Source: Peter Byrne of The Gold Report (6/24/13)
The quant who produces Trader Tracks newsletter tells The Gold Report that the technical charts project a brightening future for precious metals. Technical market analyst Roger Wiegand tracks annual trading cycles while keeping an expert eye on potentially disruptive world events. He is a stickler for fundamentals, though, when it comes to picking out the best juniors for safe bets in a cash-poor industry.
The Gold Report: In early 2012, Roger, you predictedthat the price of gold would rise to over $2,000/ounce ($2,000/oz) during the year. But as the overall stock market increased in value, the yellow metal went in the opposite direction. What happened?
Roger Wiegand: Two things happened. First, the last gold peak almost made it. It went to $1,923/oz, and that was a technical and fundamental top. Then it sold down. The other thing that happened is that the U.S. Treasury intentionally sold gold to protect the stock and bond markets. Treasury feared that if gold ran up too high too quickly, people would dump securities en masse.
We are in the seasonal cycle when many markets go sideways. We have seen the selloff at the end of last week. A triple bottom is extremely bullish. The snap back in the price going long could be impressive.
TGR: What factors are keeping gold down in the near term?
RW: Gold is taking a pounding since the big bullion banks have full control and they have to cover their radical short positions taken at the behest of the FOMC and U.S. Treasury to preserve the fiat markets. Briefly, they kept the gold market under control to prevent a runaway for the FOMC and are now using TARP bank capital and derivative dollars to drive gold to the basement. Next, they are accumulating all the gold bullion they can to preserve their wealth in the forthcoming legendary crash. In addition, they get to buy it on the cheap as the dumb money is in full exit in fear.
Also, China, South Korea and Japan have problems and each central bank is dealing American bonds. Recently, China sold American paper through its own markets in order to offload Treasury bonds for currency. All kinds of problems are looming in China; some experts claim that China's export trade numbers are only half of what was actually reported. South Korea is clearly weakening, and Japan is experiencing an emergency, causing it to stimulate at twice Mr. Bernanke's rate. That is simply unsustainable. Japan is the Achilles heel of the whole financial system. If the yen runs away, it's a disaster.
What does that mean for gold? Starting in August, the price will likely rise until the end of September. Then harsh political and economic factors will create serious problems in the global markets: I'm calling for a 50% correction in the U.S. stock markets in Q4/13.
TGR: In your June 6 newsletter, you said that we are on the verge of a brand new world.
RW: The brand new world is imminent because the lessons of 2008 were not learned. The banks are doing the same bad things they were doing before the crash, only worse. The derivative markets are larger now than they were back then. A huge number of student loans might well be written off. And the real estate market is doing a rerun. Incredible! People with foreclosures who may not be qualified for a new mortgage are receiving Federal Housing Authority-insured loans in a desperate effort to try to prop up the home loan industry, which is a major sector of the U.S. economy.
We are in a depression, not a recession. The real numbers for unemployment in the U.S. are 25%. They were 25% in the 1930s. In Spain, 54% of the workers under age 25 are unemployed. The down-the-hill slide is global and in slow motion. People still believe a lot of media nonsense, but this market simply has not corrected. The ultimate jobs program will be a new war.
TGR: Where do you think a war will break out, Roger?
RW: Iraq is cranking up for another round. War is on the agenda in Turkey. Libya has bad problems, not to mention the horror that is Syria. China is beating a war drum, but that's just talk. North Korea is not capable of going to war. But more wars over energy resources will continue to break out in the Middle East.
War creates jobs. World War II ended the Depression of the 1930s. I don't think there will be a nuclear war, but three or four conventional wars can go on simultaneously, hire a lot of people, square away the economy and get things righted in the bond market.
TGR: Given such a dismal scenario, how will that affect the price of bullion and shares in gold mining firms?
RW: In the short term, gold and silver shares will follow the futures and cash markets. We are still in a corrective phase, which can last for another six weeks. But once gold and silver start to climb, the shares will follow. It's a big mistake right now for people to unload shares in good junior companies just because the stock has been beaten down. The companies with good fundamentals and enough cash to sustain operations for the next two to three years are going to do better. Look for good management with a project next door to a senior that is going to buy out reserves. Cash-starved greenfield juniors out in the middle of nowhere with no senior around to buy them out will not make it. It is like the salmon going upstream-some fish fall by the streamside, some make it home to nest.
TGR: What technical tools do you use to analyze the future of gold?
RW: I look at the Market Vectors Junior Gold Miners ETF (NYSEARCA:GDXJ), which is the Index for the juniors group. Right now, the graph of that technical tool looks like an upside down head and shoulders, and that's very bullish. It is going to take a few more weeks for the junior stocks to pick up steam.
TGR: Do you have any junior names that meet your criteria for success?
RW: Watch California Gold Mining Inc. (CGM:TSX.V) at $0.08/share. The company has top management from Northern Gold Mining Inc. (NGM:TSX.V). It is located in a region with gold mining activity historically. Six mines are in various stages at that location. California Gold Mining stock had a low of $0.03 and a high of $0.24/share. Technically, we add the high and low and divide by two and find a 50% retracement. That is half of $0.27 or almost $0.14. The company has money and it has strong backers.
One of the standards out there that has been very good to our readers for the last four years is Timmins Gold Corp. (TMM:TSX; TGD:NYSE.MKT). It is a steady play, always on the upswing. When the futures and the cash markets rise, Timmons runs alongside. The near-term price is between $2.50 and $2.75/share. We're looking at $2.85 to $3/share in the next 30-60 days, roughly.
