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Bob Chapman - Gold should be selling for $3000/oz by now
Corvus: North Bullfrog PEA shows Base Case 2.6 year Payback
Listen: Bob Chapman on Gold Price
Puplava: Gold Should Be $2100-$2200.. Now!
Silver Passes 30% YTD
Paulson Tells Clients Gold Fund Will Top Others
Is The Silver Surge Sustainable?
Silver Breakout Attempt Underway
Bob Chapman : The New Chinese Gold exchange will boost the Gold Prices
Chatham House: Gold Standard Impractical But …
Gold Prices ‘Consolidating,’ Silver Hits 5-Month High
The Decline and Fall of the Roman Denarius
Silver: Price At $68-70 In Two toThree Months
Gold guru Turk: "Something big is about to happen" in gold and silver
Warren Buffett reveals his favorite investment now
Morning Outlook from the trade Desk 02/28/12
Turk: ‘silver price at $68-70 in two-to-three months’
Silver: a view from the charts
WATCH: Obama's Silver Bullet
The Enduring Popularity of Gold
James Turk: Something Big Imminent For the Precious Metals
Archaeologists show off priceless gold haul
How Wall Street Is Raising the Price of Gas
Paulson Said to Tell Clients Gold Fund Will Top Others
Silver Forming A Nice Balance Area
Gold & Silver Market Morning, February 28 2012
Silver Update: “Global Ponzi”
Bankers Get Greece Bailout Money
Small Cap Gold Stocks Successfully Retest 2010 Breakout
Gold and Silver Stocks Poised to Recover in 2012: Charles Oliver and Jamie Horvat

Bob Chapman - Gold should be selling for $3000/oz by now

Posted: 28 Feb 2012 05:03 AM PST

Bob Chapman - Radio liberty 3rg Hour - 27 Feb 2012 : Germany to pay off Greece...

[[ This is a content summary only. Visit my blog http://www.bobchapman.blogspot.com for the full Story ]]

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Corvus: North Bullfrog PEA shows Base Case 2.6 year Payback

Posted: 28 Feb 2012 05:01 AM PST

Vancouver, B.C……..Corvus Gold Inc. ("Corvus" or the "Company") – (TSX: KOR, OTCQX: CORVF) announces the results of an independently prepared Preliminary Economic Assessment ("PEA") for its North Bullfrog Project in Nevada. This PEA is based on the Company's November 7, 2011 resource estimate and does not include data from the recent successes from the 2012 exploration program (NR12-06, February 13, 2012). The PEA produced a robust positive economic analysis for a conceptual, low capex, heap leach project that generates an average annual gold production of 57,700 ounces over 12.8 years, at a life of mine strip ratio of 0.41 to 1 (overburden to process feed), indicating a pre-tax, pre-royalty NPV(5%) of $118.3M, and an IRR of 28.8% at $1,300 per ounce gold price (Table 1). The PEA also shows the project has a considerable leverage to gold price, with a pre-tax, pre-royalty NPV(5%) of $338M and an IRR of 70% at $1,700 per ounce gold price (Table 2) (all currency USD).

North Bullfrog Project Highlights

Low entry cost gold project with total initial capex of $68.8M with contingency and pre-production/indirect costs included resulting in a 2.6 year payback at $1,300 gold
Strong leverage to gold price with NPV(5%) of $338M at $1,700 gold with a 1.2 year payback
Large in pit resource of 1.1M ounces contained, and 747,000 ounces recoverable, gold
Average annual production of 57,700 ounces of gold with an average of 70,000 ounces of gold per year over the first 3 years
Total cash operating cost of $815/oz gold with an average of $673/oz gold over the first 3 years
Potential for significant resource expansion with ongoing drill program as highlighted with recent success in a 400 metre step out hole that returned 52 metres of 0.8 g/t gold
Additional new discovery potential for high-grade gold and silver systems, currently being drilled
Favourable permitting environment with recent examples of timely approvals
Excellent infrastructure for mine development, highway and grid power a few kilometres from deposit
Favourable low strip ratio of 0.41 that is less than 0.3 in the first 3 years
Very good recovery of gold with low cost heap leach system
Existing, skilled mining workforce in the nearby communities
Potential for fast track development project that is within the scope of a junior producer
Recently expanded land package to 43 km² to cover potential gold system extension and to address potential future mining operation

