading at the '40' level before this financial mess runs out of steam.

A default by Dubai is the latest to come and haunt us but not the last of this type of event. If the sub prime debacle has shown us that the banks are not capable of arranging and managing mortgages then why should we expect them to be successful with much larger and more complex projects. Commercial property has yet to raise its ugly head, in any downturn business's go under and the rent stream drys up so we do need to be aware that this could be the next area of the economy requiring a bale out.

Golds chart is telling us that gold is overbought and so it is easy to make the decision to reduce exposure to it. However the hard part is deciding at just what point we would re-enter the market. If you are selling some of your stocks at the moment then we wish you well, however, that call is too difficult for us make at the moment so we will stay put. Should events conspire to change our minds than we will try and trail our intentions prior to making a move.

Enjoy the week and please add any comments that you have as they all add balance to our cavalier stance on this subject.

We apologize if we have not answered your email, but there are only so many hours in a day, so please use the site to get your point across, many thanks indeed.



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Saturday
Nov282009

South Africa’s golden age is coming to an end

Gold mine.JPG

The high cost of mining old mines and the scarcity of reserves as seen the once mighty South African gold mining industry fall from grace in recent years.

South Africa’s remaining gold reserves are less than half existing estimates and the cost of bringing the dwindling resource into production may be far more than its value, a new report has found.

An article in the South African Journal of Science has highlighted the plight of the country’s gold mining industry, which is afflicted by high costs, environmental damage, falling output and illicit mining. A formerly illustrious industry is in its death throes, according to Chris Hartnady, the report’s author, who predicts that the output of the main Witwatersrand goldfields could fall below 100 tonnes a year within a decade.

South African output peaked in 1970, when the country mined 1,000 tonnes of gold and accounted for more than three quarters of world gold production, but production has declined rapidly since. Last year, South Africa produced 233 tonnes — about 10 per cent of world gold supply.


“It must be accepted that the Witwatersrand goldfields are now 95 per cent exhausted ... the glory days of South African mining appear to have arrived finally at an ignominious end,” Mr Hartnady wrote in his report.

This article was found on 'Times on Line' and should you want to read it in full, please click here.

Please fire in your comments.

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Wednesday
Nov252009

Happy Thanksgiving Day to All of Our American Subscribers

Thanksgiving 26 Nov 09.JPG

From the team here have a great day with your family and friends and enjoy that Turkey.

For football fans we are shouting for Oakland to win at Dallas by six points, Go Oakland Go!

Wednesday
Nov252009

How and Why China Will Flood the Gold Market

In this mornings mail bag we have this 'take' on China By Jeff Clark, Editor, Casey’s Gold & Resource Report

As you read this, the Chinese government is doing an extraordinary thing... something nearly unheard of in the modern world.

It is encouraging citizens to put at least 5% of their savings into precious metals.
The Chinese government is telling people gold and silver are good investments that will safeguard their wealth. After last year's meltdown in the stock market, people believe it. After all, Chinese citizens don't receive government retirement money... and they don't have company pension plans like people in many other countries do.

This is why folks in China are lining up outside of banks, post offices, and the new official mint stores to buy gold and silver (they especially like silver because it's cheaper per ounce).

The Chinese attitude toward gold and silver is a striking contrast to the American attitude right now. I don't recall a TV or radio ad from my congressman or President Obama encouraging me to buy gold or silver. Does your bank sell silver bars? Are gold mints popping up in your neighborhood? Are any of your friends, family, or coworkers scrambling to buy precious metals?

In spite of a few ads on television and satellite radio, buying gold and silver in the U.S. is still largely seen as a fringe-group activity. That's not the case in China. And in the big picture, there are three distinct trends occurring in China today that many in the Occidental world are not paying attention to.

First, look where China stands as a gold-producing nation.

China worlds largest gold producer Casey.JPG


In 2008, China produced 9,070,000 ounces of gold, exceeding all other countries. Further, its production continues to rise, while many of the top-producing countries are in decline.

Second, China had the lowest per-capita gold consumption of any country over the past half-century. This year, it is widely expected that Chinese demand for gold will surpass that of India. In other words, they'll also become the world's No. 1 retail buyer.

Third, the Chinese government has been using its foreign exchange reserves to buy gold – a lot of it – and doing so on the sly. This past April, Chinese officials made a surprise announcement that they had been secretly buying gold since 2003, increasing their gold reserves by 76% to 33,886,000 ounces. The Chinese government now owns 30 times the gold it held in 1990. And China is believed to be a leading candidate to buy some or all of the 12.9 million ounces the International Monetary Fund says it will sell.

But all this production and all this buying isn't enough...

Even though China is the world's seventh-largest holder of gold, gold comprises but a tiny fraction of its reserves, as shown in the table below.

World Gold Holdings.JPG


What would happen to the gold price if China increased its gold reserves to just 5%? What about 10%? To overtake the U.S. as king of the gold hill, it would have to buy all the gold held by the governments of France, Italy, and Germany combined. Can China really do any of that?

At $1,000 gold, to push China's gold holdings to 5% of reserves would take $55.3 billion; to 10% would cost $144.4 billion; to be the world's top gold dog would run $227.6 billion.


Chinese reserves are approaching $2.3 trillion, of which almost 70%, or $1.6 trillion, are denominated in U.S. dollars. The cost to become the world's biggest holder of gold would be a pittance compared to the amount of money China has available. In other words, money is not a problem.

Combining the country's massive holdings of dollars and the very real likelihood those dollars are going to lose much of their value, the motivation to buy tangible assets is urgent.

Further, keep this in mind: China's reserves continue to grow. Therefore, the country must continue buying gold (or consuming its own production) just to maintain the small gold-to-reserves ratio it has, let alone increase it.

In addition to the government buying precious metals, Chinese citizens will continue gobbling them up, too. Demographics alone tell us why.

Government statistics show the average urban household in China has about US$1,300 in disposable income. Multiply that by the number of urban households in China and you come up with roughly $36 billion in available capital.

According to precious metals consultancy CPM Group, about 9.5 million ounces of gold will be turned into coins this year (including "rounds" and medallions). At $1,000 gold, that's $9.5 billion, or only about one-third of the capital available in China.

The number is more striking for silver: Total coin production this year is expected to hit 35 million ounces, equaling $615 million or just 1.7% of the available capital in China. Of course, a lot of Chinese people want cars and refrigerators, etc., but it won't take much of a shift of this capital into gold and silver to have a major impact on the global retail precious metals market. It may already be under way.
And long-term projections show the demographic trend won't slow down: The middle class in China is expected to increase by 70% by 2020. So over these next 10 years, more Chinese and more money will be coming into the precious-metals markets, all at a time when inflation is almost certain to be high, adding to gold and silver's appeal. Couple this with China's long-standing cultural affinity for gold and you have the makings for a potentially life-changing gold rush.

If I were a crime detective, I'd say China has the motive, means, and opportunity to push gold and gold stocks much higher.

If you're interested in taking a stake in China's booming silver market, make sure to read the latest edition of Casey's Gold & Resource Report. Jeff has turned up a small company poised to become one of the dominant mining companies in China. This company is sitting on an incredibly rich silver property... it's heavily owned by its blue-chip management. It's the one stock to own if China goes "silver crazy." You can learn about this and all other stocks recommended in Casey’s Gold & Resource Report for just $39 per year. Try it risk-free for 3 months here.

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Hold on tight it is still going to be a white knuckle ride so please don't go too crazy on any one particular stock or vehicle, make sure that you can live to fight another day.

Finally, please, please, please, comment on our articles, they are really useful for us and our readership, thanks!

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.


For those readers who are new to this site and are interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

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.