“Gold, unlike all other commodities, is a currency…and the major thrust in the demand for gold is not for jewelry. It’s not for anything other than an escape from what is perceived to be a fiat money system, paper money, that seems to be deteriorating.” … Alan Greenspan, ex-US Federal Reserve Chairman, August 23, 2011
For now the price of gold has found resistance – likely official resistance – in the high $1700’s. I think there’s a good chance gold pops over $1800 before Memorial Day weekend, if not sooner. Silver continues to frustrate but the gold/silver ratio appears to be headed lower. Patience with silver will eventually be highly rewarded and rewarded in spades with the silver mining stocks.
Bill Powers of Mining Stock Education invited me to chat about oil, the economy, money printing and mining stocks:
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Hi Dave,
Interesting podcast, many thanks. The table of contents at the beginning is much appreciated! Couple questions:
05:30 For gold mining companies the energy costs are presumably related not to the crude oil price but to the price of refined diesel or gasoline, which will depend on refinery output and pricing. So do you expect the price of the refined product to fall to the same extent as crude?
07:50 Concerning juniors: “gold in the ground”–an elusive concept! The Newmont website contains the statement: “only 1 in 3000 discoveries lead to mine development and only 10% of the world’s deposits contain enough gold to mine”.
Therefore the first hurdle with juniors seems to me to be able to assess the credibility of their stated reserve estimates and avoid getting caught in the all-too-frequent pump-and dump schemes.
Then, even in a well-selected juniors portfolio like yours, what proportions would you currently expect to go to zero, go essentially nowhere, or make significant gains (like 5-10 fold or more), respectively? My guess having followed the sector loosely since 2009: 60%, 30% and 10%.
I applaud your scepticism of technical analysis. When someone says “GDX breaks through 7-year resistance” I ask: define “breakthrough” and “resistance” in quantitative terms. Is that 1% above the previous high? 2%? 5%? 10%? For how long? 10 minutes? a day? What if it oscillates? GDX typically exhibits massive volatility that calls its usefulnesss into question.
Regards and thanks in advance for any comments.