Jeffrey Pontius, CEO of Corvus, stated: "These initial results are impressive and reinforce the potential for creating a new Nevada gold producer. The low cost project linked with a low initial capex, attractive start-up phase, a favourable permitting environment, excellent infrastructure and available labour force, significantly de-risk this prospective project. With recent successes in our step out and high-grade drilling project we see this initial positive PEA as a critical first step in developing what we believe will be one of Nevada's next gold mines."

See Full Release Here

Listen: Bob Chapman on Gold Price

Posted: 28 Feb 2012 04:29 AM PST

Chapman:"The New Chinese Gold exchange will boost the Gold Price."

~TVR

Puplava: Gold Should Be $2100-$2200.. Now!

Posted: 28 Feb 2012 03:41 AM PST

Jim Puplava and host Leigh Greenberg discuss fractures in the global monetary system, and what this may result in for the gold & silver markets in the latest episode from GoldSilver Radio.

from WhyGoldAndSilver:

~TVR

Silver Passes 30% YTD

Posted: 28 Feb 2012 03:38 AM PST

YTD As Catch 22 Economic "Updates" Becomes Blurry

from ZeroHedge:

The economic data keeps coming fast and furious, with Consumer Confidence just printing at a blistering 70.3 on expectations of 63.0, up from 61.5? Why? Because crude is approaching records and gas is $5? No – because the market is up of course on trillions in liquidity. So confidence is up because the market is higher, and the second the higher than expected confidence number prints, the market is higher on that alone. Catch 22 FTW, and it is not alone – every other confidence-based indicator in the past 3 months has beat! Because human beings, indoctrinated to only care about nominal gains, really are that dumb – something well known and appreciated by the central bankers. In other news, we joked before it printed that the Richmond Fed would come several standard deviations above the consensus. Sure enough, the actual print came at 20, naturally far higher than the average estimate of 14, and in fact above the highest estimate of 17. The good news: silver has just hit a 30% YTD return.

¤ Yesterday in Gold and Silver

Gold rallied a bit early in Far East trading, but the moment it got too close to $1,780 around 10:00 a.m. Hong Kong time...there was someone there to sell it off, with the low of the day coming moments before 11:00 a.m. in London nine hours later.

From there, the gold price spent the next five hours digging itself out of that hole, but the moment that it punched through the $1,780 price mark around the close of London trading at 11:00 a.m Eastern time, another seller was waiting in the wings to sell it down below Friday's closing price.

Although gold did make it above Friday's closing price for a few hours...all of its New York gains disappeared by the time trading was over at 5:15 p.m. Eastern.

The gold price closed at $1,768.10 spot...down $5.50 on the day. Net volume was a not-so-light 117,000 contracts...give or take.

The silver price more or less followed the same price path as gold, but the price was more 'volatile'. I note that the early morning sell-off in London took the silver price below the $35 the ounce spot price for a few moments. The subsequent rally took silver back up to its Far East high at a couple of points during the Comex trading session, but that wasn't allowed to last...and silver got sold off from there, but did managed to recover a bit in the New York Access Market.

Silver closed at $35.46 spot...up a nickel from Friday. Gross volume was immense...over 124,000 contracts...but almost all of that was roll-overs out of the March contract...and by the time all that double counting was removed, only about 3,000 contracts net were traded yesterday.

The dollar index had a smallish 25 basis point rally in the early going in London trading...and held onto most of those gains until the close of the New York session.

The gold stocks poked their nose into positive territory for just a few minutes when the New York gold price reached its zenith just before 11:00 a.m. Eastern time, but then sank back into the red for the rest of the day as the gold price got sold off going into the close. The HUI finished down 0.98%.

