Tag Archives: silver

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.

Silver, Trump’s Trade War, Mining Stocks And The Fed’s Gold

If you have gold, you have money – If you don’t have gold, you have a problem – Alisdair Macleod

With the massive net short position in both gold and silver Comex paper precious metals, offset by the historic net long position of the “commercials” (banks, mining companies, users, hedgers), numerous rumors are swirling around the precious metals market. For certain, the availability of physical gold bars in London that can be delivered to the large eastern hemisphere buyers who demand delivery is growing tight.  Apparently the retail silver coin/bar market is starting to feel supply strains.

Miles Franklin’s Chris Marcus invited me onto this podcast to discuss the precious metals markets, mining stocks, Trump’s Trade War and the status of the gold held in custody by the Fed on behalf of the American public:

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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.

Reasons To Optimistic About The Precious Metals Sector

The September 7th COT report is probably the most bullish I’ve seen since the beginning of my involvement in the precious metals sector in 2001. As most of you probably know by now, the “commercial” trader category is now net long both gold and silver for the first time going back to at least 1994. The banks (“swap dealers”) net long position in both paper metals increased. Conversely the hedge fund net short increased in both.

It may take a few weeks for gold to push through $1215-1220, as the hedge fund algos will be looking to attack the price until they have covered their enormous net short position. That said, it will take only one particularly surprisingly bad economic report or unexpected geopolitical event (Syria, trade war, domestic political surprise, reckless Trump tweet, etc) to trigger a spike-up in the price of gold. Once this occurs, the hedge fund computers will race to cover their shorts, which will drive the price higher very quickly.

Trevor Hall and I co-produce the Mining Stock Daily, a brief, daily overview of news and events connected to the precious metals and mining stock market. We focus on junior mining stocks. We are looking to exploit audio information distribution on 10 different digital platforms including Anchor, Alexa, Apple Podcasts, etc. Trevor and I discussed why there is cause for optimism in the precious metals sector for MSD’s Friday feature interview segment (click on graphic to listen):

Why Are The Banks Long Gold And Silver Futures?

“The banks are very net long gold and silver futures. To the extent that banks can peer at what’s going on behind the proverbial ‘curtain,’ they must see something that has inspired them to take long position in the precious metals.”

Gold is behaving the same way it was behaving in the months leading up to the 2008 financial crisis.  Emerging markets are melting down and transmitting a financial and economic virus that infect the entire world.  The coming financial collapse will be magnified by the enormous amount of visible and hidden debt, the worst perpetrator of which is the United States.

Elijah Johnson invited me onto his Silver Doctors podcast to discuss the bullish set-up for gold and silver, along with the underlying factors that will lead to problems which have motivated the banks to go long gold and silver:

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You can learn more about this newsletter here:  Short Seller’s Journal information and more about the Mining Stock Journal here: Mining Stock Journal information.

Gold And Silver Are Set-Up To Soar

Per the latest COT report (note: this references the August 21st COT Report), the hedge fund (Managed Money) net short position in Comex paper gold was 90,000 contracts – by far a record short position for the hedge fund trader category. Conversely, the bank net long position (Swap Dealers) in Comex paper gold was close to an all-time high. It’s not quite as high it was in December 2015.

The hedge fund long position in US dollar futures is also at an extreme right now, with the banks taking the other side. Unless there’s something devious going on behind the scenes in the reporting of this data (possible but not probable), the banks are positioned for a huge move higher in gold and a sell-off in the dollar. The only question is timing. The commercial category of the COT Report (banks + producers/merchants/processors/users) is net long silver futures for the first time in at least 25 years. In combination with the gold COT Report structure, this is the most bullish set-up for the precious metals in history.

Note: Per the latest COT Report, positions as of August 28th, the hedge funds reduced their net short by 16,000 contracts and the banks reduced their net long by 2,700 contracts. The hedge fund covering explains why the price of gold rose roughly $20 between August 21st and August 28th.

The chart below illustrates the extreme positioning by speculators in gold, interest rates and the stock market:

The graphic shows the net short position of non-commercials (managed money, other institutional pools of investment money and retail traders) in gold futures, 10yr Treasury futures and VIX futures. It’s the largest bet in history by speculators that gold and 10yr Treasury bonds will go a lot lower and the stock market will go a lot higher (volatility declines as stocks rise so a short-VIX bet is a bet stocks go higher).

When positioned at an extreme like this, speculators are always wrong.  It may not seem like it right now, but I would also suggest some type of development is percolating that will trigger an unexpected and substantial sell-off in the dollar.

Based on looking at the increase in the hedge fund net short position in the gold futures COT report between the end of June and the latest report as of August 21st, it would appear as if most hedge fund short-interest contracts were sold short between July 31st and August 21st. During that stretch, the price of gold dropped from $1224 to $1170. I’m guesstimating that the average price on the hedge fund net short position is between $1215-$1220. The is a rough estimate but I would bet it’s pretty close.

This is important because it tells us the price-level at which we might see a big short-cover move higher begin. Last Friday gold shot up from $1194 to $1212. From this past Monday (August 27th) through Tuesday just before the Comex floor opened, gold ran up close to $1221. About an hour into the Comex floor hours, gold fell off a cliff quickly down to $1207. This price-hit occurred in the absence of any news or events that would have triggered a selloff. In fact, the yuan rose sharply vs the dollar on Tuesday, which throws cold water on the theory that the Chinese have pinned gold to the yuan.

The point here is that the hedge funds will be motivated to defend the $1220 price level. Above that price the hedge funds will start to lose a lot of money on their net short position. This is the only way I can explain the waterfall hit on the price of gold on Tuesday. If the price of gold can climb over $1220 toward $1230, it will likely trigger a short-cover move. But keep in mind that, as the price momentum heads higher, the hedge fund position will swing from net short to net long.

This is likely what will the drive start of the next move higher in gold. A move that will be reinforced by the start of the big seasonal buying season in India and China. Based on the numbers I see on a daily basis, the Indians and the Chinese are taking advantage of the lower price of gold and have already ramped-up their gold buying. When the Fed is forced by the economy to fold on rate hikes, gold will really begin move.

The junior mining stocks are trading at one the lowest valuation levels over the last 18 years in relation to the price of gold. US Gold Corp (USAU) traded briefly below $1 last week in the absence of any news or events that might have affected the stock price. The market cap is close to 50% below the intrinsic value of its Copper King Project. The stock jumped 14% on Friday and Mining Stock Journal subscribers had an opportunity to buy shares ahead of this move. You can learn more about this newsletter and why USAU is absurdly undervalued here: Mining Stock Journal information.