Mining Stocks Look Ready To Explode Higher Again

The news that China has been to some degree crowded out this year by Western demand for gold is of minor importance compared to this further evidence that the mighty double-digit growth 15+ year surge in Chinese domestic gold production seems at last to have topped out. This means Chinese appetite for gold will increasingly have to be met from overseas.  – John Brimelow   JB’s Gold Jottings report  LINK

It was reported by Reuters Africa yesterday that Chinese gold production in the first half of 2016 was up slightly from the same period in 2015.  2015 production was down .4% from 2014.

If the amount of China’s domestically produced gold begins to decline, China’s enormous demand for gold will require a lot more gold imported from the rest of the world.  This will make things interesting – given the already enormous supply/demand deficit in deliverable physical gold  – because we know that, based on retail gold coin sales in the  U.S., Canada, England and Australia,  retail demand in the west is picking up quickly.

Let’s examine the phrase, “deliverable physical gold” for a moment.  It’s well understood that the amount of legal claims to deliverable gold written on pieces of paper – Comex futures, LBMA forwards, lease agreements, hypothecation agreements, OTC derivatives, etc – exceed the amount of available deliverable physical gold by an unaccountable amount.

For example, the total paper gold open interest on the Comex exceeds the amount of gold that has been made available for delivery by a multiple of 35.  But we can’t account for the amount of LBMA forwards, lease/hypothecation claims and OTC derivatives gold liabilities. Therefore,  the total physical gold supply deficit is unaccountable.

With gold in a state of scarcity and with the mining stocks historically undervalued in relation to the price of gold and silver, the mining stocks have the potential to make a move that will rival the move made by the internet stocks in from 1998 – 2000.  James Dines is the first to have made this prediction over 16 years ago. The only difference, of course, is that the revaluation in the mining stocks will be based on measurable intrinsic value whereas the move made by the internet stocks was a modern version of the Dutch Tulip bulb bubble.

All this is to suggest that mining stocks appear ready for another big upside move (click on graph to enlarge):

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At some point soon, the mining stocks are going to undergo another significant upward revaluation, which will reflect the increasing amount of stress that is going to be exerted on the market for deliverable physical gold. This “stress” will only be relieved by a much higher price for gold and silver.

While I’m not making an official price forecast, I would not be surprised to see $1500 gold and $25 silver by the end of October.

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11 thoughts on “Mining Stocks Look Ready To Explode Higher Again

  1. Putin message to Hillary, “If I ever see your dirty face in Russia
    again, I will rip your heart out and burn it on on a stick.”
    I think I would like to buy Putin a Guinness or three.

  2. “Mining Stocks Look Ready To Explode Higher Again”

    I haven’t been looking at the mining stocks performance. If I wanted to for learning purposes, can someone supply a link or two for a source to watch [some of] them? I like charts where one can see short, medium, and a longer perspective. I’m really quite ignorant here so suggestions of sites I can bookmark are appreciated.

    Thanks

    1. Subscribe to Dave’s MSJ. Cheapest education on mining stocks and how a pro evaluates them you will find anywhere.

  3. Dave I really like your latest miner pick. Took a position and waited to see if it pulled back, it hasn’t so added today, probably means others shouldn’t buy, lol. Thanks for the pick.

  4. I tried to post this on Dave’s previous article but not sure if it went through and want to make sure my rant is seen…..
    Just wanted to drop a line saying F*ck Jim Cramer. I’m up later then I should be and Cramer’s Bitzch azz comes on one of my local channels here in the Pacific Northwest early in the morning. (I’m assuming it’s a re-run from earlier in the day) First off, he’s annoying and thinks he’s hot shit always talking about his charitable trust. But my main thesis of this post other then to say F*ck Jim Cramer is to say that he’s a freaking tool for the main stream media using this episode to try to claim/portray that the market is acting efficiently. Using examples of a few different companies who just reported earnings and how the ones who reported good earnings went up and the companies who reported mediocre or crap earnings dropped all the while totally ignoring the non-GAAP accounting these companies are using to ‘beat’ already lowered expectations! F*ck you Jim Cramer! My question is why did he feel the need to start of his show trying to portray that the market is acting efficiently? I don’t follow him or watch him very often. Only if the TV is on and his show happens to come on do I waste a few minutes of my time listening to him. I’ve never heard him before go out of his way to try and explain how the market is acting efficiently. I think it’s about time to say goodbye to these new all time highs! Now this Shethead his talking up the market and the economy once again going out of his way to signal all clear and no recession in sight. And now going into housing interviewing some CEO of waste management talking about housing starts saying that they are hitting record highs and therefore his business is expanding. I wouldn’t be surprised if next he brings on Larry Ung or whatever his name is the guy who’s the ‘Chief economist of the National Association of Realtors’. All I have left to say is WTF?????
    Dave, Love your site! Keep on speaking the truth man! Eventually this house of cards will fall.
    Wait….. now Cramer’s Bitzch Azz is talking up Apple. This guy is always bullish no matter what. What stock is he going to pump next? Amazon or Tesla?
    F*ck you Jim Cramer!

  5. Thanks Dave,
    Positively awesome mining stock picking service. To all those out there on the fence, worth every penny imho. I recently added on the huge manipulated dip of one of ur picks (u know the one!) . . . .and now BOOM! new 52-week high!! yay!

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