Virtually every company that made up Nick Laird's Silver Sentiment Index closed down on the day, but the SSI only closed lower by 0.93%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 88 gold and 42 silver contracts were posted for delivery tomorrow. It should come as no surprise to anyone that Jefferies was the big short/issuer in silver with 40 contracts...and the Bank of Nova Scotia was the long/stopper with 37 contracts. JPMorgan was nowhere to be found. The link to yesterday's Issuers and Stoppers Report is here.

There were no changes reported in GLD yesterday...but over at the SLV ETF they reported taking in another 728,691 troy ounces of silver.

The U.S. Mint had another small sales report. They sold 3,500 ounces of gold eagles...2,000 one-ounce 24K gold buffaloes...along with 170,000 silver eagles. Month-to-date the mint has reported sales of 19,500 ounces of gold eagles...6,500 one-ounce 24K gold buffaloes...and 1,420,000 silver eagles.

Over at the Comex-approved depositories on Friday, they reported receiving 595,366 ounces of silver...and shipped a smallish 32,896 troy ounces out the door. The link to that action is here.

Silver analyst Ted Butler had his weekly review for his paying subscribers on Saturday...and here are three free paragraphs.

"Since the price lows of late December, we have added $250 to the price of gold on a 65,000 contract increase in the net speculative long/commercial short position on the COMEX. This is the equivalent of 6.5 million oz of gold. While these are paper ounces, from a quantity perspective, it dwarfs any verifiable change in ownership in physical ounces, such as in ETFs. Simply put – we went up $250 in gold because speculators bought and commercials sold 65,000 net contracts on the COMEX and the speculators were more aggressive. Where does that leave us and where do we go from here?"

"Back in December, it was easy to call for higher prices in gold and silver because of the very bullish COT set up and I hoped I had conveyed that at the time. There was little additional speculative selling that the commercials could rig at that time. Now, it's different. There is enough potential speculative selling in place that the commercials could arrange for prices to decline enough to trigger off that selling. Does that mean that the commercials will definitely rig prices lower now? No, not necessarily. But they could. The commercials could also be forced to buy back shorts in gold, as happened to them this past August amid soaring prices. My point is that it is different now than it was in late December, when it looked like a sure trip north in price. We may be headed much higher from here; it's just that I can't say that with certainty. I wish I could, but I can't. I can tell you if we go down big in the relative near term, it will be because of the dirty rotten commercials rigging prices lower. But they may not be able to pull that off, so we have to be prepared for that as well."

As for silver, we are nowhere near the favorable COT set up that existed in late December. We could go down, we could go up. Both price possibilities have occurred in the past from similar COT readings. If we go down, it will be solely due to commercial rigging, same as always. But there are some very compelling factors pointing to higher silver prices, including the tight physical situation. In fact, the obvious and outrageous short position of JPMorgan has become so extreme that it could serve as the catalyst for a price explosion."

As I mentioned in my Saturday column, if you remove all the market-neutral spread trades from the Commitment of Traders Report, it shows that JPMorgan is short a bit more 25% of the entire Comex silver market. Any questions?

Here's a Point & Figure chart for gold that goes all the way back to 1975. Nick Laird sent it to me last evening. As Nick said in the covering e-mail..."The two legs up in the bull market so far stand out loud & clear." Yes they do...and let's hope that the third leg is even louder and clearer...and starts soon!

(Click on image to enlarge)

I have a lot of stories today...too many, in fact. Quite a few of them have to deal with the G20 meeting of financial 'leaders' in Mexico City on the weekend...and all the hullaballoo about Greece. I'm delighted to leave the final edit up to you.

So, where do we go from here? A good question for which I have no good answer.

Paulson Said to Tell Clients Gold Fund Will Top Others. L.A. Times notes that 'the gold market is moving east'. Iran says it has 907 tonnes of gold. Is Gold Money? Iran Says "Yes"

¤ Critical Reads

No, ITG, Zero Hedge Would Prefer To Not Regulate You Either

Here's a story that was posted over at zerohedge.com...and was sent around to all the Casey Research editors last night. Jeff Clark called it the "Zero Hedge Manifesto"...and that pretty much sums it up. I thank Casey Research's own John Grandits for digging this story up. I don't like the idea of staring off today's column with an absolute must read...but if you read no other non-gold related story today...this is the one I would pick. The link is here.

