Tag Archives: silver

Welcome To 2019: Declining Stocks, A Falling Dollar And Rising Gold / Silver Prices

The stock market has become the United States’ “sacred cow.” For some reason stock prices have become synonymous with economic growth and prosperity. In truth, the stock market is nothing more than a reflection of the inflation/currency devaluation caused by the Fed’s money printing and lascivious enablement of rampant credit creation. 99% of all households have not experienced the rising prosperity and wealth of the upper 1%. The Fed’s own wealth distribution statistics support this assertion.

It’s been amusing to watch Trump transition from tagging the previous Administration with creating a “big fat ugly stock bubble” – with the Dow at 17,000 – to threats of firing the Fed Chairman for “allowing” the stock market to decline, with the Dow falling from 26,000 to 23,000. If the stock market was big fat ugly bubble in 2016, what is it now?

If the Fed pulls back from its interest rate “nudges” and liquidity tightening policy, the dollar will sell-off, gold will elevate in price rapidly and the Trump Government will find it significantly more difficult to finance its massive deficit-spending fiscal policy. Welcome to 2019…

SBTV, produced by Silver Bullion in Singapore, invited me onto their podcast to discuss the Fed, the economy and, of course, gold and silver:

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If you are interested in ideas for taking advantage of the inevitable systemic reset that  will hit the U.S. financial and economic system, check out either of these newsletters:   Short Seller’s Journal  information and more about the Mining Stock Journal here:   Mining Stock Journal information.

A Quiet Bull Move In Gold, Silver And Mining Stocks

Silver is up 12.4% since November 11th, gold is up 9.3% since August 15th.  But the GDX mining stock ETF is up 21.4 % since September 11th.  GDX is actually up 71% since mid- January 2016.  By comparison, the SPX is up just 34% over the same time period (Jan 19th, 2016).

There’s a quiet bull market unfolding in the precious metals sector.  But don’t expect to hear about it on CNBC, Bloomberg TV or Fox Business – or the NY Times, Wall Street Journal and Barron’s, for that matter.

My colleague Trevor Hall interviewed precious metals analyst and newsletter purveyor,  David Erfle to get his take on what to expect in 2019 for the sector and  a couple of his favorite stocks (download this on your favorite app here: Mining Stock Daily):

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I discuss my outlook for the precious metals and mining stocks in my latest Mining Stock Journal, released to subscribers last night. I also present a list of large and mid-cap mining stocks that should outperform the market for at least a few months, including ideas for using call options. You can learn more about the Mining Stock Journal here:   Mining Stock Journal information.

Trump’s Trade War Dilemma And Gold

If the “risk on/risk off” stock market meme was absurd, its derivative – the “trade war on/trade war off” meme – is idiotic.  Over the last several weeks, the stock market has gyrated around media sound bytes, typically dropped by Trump,  Larry Kudlow or China,  which are suggestive of the degree to which Trump and China are willing to negotiate a trade war settlement.

Please do not make the mistake of believing that the fate the of the stock market hinges on whether or not Trump and China reach some type of trade deal.  The “trade war” is a “symptom” of an insanely overvalued stock market resting on a foundation of collapsing economic and financial fundamentals.  The trade war is the stock market’s “assassination of Archduke Franz Ferdinand.”

Trump’s Dilemma – The dollar index has been rising since Trump began his war on trade. But right now it’s at the same 97 index level as when Trump was elected. Recall that Trump’s administration pushed down the dollar from 97 to 88 to stimulate exports. After Trump was elected, gold was pushed down to $1160. It then ran to as high as $1360 – a key technical breakout level – by late April. In the meantime, since Trump’s trade war began, the U.S. trade deficit has soared to a record level.

If Trump wants to “win” the trade war, he needs to push the dollar a lot lower. This in turn will send the price of gold soaring. This means that the western Central Banks/BIS will have to live with a rising price gold, something I’m not sure they’re prepared accept – especially considering the massive paper derivative short position in gold held by the large bullion banks.  This could set up an interesting behind-the-scenes clash between Trump and the western banking elitists.

