Animal Spirits Are Percolating In The Gold Market

The use of the term “animal spirits” is most commonly attributed to John Maynard Keynes. But it originates from the Latin term, “spiritus animales” in reference to the spirit that drives human thought, feeling and action. We saw animal spirits at work in gold and silver on Tuesday this past week when the Dow dropped 237 points and gold quickly popped up $16. Silver jumped 72 cents, much to Wall Street’s surprise, on March 16th after the FOMC issued its latest monetary policy statement despite an assurance that the Fed would raise rates three more times this year.

At some point the paper control of the gold market is going to fall prey to animal spirits. I think the reaction of the metals after the FOMC policy release and when the Dow plunged are evidence that “animal spirits” are percolating in the precious metals market. (Excerpt from yesterday’s issue of the Mining Stock Journal)

In the latest issue of the Mining Stock Journal I review a junior mining stock that was heavily promoted last summer ahead of a big issuance of stock. Many of you may own it thinking you sitting on junior with close to 20 million ounces of gold in the ground. What I found when I examined the background of management and quality of the alleged mineralization on the company’s properties, with no plans for advancing the properties, might shock you. This stock is down 50% from its highs last summer and insiders were dumping shares in September before the stock sold off. This is a stock you want to avoid and you can find out more about it by subscribing:  Mining Stock Journal subscription info.

When I asked a colleague and subscriber who invests in junior mining stocks and participates in select financings if he had an opinion on the above-mentioned company, this was his partial response: “No, I have never looked at it principally because of the people behind it, who are well-known to front run their own subscribers.”

12 thoughts on “Animal Spirits Are Percolating In The Gold Market

    1. I second that! I used to have that name in my portfolio, and was considering re-buying not too long ago. Now I’m glad I got rid of it and will not touch it again, just observe. There’s better fish in the sea, so better not pick one that has a foul smell to it.

  1. You can have all the animal spirits you want, as long as gold is controlled by the paper gold derivatives (including the FRN dollar) the price will be set by the ESF. The dollar is a derivative of gold and the ESF controls the gold price to defend the dollar. After 1934 the fed is nothing but a front for the Treasury Dept and the ESF. IMHO the tell will be when no one can purchase gold at the posted dollar derivative price and there is a collapse in the paper pricing mechanism. As Rob Kirby is posting this is occurring in the market for physical gold bought by the tons. Yuuuge premiums for purchases in the tons with tight supply. The wrinkle to me though is the separation of the dollar derivative price from the physical price may occur in a collapsing paper market. This is where the Dent’s and Prechter’s of the world get there 15 minutes of fame. $XXX priced paper gold, but none can be physically bought at that price. Once this occurs gold will then be free to do what it has always has, price currency and act as the number one wealth reserve asset. I hope this makes sense and is just food for thought.

    1. If the derivatives price of gold tanks, and physical were unavailable, then buying one of Dave’s recommended miners would be a good strategy. They usually trade to paper gold. Although, not too sure what you could buy with those fiat profits in such a scenario. You could also stuff your “gold money”account. My tax return is coming in and a large part is going into my “gold money” account. I love the flexibility that account offers should a currency reset occur or I decide to relocate outside the U.S. At a future date.

  2. Dave, do you read any of the energy analyses of SRSrocco (Steve St. Angelo) ? He thinks that the energy sector will hit a seneca cliff sometimes in the years ahead, with energy production tanking big time, and oil prices along with it (and a completely crushed world economy). If that was to / will materialize, would you think that the miners would still be the place to be or would many of them also go bust (irrespective of how good they look now) ? Do you think the stock exchanges and brokerage/banking system will actually survive any of what it yet to come? Our do you bank on a moonshot of the metals, along with an even sooner shot of the miners, then sell out for more phizzial metal? Just wandering your thoughts on these somewhat mid- tolonger-term issues.

    Thanks for all you do and great job with the Mining Journal – really enjoy your insights and thoughts on the various names and associates projects.

    1. I doubt the energy market will be the catalyst for what will trigger the inevitable. Always hold physical gold/silver as hedge against fiat currencies and Central Bank/Government insanity. I doubt the banking and brokerage system will survive but I’m not an “go off the grid” survivalist. I’ll keep money in the stock market as long as I think I can. If the Atlas Shrugged or The Road scenario starts to descend, I’ll probably try to check out altogether. Don’t really care to see the aftermath of either of those two scenarios. I’m sure oil will still be flowing freely from the ground when either of those two scenarios hits.

      1. Well that’s the point, oil is not flowing “freely” form the ground anymore like in the good old days. It takes more and more every to produce new barrels, and more and more debt to keep the companies afloat (for the time being). Without the cheap credit, the US oil shale “boom” would have never happened. Anyway, same here, the core is in the fizz metals (plus some hard paper cash) and the rest is pretty much gaming and gambling the miners. Thanks again and all the best.

    1. No opinion on it at this time. I have not analyzed the financials since last year. I like good solid junior explorers.

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