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
INVESTING IN HIGH RISK TECH STOCKS - ALL OR NOTHING - 16th May 21
Is Stock Market Selling Madness About Over? - 16th May 21
Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
Budgies Birds of Paradise Indoor Grape Vine Singing, Chirping and Flying Parakeets Fun 3D VR180 UK - 16th May 21
Wall Street Roiled by Hot Inflation Data: Is This REALLY “Transitory”? - 16th May 21
Inflation Going Stag - 16th May 21
CHIA Coins After 1st Week of Plotting 140 Plot 14tb Farm. Crunching the Numbers How to Win - 15th May 21
Tips to Create the Best Cross-Functional Teams - 15th May 21
Gold: Lose a Battle to Win the War - 14th May 21
Are You Invested in America’s “Two-Hour Boom” Fast Shipping Stocks? - 14th May 21
Gold to Benefit from Mounting US Debt Pile - 14th May 21
6 Solid Signs You Should Have Your Smart Device Repaired Right Away - 14th May 21
Ways to Finance Your Business Growth - 14th May 21
Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
How Much CHIA Coins Profit from 100 Plot 10tb Farm? Hard Drive Space Mining - 13th May 21
Stock Market Bulls Getting Caught in the Whirlwind - 13th May 21
Legoland Windsor Mini land and Sky Train Virtual Tour in VR 360 - UK London Holidays 2021 - 13th May 21
Peak Growth and Inflation - 13th May 21
Where’s The Fed? Watch Precious Metals For Signs Of Inflation Panic - 13th May 21
Coronavius Covid-19 in Italy in August 2019! - 13th May 21
India Covid Apocalypse Heralds Catastrophe for Pakistan and Bangladesh - 13th May 21
TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
Gold Price During Hyperinflation - 12th May 21
Stock Market Extending Phase Two? - 12th May 21
Crypto 101 for new traders – ETH or BTC? - 12th May 21
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Metals Industry Confidence Creeping Back as Australian Prime Minister Put on the Defensive

Commodities / Gold and Silver 2010 Jun 23, 2010 - 10:34 AM GMT

By: Neil_Charnock

Commodities

Best Financial Markets Analysis ArticleBreaking news in Australia as the Prime Minister falls on the super tax sword.  PM Rudd is going to fight this leadership challenge however this is still a great moment for Australia.   The people have already voted forcing the government to shift to a new leader tomorrow.  The mining industry in Africa and Canada, Brazil and elsewhere will weep a few tears of sorrow.  But Labor is not dead yet and we have to see if they will now distance themselves from Henry, Rudd and the RSPT.  This writer could not imagine that they could do anything else but run as far from this tax proposal as they can.


At least they could then claim that it was all Kevin Rudd’s fault for not consulting the mining industry and getting the right balance, the right terms that might have achieved somewhere near the result they were after.  I do not take political sides so I will leave it at that.  I do support Australia however and our checks and balances here prove this is a great nation.

I do also support the mining industry and investors in our mining sector and urge the new PM, most likely Julia Gillard, to scrap the tax proposal altogether and go back the drawing board and fix the tax system here without slamming any one industry.  What ever happened to a government serving the people and business by making it easier to earn a living?  I have felt the confidence creeping back into the share prices of even diversified mining stocks this past week or two so perhaps this political move and a major policy shift will finally reveal why.

I have severe reservations that this current government can regain power at all in the upcoming election.  This might end up being the proof of my claim that if you try to mess with mining here you mess with the people – this is a strong mining culture as this is embedded in our history and culture.  

I hope this event goes down in history as proof of this concept and that our brilliant sovereign risk status will now recover.  In some ways this should prove we are worthy of a first tier sovereign risk status as even an elected government could not succeed in hurting this industry for long.  Now back to gold and back to the markets…

Gold finally broke the US$1250 level this week as we gradually leave this consolidation zone behind us and head for the $1300 level.  It did not respect the $1230 level either as sinister rumblings continue to taunt investors and CB’s into the arms of gold.  The inflation adjusted price of gold is still unbelievably cheap when you factor the real inflation of the money supply into the price model.

It is not expected that gold would manage to rise this time of year at all however it is.  One would expect any unexpected rise in the POG to be slow and steady at best this time of the year due to seasonal factors.  This movement again shows the resilience of this gold rally despite all sorts of recent calls for major falls and USD strength.   Gold is gradually going through the roof one tile at a time.

