Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) - 24th Feb 21
Should You Buy a Landrover Discovery Sport in 2021? - 24th Feb 21
US Housing Market 2021 and the Inflation Mega-trend - QE4EVER! - 24th Feb 21
M&A Most Commonly Used Software - 24th Feb 21
Is More Stock Market Correction Needed? - 24th Feb 21
VUZE XR Camera 180 3D VR Example Footage Video Image quality - 24th Feb 21
How to Protect Your Positions From A Stock Market Sell-Off Using Options - 24th Feb 21
Why Isn’t Retail Demand for Silver Pushing Up Prices? - 24th Feb 21
2 Stocks That Could Win Big In The Trillion Dollar Battery War - 24th Feb 21
US Economic Trends - GDP, Inflation and Unemployment Impact on House Prices 2021 - 23rd Feb 21
Why the Sky Is Not Falling in Precious Metals - 23rd Feb 21
7 Things Every Businessman Should Know - 23rd Feb 21
For Stocks, has the “Rational Bubble” Popped? - 23rd Feb 21
Will Biden Overheat the Economy and Gold? - 23rd Feb 21
Precious Metals Under Seige? - 23rd Feb 21
US House Prices Trend Forecast Review - 23rd Feb 21
Lithium Prices Soar As Tesla, Apple And Google Fight For Supply - 23rd Feb 21
Stock Markets Discounting Post Covid Economic Boom - 22nd Feb 21
Economics Is Why Vaccination Is So Hard - 22nd Feb 21
Pivotal Session In Stocks Bull Bear Battle - 22nd Feb 21
Gold’s Downtrend: Is This Just the Beginning? - 22nd Feb 21
The Most Exciting Commodities Play Of 2021? - 22nd Feb 21
How to Test NEW and Used GPU, and Benchmark to Make sure it is Working Properly - 22nd Feb 21
US House Prices Vaccinations Indicator - 21st Feb 21
S&P 500 Correction – No Need to Hold Onto Your Hat - 21st Feb 21
Gold Setting Up Major Bottom So Could We See A Breakout Rally Begin Soon? - 21st Feb 21
Owning Real Assets Amid Surreal Financial Markets - 21st Feb 21
Great Investment Ideas For 2021 - 21st Feb 21
US House Prices Momentum Analysis - 20th Feb 21
The Most Important Chart in Housing Right Now - 20th Feb 21
Gold Is the Ultimate Reserve Asset - 20th Feb 21
Is That the S&P 500 And Gold Correction Finally? - 20th Feb 21
Technical Analysis of EUR/USD - 20th Feb 21
The Stock Market Big Picture - 19th Feb 21
Could Silver "Do a Palladium"? - 19th Feb 21
Three More Reasons We Love To Trade Options! - 19th Feb 21
Here’s What’s Eating Away at Gold - 19th Feb 21
Stock Market March Melt-Up Madness - 19th Feb 21
Land Rover Discovery Sport Extreme Ice and Snow vs Windscreen Wipers Test - 19th Feb 21
Real Reason Why Black and Asian BAME are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 19th Feb 21
New BNPL Regulations Leave Zilch Leading the Way - 19th Feb 21
Work From Home Inflationary House Prices BOOM! - 18th Feb 21
Why This "Excellent" Stock Market Indicator Should Be on Your Radar Screen Now - 18th Feb 21
The Commodity Cycle - 18th Feb 21
Silver Backwardation and Other Evidence of a Silver Supply Squeeze - 18th Feb 21
Why I’m Avoiding These “Bottle Rocket” Stocks Like GameStop - 18th Feb 21
S&P 500 Correction Delayed Again While Silver Runs - 18th Feb 21
Silver Prices Are About to Explode as Stars are Lining up Like Never Before! - 18th Feb 21
Cannabis, Alternative Agra, Mushrooms, and Cryptos – Everything ALT is HOT - 18th Feb 21
Crypto Mining Craze, How We Mined 6 Bitcoins with a PS4 Gaming Console - 18th Feb 21
Stock Market Trend Forecasts Analysis Review - 17th Feb 21
Vaccine Nationalism Is a Multilateral, Neocolonial Failure - 17th Feb 21
First year of a Stocks bull market, or End of a Bubble? - 17th Feb 21
5 Reasons Why People Prefer to Trade Options Over Stocks - 17th Feb 21
The Gold & Gold Stock Corrections Are Normal - 17th Feb 21
WARNING Oculus Quest 2 Update v25 BROKE My VR Headset! - 17th Feb 21
UK Covid-19 Parks PACKED During Lockdown Despite "Stay at Home" Message - Endcliffe Park Sheffield - 17th Feb 21
How to Invest in ETFs in the UK - 17th Feb 21
Real Reason Why Black and Asian Ethnic minorities are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 16th Feb 21
THE INFLATION MEGA-TREND QE4EVER! - 16th Feb 21
Gold / Silver: What This "Large Non-Confirmation" May Mean - 16th Feb 21
Major Optimism for Platinum, Silver, and Copper - 16th Feb 21
S&P 500 Correction Looming, Just as in Gold – Or Not? - 16th Feb 21
Stock Market Last pull-back before intermediate top? - 16th Feb 21
GAMESTOP MANIA BUBBLE BURSTS! Investing Newbs Pump and Dump Roller coaster Ride - 16th Feb 21
Thinking About Starting to Trade This Year? Here Are Some Things to Keep in Mind - 16th Feb 21
US House Prices Real Estate Trend Forecast Review - 15th Feb 21
Will Tesla Charge Gold With Energy? - 15th Feb 21
Feeling the Growing Heat and Tensions in Stocks? - 15th Feb 21
Morgan Stanley Warns Gasoline Industry Is About to Become Totally Worthless - 15th Feb 21
Debts Lift Gold - Precious Metal Prices Will Rise on a Deluge of Red Ink - 15th Feb 21
Platinum Begins Big Breakout Rally - 15th Feb 21
How to Change Car Battery Without Losing Power, Memory, Radio Code Settings - 15th Feb 21
Five reasons why a financial advisor can make a big difference to your small business - 15th Feb 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

