Gold and Silver Prices Will Begin to Shine 30 comments
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Although it's not a great consolation, if you've seen your investment accounts implode and your net worth wilt like a rosebud in a desert sun, you can be comforted by the fact that you are not the only one.
Even the great Warren Buffett has seen his "mother lode", Berkshire Hathaway (BRK.A) decline from a 52-week high of $151,650 down to $74,100 a share. It has "recovered" to a recent price of $94,000, still 38% off its high.
Dorothy Kosich, covering the Northwest Mining Association conference on Wednesday in Reno, Nevada, filed the following report with comments from one of the top executives in that industry.
His words reflect the magnitude of the meltdown we have all experienced.
"Never has there been so much money lost in such a short period of time," Franco Nevada (Toronto: FNV.TO) President and CEO David Harquail told an audience at the Northwest Mining Association conference Wednesday.
Nevertheless, Harquail declared," We're expecting gold to go into the thousands" as a monetary expansion generates the "next gold bull market."
The former president of Newmont Capital, Harquail advised that when gold gets re-inflated, expect other commodities to follow.
In his luncheon address to the Northwest Mining Association conference in Reno, Harquail admitted witnessing shock and fear last month in London among the fund managers who had heavily invested in precious metals mining. At the time mining shares were down an average of 72%, major mining companies had been placed on Credit Watch, and mining M&A bids were collapsing.
Molybdenum alone had dropped from $31 to $11 in only two weeks.
Ironically, the earlier timing of when the global economic crisis hit the mining sector and other resource industries could eventually reap some benefit for mining, Harquail suggested. In the meantime, since mining companies could not borrow as heavily as other industries, it may also help the sector's recovery.
Harquail says major mining companies, junior companies and gold are looking better. But, mining exploration may pay the price for the industry's past six months of freefall. [Thursday, companies like Newmont Mining (NEM) and Yamana Gold (AUY) were experiencing a mainly positive day.]
Mining companies with sufficient cash reserves would now rather buy other companies rather than continue to explore or develop new mines. Some are taking advantage of their low share prices to use their cash to buy back their own shares.
And, Harquail noted, some miners are choosing to go private.
Harquail explained that companies without dollars are now operating in survival mode or are actually facing extinction. He referenced examples of as many as six smaller companies considering mergers into a single company.
As a result, Harquail is fearful "that a lot of companies will get out of the exploration business."
Meanwhile, he noted a number of mining and exploration companies won't be able to raise financing for another 18 months.
Nevertheless, Harquail sees a good long-term outlook for a mining industry which has grown accustomed to planning to weather mining's cycles.
Mining's improved stewardship practices have enhanced the reputation of the industry as an investment destination, he said.
Companies also have learned to be able to build cash and diversify. [keep an eye on bell-wether companies like Barrick Gold (ABX) and Goldcorp (GG), as well as Anglogold Ashanti (AU) to see how the most successful companies raise capital, pay off debt, build cash and diversify their operations].
Have you seen the one-year chart of the Market Vectors Goldminers ETF (GDX)? If you are a technical chartist it does appear to have put in a double bottom
However, Harquail is not happy with a U.S. system that has "let a form of casino capitalism" take the domestic mining industry hostage, especially through hedge fund investment. He also joked that the gold mining sector is "overdue for a 15-30 million ounces discovery."
This author isn't convinced that the gold and silver mining industry stock correction is finished yet. However, when we see royalty trusts and "middle men" like Royal Gold (RGLD) and Silver Wheaton (SLW) are trading at prices at the opposite ends of their respective 52-week ranges, one realizes that there is a great deal of confusion and uncertainty over the short term prospects.
I for one will be patient, and hope to pick up more shares of the "best-of-breed" companies whenever they test their recent lows. Without a crystal ball or compelling evidence, it seems foolish to bet too much on a short-term rally with all the current signs of temporary deflation (did you see oil tumble below $43 Thursday?).
It seems prudent to keep enough cash on the sidelines to buy the inevitable dips. Yet I haven't forgotten how far these stocks have fallen already, and that this is the season where gold and silver prices begin to shine.
Disclosure: Long SLW, GDX, NEM, ABX, AU GG, AUY.
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This article has 30 comments:
Yes, I know this "comment" section is not a forum to discredit authors but nor should authors use Seeking Alpha to relentlessly and desperately try to pump their own holdings.
For the record, I do not own AUY but this fellow does and has been recommending it all the way down.
On Dec 05 05:22 AM Marketer25 wrote:
> This fellow's comments ought to come with a warning message. That
> being he hasn't got a clue.
