JDH Weekly Commentary "Gold: What’s Up? Silver?"

[sunseeker]

JDH asked the question:

"So why is it that gold seems to be recovering, but gold stocks aren’t?"

Maybe it's a case of political risk. Even companies which “only” have operations in politically stable countries could be a target for government interference. Taxes, or if they become the “New Currency Printing Presses” then even nationalisation.
Gold the metal has no allegiance to to any government. If a crisis of epic proportions occurred it would probably be easier to move gold to your chosen safe haven than something held for you electronically (traceable). That includes bank accounts ( traceable).

Especially if you're forced to do it in haste.

As in this case.

"Deposed Tunisian President Ben Ali Said To Have Fled Country With 1.5 Tons Of Gold”

http://www.zerohedge.com/article/deposed-tunisian-president-ben-ali-said-have-fled-country-15-tons-gold

Silver?

Silver as we all know has been manipulated by the JP Morg. They're going to have to close down a number of their silver shorts soon.

But regardless of that....

Soaring investment demand.

AND

http://www.silver-investor.com/blog/silver-market-update/will-silver-hit-new-highs/

“The applications for silver in everyday living touch everybody on this planet. The US Patent Office issues more patents for silver-based products than any other metal, by a very wide margin.”  

Industrial demand.
The bulk of silver use used to be in the photographic industry. Most of that silver could be recovered. Now much of the silver used for industrial purposes is destroyed or ends up in landfill. Either way it's no longer available. A dwindling resource.


Both will hit home (JPM) sooner or later.

ATB  

[MetalMeister]

Elementary my dear Watson... 

Miners always lag commodities.  Same for precious metals.

The only time it seems they do not lag the real thing is when there is particular interest generated my newsletter writers and radio, TV, etc, media and there is an initial feeding frenzy.

Safest best to to always be in stocks with defined resources are ones that are going to be defined soon. 

OR stocks that have proven management teams and major investors like GORO which people in the Hommel forum bought at $1-2 just because they knew who was running the project and that he has a track record like hardly anyone else.  Knowing who these people are takes time and research.  Fundamentals, my friends.

Explorers and Juniors can make a strong case in the beginning but they are high risk especially if someone is not behind them and putting up big money and they have a history of putting up big money like Rob McEwen or Jim Sinclair.  These guys do not put up money just for kicks unless they have a pretty good idea that a project will pay off.

Another factor to remember is whether or not a stock has the marketing ability to get newsletter writers and investment fund attention and able to close the deal with them so they promote and/or more importantly invest in them.

Lots of fundamental factors.

[sunseeker]

Elementary my dear Watson... 

Miners always lag commodities.  Same for precious metals.

The only time it seems they do not lag the real thing is when there is particular interest generated my newsletter writers and radio, TV, etc, media and there is an initial feeding frenzy.

Safest best to to always be in stocks with defined resources are ones that are going to be defined soon. 

OR stocks that have proven management teams and major investors like GORO which people in the Hommel forum bought at $1-2 just because they knew who was running the project and that he has a track record like hardly anyone else.  Knowing who these people are takes time and research.  Fundamentals, my friends.

Explorers and Juniors can make a strong case in the beginning but they are high risk especially if someone is not behind them and putting up big money and they have a history of putting up big money like Rob McEwen or Jim Sinclair.  These guys do not put up money just for kicks unless they have a pretty good idea that a project will pay off.

Another factor to remember is whether or not a stock has the marketing ability to get newsletter writers and investment fund attention and able to close the deal with them so they promote and/or more importantly invest in them.

Lots of fundamental factors.

Hi MM (Sherlock)

I had noticed that too...

http://buy-high-sell-higher.com/forum/general-discussion/stock-market-july-2009-t1028.0.html;msg10829#msg1082

Physical gold does have it's merits though....

http://buy-high-sell-higher.com/forum/general-discussion/precious-metals-t1018.0.html;msg12301#msg12301

High net worth clients are a fairly risk adverse bunch in my (limited) experience.
This market seems to be too risky for the sheeple in general.
In their absence it's down to the Financial Institutions to invest in the companies?

Glencore (the biggest company you've probably never heard of). Could list on the London Stock Exchange.

http://www.glencore.com/

http://www.cityam.com/news-and-analysis/glencore-hires-eight-banks-handle-its-ipo

Goldman Sachs and Bank of America Merrill Lynch are thought to be among the five new banks recently hired by Glencore, though neither commented yesterday.

Glencore’s existing banks – Citigroup, Credit Suisse and Morgan Stanley – either declined to comment or did not answer calls yesterday. Glencore also refused to comment.

That could stir up allot of interest.


ATB 

[MetalMeister]

Holmes,

How DO you pull those old rabbits out of your hat?

 

signed Watson

PS  Sniff, sniff, Glencore smells of something and also corrupt smart money.  36 years old minimum, for starters.  I suppose you know its history beyond the obvious.  What would be their plans for all this IPO money they WILL raise? 

Sniff, sniff... 

http://en.wikipedia.org/wiki/Glencore#History

Oooops!  Marc Rich

http://en.wikipedia.org/wiki/Marc_Rich

Oooooops!  Scooter Libby!

http://en.wikipedia.org/wiki/Lewis_%22Scooter%22_Libby

Something tell me that Marc Rich WILL get a lot richer.  Maybe Scooter is downline somewhere in there? 

I bet he got some private shares for representing Rich!