I’ve labeled this, “Trump’s Dilemma.” As anyone who has ever taken a basic college level economics course knows, the Law of Economics imposes trade-offs on the decision-making process (remember the “guns and butter” example?). The dilemma here is either a rising trade deficit for the foreseeable future or a much higher price of gold. Ultimately, the U.S. debt problem will unavoidably pull the plug on the dollar.  Ray Dalio believes it’s a “within 2 years” issue. I believe it’s a “within 12 months” issue.

Irrespective of the trade war, the dollar index level, interest rates and the price of gold,  the stock market is headed much lower.   This is because, notwithstanding the incessant propaganda which purports a “booming economy,” the economy is starting to collapse. The housing stocks foreshadow this, just like they did in 2005-2006:

The symmetry in the homebuilder stocks between mid-2005 to mid-2006 and now is stunning as is the symmetry in the nature of the underlying systemic economic and financial problems percolating – only this time it’s worse…

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The commentary above is a “derivative” of the type of analysis that precedes the presentation of investment and trade ideas in the Mining Stock and Short Seller’s Journals. To find out more about these newsletters, follow these links:  Short Seller’s Journal  information and more about the Mining Stock Journal here:   Mining Stock Journal information.

Mining Stock Daily: Western Copper & Gold Is Undervalued

The Mining Stock Daily, a collaboration between ClearCreekDigital and Investment Research Dynamics, interviewed the CEO, Paul West-Sells, to learn more about Western Copper & Gold (WRN on both the NYSE and TSX). But first, here’s background on WRN:

Western Copper & Gold is advancing the Casino Project, a world-class copper-gold porphyry deposit, in the Yukon. The deposit contains 4.5 billion lbs of copper and 8.9 million ounces of gold reserve and 5.4 billion lbs and 9 million ozs of inferred resource.

Western Copper was a spin-off from Western Silver after Glamis Gold acquired Western Silver in May 2006 (three months later Goldcorp acquired Glamis). WRN acquired the old Lumina Resources in September 2006 for Lumina’s three copper properties, one of which was Casino. WRN spun-off the other two properties.

WRN only has 106.4 million fully-diluted shares outstanding (including options/warrants), which is remarkable for company that has been developing a massive copper-gold project for 11 years. Insiders own 8% of the stock. A small group of high net worth private investors who have made a lot of money on companies run by WRN Executive Chairman, Dale Corman, own 48% of the stock and institutional/retail own the remaining 44%.

WRN raised $32 million in 2012 selling a Net Smelter Return royalty to Orion Capital. That NSR was sold to Osisko in June 2017 when Osisko acquired a portfolio of royalty assets from Orion.

With a market cap of US$70 million (fully-diluted basis), WRN is extraordinarily undervalued on a risk-return basis. This is especially true considering the recent wave of copper-gold porphyry project M&A activity. Recall that Newcrest invested approximately US$14 million for a 19.9% stake in Azucar’s El Cobre, which valued that early-stage copper-gold project at US$74 million. In 2017, Goldcorp paid US$185 million for Exeter’s Caspice copper-gold project high up in the Chilean Andes.

There have been several other transactions in the copper-gold space, including Zijin’s (Chinese company) acquisition of Nevsun for $1.41 billion (September 2018) for the Timok copper-gold project in Serbia and the recently closed sale of the Malmyzh copper-gold project (Freeport, EMX Royalty) to Russian Copper Company for US$200 million.

WRN’s project is not as large or as high-quality as Malmyzh, but it’s several years closer to being converted into an operating mine. At this juncture, with the current price of copper and gold, the “asset value” of WRN, based on the roster of comparable transactions, is at least US$140 million. I would not be surprised to see one of the companies with projects near Casino make bid a for WRN at some point in next 6-12 months. There’s also a list of other potential acquirers, including RioTinto, BHP and Freeport.

Click on the graphic below to hear Trevor Hall’s interview with WRN’s Paul West-Sells (you can also download the interview on your favorite app by clicking here: MSD platforms):

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The analysis above on WRN is from the November 8th issue of the Mining Stock Journal. To learn more about this newsletter, click here: Mining Stock Journal information

Treasury Debt And Gold Will Soar As The Economy Tanks

“People have to remember, mining stocks are like tech stocks where everybody and their car or Uber driver piles into them when they’re moving higher. It’s not a well-followed, well-understood sector which is what I like about it because it means there’s plenty of opportunities to make a lot money in stocks that don’t end up featured on CNBC or everybody’s favorite newsletter.”