View full GSD edition

Philadelphia Fed president notices that Fed is rigging markets

Philadelphia Federal Reserve Bank President Charles Plosser said that central bank purchases of mortgage-backed securities may be an inappropriate foray into policy that should be conducted by the U.S. Treasury.

"When the Fed engages in targeted credit programs that seek to alter the allocation of credit across markets, I believe it is engaging in fiscal policy and has breached the traditional boundaries established between the fiscal authorities and the central bank," Plosser said according to prepared remarks of a speech he gave in New York on Friday.

This Bloomberg article, plus one other link, is contained in this GATA release...and the link is here.

View full GSD edition

Why We Should Still Be Worried about a Double-Dip Recession: Jim Rickards

The late summer and fall of 2011 was filled with fears of a double-dip recession in the United States coming hard on the heels of the 2007-2009 recession, frequently referred to as the Great Recession. With improved economic news lately including lower unemployment, lower initial claims, higher growth, and higher stock prices, this recession talk has died down. That's why Lakshman Achuthan, the highly respected head of the Economic Cycle Research Institute, caused a stir last week when he repeated his earlier claim that a recession later this year was almost inevitable despite the better news.

Economists dislike the concept of depression because it has no well-defined statistical meaning unlike recessions that are conventionally dated using well-understood criteria. They also dismiss the word "depression" because it's, well, too depressing. Economists like to think of themselves as master manipulators of fiscal and monetary policy levers fully capable of avoiding depressions by providing the right amount of "stimulus" at just the right time. They tend to look at a single case—the Great Depression of 1929 to 1940—and a single cause—tight money in 1928, and conclude that easy money is the way to ban depressions from the business cycle.

This story was posted over at the usnews.com website yesterday...and I thank reader Randall Reinwasser for sending it along. The link is here.

View full GSD edition

Wine Cache Rescues Those Short of Cash

Some U.S. pawnbrokers are taking liquid assets - literally.

Fine wines are among the items they will accept as collateral for loans, along with family jewels and fine art, as a practice common in Britain and France catches on across the Atlantic.

Liquidity issues, or a cash shortage, can be found on most rungs of the economic ladder, the pawnbrokers said.

"You'd be amazed by how many wealthy individuals have terrible credit ratings. And besides, if you go to a bank, it can take weeks or months to get a loan. When we make a loan, it's usually the same day," said Jordan Tabach-Bank, head of Beverly Loan Co.

This very interesting Reuters piece was picked up by cnbc.com yesterday...and is well worth the read if you're interested in fine wine pawn shops. I thank West Virginia reader Elliot Simon for sending it along...and the link is here.

View full GSD edition

German minister tells Greece to exit eurozone

Germany's interior minister on Saturday came out strongly in favour of debt-stricken Greece leaving the eurozone, arguing that this would improve its chances of becoming competitive again.

"I do not mean that Greece should be kicked out of" the 17-nation eurozone, said Hans-Peter Friedrich in an interview with news magazine Der Spiegel, "but to create incentives for an exit that they cannot turn down."

"Outside European monetary union Greece's chances of regenerating itself and become competitive are definitely bigger than if it remained inside the eurozone," said Friedrich.

Absolutely true, of course. This AFP story was posted on the france24.com website on Saturday...and I thank reader 'h c' for sending it along. The link is here.

View full GSD edition

G20 to Europe: show us the money

Leading economies told Europe it must put up extra money to fight its debt crisis if it wants more help from the rest of the

Archaeologists show off priceless gold haul

Posted: 27 Feb 2012 09:23 PM PST

Archaeologists show off priceless gold haul

For the first time archaeologists are showing a 1.8-kilo haul of gold they found while performing excavations around a gas pipeline last year.

The bracelets, rings and other objects have been stored at Lower Saxony's State Conservation Office since they were found in April 2001 near the town of Syke while engineers prepared for construction of the so-called Nord Stream pipeline.