We have followed Canasil Resources Inc. (CLZ:TSX.V) for years. It is trading around $0.055/share. Rounding to $0.06, we are looking at $0.125 as a goal within 90 days. A key point with Canasil is it is primarily a silver exploring company in northern Mexico. Its partner is MAG Silver Corp. (MAG:TSX; MVG:NYSE), and the two companies just signed a partnership agreement, expanding a major project with an injection of several million dollars. MAG Silver has a lot of capital. MAG Silver's Peter Megaw is one of the top geologists in the business. He told me that the company plans to build a 100 million ounce silver reserve and make it as big as the biggest of the precious metal mines in Mexico. So far, it is doing exactly that. Canasil also has some wonderful projects in British Columbia that just got permits.
At Trader Tracks, we like Santacruz Silver Mining Ltd. (SCZ:TSX.V; 1SZ:FSE) at CA$1.15/share. We are looking for a 50% retracement back to CA$1.75/share.
And there is Gold Standard Ventures Corp. (GSV:TSX.V; GSV:NYSE) in Nevada, right next door to Newmont Mining Corp. (NEM:NYSE). The chief geologist for Newmont has done the exploratory work and the results look good. The firm's shares have big support by some very wealthy investors and are going up. The price was down to CA$0.50/share in May, and it is at CA$0.67 today. Gold Standard Ventures is the perfect example of a company that is building good reserves next door to a senior that, in my opinion, is going to buy it out.
One of our old favorites is Hecla Mining Co. (HL:NYSE). Today, it is at $2.79/share. The company went through a spate of problems during the last three years. But after settling a lawsuit with the Environmental Protection Agency, it expanded the Lucky Friday mine in Idaho. It bought out Rio Tinto Plc's (RIO:NYSE; RIO:ASX) partnership shares there. It now totally owns the Greens Creek project on Admiralty Island in Alaska, which has a silver life of 50 years. That island mine was running on electricity generators, and now it is connected by wire to the mainland. Hecla has been busy with a gold mine in northern Mexico in an area that is very rich, with four seniors operating in the region. We are looking for a high of $4.88/share in three to six months. Hecla's stock likes to go to $8 or $9/share, and then retreat on a correction.
TGR: Roger, can you tell us what kind of technical information you look at to come up with your recommendations?
RW: I am mainly a chartist and a technician, but one cannot neglect the fundamentals, particularly considering the state of political economy in the world. First off, does a firm have good management? Is it located in an area that's politically reliable? Does it have expertise in engineering and geology? Then, we look at valuations.
Remember, if you want to find gold or silver, go where the old mines have been prolific. Just because a lot of ore has been pulled out successfully does not mean that there is not more there to be mined. California Gold is a perfect example. The two big mines that Hecla runs in Idaho and Alaska are examples. The old mines in northern Mexico are loaded with silver. First Majestic Silver Corp. (FR:TSX; AG:NYSE; FMV:FSE) is an intermediate-size miner in Mexico that has done exceedingly well. Its stock is lofty in price, but the company continues to prove its way down the road and make money by expanding the business.
After assessing the fundamentals, we examine the technical side with a long-range chart of 5 or 10 years. Then we narrow it down to a one-year chart. We next narrow it down to the cycles. Historically, gold and silver do very well between Nov. 1 through April. From May through mid-August, everything slows down. The annual fall rallies start the second or third week of August and run until the middle of October. Traders and investors in gold and silver know that the two big contracts in Q4 for gold and silver are the December futures, and they expire in November.
TGR: The futures explain the cycles?
RW: Yes. August gold is not that big a deal. December is the really big one for gold. In silver, March is the big one. July is less important. September is big because it's in the middle of the peak season going higher. The other big cycle for silver is December. So keep these cycles in mind when trading and investing. Those are the times of year a trader or investor with average experience can profit from quantification. Chart the time of year when prices consistently bottom out and then start to rise.
TGR: Any junior names for us outside of North America?
RW: We follow Global Minerals Ltd. (CTG:TSX.V; DPF:FSE) in Slovakia. It has great reserves. It is a previously exploited, proven mine. Slovakia is a business-friendly, Westernized country with all the big auto and consumer companies operating there. Global Minerals had a dewatering project that went on for about eight months. The pumping is completed, and the engineers and geologists are working at the 3,000-foot level, doing the exploratory work for the next move.
TGR: Do you own stock in Global Minerals?
RW: I trade futures and commodities. Because I recommend stocks for the Trader Tracks newsletter, ethically I cannot buy them. That breaks my heart, sometimes, because I've seen some dandies that I knew were going to do well. But I personally trade futures in gold, silver, currencies, the energy sector and grains.
TGR: Any parting advice, Roger?
RW: Please have patience, gold investors. Some analysts are predicting crazy numbers, like $900/oz. Not me.
TGR: Thanks, Roger.
Roger Wiegand-aka Traderrog-produces Trader Tracks newsletter to provide investors with short-term buy and sell recommendations and give them insights into political and economic factors that drive markets. After 25 years in real estate, Wiegand has devoted intensive research time to the precious metals, currency, energy and financial market for more than 18 years. He creates a weekly column forJay Taylor's Gold, Energy & Tech Stocks newsletter.
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1) Peter Byrne conducted this interview for The Gold Report and provides services to The Gold Reportas an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Timmins Gold Corp., MAG Silver Corp., Santacruz Silver Mining Ltd., Gold Standard Ventures Corp. and Global Minerals Ltd. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Roger Wiegand: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
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