Tis' true.  The Rich get richer and the poor, well, they get taken.

http://buy-high-sell-higher.com/forum/general-discussion/stock-market-july-2009-t1028.0.html;msg10829#msg1082

Physical gold does have it's merits though....

http://buy-high-sell-higher.com/forum/general-discussion/precious-metals-t1018.0.html;msg12301#msg12301

Glencore (the biggest company you've probably never heard of). Could list on the London Stock Exchange.

[onlooker]

JDH asked the question:

"So why is it that gold seems to be recovering, but gold stocks aren’t?"

Here’s one trader’s view on why sometimes, gold mining shares are not doing as well as gold.

See: 

Trader Dan's Market Views

Market Insights and News

Saturday, February 26, 2011

HUI - Gold Ratio, GLD and the Ratio Spread Trade

The following chart details this ratio from which one can determine the performance of the gold shares in general against the price of the actual metal. It was in 2006 when I believe that the hedge fund world began implementing their ratio spread trade, in which they are going long the metal or the ETF and shorting some of the various gold shares. Since that time, the shares have acted as if there was a lead weight upon them compared to the price of gold itself with the exception of course being the announcement of the QE program in late 2008 alongside of the TARP.

You will note that this was not the case during the infancy period of this decade+ long bull market in gold. For nearly 3 years, the gold shares outperformed the metal itself as one can easily see by noting the soaring ratio. (2001 - late 2003).

I do not think it is any coincidence that once the GLD ETF was formed, the HUI - Gold ratio never exceeded the previous peak reached late in 2003. That ETF was formed and open for trading in November 2004. While the ratio did manage to move higher into early 2006, it peaked and then moved lower failing to better its high water mark from late 2003.

If there was ever a vehicle invented to siphon money out of the mining sector shares, GLD was it. Hedge funds and other large players seeking leveraged exposure to the gold price no longer had to go the mining share route but could instead margin up on GLD and play it that way. They also could make a pure play on the metal without worrying about geopolitical surprises, environmental issues, labor disputes, management issues, or dwindling gold reserves. In other words, they could get leveraged exposure to gold without dealing with the other risks associated with buying shares in a particular mining company.

http://traderdannorcini.blogspot.com/2011/02/hui-gold-ratio-gld-and-ratio-spread.html

~     ~     ~

Yamana is traded on both the American and Canadian stock exchanges.  When I brought Yamana at either stock exchanges, I found it got smacked down and out of sync with the rising price of gold.
 
I believed that American stocks are badly manipulated.   

So, I tested out my theory by buying Osisko Mining Corp. (Public, TSE:OSK) which is only found at the Toronto Stock Exchange. 

I found OSK to be more in sync with the rising price of gold.  Coincidence?  Don’t know for sure, but it worked for me.

[sunseeker]

Hi OL

From the article that you posted

http://traderdannorcini.blogspot.com/2011/02/hui-gold-ratio-gld-and-ratio-spread.html

The shares began outperforming the metal once again until the summer of 2009 when it appears that the hedgies then began treating the sector differently and re-established the ratio spread trades once again.

2009??? Your post got me to thinking.............
The “Gold Hedge Book” and in particular Barrick Gold's decision to dehedge seems to have been something of a game changer....

The world’s largest gold miner, Barrick produces about 8 million ounces a year. But its hedge book totals 9.5 million ounces, fixed at prices hundreds of dollars less than the current $1,000-plus range.

http://www.goldnewswire.net/barrick-bets-that-gold-rally-has-long-way-to-go

The gold mining companies practice of hedging helped to hold back the price of gold for so long that the metal had some catching up to do. Buying back those hedge positions cost Barrick too...

Barrick Gold, the Canadian-based miner, said last week that it would spend $2.9bn to buy back most of its hedge book

http://www.reuters.com/article/2009/09/08/us-barrick-hedge-idUSTRE58767F20090908

If you interfere/manipulate whether it's a commodity or a currency eventually the price will be paid. Who pays for it is  altogether another matter.

http://www.conspiracyplanet.com/channel.cfm?channelid=53&contentid=703&page=2

The lawsuit claims that in the past five years Barrick and
J.P. Morgan Chase injected millions of ounces of additional
gold into the market -- additions that were several times as
great as the annual production of every gold mine in South
Africa, the largest gold producing nation in the world. By
using privately negotiated derivative contracts and
concealing the addition of billions of dollars worth of
(physical) gold with off-balance sheet accounting,
Barrick was able to make it virtually impossible for gold
analysts and investors to determine the size and the
market impact of its trading positions.

I love this site (Buy-High-Sell-Higher) as it throws up the most thought provoking posts.
Your contributions help to keep those brain cells busy.

                                

Great post I will be watching  Osisko Mining Corp much more closely now on.  

ATB  

Off to fill the tank, and probably loose a few more brain cells now. Here...

http://www.wonderlandchinese.co.uk/

[onlooker]

Hi SS

SS's quote:

I love this site (Buy-High-Sell-Higher) as it throws up the most thought provoking posts.

   
Ditto!

From the dialogues, and collective thinking at BHSH, I get flashes of understanding, or different perspectives of a problem; which then enable me to make better investment decisions.

http://s3.hubimg.com/u/728662_f520.jpg

They make up for the days when I think and feel like this:

http://bifsniff.com/images/cartoons/outside-the-box.gif     

[MetalMeister]

http://news.yahoo.com/s/nm/20110306/bs_nm/us_glencore