Elijah Johnson of Silver Doctor’s (silverdoctors.com) invited me on his podcast to discuss the fast-approaching economic crisis and my outlook for the precious metals sector:

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I’ll be presenting a detailed analysis of the COT report plus a larger cap silver stock that has had the crap beat out of it but has tremendous upside potential in my next issue of the Mining Stock Journal. You can learn more about the Mining Stock Journal here:  Mining Stock Journal information

Paramount Gold: An Undervalued Advanced-Stage Junior Gold Stock

Paramount Gold (PZG) owns a 100% interest in the Grassy Mountain Gold Project in eastern Oregon and a 100% interest in the Sleeper Gold Project in northern Nevada. PZG acquired Grassy Mountain (GM) in July 2016 via the acquisition of Calico Resources for $15 million in PZG shares. GM has a total resource of 1.65 million ozs of gold (mostly measured) and 4.96 million ozs of silver. Of this, 504k ozs of the gold is underground with a grade of 5.32 g/tonne. The rest is 1.15 million ozs of low grade, open pit resource. PZG now controls all of the mining claims within its 10,000 acre Grassy Mountain land package.

Contrary to what one might think, the State of Oregon is highly supportive of developing the mining industry in eastern Oregon.  At this point, PZG is in the final stages of permitting. The Company has already received preliminary outline proposals for financing mine construction. The existing PEA shows a project with an after-tax NPV of $87 million. The market cap of the stock, fully diluted, is $30 million. Because of the high-grade nature of the underground material, at higher gold prices this project is a literal cash cow.

The Sleeper Gold Project is a former high-grade open pit gold mine operated by AMAX Gold from 1986-1996 (AMAX closed the mine due to the falling price of gold). It produced 1.66 million ozs of gold and 2.3 million ozs of silver. This asset has over 4 million ozs of low-grade measured, indicated and inferred resource. With a gold price a few hundred dollars higher, this project is potentially a home run for a large mining company.

My colleague, Trevor Hall, sat down with PZG’s Executive Chairman, John Seaberg, to take an in-depth look at Paramount’s operations (you can download this podcast from 11 different platforms – MSD apps) :

Mining Stock Daily is collaboration between Clear Creek Digital and The Mining Stock Journal

Overvalued Stocks, Undervalued Gold And Silver, Insolvent Tesla

Craig Hemke, the well-known proprietor of the TF Metals Report  invited me on this his new “Thursday Conversation” podcast to discuss the stock market,  economy, precious metals and Tesla.

“If you adjusted the current S&P 500 earnings stream using the same GAAP accounting standard that were applied in 1999, the current S&P 500 P/E ratio – expressed in 1999 GAAP accounting terms – would be the most overvalued in history.”

“Deutsche Bank is a zombie bank that would have blown up in 2012 if the Bundesbank, ECB and German Government hadn’t bailed it out.”

“Elon Musk used a Halloween bag full of accounting tricks to generate GAAP ‘net income.'” The fact remains that Tesla is closer to insolvency this quarter than it has been at any point in the history of the Company.

“Mining stocks are cheaper now in relation to the S&P 500 and to the price of g old than they were at the bottom of the 20-year gold bear market in 2001”

You can listen to my conversation with Craig “Turd Ferguson” Hemke by clicking on the graphic below:

(NOTE: You can download the MP3 by using this LINK and right clicking on the audio bar)

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If you are interested in ideas for taking advantage of the inevitable systemic reset that  will hit the U.S. financial and economic system, check out either of these newsletters:   Short Seller’s Journal  information and more about the Mining Stock Journal here:   Mining Stock Journal information.