> Yes, I know this "comment" section is not a forum to discredit authors
> but nor should authors use Seeking Alpha to relentlessly and desperately
> try to pump their own holdings.
> For the record, I do not own AUY but this fellow does and has been
> recommending it all the way down.
If you have strong beliefs on investments you like, write an interesting, fact based article about them and submit it to SA. Readers here are looking for new ideas from an informed viewpoint/
Again, where is this "deflation"?
It all depends what you're looking at.... try looking at the housing market.... or stock market... I do agree with what you've said about the rising prices of some items...
How come it's almost impossible to find a small bar or coin anywhere? The products are "too difficult" to make quickly we're told.
The fact is Comex is a paper rigged casino populated by those desperate to get out of the game with their shirts still on.
Gresham's Law says it all: bad money drives out good. There's plenty of crisp paper being created and passed around but no gold or silver. We're seeing the same phenomenon Gresham saw in the Middle Ages.
their own holdings" but a place to share ideas and compare our investment strategies and experience. It should be a way of networking with other investors and learning from each other.
On Dec 05 05:22 AM Marketer25 wrote:
> This fellow's comments ought to come with a warning message. That
> being he hasn't got a clue.
> Yes, I know this "comment" section is not a forum to discredit authors
> but nor should authors use Seeking Alpha to relentlessly and desperately
> try to pump their own holdings.
> For the record, I do not own AUY but this fellow does and has been
> recommending it all the way down.
On Dec 05 09:24 AM Marp wrote:
> Gold doesn't pay any interest. The Fed funds are no their way to
> achieve that objective,too. Plus the Feds are busy printing trillions
> of dollars of new debt. I guess paper , historically, is a better
> storage of value. Or isn't it?
Buy gold and silver folks....the dollar is toast summer of 09...you will be happy to have it in your possession...no matter what the girly men here spout.
you have been warned.
On Dec 05 02:48 PM JPBL wrote:
> LOL you people kill me, how can one sit here intelligently and say
> we will not have an inflationary period in 09...hahah!..is this CNBC...sure
> in hell sounds like it.
>
> Buy gold and silver folks....the dollar is toast summer of 09...you
> will be happy to have it in your possession...no matter what the
> girly men here spout.
>
> you have been warned.
I'm back in Udon Thani in time for New Year. A lot of these under-age commentators do NOT understand the Asian respect for Gold as a currency.
Shame really, Their families spent good money on their education.
regards
You are right on the point.
My question is when will (ie at what price?) will the US government steal, er I mean "nationalize", gold for the "good of the country"?
On Dec 05 04:35 PM Econ 101 wrote:
> Ashmore,
> You are right on the point.
>
> My question is when will (ie at what price?) will the US government
> steal, er I mean "nationalize"... gold for the "good of the country"?
reversion to the mean
buy/invest in "things you could barter or live on"
an ounce of gold has provided the means to buy a set of clothing/shoes for thousands of years in time.
the deflation now being experienced is a natural occurence. the previos values of things were not real. had one lived/invested with reality, that person would be less frustrated with the unfortunate circumstance of the day.
if the velocity of the fiat world currencies is not managed properly, hyper inflation/deflation will occur. make your bet! i doubt the "just right" three bears scenario is likely to happen.
history is sometimes prologue, but not always. we'll not know 'til it's all over.
On Dec 05 12:42 PM Marc Courtenay wrote:
> First, I try to follow my "mentors" suggestions which have been correct
> more times than they have been incorrect. In this unprecedented derivatives
> and credit crises, all we have are "clues". Secondly, AUY and many
> other well-managed miners tend to trade in ranges and there have
> been many opportunities to "buy low and sell high" in shorter periods
> of time. Lastly, no one I've heard of and follow was able to anticipate
> how badly the resource stocks would be decimated. Seeking Alpha isn't
> a forum for authors to "pump
> their own holdings" but a place to share ideas and compare our investment
> strategies and experience. It should be a way of networking with
> other investors and learning from each other.
>
> On Dec 05 05:22 AM Marketer25 wrote:
Lets go down the line of currencies which have are alive in the here and now but before the Existence of THE USA which has lost 97% of its value since it was created.
Hmm, the British Pound, The French Franc, The Spanish Peseta (remember Columbus) to name a few. Just because the French and Spanish currencies are part of the Euro like the German Mark, doesn't mean they do not have valuations within the framework of the Euro like they do.
The Gulf States have been moving to a Gulf Region Currency. They hope to have one in place by 2010. Gold however is not the basis on which their yet to be named currency will rely. The proposal currently applies to a basket of oil grades produced within the region. Gold is priced in US dollars, they wish to diversify out of the dollar, hence their own oil based currency.
