Tag Archives: Gold

Problematic 1970’s Comparison

By Steve Saville

The Problematic Comparison With the 1970’s

We suspect that the gold bull market that began in 2001 is, in very rough terms, an elongated version of the 1971-1980 bull market. Part of our reasoning is that there is evidence in the performance of the gold-mining sector of a bullish gold trend beginning in the early-1960s, with gold itself being unable to reflect this bullish trend until 1971 when it was officially untethered from the US$.

At the point when the official link to the US$ was broken, the gold price was like a coiled spring. After it was released it shot upward in spectacular fashion to a high in 1974 and then plummeted to a low in 1976, all as part of trying to find the level that best reflected gold’s value under the new monetary system.

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Signs of a Resource Sector Bottom? Really?

By Biiwii

I have not even read the interview before starting this post.  By the end of the post I will have read it and I assume, taken issue with at least some of it.

Doug Casey: Signs of a Resource Sector Bottom

The very term “Resource Sector” is something that bothered me going back to the ‘inflation bull’ market of 2003-2008.  Back then I used to grouse about the gold is silver is copper is tin is oil is hogs crowd always lumping ‘resources’ together as if they are anywhere near the same thing.  They are not; they are vastly different, with most ‘resources’ being economically cyclical while gold is counter cyclical.

Sure, sometimes when the inflation tout is going good it all goes up.  But there is no resources sector as a discrete and unified asset class.  So my conclusion was that anyone pitching “the metals” as many used to often do (gold and industrial metals all in the same analysis) is either just lazy or a ‘resource sector’ pitch man or woman.  There were tons of ‘em in 2003-2008.

Anyway, on to Casey here…

L: Well, Doug, we’ve seen another quarter of high volatility and significant world events. What strikes you as most important at present?

Doug: Everything is still held together with chewing gum and baling wire, for which I’m grateful, considering what’s coming. It’s very clear to me that the global economy is in very much the same space as it was in 2007—in other words, on the edge of a precipice.

So buy resources!  Wasn’t that a solution from many corners of the fear trade into the 2008 top when resources of all kinds eventually crashed as bad or worse than the stock market?

Continue reading Signs of a Resource Sector Bottom? Really?

Randgold Ups Reserves…

By Biiwii

Randgold Resources (GOLD) is one of the few senior gold miners I am able to list in NFTRH as a miner of relative quality.  It appears along with Royalties, Junior miners and Explorers that are always on my watch list.

I sold it on the last pop to the March high, but found this article at Mineweb to be interesting.

Randgold: Ups reserves, raises dividend, seeks more growth

On 2014 performance, CEO Mark Bristow (pictured) noted that unlike most of its gold mining industry peers, Randgold had not needed to write down its reserves and resources as the gold price dropped because it had calculated its reserves at $1,000 per ounce and its resources at $1,500 per ounce for the past four years. Many other miners, developers and explorers had been building higher prices into their calculations and have since had to backtrack, sometimes resulting in some major write-downs.

Bristow commented, “We have looked closely at all our mines to ensure that they will still be profitable at $1,000 per ounce and we’ll continue to review our operations against a range of gold price scenarios. With the inclusion of Gounkoto underground we are now able to demonstrate a 10 year plan of plus 1 million ounce production per year and all our operations will be profitable at a $1,000/ounce gold price which is unique in the industry.”

I do not make much public commentary (leaving that for the freely available micro managers) about when the sector will be ready for real investment (it’s still a bear market, technically, folks) but I will note that this is one of the companies that will be around and in position to lead when the time is right.

But looking ahead, Bristow notes that there is great potential in the existing low price environment for additional growth opportunities resulting from the squeeze on developers and explorers resulting from this. “Organic growth will remain our core driver but, as we look ahead from this position of strength, we will consider opportunities that are often generated by stressed markets and may well elect to play a part in the likely restructuring of the gold mining industry,” he says.

