Gold & Precious Metals Sector and Stocks Analysis from Seeking Alpha

Teck Surprises with Equity Issue and Sale

FP Trading Desk — Sun, 05 Jul 2009 11:08:42 -0400

FP Trading Desk submits:

Teck Resources Ltd.’s announcement that it has issued 101.3 million Class B subordinate voting shares at C$17.21 each for C$1.74-billion from sovereign wealth fund China Investment Corp. ((CIC)) comes as a surprise to some given recent comments from the mining giant that it was not looking to raise equity. Instead, the suggestion was that it was looking at selling a stake in the Elk Valley metallurgical coal operations.

Nonetheless, BMO Capital Markets analyst Tony Robson sees the deal, which represents 17.5% of outstanding B shares and 6.7% voting interest, as positive for Teck given that it comes after a strong share price rally recently.

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Why German Customers at Austrian Banks Are Suddenly Silver Bulls

The Prudent Investor — Sun, 05 Jul 2009 07:47:39 -0400

The Prudent Investor submits:

It has become rare under ever tightening money transfer laws - allegedly because this helps fight "terrorism" - to be able to issue an alert that may help those cautious Germans who survived the market's tsunami of 2008 to repatriate money from tax-friendly Austria back home.

Legions of German savers with money deposits at Austrian banks appear to have turned into silver bulls.

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Gold Rebounds After Worse-Than-Expected Jobless Figures

GoldCore — Sun, 05 Jul 2009 04:40:19 -0400

Mark O'Byrne submits:

Gold: Gold rebounded Thursday after the jobless figures out of the US were worse than expected. This instigated a slump in equities and investors pumped funds into gold to hedge against falling stock markets. As of this writing (July 3) Gold is currently trading at $932.60/£571/€666.04.

Silver: Silver has regained some of Thursday's losses but as of this writing was still trading at $13.39, down from $14.13 only 4 days ago.

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Gold Price Manipulation: So What?

Kristjan Velbri — Sun, 05 Jul 2009 04:15:21 -0400

Kristjan Velbri submits:

Whether or not the price of gold, as many have been arguing here and elsewhere, is being manipulated or not, interestingly enough, doesn't matter. Gold is told to be an excellent preserver of wealth, especially in rough times like these. I agree with that but I don't think the manipulation hypothesis should be given as much focus as it's been given so far, simply because there is nothing wrong with central and commercial banks occasionally pushing the price lower.

Why? Well, the central banks, led by the Federal Reserve, have been printing huge amounts of new 'money' and as soon as it gains velocity, inflation will propel gold to new highs. One way to preserve wealth is to buy gold and the best time to do it is before inflation kicks into high gear. Let's assume that the manipulation hypothesis holds true and the price of gold is being artificially suppressed. As an individual who is trying to buy gold I could not wish for a better setup, I would be glad to be able to buy gold at a suppressed price.

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Taking a Lesson from the Great Depression

David Goldman — Sun, 05 Jul 2009 02:23:35 -0400

David Goldman submits:

The present deflation is worth putting in context. Below (click to enlarge) is the annual rate of CPI change since 1913:

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Silver's Strength Waning

Hard Assets Investor — Thu, 02 Jul 2009 17:04:14 -0400

Hard Assets Investor submits:

By Brad Zigler

real-time Monetary Inflation (per annum): 8.5%

There's a little bit of tarnish on silver now. Silver spent the first five months of 2009 building strength against gold. The gold/silver ratio, which started the year at 80-to-1, slumped to a 61 multiple at the beginning of June. It's been rebounding since then and now has breached its former breakout level at 68x.

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A Brief Primer on Choosing Gold Stocks

Moses Kim — Thu, 02 Jul 2009 13:21:15 -0400

Moses Kim submits:

Now that a generation of stock gains has been wiped out by the Big Bad Bear Market of 2008, investors are more skeptical than ever of bull market hype. Let's face it, in a bear market most stocks go down. Nonetheless, I believe there is a huge bull market brewing under the surface in gold stocks that will explode no matter what happens in the stock market.

Gold stocks are simple companies to understand as they produce one main asset- gold. The key is to understand what environment gold thrives in. Gold is widely considered a hedge against inflation, so obviously inflationary environments are something to look for. But, gold is also a great hedge against deflation. In fact, gold does better in a deflationary environment. The rationale behind this is simple: as prices deflate, production costs and expenses do too. During the deflationary Great Depression, gold stocks outperformed the Dow by many multiples. While the Dow was getting pummeled, the bellwether of gold stocks, Homesteak Mining, was trading at nearly 7 times 1929 prices.