There were 6 countries involved in the process but only 5 are now active since Kuwait stopped accepting dollars for their oil recently and is accepting a basket of currencies of which the dollar is only a part. What the final currency will be is anyone's guess.
Its really a shame that an all knowing person like Georealist is wasting his precious time reading the posts of halfwits like myself ( one "t" not two ). IMHO
ceotalk.blogspot.com
Having said that, Money flow into FCX has been positive over the last 10 trading days.
Do some research on Hecla Mining (HL), visit their web site, I do not own it but am following it closely. Take a look at their production. HL is no longer just a Silver producer, Gold, copper, lead, zinc have been added to the mix in quantity due to am acquistion in spring of 08. They had a gold property in Venez. which they were fortunate enough to sell.
There are many great stocks. FCX is not the Gold/Copper play it once was. I believe Gold is only 20% of overall production. They will not shut down their Indonesian operation, its a political thing.
The only company that I know about which has a slice of almost every mineral is AAUK, (including diamonds).
There are a lot of mineral plays. I do not want to lock up my money in any individual stock and wind up waiting for it to bottom. Especially if there is no dividend to be had.
Good luck on your hunt, it is always better to do your own research than to pay attention to someone who has had such a bad record in picking stocks to buy and prices to buy them at. The Track record of anyone making a post is available to anyone willing to do the research. Just click on the Comments next to the name and every single comment from the very first entry made on Alpha is available. (including mine)
IMHO
Net free reserves by the definition provided signify whether the Fed's monetary policy is loose or tight. These reserves are decidedly negative and have been so for months.
All of the money that has been created has been sucked into a Black Hole. The Fed is not creating money fast enough to turn this figure positive. IMHO
How do you figure,,,check out a 5 year chart,,,gold has appreciated at a 20%- 30% every year in the last 5 years.
And,,,even though it is down this year,,,it has fallen less than all other commodities.
Furthermore,,,Although gold may be down this year,,,it has outperformed most other investments when you combine the last 5 years.
As soon as the credit crisis relaxes,,,and the monetary inflation hits the street,,,I believe Gold will surge.
Demand is up,,,Central Banks are now buyers,,,whereas they have been sellers the last 5 years.
And mine output is down.
Gold is the # 1 investment IMO,,,,and the dollar has topped,,,,Treasuries will soon fall like a rock IMO,,,,just look at that parabolic chart of the 10 Year T-Bill
On Dec 05 11:12 AM O-B-WON wrote:
> Again, where is this "deflation"?
>
> It all depends what you're looking at.... try looking at the housing
> market.... or stock market... I do agree with what you've said about
> the rising prices of some items...
On Dec 05 01:32 PM Ashmore wrote:
> I live in Thailand and converted most of my cash into gold. Why?
> If the banks fail here I will have zero. This is totally on the
> cards. There would be a lot more casualties in the banking sector
> if it was not for the aid the US goverment has given this sector.
> As this recession deepens there is a possibility that a debt based
> currency could collapse. Any sane person would convert to gold.
> The safety of gold is a very big selling point. India has been waiting
> for the price to come to where it is today and NOW they are going
> to buy phsical gold at a hundred miles an hour. This will support
> the 750 level. India gold demand however has nothing to do with
> the price of eggs. A lot of phsical gold is now been bought behind
> closed doors. The COMEX price is supported by 23 year old business
> graduates making quick money and a scared US govenment. These guys
> live in a bubble and have mastered the art of selling long and short.
> This keeps the FED happy. The big boys (China, Russia, Sovereign
> Wealth Funds) are in a buying mode. They buy direct and these purchases
> go under the radar. The big boys are serious and there is a lot
> at stake. Delivering a death blow to the COMEX is last on the agenda.
> If the big boys pay betwween 700-850 for gold they are not worried
> becuse when they hit the trigger it will be too late for those that
> did not grasp the big picture. The bullion banks know this and that
> is why they support an argument that gold with soar. They are the
> insiders. There is a bigger game in play and as long as you have
> journalists who have no idea and cant even manage their own household
> debt it hides the truth. The gold price is not following classical
> movements. This recession has changed the way the big boys look
> at the USA and believe me they are not happy. The Chinese will not
> tell you directly to your face of their intentions. They do not
> like corruption or manipulated markets. The directors of these companies
> on Wall street would all be sitting in Chinese jails awaiting exection
> if they were Chinese citizens. UAE countries dont condone this behaviour
> as well.
Come on Greg, this is what happens when you change handle to your real name. You can no longer give yourself Kudos as if you were some one else.