The Changing Landscape in Gold and Silver

Commodities / Gold and Silver 2010 Nov 02, 2010 - 01:34 PM GMT

By: Midas_Letter

Commodities

Best Financial Markets Analysis ArticleWhereas the apparent robust performance of major indices around the world suggests the world is returning to something approaching normal, what we’re really seeing is a long line of traps being set to snag a fresh round of suckers who fall for the mainstream smokescreen. With another US$1 Trillion on the way from the Fed to further devalue the dollar, and with other nations thereby comforted sufficiently to follow suit, gold and silver prices can do naught but rise.


Our chart below of the 1 year performance of the mining-dominant TSX Venture Exchange in Canada tells the tale. An increase of nearly 31% since July demonstrates the intense demand for mining stocks that is driving the index towards pre-2008 levels.

If the United States Federal Reserve is going to continue to rig the appearance of market health through what has become the annual injection of a trillion dollars worth of growth curve, the only rational outcome to be expected is the hyperbolic explosion of precious metals prices upward in direct proportion to the diminishing dollars’ buying power downward. That is going to drive more and more investors into gold and silver exploration companies as the effect of such delusional fiscal mismanagement continues to wipe out the value of U.S. denominated savings, and retirees who thought they were set find themselves being forced to seek speculative rates of return.

Especially as risk becomes uniform across the asset classes in a volatile world where currency exchange rate instability and negative returns on government debt undermine the historic safety of blue chips and fixed income.

So assuming that we all agree that investing in junior explorers and miners is just slightly less risky than investing in U.S. denominated triple A assets, we owe it to ourselves to stop the hand-wringing and worrying, turn off the Fox Business news and CNN, use the Wall Street Journal and New York Times for their superior functions as fire-starter and fish wrappers, and get focused on how to maximize returns and minimize risk in this red hot sector.