The XGD Australian gold share index is again approaching record highs after hitting over 6650 on Monday however the end of financial year is almost upon us.  There is therefore potential for a small pull back to the 6200 area on tax loss selling before we see a continued rise. 

There have been several strong performers during June amongst our top ASX listed gold producers, especially those with offshore mines as expected due to the RSPT.  Monday we saw several strong performances in the sector indicating strong accumulation activity.

This broader gold sector now resembles a coiled spring with tremendous potential energy after a long consolidation period.   This index failed to fully recover after the ‘2008 stock panic’ as Adam Hamilton called it so perfectly.  The AUD price of gold is much higher than 2006 and 2008 levels; therefore these shares have drastically under performed gold. 

Here is the updated chart of the mid tier producers showing this weeks jump to 490.  I have circled what appears to be a break out of this consolidation which is not evident on the XGD due to the disproportionate weighting of NCM in that index.  It is on the far right and hard to see however it is definitely there.  Once we break the falling resistance currently at 550 we are off to the races.

Volume has been solid as we approached the tip of the apex of this formation.  We have an excellent chance of upward price action here in the second half of 2010.

The developers who are unfunded represent the biggest risk as the RSPT (super tax) still forces banks to factor in the worst case scenario.  Hopefully this will be resolved soon after the leadership spill tomorrow.  The fully funded lower cost producers make up the elite portion of the Australian gold sector with much lower risk so these will rebound the fastest.

We have some excellent emerging producers with forward P: E’s less than 1 which is a stupendous opportunity.  It is the smaller gold stocks that have the biggest potential upside.

Just a quick note on Europe, yes I know I harp on about this however I cannot believe how poorly debt is understood.  Confidence is creeping back there too but for how long?  The recent stress tests in Europe proved nothing because they valued the Greek, Spanish, Irish (etc) debt at par.  This has everything to do with gold so let me persevere here please.  This is the source of the next burst of interest in gold from the Euro zone, which will be strong, and likely to produce another burst of currency volatility.

Banks can value this debt at par at the moment because the ECB is a buyer.  However when this music stops things will change fast.  At present the balance sheet looks alright and this debt can be carried as a zero risk weighted asset meaning no reserve requirements for the banks. 

Once this situation changes, and it must eventually, the banks need to account for this debt as a 100% risk weighted asset meaning 100% reserve coverage and therefore they will be forced to sell at circa 45% of face value.  They will be forced to sell because they need to balance their reserve levels.  Remember Governments cannot be declared bankrupt and put into liquidation; the debt has to be consolidated, partially written off and heavy measures on spending follow.  Therefore the debt does not fall in value to zero but it does fall dramatically and cause upheaval for the banks.

I invite the readers of this fine site to visit our Members News page found in the drop down menu under the “Members Area” tab in our tool bar at GoldOz to see a free company update report.  It is listed under June 22 so it’s absolutely recent.  There is no plug in this report or special offer for membership so this is a no strings offer.  Of course new and old members are welcome to join us so we can assist you to take advantage of some of the cheapest gold stocks on any exchange anywhere at this time – if you are interested. 

Good trading / investing.
Regards,

Neil Charnock

www.goldoz.com.au

GoldOz is currently developing a Member area and has added further resources for free access. We have stepped up our research and stand by to assist investors from all walks of life. We sell an updating PDF service on ASX gold stocks from only $AUD35 for 3 months – the feedback is grateful and enthusiastic because we are highlighting companies that have growth potential and offering professional coverage of the sector. GoldOz web site is a growing dynamic resource for investors interested in PGE, silver and gold companies listed in Australia , brokers, bullion dealers and other services.

Neil Charnock is not a registered investment advisor. He is a private investor who, in addition to his essay publication offerings, has now assembled a highly experienced panel to assist in the presentation of various research information services.  The opinions and statements made in the above publication are the result of extensive research and are believed to be accurate and from reliable sources. The contents are his current opinion only, further more conditions may cause these opinions to change without notice. The insights herein published are made solely for international and educational purposes. The contents in this publication are not to be construed as solicitation or recommendation to be used for formulation of investment decisions in any type of market whatsoever. WARNING share market investment or speculation is a high risk activity. Investors enter such activity at their own risk and must conduct their own due diligence to research and verify all aspects of any investment decision, if necessary seeking competent professional assistance.

Neil Charnock 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