If the Fed Is Printing Money, I'm Buying Junior Gold Miners

In the back of our minds, we all knew Helicopter Ben Bernanke would eventually begin to monetize debt. I just thought he would do it slowly and quietly.

I was wrong. In a tribute to Johannes Gutenberg, Bernanke announced that the Fed would print money to buy Treasuries. It's also ramping the presses to fund purchases of distressed RMBS and agency securities.

This could be a watershed event. And not just for the U.S. When the world’s largest fiat currency joins the race for competitive devaluation, other nations will also be encouraged to print more money.

Equities were up on the news, but the real moves were in commodity, currency and Treasury markets. For my purposes, the most important of these markets is gold. Gold was off more than 2% in the morning, but spiked up on the Fed announcement to close up over 4%.

There is a good chance that yesterday’s move was the beginning of another up leg for gold. I expect new highs for the metal before year end.

I bought junior mining shares hand-over-fist yesterday, in part because I had sold off much of my position a few weeks ago, but mostly because over the next few weeks I want to have as much exposure to gold as possible.

Here are the junior gold mining stocks that I bought yesterday:

U.S. Gold (Amex:UXG)

New Gold (Amex:NGD)

Golden Star Resources (Amex:GSS)

Banro Corp. (Amex:BAA)

With the exception of GSS, I bought these shares after the Fed announcement so I largely missed Wednesday morning’s rock-bottom prices. But now is not a time to focus on pennies. With gold itself moving so violently to the upside, and being within 20% of all-time highs, I’m looking for large moves in junior miners. As an added bonus, these stocks are currently hated. Last week’s Barron’s, for example, identified Golden Star Resources (GSS) as the most-heavily shorted stock on the American Stock Exchange.

Bottom line: Unless gold drops sharply, the junior miners should have much further to run. If gold breaks to new highs — a distinct possibility in coming months — I think many juniors will see 200-400% appreciation.

DISCLOSURE: Long UXG, GSS, NGD, BAA.

Comments

[oldmaninPA]

Good piece!

I picked up some NG

2009 Mar 19 08:09 AM

[optionsgirl]

check out JINFF.

2009 Mar 19 08:10 AM

[Just Say Whoa!]

Why buy gold miners?

They take part of your profits, that's why!

To maximize your profits, you should get a pan, stake a claim and Do It Yourself (DIY).

www.goldgold.com/panni...

There's gold in them thar hills!!!

What are you gold buggers waiting for?

Time's a wastin'!!!!

2009 Mar 19 01:04 PM

[James Quinn]

It's Gold Jerry!!!

theburningplatform.com...

2009 Mar 19 01:27 PM

[User 238172]

Actually the best micro stock in the 'miners' is Nevada based Itronics, ITRO.OB-sells silver made from waste streams, hence a 'clean and green' miner. Silver is going to go on a real tear based upon traditional gold/silver ratios and returning industrial demand. Company doubling++ sales and also as a by product sells landscaping products. Here are some recents news pieces:

RENO, NV--(MARKET WIRE)--Mar 17, 2009 -- Itronics Inc. (OTC BB:ITRO.OB - News) (Frankfurt:ITG.F - News) (Berlin:ITG.BE - News) reported today that its wholly-owned subsidiary, Itronics Metallurgical, Inc., has made a silver refining process discovery that increases per melt bullion recovery by 40 percent and reduces the per ounce silver refining cost proportionately. The Company is now implementing the new process into its refining operation and expects the transition to be completed this month.
"The new process immediately benefits Itronics by increasing turnover in silver inventory and by reducing the per ounce refining cost, which benefits the Company by reducing working capital needed to sustain the silver refining operation. This new process is expected to materially improve the profitability of the refining operation going forward," said Dr. John Whitney, Itronics President.

Silver refining test work that resulted in this new refining process was begun in the second half of 2008. It is a significant improvement in the refining chemistry and is achieved by reducing the amount of silver in the glass/slag and iron matte produced by the refining process.

