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Marco G.
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A veteran of the small cap wars, the Goombarh has survived both the glory and collapse of the internet boom and the 2008 bust. Now he is focused on oil, mining and commodity junior stocks. The world has evolved with the rising tide of demand from the emerging markets growth of their middle... More
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  • Fight Low Inflation - Buy Gold Stocks!  5 comments
    Jan 28, 2011 2:48 PM | about stocks: GG, SIL

    The author was perusing news whilst devouring his breakfast steak (well, maybe not breakfast, but real thick beef loin, as I had been surviving on only coffee for 5 hours this morning), and came across this: 

    The Federal Reserve's total asset base has risen to $2.5 trillion dollars in their treasury purchases as the second round of its quantitative easing program.  The objective was to spur economic growth and prevent "inflation from falling too low" (emphasis author's). 

    This initiated a thought train in the author's mind-- keeping inflation from going lower must mean that the Fed is trying to inflate.  The inflation referred to is the currency.  Then what benefits from this inflation is hard goods and the precious metals.

    This was what is driving Gold this morning, was the weird Fed statement of combating  low inflation.   I wondered how the chart looks for my bellweather Gold stock, Goldcorp (GG, TSX: G), displayed following:  (click to enlarge)

    G.TO (Daily)

    Sure enough, Goldcorp has bottomed and is turning higher.  The large white candles for this prime Prima Donna Gold stock lately stands in stark contrast to the declining red candles since December. 

    At the bottom of the chart, the CMF(Chaikin Money Flow) has even gone less negative, again indicating less money leaving this stock than previous.  (Eh, Marco, grasping at straws here --less negative, you are starting to talk in double negatives as what the Fed just did; rather than turning positive, tut..tut!). 

    Goldcorp is a high quality recognized Gold stock, and if smart money is moving in, then this bears paying attention to, I thought to myself.  

    In addition to fighting low inflation, the earnings report and fiscal year for all these large cap Gold and precious metals producer stocks is just around the corner.  The precious metals miners that are not hedged should be enjoying rather high prices for their commodities sold this past fall and winter, with the burgeoning Gold prices. 

    Okay, the bellweather Gold stock is moving, but what about the Silver sector?  Perhaps the author's call for Silver bottom last week was a little bit early.  The chart for SIL, the ETF of the top Silver miners in the world follows:  (click to enlarge)

    SIL (Daily)

    Sure enough again, the chart for SIL above is also displaying bottoming and white candles turning around from the decline of almost 30% since the beginning of the year. 

    I wonder, is not Silver expected to move more than Gold?  Are not the Silver mining equities expected to leverage upon the Silver price moves?  (Yes, the equities also leverage the Silver price moves downwards)  The early smart money seems to be investing now in the Silver equities.  The author posted  a previous listing of possible suspects a few postings back, here.  Yes Silver can be used to fight "Low Inflation" also. 

    Thanks to the Fed for coming to the rescue of the precious metals stocks.  Perhaps, this may be a wise time to position oneself in selected Precious Metals Junior mining stocks to aid in this fight against "Low Inflation"?

     

    Disclosure: The author is long Junior mining stocks.

    Important Disclaimer

    The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.

     



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: I am long junior mining equities
    Themes: gold, silver, inflation, junior miners Stocks: GG, SIL
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Comments (5)
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  • haleiwahu
    , contributor
    Comments (3466) | Send Message
     
    What's your take on the movement of Coppers when compared with the Silver and Gold movements? Shouldn't they be close to parallel? for example (SCCO)
    1 Feb 2011, 11:24 AM Reply Like
  • Marco G.
    , contributor
    Comments (474) | Send Message
     
    Author’s reply » Hi Haleiwahu,

     

    As you may be aware, I generally do not take on big companies such as Southern Copper.

     

    As to compared to Gold/silver, possibly Southern is better than say, Kinross, in terms of share holder dilution, so SCCO should be better.

     

    But for the largest bang for the buck, look at juniors such as Mercator Minerals (MLKKF)

     

    Marco G.
    1 Feb 2011, 11:37 AM Reply Like
  • haleiwahu
    , contributor
    Comments (3466) | Send Message
     
    Copper stocks even climbed higher than my (SLW). I let my gold stocks sit on the sideline today. Silver, (AAPL) (X) and (AMZN) was very busy. Dumped (F) today, good thing. I have a funny feeling that gold and silver will be down tomorrow. What's your take on PMs?
    1 Feb 2011, 09:08 PM Reply Like
  • Marco G.
    , contributor
    Comments (474) | Send Message
     
    Author’s reply » I don't know about the short term, such as tomorrow, but I am holding for the intermediate term...that is about 3 months anyways, until May or so. The sell in May was quite bad for Juniors in 2010.

     

    Marco G.
    1 Feb 2011, 11:01 PM Reply Like
  • haleiwahu
    , contributor
    Comments (3466) | Send Message
     
    Since your report of GG at $41and change, today Wed, 2/16 (GG) hits $44.27 about a 7% increase in less than a month. And (MLKKF) up about $.30 Good calls.
    16 Feb 2011, 11:07 AM Reply Like
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