A Large Decline In Stocks Accompanied By A Huge Move Up In Gold

Elijah Johnson invited me onto the Silver Doctor’s precious metals podcast to discuss why mining stocks are historically cheap and why an expected crash in the stock market will be accompanied by a soaring precious metals sector.   We also discuss why Trump is beating up the Fed over rate hikes:

Note on my Mining Stock Journal. I mentioned a highly undervalued intermediate gold and silver producer in the podcast. I also want to note that occasionally I issue “sell” or “avoid” recommendations. I happened to notice yesterday that Novo Resources was below $2.  A year ago I strongly urged my subscribers who owned Novo  in my October 19, 2017 issue to sell the shares when the stock was above $6. Here’s what I said:

I am following this saga with fascination because it’s a great study in mass crowd psychology and investing. It blows my mind that this stock can have a $1.3 billion market cap with almost no evidence of a mineable resource other than small, pumpkin-size “seeds” of gold samples. I exchanged emails with my junior mining company insider to get some interpretation of the results and affirmation of my view: “These nugget deposits are very difficult to model and drive mining engineers absolutely nutz! This is what happened with Pretium’s first shot at a published resource at the Brucejack project in BC. The gold is coarse and not equally and predictably distributed, so the consultant had a very difficult time modeling the deposit and therefore coming up with an agreeable resource estimate.

You can learn more about the Mining Stock Journal here:  Mining Stock Journal information

Mining Stocks Have Not Been Cheaper In The Last 78 Years

It’s important to keep in mind that the mining stocks have been sold to levels well-below their intrinsic value – in the case of larger-cap producing miners. Or their “optionality” value – in the case of junior mining companies with projects that have a good chance eventually of converting their deposits into mines. “Optionality” value is based on the idea that junior exploration companies with projects that have strong mineralization or a compliant resource have an implied value based on the varying degrees of probability that their projects will eventually be developed into a producing mine.

In relation to the price of gold and silver, the mining stocks generically (i.e. the various mining stock indices like the HUI or GDX) have rarely traded at cheaper levels than where they are trading now:

The chart above, sourced from Incrementum (the October 2018 chartbook update to the “In Gold We Trust” 2018 report), shows the ratio of Barron’s Gold Mining Stock Index (BGMI) to the price of gold (gold line) and the S&P 500 (blue line) going back to 1950. As you can see, gold mining stocks are trading at their lowest level relative to gold and the broad stock market in 78 years. The two dotted lines show the median level for each ratio since 1950.

As you can see, mining stocks do not spend much time below the median ratio. I strongly believe that the chart reflects a high probability of a major move higher in precious metals and mining stocks that is percolating, if not imminent. Certainly the global economic, financial and geo-political risk fundamentals support this assertion.

Unless the precious metals mining business is going away, that chart implies that now is one of the best times since World War Two to buy mining shares. Not surprisingly, industry insiders must agree with that assertion, as mining stock acquisition deal-flow has picked up considerably in the last few months. Most of the deals have been concentrated in the junior mining stocks.  But Barrick’s acquisition of Randgold, announced September 24th, is the largest precious metals merger in history. I strongly believe Barrick bought Randgold out of desperation to replace its rapidly depleting gold reserves.

Fundamentals aside, I believe gold is technically set-up to make a big move:

The chart above shows GLD (used a proxy for the price of gold) from late 2004 to the present on a weekly basis. I’ve sketched a trendline that goes back to 2004. 2004 is when gold finally pushed through $400 for good. It was right before that event that Robert Prechter, of Elliot Wave fame, predicted that gold would fall to $50. While I’m not a big fan of analysis based on lines drawn on charts, this particular tend-line has held intact since gold bottomed in December 2015.

Notwithstanding chart analysis, the COT technicals have never been more bullish. This assertion assumes, of course, that the track record of hedge funds being wrong when positioned long or short at an extreme level remains intact.

Gold Going Higher – Mining Stocks Are Historically Cheap

It’s important to keep in mind that the mining stocks have been sold to levels well-below their intrinsic value – in the case of larger-cap producing miners. Or their “optionality” value – in the case of junior mining companies with projects that have a good chance eventually of converting their deposits into mines. “Optionality” value is based on the idea that junior exploration companies with projects that have strong mineralization or a compliant resource have an implied value based on the varying degrees of probability that their projects will eventually be developed into a producing mine.

In relation to the price of gold and silver, the mining stocks generically (i.e. the various mining stock indices like the HUI or GDX) have rarely traded at cheaper levels than where they are trading now.

Bill Powers invited me on to his Mining Stock Education podcast to discuss why the price of gold and silver is going higher and why the mining stocks are historically undervalued:

In the next issue of the Mining Stock Journal, I dissect my favorite junior mining stock ideas. These are stocks that have unreasonably sold-off and have at least 10-bagger potential. You can learn more about this here:  Mining Stock Journal information.