The haul included 117 objects, the most recent of which appear to date from the Middle Bronze Age, around 3,000 years ago.

Investigations have revealed that the gold likely came from Central Asia, although researchers are still unsure how it ended up in Europe.

How Wall Street Is Raising the Price of Gas

Posted: 27 Feb 2012 09:23 PM PST

How Wall Street Is Raising the Price of Gas

Every time you fill up your car with gas, your dollar ends up in the hands of a wide range of interests from around the world. Some of your money goes to oil companies, some of what you pay goes to refineries, and more still gets divided up by the gas stations you stop at.

What may surprise you, however, is what one of Wall Street's top regulators has to say about who else you're paying: speculators on Wall Street.

Bart Chilton, a commissioner at the Commodity Futures Trading Commission, the federal agency that regulates commodity futures and option trading in the United States, said it's time to look at home — in addition to overseas — when searching for the reasons why gas prices are on the rise.

Paulson Said to Tell Clients Gold Fund Will Top Others

Posted: 27 Feb 2012 09:23 PM PST

Paulson Said to Tell Clients Gold Fund Will Top Others

Silver Forming A Nice Balance Area

Posted: 27 Feb 2012 09:01 PM PST

from scottpluschau:

Silver forming a nice balance area for three days…
Auction Market Principles can be applied to all futures markets, in all time frames. Some principles I find more effective in different degree timeframes, and less effective in others. Nonetheless, any balance area that forms over a three day period on a 30 minute charts demands my attention. Take a look at the chart left hand side below. Once I have identified a balance area, I want to stay out of trading inside of it and look for a favorable trade location at the extremes. Between approximately $35.10 and $35.70 has been noise. There is no edge in trading noise. Noise is randomness. What causes noise is the fact that there are investors and traders making moves for multiple different reasons in multiple different timeframes. Staying out of noise preserves capital for a day trader. Most importantly, "breakouts" from balance areas that are accompanied by a surge in volume often lead to vertical development, and that is where I want to keep building on continuation patterns that develop.

I am eager to trade on the long side of the silver contract due to the structure of the daily timeframe. You can see below on the right hand side a balance area that formed on the daily chart, with a breakout that was text book. The path of least resistance will be higher.

Continue reading @ scottpluschau.blogspot.com

Gold & Silver Market Morning, February 28 2012

Posted: 27 Feb 2012 09:00 PM PST

Silver Update: “Global Ponzi”

Posted: 27 Feb 2012 08:47 PM PST

from BrotherJohnF:

BJF on yen, silver, gold, oil, and nothing is at all as it appears.. in the 2.27.12 Silver Update.

Got Physical ?

~TVR

Bankers Get Greece Bailout Money

Posted: 27 Feb 2012 08:40 PM PST

My take on the market numbers as of day end February 23.

Dow Jones Industrial Average: Closed at 12984.69 +46.02 on flat and falling momentum and 85% of normal volume. Price is above moving averages, which is bullish. However, it is topping at 13,000 near former highs and is being squeezed in a tightening triangle. Resistance is 13,000 and support is 12,950; in a very tight trading range. We are expecting a mild correction of about -150 points, or so taking price back to 12,800-12,850 support on technicals. The larger problem for all global stocks is the Mid-March European meeting to sign-off on the agreed Greece re-financing as they cannot pay a big note due on March 20. New reports say the Greek people get nothing and that the refinance is for the bankers who made bad loans. Bankers are repaying and self-financing themselves. Next, they are taking Greek central bank gold as new loan collateral to steal it when the new loans cannot be repaid. Then streets go violent.

S&P 500 Index: Closed at 1363.46 +5.80 on normal volume and flat-lined momentum. Price is above all moving averages. However, it is matching a peak posted at the end of April last year and could begin to sell back mildly. Price is jammed in a tightening triangle. Resistance is 1375 and support is 1350. Watch for meandering trading on Friday with PPT support next week to soften selling just ahead. We are looking for the S&P's to correct back to 1350 first and then potentially 1275-1285 in a milder correction.

