Goldenstar Resources, Western Goldfields: Gold Explodes Upward

Only two weeks ago, gold was stuck in this multi-month spiral:

Because the long-term trend was bullish, the congestion was at the high end of the long-term range, and loosening central bank policies were likely to support the metal, I wrote that “I suspect we may be near a major breakout.”

Well, we got it. The yellow dog has shot up $50 since then:

This is a substantial breakout. While I expect enough volatility to turn the stomachs of even the staunchest bulls, the most dangerous move here is calling a top. Truthfully, nobody knows how high gold could go. Gold does have a number of fundamental factors that could point to a significantly higher trading range over time: (1) a decline in central bank selling; (2) higher demand from ETFs and retail investors; (3) declining US dollar; (4) emergence of markets in countries like India and China where gold has a more significant cultural role; (5) majors buying out of hedges; (6) [in my opinion this could be much more serious than most anticipate] a huge increase in reserve replacement costs as the trophy mines of the majors tail off in production, exploration and lifting costs increase, and experienced mining and geological experts become scarce.

For these reasons, I still like both the metals and the miners — especially juniors and mid-tier. I remain bullish on both of the junior miners I bought in mid-August, Goldenstar Resources: GSS (added at $2.66, closed Thursday at $4.20) and Western Goldfields: WGDFF.OB (repurchased at $1.94, closed Thursday at $3.15), and own a handful of others. Have a great microcap mining name? Send me an e-mail with a short paragraph on why you like it.

DISCLOSURE: Long GSS, WGDFF.OB, gold futures, silver futures.

Comments

[six17:]

sure ask Peter T over @ Glencairn how he is going to be the turn around story since DEZ...talk about taking one on the chin..ouch 2 out of 3 mines out of action with 1 maybe a BIG problem and almost out of cash stock falls 75% on the panic.....look for Bellasvista to come back as a alt. process green gold so long cynaide and Glencairn becomes the gold miner of choice for Latin America..la libertad new mill is fast tracked and doubles production while lowering cost 50%....

2007 Sep 24 01:43 PM

[dipps:]

good one - I have both LMC and GSS > gold is having a healthy correction now in a long "raging bull" gold market !!
cheers,
Guy D.

2007 Sep 25 12:52 PM

[Kjell:]

I like a junior canadian goldminer called Jinshan Goldmines (JIN)
traded on the Toronto Stock Exchange because they have already
started mining and have meldted their first goldbars. Expected
production 2008 120.000-200.000 ounces of gold. If mining costs
can be estimated at maximum 50% of the gold price we get about
USD 0:35-0:40 in earning per share. Calculated at PE 10 it makes
a share price of USD 3:50-4:00. Trades today at abt CAD 2:10.

2007 Sep 25 12:57 PM