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David Urban
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A true investing contrarian with more than a decade's experience in the financial markets. I review a variety of sectors with both long and short ideas. @dcurban1 Blog address: http://www.atruecontrarian.com/ The top gold and silver analyst on Seeking Alpha. One of the few that does the hard... More
My blog:
A contrarian investor with a global macro view.
My book:
The 2012 Investment Forecast
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  • Gold Stocks – Where is the Bull Market?

     

     

    Gold bullion has been on a strong and steady march since its bottom in late 2008 but Gold stocks have remained mired in a sideways movement as investors become impatient waiting for the sun to shine upon them. But to understand why Gold stocks are moving sideways investors first need to have a brief history lesson about the industry.

    For the 80′s and 90′s Gold was looked at with disdain after Paul Volcker broke the back of inflation and equities started their great bull market. With the Gold price trading in a tight range close to the production price Gold producers were forced to hedge against price declines. With profit margins tight, hedging was the smart strategy as it gave downside protection to the mining companies. Exploration projects were difficult to fund and companies instead focused on increasing production and efficiency at current mines.

    When the Gold bull market started gold producers continued to be wary of the runup in price after spending almost 2 decades in a zero profit margin environment.

    In the early part of the 2000 decade new investors looked to mothballed projects drilled out in the 70′s and 80′s which were shelved because they were uneconomic at the current prices. Savvy investors purchased many of these projects and looked over the drill results with new technology, often leading to major new discoveries.

    Technological advancements also led to new discoveries at existing mines and greenfield areas. Exploration companies popped up overnight and a global Gold rush began as investors scoured the globe looking for major projects in South America, Canada, the Caribbean, and Africa.

    New producers realized that having only one mine with a 10 to 20 year lifespan puts an end date on the company if additional projects are not discovered/purchased. This pushed the new producers to use the rising Gold price as an opportunity to acquire assets and build up the inventory to increase the life span of the company.

    More importantly, it allowed the new producers to continue to move up the curve from being an exploration company to a development company then to a small and mid-tier producer and finally a major producer.

    This in turn led to companies like Goldcorp growing into major Gold producers since before companies like Barrick Gold and Newmont Mining dominated the landscape.

    The new producers have become even more aggressive than their old guard counterparts acquiring bolt on projects similar to Goldcorp’s activities at Red Lake to increase the assets and existing life of a project.

    In most cases stock is used as currency to acquire the new projects diluting current shareholders but offering long-term value as a more ounces in the ground extends the life of the company.

    This has caused stock prices of most companies to trade sideways while the price of Gold bullion rises disappointing investors. But hope is on the way, as the remaining major exploration and development projects are acquired Gold producers, new and old, will have to turn inward for growth. This means corporate efficiency and a decrease in development expenses which will translate into a jump in profits and stock prices.

     

     

     

     

    Disclaimer
    Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
    PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

    Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

     

     



    Disclosure: Long Gold exploration stocks
    Sep 16 7:28 PM | Link | Comment!
  • North American Technical Commentary – September 13th, 2010

     

     

    Dow Jones Industrial Average – We have had a nice move up over the past two weeks bouncing off support and now we find ourselves in a virtual no mans land between the 50 and 200 day moving averages. Technicals are positive but inconclusive as we wander in this trading range between 10400 and 9800.

     

    Traders and fund managers return this week and there are some items which should dominate headlines namely concerns out of Europe, 3rd Quarter corporate profits, important economic reports namely CPI, PPI, Capacity Utilization, Industrial Production, and the upcoming mid-term elections.

     

    Caution is warranted here unless we can break above the 200 day moving average and clear the 10500 level. It is possible that we start the week with a rally but have it lose strength as the week goes on.

     

    Longer-term we need to move above the 50 week moving average in order to move back to the 200 week moving average.

     

    I would be hesitant to put any new capital to work on the long side until we have a confirmed breakout above resistance and the trend establishes itself.

     

    DJIA Chart 9-10-10

     

    Dow Jones Utility Average (UTIL) – The Utilities were added because there is something interesting on the daily chart relative to the Industrials. Check the RSI and MACD as they appear to be in the process of rolling over while Friday's down volume was much heavier than normal.

     

    This bears watching as the week goes on as the Utilities may be leading the market and flashing a sign.

    Dow Jones Utility Average chart 91010

     

    Canada (TSX) – The TSX is in a long basing pattern. Economic reports over the past week gave investors some pause with the possibility of 3rd Quarter growth coming in weaker than expected due to a slowdown in the US. Technical indicators look overbought and investors would be well served to hold off on any buying in the event the TSX pulls back in the coming weeks.

     

    A move above 12250 would signal a breakout and move higher.

     

    Canada TSX chart

     

     

    Disclaimer
    Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
    PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

    Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

     

     



    Disclosure: No positions
    Tags: DIA, DDM, DOG, DXD, IDU, UPW, SDP, XLU
    Sep 13 12:49 AM | Link | Comment!
  • Gold Bullion – Are the stars alligned for a major breakout?

     

     

    By David Urban

    dcurb.wordpress.com

     

    Historically, the argument against Gold was that it provided no yield to investors. Stocks, bonds, and cash all provide some sort of yield so Gold as an investment has no merit.

     

    But that view appears to be changing, with volatility in the equity markets, bonds now providing little or no yield (witness the US treasury yield curve and IBM's latest offering), and money markets and cd's providing scant yields Gold is looking much more attractive as a place to park cash.

     

    Seasonally, the fourth and first quarters of a year are the most bullish for Gold.

     

    In countries such as China and India which are experiencing strong economic growth Gold is looked at as a store of value. In both countries imports of Gold are rising as citizens view Gold as lucky and a store of value.

     

    Recent news out of Europe indicates market participants are increasingly worried about the stress tests performed on European banks as they are increasingly being viewed as not that stressful at all.

     

    In the US the economy appears to be slowing into a 1-2% growth range, with a budget deficit of over a trillion dollars, new spending proposals, and the Federal Reserve instituting a Zero Interest Rate Policy (ZIRP).

     

    So while we look over the world we see two major areas with slow growth, Europe and the US, and investors rushing to Gold as a safe haven to protect against problems in the banking sector and at the sovereign level.

     

    In Asia strong economic growth is allowing investors to diversify their wealth by purchasing and giving Gold as gifts.

     

    While we may be near a major resistance level, Gold has provided investors with a safe haven in times of trouble. Since its rally from the 2008 lows Gold has seen rising support levels as investors buy on any dip.

     

    Technically, the weekly charts have six straight weeks of upward price movement and may make a slight pullback at this major resistance level. Silver is also outperforming Gold as well which is often a sign that a pullback in both markets is forthcoming.

     

    Investors would be wise to buy Gold on any dips and be ready to allocate some capital before the next leg up starts.

     

    Next week: Gold Equities – Where is the Bull?

     

     

    Disclaimer
    Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
    PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

    Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

     

     



    Disclosure: no positions
    Tags: GLD, SLV, DGP, gold, silver
    Sep 10 9:21 PM | Link | Comment!
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