Among the emerging realities of a $1,300 an ounce gold price that is firmly embarked on a path beyond $1,500 near term is the fact that heretofore uneconomic ore-bodies of gold and silver have suddenly become handsomely economic. Examples abound of companies who are moving forward with deposits whose mines will ultimately realize a head grade well below one gram per tonne. And that has created extreme opportunity for investors in the sector.

Among investors comfortable in the gold and silver exploration space, the fuel that takes share prices northward has always been drill results. A drill result headline makes an instant home run in certain cases. Anything that combined a length of 100 meters or better with a grade of 5 grams per tonne or better has historically seen an immediate and generally lasting lift in the share price – especially if followed up with step-out holes of similar value.

Also historically, 100 meters or better of anything less than a gram per tonne would mostly be overlooked or received with a lukewarm bump in share price that quickly faded. And that mindset hasn’t really changed that much recently, even with gold up $300 in one year. True, the general investing public has always been slow on the uptake where fundamental shifts in any given market occur. And the explosion of ill-informed and just plain wrong-headed advice on the net thanks to social networking ubiquity has only compounded the problem by drowning out the voices of reason with the vastly more numerous voices of stupidity.

So there are future fortunes being gathered now by shrewd veterans of the precious metals investment world who fully understand and embrace these new realities of this gold and silver bull market.

Which brings us to another point that happens to mislead and delude mainstream investors who take their advice from publications with broad circulation: the whole idea that the gold price is some kind of bubble that will pop, like technology or houses or tulips, or any other commodity that can be easily grown or fabricated at will.

Gold is not consumed. For the most part, it is preserved and hoarded. It can’t be fabricated, and its extraction from the earth profitably is anything but easy. Its concentration in economic deposits is rare, and very finite. It is exactly these characteristics that make it so intrinsically valuable. Ignore those who claim it has no intrinsic value. The mere fact of its status as world monetary standard for over 5,000 years IS intrinsic value.

That is not to say that a price bubble can’t form in the market for gold. In fact, there is little doubt that the gold market will be subject to the formation of bubbles that pop and reform as the price evolves towards its ultimate high. But the pressures that form bubbles –irrational demand, the herd mentality becoming the stampede mentality, leveraged spec positions in the futures markets – have all been present in the gold market to some degree since it first charged through $300 in late 1999. So those spikes and dips in the price chart since then can arguably be classified as bubbles forming and popping.

It is interesting for gold investors that one of the results of the pro-regulation environment that always manifests after a major market contraction such as the one we affectionately refer to as the global financial crisis of 2008-09 is the enhanced scrutiny of the gold and especially (at this point) the silver markets by the CFTC, whose commissioner Bart Chilton said market players have made “repeated” and “fraudulent efforts to persuade and deviously control” silver prices.

Mr. Chilton said he believed there have been violations of CFTC rules that should be prosecuted, though he couldn’t publicly disclose trader names. The lawsuits brought against J.P. Morgan and HSBC shortly thereafter negated any requirement of that.

There’s still a long way to go and a track record of failure in trying to prove manipulation cases against entities such as these with bottomless legal defense pockets and no shortage of friends in high places. But the howl for blood from the mob is increasing, and so it stands to reason that J.P. Morgan, HSBC, and other perps in the scheme are going to be looking to reduce their participation, and therefore their influence, in the precious metals markets.

Absent the insidious influence of hundreds of thousands of contracts on the short side of the market, the price of gold, both current spot and for future delivery, will likely surge free of these yokes.

James West is the publisher of the highly influential and widely respected Midas Letter at midasletter.com. MidasLetter specializes in identifying emerging companies in gold and silver exploration at the beginning of their share price appreication curves, and regularly delivers 10 baggers (stocks that increase in value by at least a factor of 10) to his premium subscribers. Subscribe at http://www.midasletter.com/subscribe.php.

© 2010 Copyright Midas Letter - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Midas Letter Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules