Mad Hedge Fund Trader

Hard Assets Should Continue to Appreciate - Sprott's Oliver and Horvat

jkfgh Reflections on Risk -- The behavior of the global markets on Friday was a great “tell” on the current state of risk taking. We finally got the one data point that we have been hoping for, even praying for, for two years, nonfarm payroll job losses near zero. The stock market should have soared, but the Dow eked out only a miserly 22 point gain. The markets that should go down on this news got absolutely slaughtered, like bonds, gold, silver, platinum, crude, commodities, and foreign currencies. This tells you that the current risk/reward in the markets totally sucks right now. I believe that Mr. Market does whatever he must to shortchange the most people. And with almost all positions right now, you are facing a “heads, Mr. Market wins; tails, you lose” dilemma. This is why I have been out of the market since October, except for my physical precious metals, which are too expensive to turn over. Furthermore, all of the markets that have the greatest long term fundamentals suffered the most ferocious falls, like gold’s $80 hickey, because they have become the most overbought, thanks to those late to the party, the performance chasers and momentum players. This all leaves me more convinced than ever that I am making the right long term strategic call. Buy hard assets, but not at frothy peaks. Shun paper of all kinds, including stocks and bonds, especially US Treasuries, the world’s most overvalued asset.

Peak Gold Output Looms as ‘Big Money’ Flocks to Exeter Resource

klhg With gold’s whopping great $80, 6.6% pull back from Thursday’s all time high, I have been deluged by readers asking if this was the peak, if this was the final blow off top, and if gold is finished as an asset class. My answers are no, never, and not on your life. Obama has not suddenly become a paragon of fiscal restraint. Bernanke has not morphed into a tightwad overnight. When I pull a dollar bill out of my wallet, it’s as limp as ever. The relentless whir of the printing presses still keeps me awake at night; even though, according to Mapquest, I live 2,804.08 miles from Washington DC. I see the three day plunge as a gift. If you forgot to buy gold at $35, $300, or $800, another entry point is setting up for those who, so far, have missed the gravy train. Start scaling in around the Dubai low of $1,135, and add on further declines down to $1,040. That’s where the Reserve Bank of India started the recent love fest for the barbaric relic with its 200 ton purchase in November. Then the next time that snarky guy at the country club starts boasting again about the killing he made in gold futures, the UPS delivery guy chortles about his gold mining stocks, and your cleaning lady quits because of the fortune she made in Mexican 50 peso gold coins, you’ll at least be able to shoot back with your own witty response. If the institutional world devotes just 5% of their asset to a weighting in the yellow metal, as many have recently promised, it has to fly to at least $2,300, or higher. By the way, you can pick up those gold pesos by visiting Millennium Metals by clicking here at millenniummetals.net . ETF players can look at the 1X (GLD) or the 2X leveraged gold (DGP). If you don’t believe a single word of this, or want to protect your existing holdings from a more prolonged move South, visit the Horizons BetaPro Comex Gold Bullion Bear ETF (HBD.TO), a 200% leveraged short position in the yellow metal.

Is the Gold Rally Getting Frothy?

oout Welcome to the new gold standard! There was a time that to own gold you had to be a “gold bug” and believe in the myriad urban legends that percolated in the underground. Fort Knox is either empty, or full of gold plated steel bars. The Treasury cut back on the minting of new gold coins because it had to ship the bulk of our reserves to China to cover the trade deficit. The US government is going to ban private gold ownership again. The Feds have unwittingly fanned the flames of paranoia, with the Patriot Act forcing all American gold and jewelry dealers to register with the Treasury Dept. But adherents to the yellow metal are considered raving nut cases and conspiracy theorists no more. Emerging market central banks, pension funds, hedge funds, mutual funds, and millions of individuals around the world have all simultaneously decided to keep a certain percentage of their assets in the barbaric relic. They are either making a bet on an extended super cycle in favor of all hard assets, or looking for insurance against a wave of hyperinflation that Washington’s policies threaten. Enthusiasts are no longer burying pillow cases of coins in the back yard, but instead are pouring into an ever expanding legion of ETF’s, mining shares, bullion, and futures contracts. The SPDR Gold Shares (GLD), with $37 billion of the yellow metal, is now the world’s sixth largest owner of gold. Some economists are now arguing that if you take world GDP and divide it by the value of the gold above ground today, an historic mean ratio would put the yellow metal at $11,000 an ounce. That makes the current spot price look like the deal of the century, and my target of the old inflation adjusted high of $2,300 positively conservative. To sign up for a great free weekly research product on precious metals, please click here at www.millenniummetals.net/

Gold: It's All About the Dollar and (Yes Dr. Roubini), Inflation

nju News broke this morning that, out of the blue, the Reserve Bank of India bought 200 metric tonnes of gold from the IMF for a handy $6.8 billion. The news set the gold market on fire, boosting the December futures $40 to an all time high of $1,088. It is the largest transaction in the barbaric relic since the Alaric’s Visigoths sacked Rome in 410 AD. It has been public knowledge for some time that the IMF was looking to unload 403 tonnes of the yellow metal in order to fund lending to poor countries. Many traders say this threatening overhang is why gold failed to definitively break out to the upside this year, despite six attempts. The expectation was that China would take this hoard as part of a broader diversification away from the dollar. Bringing India into the fray, which had no prior history of stockpiling gold, is a whole new plate of basmati rice. Not only does this raise the prospect of a bidding war with China for more gold reserves, other cash rich emerging market central banks are likely to join the mosh pit as well, no doubt panicked by the ominously rising whirr of printing presses in the developed countries. My short term goal for gold was $1,200, but I now have to raise that to the $1,300 favored by some chartists in view of the new dynamics. If you want to see my long term target, take a look at the chart below, which has gold zeroing in on its inflation adjusted all time high of $2,358. For those who prefer holding the barbaric relic of the physical kind, visit the tightest spreads in town on American Eagles and bullion at www.millenniummetals.net/ . And while you’re there, sign up for their free research product on precious metals.

Gold Stocks vs. Gold: Who's Winning?

nfc Brace yourself for the impending gold shortage. Gold shortage? Yup. With the launch of the eighth gold ETF this yesterday, the ETFS Gold Trust (SGOL), total ETF holdings of the barbaric relic reached 54 million ounces worth $55 billion, more than total world production in 2008. Last year, South Africa suffered its steepest decline in gold production since 1901, falling 14%, to a mere 232 tons. It now ranks only third in global production of the yellow metal, after China and the US. Severe electricity rationing, a shortage of skilled workers, and more stringent mine safety regulations have been blamed. Choked off credit has frozen the development of new capital intensive deep mines, as it has for everybody else. Rising production costs have driven the global breakeven cost of new gold production up to $500 an ounce. In the meantime, the financial crisis has driven flight to safety demand for gold bars and coins to all time highs. Last year, the US Treasury ran out of one ounce $50 American Gold Eagle coins, now worth about $980. Competitive devaluations by almost every central bank, except Japan, mean that currencies are not performing as the hedge that many had hoped. It all has the makings of a serious gold shortage for the future. Could last year’s downturn be a blip in the eight year bull market? Now that we are solidly over $1,000, kissing $1,025 last night, the match could hit the fuel dump at any time.

Can $1,000 Gold Last?

ttm Those transfixed by gold blasting through the $1,000 level have been missing the real action in silver. The white metal has soared 57% to $17 since the beginning of the year, compared to only a 22% move for the barbaric relic, an outperformance of almost three to one. I have been a raging bull on silver all year, and on May 7, grabbed you by the lapels and shook you senseless if you didn’t buy at $12.70 (click here for earlier report ). It is nothing less than owning gold with a turbocharger. Silver gives you a nice double play. Its qualities as a precious metal are giving it a major boost from the flight from the dollar, one of this year’s certainties. It is also an industrial commodity, which unlike gold, is consumed, and therefore gives you a call on the recovering economy. If you don’t think this move is real, check out the shares of the silver producers. Coeur D Alene Mines (CDE) has rocketed by 57% this month and is up 144% YTD, while Silver Wheaton (SLW), and Hecla Mining (HL) have also done well. If you want to get set up on buying silver futures, e-mail me at madhedgefundtrader@yah... and I’ll tell you how to do it. To accumulate .999 fine silver dollars for only a buck over spot, or bullion at the lowest spreads in the market, visit mileniummetals.net by clicking here. How long will it take to get to the old high of $50? The Hunt brothers must be grinding their teeth.

Will This Gold Rush Continue?

itin. Those transfixed by gold blasting through the $1,000 level have been missing the real action in silver. The white metal has soared 57% to $17 since the beginning of the year compared to only a 22% move for the barbaric relic, an outperformance of almost three to one. I have been a raging bull on silver all year, and on May 7, grabbed you by the lapels and shook you senseless if you didn’t buy (click here for earlier report ). It is nothing less than owning gold with a turbocharger. Silver gives you a nice double play. Its qualities as a precious metal are giving it a major boost from the flight from the dollar, one of this year’s certainties. It is also an industrial commodity, which unlike gold, is consumed, and therefore gives you a call on the recovering economy. If you don’t think this move is real, check out the shares of the silver producers. Coeur D Alene Mines (CDE) has rocketed by 57% this month, while Silver Wheaton (SLW), and Hecla Mining (HL) have also done well. If you want to get set up on buying silver futures, e-mail me at madhedgefundtrader@yah... and I’ll tell you how to do it. To accumulate .999 fine silver dollars for only a buck over spot, or bullion at the lowest spreads in the market, visit mileniummetals.net by clicking here. How long will it take to get to the old high of $50? The Hunt brothers must be grinding their teeth.

Meet the Counterparties that Hedged Barrick's Gold

tyeb Those transfixed by gold blasting through the $1,000 level have been missing the real action in silver. The white metal has soared 57% to $17 since the beginning of the year compared to only a 22% move for the barbaric relic, an outperformance of almost three to one. I have been a raging bull on silver all year, and on May 7, grabbed you by the lapels and shook you senseless if you didn’t buy (click here for earlier report ). It is nothing less than owning gold with a turbocharger. Silver gives you a nice double play. Its qualities as a precious metal are giving it a major boost from the flight from the dollar, one of this year’s certainties. It is also an industrial commodity, which unlike gold, is consumed, and therefore gives you a call on the recovering economy. If you don’t think this move is real, check out the shares of the silver producers. Coeur D Alene Mines (CDE) has rocketed by 57% this month, while Silver Wheaton (SLW), and Hecla Mining (HL) have also done well. If you want to get set up on buying silver futures, e-mail me at madhedgefundtrader@yah... and I’ll tell you how to do it. To accumulate .999 fine silver dollars for only a buck over spot, or bullion at the lowest spreads in the market, visit mileniummetals.net by clicking here. How long will it take to get to the old high of $50? The Hunt brothers must be grinding their teeth.

Four Keys to Gold’s Next Move

ziin Those transfixed by gold blasting through the $1,000 level have been missing the real action in silver. The white metal has soared 57% to $17 since the beginning of the year compared to only a 22% move for the barbaric relic, an outperformance of almost three to one. I have been a raging bull on silver all year, and on May 7, grabbed you by the lapels and shook you senseless if you didn’t buy (click here for earlier report ). It is nothing less than owning gold with a turbocharger. Silver gives you a nice double play. Its qualities as a precious metal are giving it a major boost from the flight from the dollar, one of this year’s certainties. It is also an industrial commodity, which unlike gold, is consumed, and therefore gives you a call on the recovering economy. If you don’t think this move is real, check out the shares of the silver producers. Coeur D Alene Mines (CDE) has rocketed by 57% this month, while Silver Wheaton (SLW), and Hecla Mining (HL) have also done well. If you want to get set up on buying silver futures, e-mail me at madhedgefundtrader@yah... and I’ll tell you how to do it. To accumulate .999 fine silver dollars for only a buck over spot, or bullion at the lowest spreads in the market, visit mileniummetals.net by clicking here. How long will it take to get to the old high of $50? The Hunt brothers must be grinding their teeth.

Barrick's Buy-Back Comes at a Bad Time

cvn. The precious metals markets were stunned with Barrick Gold’s (ABX) announcement that it will float a $3 billion public offering to retire its gold hedges in the futures markets. The means that the world’s largest producer is cashing in its downside production and gearing itself for a ballistic move up in the price of the barbaric relic. The timing of the announcement, the day that the yellow metal broke $1,000 for the first time since February couldn’t have been more auspicious. I have been a huge fan of Peter Munk’s ABX all year, cajoling readers into the stock at $27 in January before its 56% run (click here for report at www.madhedgefundtrader...) . South Africa’s largest gold miner, AngloGold Ashanti’s CEO Mark Cutifani says his company put its money where its mouth is, taking off its hedges some time ago. “People are doing what they have been doing for 5,000 years, and that is buying gold as the only hard currency,” opines Cutifani. In the meantime, the Street Tracks gold ETF (GLD) announced that it has $34 billion of gold holdings, making it the largest ETF of all, and the fifth largest owner of gold in the world after four central banks. If you want to buy gold bullion or coins for the tightest spread over spot, check out www.millenniummetals.net by clicking here.

Gold Trades Up on Weak Dollar, Poor Non-Farm Employment Data

ip. ) Just as it is prudent to top up your flood insurance ahead of the hurricane season, investors are loading up on gold ahead of the treacherous September-October stock trading period. Yesterday’s $22 move up shows that attempt number six to run the yellow metal up to a new high has begun. Silver happily tagged along for the ride, tacking on 70 cents to $15.49. Historically, September is the best month of the year to own the barbaric relic, showing an average 3.5% gain over the last 20 years. The onset of the Indian wedding season, Ramadan, and the run up to the Christmas and the Chinese New Year jewelry buying binge are all conspiring to give gold a boost. A tip off this was coming was the big put selling seen for the shares of the gold ETF (GLD), and Kinross (KGC). One good way to play gold at this late stage might be the shares of highly leveraged unhedged producers like Rangold resources (GOLD), Jaguar Mining (JAG), and royal Gold (RGLD). Confirmation that the markets are moving towards risk aversion can be found in the euroyen chart, which hit a one month low at 131, after double topping at 140.50. If gold does break, it could tack on 20% very quickly to $1,200. Keep those American gold eagles.

Gold Stocks Set for Big Advance

Where's the beef? ) I have been a huge bull on gold this year, piling investors into the yellow metal at the $800 level in early January (see www.madhedgefundtrader...). But after an exciting couple of months, it has tiresomely become dead money. This is a commodity that has absolutely everything going for it; the Great Depression II, threats of nuclear war with North Korea, riots in Iran and China, a government borrowing binge of Weimar proportions, and money supply growth that is through the roof. In fact the US is doing everything imaginable to debase its own currency. Unfortunately, all I see on my screen right now is an ugly smudge at $910 an ounce. So what gives? Someone has been leaning heavily on gold every time it approached the magic $1,000 level, and they have now created a quadruple top on the charts. Gold has become the metal that everyone loves, but nobody wants to buy. There have been rumors of European Central Bank selling of gold reserves, Russian selling to cope with a lower oil price, and traders simply playing the range for lack of anything else better to do. The global risk reduction that began with a vengeance a few weeks ago is certainly having an impact. If demand from the famed Indian wedding season doesn’t come through, things could get worse. Gold bugs should expect to suffer more short term pain in this great long term core holding.

Barrick Gold: A Hedge Against the Dollar and Inflation

This is a great company. “There is room for bulls and bears, but pigs get slaughtered,” said Peter Munk, the legendary founder and CEO of Barrick Gold, the world’s largest gold producer. This is his admonition to worshipers of the barbaric relic hoping for a quick super spike to $2,000 or $5,000 an ounce. Since 2003 gold has tripled from $300 to $1,000, outperforming every asset class in every currency, and he has no problem with it backing and filling here in a long term uptrend. The fundamentals look great, as the world is running out of the yellow metal. The industry used to be run by demand from the Indian wedding season. The current economic stress has made the country a net exporter of gold for the first time. Global jewelry demand is at a 20 year low. With the help of satellites, the world is pretty well mapped out, so there will be no more surprise Californias or Klondikes found. The only untapped reserves are in the Andes at 13,000 feet, or in countries too dangerous to visit. The cost of extraction has also doubled in ten years to $400/ounce, driven by labor, fuel, trucks, and environmental mitigation. Gold will only go down when the US government turns off its printing presses. With record stimulus packages in place, there is a fat chance of that happening in this lifetime. Ultimately, the price of gold is a barometer of fear, which will not be in short supply in the new era we are facing.

How Gold Gets out of the Ground

Here's a new source. Peter Monk’s Barrick Gold (ABX) snared approval for its Pascua-Lama adventure after Chile and Argentina signed a tax treaty on how to treat the mine’s profits. When completed, the $3 billion, 13,000 foot high project will be one of the world’s great engineering achievements, extracting a forecast 800,000 ounces of gold and 35 million ounces of silver in the first five years. This will raise the company’s production by 10% at a time when precious metals are getting increasingly hard to find. Just another reason to buy one of the world’s best managed companies producing the most sought after product.

Gold Stocks Are Undervalued

Here is some insight. The Financial Times printed a great interview with Peter Munk, the visionary chairman of Canada based Barrick Gold (ABX), the world’s largest gold producer. He says that it will only take decisions by a few central banks to move gold up to $2,000 an ounce. The feeling of insecurity is here to stay, and the appeal of gold as a hedge has broadened enormously. With a new floor of gold at $800, the profitability of gold mining companies is soaring. Gold is a win-win play because if financial distress continues, so will gold’s flight to safety bid. If the economy recovers, jewelry demand will come roaring back. The world’s gold supply is constrained, as miners are having to dig deeper and deeper. Send me another sack of American eagles!