1-Is the price of gold being manipulated? We think it is, how can governments issue debt at under 1% to 3% with some food and energy prices rising over 40% in some categories over the last five years? Central bankers do not want to see gold moving up. And isn’t it odd how suddenly in a quiet market we see large amounts of gold on the Comex suddenly sold in what seems to be “market orders”?
In other words, it seems that the gold is being sold, not trying to get the best price for the client but with the intent to affect the price of gold-down! In the opinion of many, paper trades such as those transacted on a commodity exchange have been a ruse to create an image of price weakness in gold and it has worked.
2-Over a year ago, Germany requested delivery of its 350 tonnes of gold held in “safekeeping” at the New York Fed and for some reason it could not be delivered. Germany was told that they can expect 50 tonnes per year for the next seven years. Of course, we don’t know, but we are told that they have received a mere 5 tonnes so far. The fact is that if delivery is demanded by gold bullion buyers throughout the world, the price of gold could rise dramatically just on that basis.
3-Are central banks colluding to keep gold down? We don’t know, but keep in mind that some central banks and institutions are large buyers and price weakness is to their advantage. China has been quietly accumulating what appears to be half of the world’s monthly production recently. They take advantage of the price weakness in gold to accumulate more bullion at lower prices.
4-Most of the “easy to find” gold has been found. It is now more difficult and expensive to discover. Like oil, we may have seen “peak gold.” Mining is now a more difficult business and one can see it in the rising cost of production. Additionally, mine production is expected to be flat for the next several years.
5-What price is needed? Our analysis suggests that we need gold to surpass the $1400-$1450 level to create strong renewed interest in mining stocks. But note, all stocks will not move at the same time.
6-A bull market in the gold and mining stocks generally occurs concurrently with a bear market in the large industrial stock market. Our analysis has suggested that a major industrial bear market could be looming. Low rates and Federal Reserve intervention have prevented that from occurring.
7-Market makers (specialists) are no longer active in the markets to the same degree as in the past bringing support and stability to the market in mining stocks. So expect and learn to live with it. Virtually no spreads (between the bids and offers)has been a detriment. But in our view, the disappearance of market makers can create exceptional opportunities for the average investor to accumulate mining stocks at cyclical lows.
8-No in-depth research? The sad fact is that today there is very limited comprehensive research available for most publicly traded companies. Overall, less than 15% of all publicly traded stocks presently have in-depth research coverage. In junior mining stocks, the percentage is even less. Generally one has to do the research oneself.
9-The large industrial stocks have recently seen the largest dollar value of “insider” selling by their officers and directors in years. Yet, Canadian junior mining stocks have seen consistent and ongoing buying by officers and directors. (Note again that we need a bear market in large industrial stocks to facilitate a bull market in mining stocks.)
10-Technical and cyclical analysis for the gold market suggests that we are in the process of finishing this major bottom in gold. In fact, some cycles project that we are about to enter a major move up in gold . The difficulty is obvious manipulation of gold’s price. Additionally, as we chart many mining stocks using such technical indicators as “on balance volume,” “money flow,” and MACD, we feel that we may be soon seeing some surprising moves up in many of the mining shares.