S&P 100 Index: Closed at 616.69 +2.16 as this index has peaked and resisted at 615.00 on our previous forecast. That number of 615 is now support and resistance on 90% of normal volume and flat-lined momentum. This index has stalled in a tiny two day double top. It can begin to sell mildly, or trade sideways on low volume for a few days. Investors are afraid to sell but they are not buyers either. This creates a stalled top as we are also nearing an end of month close out. I doubt the index would drop more than 15-20 points before new buying appears. Yet, there is danger coming in the middle of March that most folks are wary of and watching closely. Expect a peaky stall and some mild selling followed by nearby support.

Nasdaq 100 Index: Closed at 2594.93 +15.15 on 95% of normal volume and toppy, flat lined momentum. This index tried to breakout, up and through 2600 for five days and could not do it. We are expecting some lighter selling despite the price close being higher than all moving averages. This is the leading signal for all the stock trading indexes. It is saying the top is in and now we sell. The larger question is how far down do we go? Last year at this time, we dropped about -200 points from the middle-end of February to the middle of March. We can easily repeat this performance followed by a rally of six weeks with a top at the end of April.

30-Year Bonds: Closed at 142.69 +1.46 with the price gradually moving down in a bear flag pattern. Momentum has been dropping since it peaked at the end of August in 2011. For now the bonds are trading in a tighter trading range between 140.00 and 142.50 for support and resistance. A lot of this wavering and levitation has to do with European news and the US bonds being overbought at 145-146.00 in Mid-December. I think 140.00 can hold and price might go up to 142-143 as stocks gradually pull-back. However, after the newer bond auction refinancing, keep watch for something exciting that could move all markets either way in March. For now we are stuck in that trading range of 140.00 to 142.00 for a few more days. End of month could change things.

XAU: Closed at 202.36 +1.08 as the gold and silver wavered but then got some trading legs on this Thursday of 2-23-12. Gold was up nicely but silver had a major breakout we have been forecasting for weeks. The XAU closed above all moving averages and the price resistance at 200. Further, it popped up and out of the hard resistance on a bearish down-sloping line. Next resistance is 205 on our forecast. Keep in mind that if the broader markets and the metals both go toppy, which we do forecast, 205 could be the near term peak with a following sell back to 198.84 on the 200-day moving average.

Gold: Closed at 1780.40 +2.80 on momentum that first rallied from January 1, peaked in early February and then began to rise again. We are running out of month but gold has 1-2 more waves to peak out. We are not far from $1807, which would be the next resistance if gold can continue this rally. We should peak in three or four days and then pull back in a mild correction of ABC with a follow-on rally. Depending upon what happens in Europe in Mid-March gold can finish the run to $1,923 with one more good boost, or go even higher if the 3-15-12 news is perceived as negative. Watch for a rally to $1807 by the end of February followed by an early March corrective selling taking the price back maybe -$35 to -$50 points.

Silver: Closed at 35.42 +1.07 in a major breakout closing above the very hard resistance at $34.48. The move was large enough today to hold support at a minimum of $35.15. Next higher resistance is a run at $36.15 to 36.18 followed by $38.85, which is stronger resistance. This rally is replicating the huge move last year when silver ran from $26.50 to $49.62 from the end of January to an end of April peak price. Watch for the rally to complete in the next 2-3 days near $36.15.

US Dollar: Closed at 78.65 just 15 ticks above our forecast support at 78.50. Momentum has stopped sinking and is now moving sideways. The dollar was oversold after a peak in January when the Euro began to recover. For now we see a bullish inverted head and shoulders signaling the dollar could rise back to 80.00 resistance. All the moving averages are between 78.00 on the 200-day to 79.23 on 20-day. That is the current trading range and we forecast the dollar to sell some more at least until the end of this month on all the credit problems and the chart technicals.