So believe it or not, the much ballyhooed argument of deflation vs. inflation is immaterial. In the 2 great bull markets in gold in the 20th century, one was marked by inflation, and the other by deflation. The similarity? A dramatic downturn in the economy and collapsing confidence in the government. So if you believe we're in for a doozy of a depression, and you're losing trust in the government, you may want to look into diversifying into gold companies.

Now let's take a look at the different tranches of gold companies. There are the majors, which are established companies that produce millions of ounces annually. These are the most conservative gold stocks and they provide modest dividend income. Then you have the intermediates, which produce hundred of thousands of ounces annually. While still relatively conservative investments, you get slightly more upside with intermediates. At the bottom of the rung are juniors and exploration companies that are not yet in production, but hold the promise of striking gold and returning many multiples on invested capital. As you go down the ladder of gold companies, attendant risks rise, but so do the rewards.

As you dip your foot into gold stocks, here are some things to look for:

Management: Yes management counts. Pick a company with a proven leader at the helm. Rob McEwen, current CEO of U.S. Gold, is one CEO that comes to mind. Using innovative gold-locating strategies, McEwen helped turn the failing Goldcorp into a global giant.

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Preserve Your Wealth with Precious Metals

Nick Barisheff — Thu, 02 Jul 2009 12:27:30 -0400

I’m not so much interested in the return on my money as I am the return of my capital." (Will Rogers)

In this extraordinary environment, preserving your personal wealth becomes priority one. Before you make another major financial decision, it is imperative to understand the big picture by recognizing and understanding three critical issues. First, we are in a secular bear market for financial assets (stocks and bonds). Second, the consequences of the global bailouts will likely be highly inflationary. Third, we are at a pivotal point in the long-term investment cycle.

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Two Short-Term Scenarios for Gold

Jeff Nielson — Thu, 02 Jul 2009 11:54:50 -0400

Jeff Nielson submits:

At the beginning of May, the usual chorus began that gold was about to have its annual spring sell-off. Those voices included not only the anti-gold cabal, but also a number of commentators inside the sector.

The prevailing “wisdom” was that since gold always sells off in the spring that it must do so again. As is usually the case in the market, there was no actual analysis of why gold tends to sell-off in the spring – and if those conditions were present this year.

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Exploring Gold Miner Stocks: Mid-Year 2009 Analysis

The Gold Stock Strategist — Thu, 02 Jul 2009 11:48:50 -0400

The Gold Stock Strategist submits:

There are several ways to value large gold producers. One of the conventional methods is to use “price to earnings” ratio calculations, commonly referred to as “PE”. This method of analysis is the one of the most basic valuation techniques. Lower PE ratios suggest a company is undervalued relative to competitors. PE ratios are best used as a “first cut” in due diligence to see how the market is valuing gold mining companies relative to others in the industry.

As the table below (sorted by 2010 PE ratios) shows, current PE levels in 2010 for 14 major and mid tier gold producers elegantly break down into two groups—those above a 20 PE and those below.

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Why You Can't Day Trade Gold

Bron Suchecki — Thu, 02 Jul 2009 11:15:14 -0400

Bron Suchecki submits:

The nature of the gold market makes profitable day trading difficult, if not impossible. It is all about information, or lack thereof. Apart from pockets of relative transparency (emphasis on relative) like COMEX or ETFs, the vast majority of the market is opaque. The “retail” or “average Joe” trader simply does not have access to the same amount of information about the status of the market and its flows that a “wholesale” trader does (and even they can’t see the entire market).

Without understanding what is really driving short term changes in the price, it is not possible even for the most astute and disciplined trader to make consistent profits.

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Gold Confirms Currency Hedge Status

GoldCore — Thu, 02 Jul 2009 10:15:38 -0400

Mark O'Byrne submits:

Gold: China has requested that a new global currency be discussed at next week's Group of Eight meeting in Italy. The news sent the dollar into a downward spiral and the price of gold rallied above $940, confirming its status as a currency hedge. The dollar has strengthened slightly today resulting in a small drop off in the gold price to $926.70. China has been pushing this agenda for some time now and while the dollar is unlikely to lose its reserve currency status anytime soon – uncertainty regarding the international monetary system should result in gold remaining in strong demand.

Silver: Silver has reacted to today's dollar strength as well, dropping to £13.31.