As he has been able to do in the past, he also points out that the company has solid operations with strong cash flows, a robust balance sheet with no debt and substantial cash, and a share price which for years has consistently outperformed the market. Its five-year forecast shows a growing production profile and a reduction in costs.

Why am I pumping Randgold’s tires here?  I don’t even own it.  But I always appreciate well run businesses and management that is in line with investors’ goals.  That is what I think Mark Bristow is and I just wanted to highlight that.

As to the chart, I lucked into buying it right at the March low and sold it on the pop (one bear market rule is that if you are going to trade long in a bear market, you are sure as hell going to take profits).  The chart has a lot of work to do, beginning with the red dotted line, on through the moving averages, turning RSI and MACD green, etc.

But it’s a quality miner among the wreckage.

gold

Here’s Why it Could Get Way Better for Gold

By Biiwii

Here’s why it could get way worse for gold

gold

“When that dollar really does break up towards that 100 level on the futures… ahm, perhaps the Fed raises rates, whatever it may be, that will be the thing that finally pushes gold through to the downside and for traders – this is trading nation [biiwii comment: wtf does that mean?] – gold is a great trader to the downside.  It tends to be very deliberate, very tradeable… I look forward to it but its still range bounce for now.”

Well okay, CNBC’s talking head expert agrees with Team Final Plunge, all aboard the Gold Downside Momo Express!  By the way TFP, how do you feel having this crowd in your trade?

Now don’t get me wrong.  I am not bullish on gold’s price yet and indeed NFTRH‘s lowest potential target is 970.  But never will CNBC be right there giving the public the ‘need to know’ information when they really need to know it.  If gold takes a final plunge, it is probably going to be quick and it is going to be a final washout prior to something entirely new on the macro.

Anyway, then they go on to blab about bad fundamentals “as the US dollar rises” and needs “a real volatility avoidance mentality, and we don’t see that.  Overall I’d say you’re better off focusing on your equities and fixed income vs. gold.” 

Then the Barbi Doll doing the interview of these high level geniuses closes with “not a fan, that will do it for us…”

Get this; these clowns following the trends were nowhere to be found last summer when we began chronicling the bottom and upturn through resistance in the US dollar.  These clowns are the ones who are going to put the public against gold, for the US dollar and for equities just as these clowns are the ones who put them in gold and silver heavy in 2011.

Get this also; while it has been a patience play for sure, a strong US dollar is one strong fundamental consideration in bringing on a new bull market maybe not in gold, but in the gold stock sector.  That is because we are 100% focused on economic cycles now.  Not some stupid blathering about a strong US dollar and the Fed’s ongoing Kabuki Theater ‘will they or won’t they raise the Funds Rate by a lousy 1/4 point’.

I really do dislike the MSM’s utter banality, it’s just that I need them to gauge the psychological aspects of an overall plan that includes so much  more than what the average TV star analyst puts out there, not to mention a good chunk of the mainstream financial services industry.

Palladium vs. Gold

By Biiwii

No one indicator should be considered in a vacuum, especially one that is the ratio of a substance that has unique supply/demand fundamentals (Palladium) vs. one that is stable (Gold).  But here it is anyway, the Pall-Gold ratio as we have used for a long while in NFTRH.  Why?  Because for whatever reasons, it has been in line with economic cycles.

Here’s the weekly chart we usually use, showing a volatile series of spikes and drops.  The indication is still economic trend up, but as noted in NFTRH 336 “If this volatility keeps up it is going to turn the moving averages down and put a red arrow there.”

pall.gold

We also noted that nominal PALL is on the verge of entering a bear market, to join its big bro, Platinum.

Here is what Palladium is doing vs. Gold (roughly) today (PALL-GLD)…

pall.gld

Okay so remember, it is just an indicator made up of two discrete items.  But it is also an indicator that tends to be in line with economic up and economic down cycles.