Crude Oil: Closed at 107.83 +1.73 on a breakout over the past two days with a larger up-leg on price this Thursday. Momentum is sharply up and we are in the annual cycle for oil to rally at least until the end of April. Middle Eastern news gave us a $10 oil price premium, the annual up cycle is now, and gasoline is rising quickly; moving up ten cents in one day yesterday. We are sticking with our weeks ago forecast of crude oil to $115-$120.00 barring any more negativity from the Middle East that could move the price up very quickly. Next resistance is $108 then $110 and $112. The new trading range is $106.50 to $110.50.

CRB: Closed at 323.40 +0.54 on rising momentum and nearby support at 319.04 on the 200-day moving average. Like the oil market, the CRB driven oil component is pressuring the CRB higher. Over the last three days the price gapped up and punched through the hard resistance on the 200-day average. With oil, metals and grain having some more room to rise, the CRB could touch 325 and then 330 on next resistance levels. Do not forget we are entering a prolonged period of inflation for probably several months. This causes the CRB prices to rise in the basket propelling component markets to increase in price. Big hedge funds buy the index in blocks of hundreds of millions on new commodity runs. I expect them to stay with the trend until the end of April, 2012.

This posting includes an audio/video/photo media file: Download Now

Small Cap Gold Stocks Successfully Retest 2010 Breakout

Posted: 27 Feb 2012 07:05 PM PST

When one speaks of gold stocks they should be more specific as the sector is diverse. The term Gold stocks usually refers to the large unhedged producers. Indices such as the HUI or GDX track these stocks and are a proxy for the gold stock universe. However, most companies in the sector are much smaller. We hear the term "juniors" so often and that is what makes it inconsistent. Juniors are typically micro-cap exploration companies. Yet, GDXJ the junior ETF is comprised of companies with market caps in the $500 Million to $1 Billion range. There is nothing junior about that. We notice there is a gap in terms of terminology. If Juniors are sub- $100 Million, and large caps are over $1 Billion, then what do you call those that fit the gap?

We prefer to use the term "established juniors" or small cap. After all, small caps by definition are in market cap between $100 Million and $1 Billion. These terms are most appropriate for those in the middle of said range rather than the bottom or top. We prefer the established juniors as being established (which is open to interpretation) they have less risk than the true juniors and if successful can grow to $1 Billion or more in capitalization.

In our opinion, small caps are the area to focus on as they have a much greater likelihood of growth and leverage to Gold than the large producers. Historically, the large producers do not outperform Gold on a consistent basis. The law of numbers combined with the difficulty of the mining business explains why.

Our junior/small cap index consists of 20 stocks equally weighted with a median market cap of about 600 Million. In the second half of 2010 the market broke to new highs for the first time since 2007. With every breakout comes a retest. Heading into 2011 we predicted the retest would last into the summer. The retest lasted the entire year but appears to be successful.

Our bet is that the small caps will work their way back to the high before the end of the summer. It will take the time to overcome resistance but the trend will remain higher. If and when the market makes a new all-time high it will be very bullish for several reasons. It would be the first sustained breakout to a new all-time high since 2005-2006. It would come at a time when the bull market is starting to transition out of the wall of worry phase. Finally, it would generate significant momentum when overhead resistance is basically nil.

This is possible due to a combination of Gold rising and present low valuations improving. In the next chart we graph our index and the ratio of our index to Gold. Gold companies are generating record profits and the price of Gold is near its all-time high yet leveraged small caps are trading near a low relative to Gold. That, in our view is a function of market sentiment and evidence of the wall of worry stage.

If the ratio would rise back to its 2007 and 2010 highs at 0.065 and Gold would reach $2000, our small cap index would just about double. That is right, a potential 100% gain.

The bottom line is small cap gold stocks have completed a textbook breakout and retest. As we said, the market will likely have a hard slog for the next several months as it encounters supply from the 2011 correction. If and when the market nears its old high it will have built up the necessary strength and momentum to embark on an explosive breakout. Thus, now is the time to be doing your due diligence to find and research those candidates to lead the market in a potential rip roaring move into 2013. If you'd be interested in professional guidance in this endeavour then we invite you to learn more about our service.

Jordan Roy-Byrne, CMT
Jordan@TheDailyGold.com
The Daily Gold