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Is the Black Gold Rally Over?

Zignals — Thu, 02 Jul 2009 08:49:26 -0400

Zignals submits:

A weakening dollar will keep commodity bugs aflutter, but what can it mean for commodity prices; gold and oil in particular? The chart below shows my June 22nd annotations for the EURUSD which are still in play. If the dollar was to weaken another 10% what impact will this have?

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China Wants More Gold

Tim Iacono — Thu, 02 Jul 2009 08:36:20 -0400

Tim Iacono submits:
It comes as no surprise that the Chinese want to swap some of their U.S. dollar holdings for dumb 'ol gold bars, but the amount is a bit of a shock. Numismaster has the details:
It wasn't until about June 9 that the mainstream media was told that the Chinese government was planning to purchase an additional huge quantity of gold. The information became public when U.S. Rep. Mark Kirk (R-Ill.) was interviewed on Fox News by Greta Van Susteren.

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Poor Demographic Prospects Point to Higher Gold Price

Sami J. Karam — Thu, 02 Jul 2009 04:29:38 -0400
Sami J. Karam submits:
The question about owning gold should not be 'why' but 'how much'. At the very least, gold should be considered a form of insurance against either financial collapse or rising inflation. It is pointless therefore to ask 'why' if you generally believe in the merits of owning insurance on anything. You don't buy insurance for your house as an investment, but as a hedge against the low-probability scenario of it burning down or being destroyed by a hurricane or flood.

The only caveat to this analogy is if you don't believe gold is a suitable form of insurance. But then what is? One scenario where gold may fail the test would be a deflationary economy. However, considering the amount of pump-priming that central banks are engaged in, the likelihood of deflation has receded compared to six months ago. Furthermore, the scenario of a Japanese-style deflation is unlikely for the American economy because our financial system (unlike Japan's) is hard-wired to domestic economic growth and any deflation would quickly result in renewed systemic stress which would in turn lead to more investors buying gold.

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Silver Wheaton: A Hidden Gem

Hyperinflation — Wed, 01 Jul 2009 10:36:01 -0400

One of the most dynamic companies I have ever come across is a hidden gem. Silver Wheaton (SLW) should be a core position in everyone's portfolio for the following reasons.

The first reason is obviously valuation - I mean this is the stock market after all. It recently acquired Silverstone, increasing previous guidance of 14m/oz to 18m/oz. The company will then reach 25m oz in 2010, 29m/oz in 2011 and 33m/oz by 2012.

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The Silver Indexed Bond

Roland Watson — Wed, 01 Jul 2009 08:45:11 -0400

Silver investors over the last seven years have been on a rollercoaster ride as silver has bucked like a bronco to move between various price extremes with a rapidity not often seen in other asset classes.

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Gold Manipulation Redux

Hard Assets Investor — Wed, 01 Jul 2009 08:08:22 -0400
Hard Assets Investor submits:
By Brad Zigler
We at HardAssetsInvestor.com (HardAssetsInvestor.com) often hear the volume level rise precipitously in the conversation whenever the words "gold" and "manipulation" are strung together in the same sentence.

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Gold: History Solves the Mystery

Empower Investments — Wed, 01 Jul 2009 07:24:30 -0400

Recently there has been great speculation to the direction of the gold market. While there is no doubt that we are in uncertain, volatile times, it is my opinion that we cannot know where we are going unless we know where we have been.

I believe that we need only look to the historical charts to see what the future holds for gold. In 6 of the past 8 years, Gold has had an uneventful summer. The market has been down and/or sideways starting in or around June, and continuing until September. In 6 of 8 years, these summer doldrums were followed by a positive 4th quarter. Only in 2001 (September 11th), 2006 when the market continued sideways, and in last year's crash did we deviate from this pattern.

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Silver and Oil: Shiny and Rare

John Dalt — Wed, 01 Jul 2009 06:03:45 -0400
John Dalt submits:
Our two main topics today are silver and oil. Silver is a precious metal, but much more. It is in almost every electronic piece of equipment produced in the world. Oil is in everything produced in the world, period. Energy, without it, you would need a horse walking in a circle. I have called crude oil the trade of the year. We may be facing a soft period ahead for a week or two, but who cares?
Silver has been jumping like a thoroughbred at the starting gate for the last two months. Would you rather own silver and oil, or some biotech company that is one FDA letter away from oblivion? Nobody said investing was easy. Like I used to say in the construction business, "If you want a friend, get a dog."

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