Itronics Metallurgical also expects that the new refining process will significantly enhance the profitability of the planned Stage 1 silver refinery expansion which was discussed in a press release dated February 24, 2009. The silver captured by Itronics is recovered from spent photo liquids, a highly acclaimed environmentally "Green" and environmentally beneficial process.

2009 Mar 19 07:32 PM

[mr freddo]

Thanks for the recommendations! I have GLD and GDX but have been interested in taking some speculative positions in the juniors as they can jump so dramatically. I will be checking out these stocks and look to get in soon if they pass due diligence.

2009 Mar 19 07:42 PM

[Northstar10000]

you are too early, wait for one more disappointment on the gold front.
Gold will light up the night in the fall. 

2009 Mar 19 08:22 PM

[Minlita]

This is today's U.S. Stock Market Analysis (3/19/09) order by market capitalization:
finviz.com/forum/yaf_p...
Silver, Aluminium, Mining, Rifined Oil and Gas, Copper, Industrial Metals and Minerals of course Gold are on the top of the bar chart, all of them were great picks for today.

Mining is a risky business. A lot can go wrong. But the reward to risk ratio is better than any other investment sector IMO.

Those are more junior gold miners stocks:
PINK: MEAOF
NYSE:JAG
CVE:SGR
AMEX:MFN
AMEX:NSU
TSE:GQM
AMEX:NG

This website is about those junior mining companies that are out exploring for the next big discovery:
www.juniorminers.com/

2009 Mar 19 09:46 PM

[User 238172]

I also forgot to mention that Itronics runs its own site dedicated to junior golds called insidemetals.com. Great site. ITRO.OB

2009 Mar 20 03:05 AM

[tiananman]

Gold! Big as yer fist! In them hills!

Don't let them "company men" with their bidness suits come in and take yer profits! Ron Paul 08
On Mar 19 01:04 PM Just Say Whoa! wrote:

> Why buy gold miners?
>
> They take part of your profits, that's why!
>
> To maximize your profits, you should get a pan, stake a claim and
> Do It Yourself (seekingalpha.com/symbo...).
>
> www.goldgold.com/panni...
>
> There's gold in them thar hills!!!
>
> What are you gold buggers waiting for?
>
> Time's a wastin'!!!!

2009 Mar 20 10:05 AM

[Ian R. Campbell]

At a high level I agree with the author with respect to ‘well researched’ junior gold explorers and producers who have NI 43-101 Resources and Reserves, external and internal infrastructure in place or access to it, and so on. My detailed views on these things and what I think investors need to review when researching gold explorers and producers are summarized in the E-learning book titled ‘Valuation of Mining Companies’. That E-book that can be accessed at no cost under the E-learning tab on the home page of StockResearchPortal.com;

That said, in my view anyone who lacks both detailed fundamental knowledge of mining and the junior miners should either not buy them or should gain that fundamental knowledge before buying them. Failure to understand and apply knowledge of the key drivers to researching them carefully before investing in one or more junior miners is more likely than not to result in losses rather than gains in any market condition; and,

For what it is worth, I would never invest in a junior gold explorer or producer without first talking to the company’s President ‘one on one’ and forming my own impression of the ‘cut of their jib’. I have found that an easy way to gain access to those Presidents is to first buy, say 1,000 shares of a company that looks interesting as an investment, and then calling the President of that company and introducing myself as one of his shareholders. I have yet to have my calls screened, or to have a President refuse to talk to me as one of his/her shareholders.

2009 Mar 20 10:08 AM

[Lin]

Re

Check out IAG as well .

2009 Mar 21 12:06 AM

[Lin]

Re
I almost forgot

Check out minera andes MNEAF . Rob McEwen , owns a boatload of this ! Do your D Diligence

2009 Mar 21 12:12 AM

[User 384015]

"That's right," the man said. "I couldn't remember the word." He was the only t, then high school students, and, finally, to anyone aged 13 and over. The website currently has more than 175 million active users in amount of visitors, making Facebook the most popular social network, followed by MySpace and Twitter.other human at the loading dock this morning. The man didn't have a name, just a number, like the rest of the robots.Paris, at Night.

2009 Mar 27 03:44 AM