NFTRH 336 Out Now

By Biiwii

Well, I just wrote 42 pages.  I’m spent, so no big promo.  I am personally enjoying the market for what it gives and having a good year so far.  In that existing trends have not changed yet, the real fun however, begins at some future point.

nftrh336

Around the Web

By Biiwii

 

NFTRH 334 Out Now

An important new theme is introduced with respect to the Fed and its unruly subject, Uncle Buck.  Lot’s of other good stuff too.

nftrh334

Gold Sucks!

By Biiwii

[edit] a quick look around the interpipes tells me that there are people watching gold with no sense of humor, taking the title of this post literally or as a contrary indicator.  sometimes i just don’t know.

Ben Kramer-Miller, a fundamental gold stock analyst who I keep an eye on, recently had an article at SeekingAlpha called Gold’s Bull Run Has Not Yet Begun.  I remember taking note of the title when it came out, but as is usually the case I did not have the time, nor the inclination to read it.  I like to keep my own thoughts square and balanced and don’t need other peoples’ thoughts on gold clouding my own.

But as I was fooling around over at the St. Louis Fed’s website (it is recommended that geeks register for a free account) doing the following charts I remembered ‘oh jeez, I think somebody’s already on this topic’.  So I checked it out and sure enough he did gold vs. the Monetary Base using a graphic from the also-recommended MacroTrends website.  Anyway, preamble behind us we move on…

The long-term chart of nominal gold, anyway, has not done so bad.  Boy, this bubble from 2001 to 2011 sure was a humdinger.  It must have so much further to fall.  Look how much higher gold went this time compared to the bubble that blew out in 1980.

gold

Oh wait, this bubble was actually not as bad as the 1980 bubble when CPI adjusted.

gold.cpi

Oh wait again, gold is and has been in a bear market in Monetary Base units ever since the US dollar was freed from its shackles in the early 70’s.

gold.base

Bottom Line

  1. Either gold sucks
  2. …or its bull market has not yet begun

…and may never begin if confidence remains intact in policy makers conjuring up digital funny munny units out of thin air while holding our trust in their stewardship.

Stewardship is defined here as blatant manipulation of things that used to mean something, like the rates of interest on loans to be paid back and the productivity that would spring forth from savings, capital deployment and investment.  You know, hokey old fashioned stuff like that.

But this is a world where large entities, including governments, don’t need to be responsible for the ‘paid back’ side of the deal and so, gold has sucked because there seem to be no repercussions for it to protect people from.  They are creating debt and confidence money and this stupid rock is below the pre-Bretton Woods levels in Money Supply terms.

All the more reason that the ‘gold is not about price, it’s about value’ mantra holds up just fine.  It’s price sucks and its value in a traditional sense measured by out of control governmental money creation, has never been better.

China’s Gold Holdings

By Steve Saville

Total guesswork regarding China’s gold holdings

Last year I noticed an article by Alasdair Macleod containing an estimate that China (meaning: China’s government) had accumulated 25,000 tonnes of gold between 1983 and 2002. I would say that this estimate was based on rank speculation, but that would be doing an injustice to rank speculation. It is more like total guesswork. It is largely based on assumptions that are either obviously wrong or that have no supporting evidence. I bring this up now because it looks like the 25,000-tonne figure that was plucked out of the air by Mr. Macleod last year is on its way to becoming an accepted fact in some quarters. For example, it forms the basis of a new estimate that China’s government now has 30,000 tonnes of gold.

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Tilting at Golden Windmills

By Biiwii

dq.windmillsThere is a writer we’ll call Don Quixote who is tilting at something that no longer really exists… the evil gold promoters that used to be taken seriously by innocents to the tune of near total destruction of their portfolios.

Don once went on about the gold cult and I even highlighted his post because I had been going about the gold cult as well.  The cult-like aspect of the gold “community” (← a dead giveaway) was real, and the group-think that the 2001-2011 bull market fostered was very strong and really damaging to those who did not question its tenets until it was too late.

Continue reading Tilting at Golden Windmills