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Tuesday, September 4, 2012

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Public getting spooked... gold mania may lie ahead

Posted: 04 Sep 2012 12:14 PM PDT

We don't know whether to be bullish or bearish on this one…

Eric Sprott, one of Canada's top money managers, says, "The window to raise money for gold stocks has blown open." Barrick Gold CEO Peter Munk says he's getting tons of calls from investors asking how to protect their money. Investor interest in gold is soaring.

This level of interest usually coincides with a vicious correction in an asset. It's only when the papers are full of bearish news does a true bull market rally move into high gear. But given the state of the government boondoggle right now, we wouldn't be surprised to see these sorts of comments coincide with a move over $1,000 an ounce…

Read on...

Make 20% a year in the world's worst real estate market

Posted: 04 Sep 2012 12:14 PM PDT

From DailyWealth:

Andrew started flipping houses. He'd gather the gloomiest articles about Detroit real estate. He'd mail these articles to loan officers at the local banks. Then, he'd offer to buy their foreclosed properties for pennies on the dollar. Andrew's strategy worked. He'd pay a Polish cleaning crew to overhaul the houses and then resell them for a profit.

Now, Andrew has found a new business in Detroit. He says this business is "the most fundamentally sound cash-flowing businesses in the nation right now."

Investing in apartment buildings is Andrew's new business. He buys buildings with between 30 and 200 units. He says these buildings are too big for the average owner but too small for institutions and hedge funds. Andrew says there's "very little competition" for these buildings since the credit crunch struck Detroit.

Read full article...

Better than gold; this metal will soar in 2009

Posted: 04 Sep 2012 12:14 PM PDT

From The Growth Stock Wire:

This year will be the year of precious metals. I'm certain of it.

The U.S. government is printing trillions of new dollars to bail out everyone from Wall Street bankers to Detroit automakers to Miami housing speculators to Las Vegas gamblers. That will lead to inflation.

...But if you can only buy one precious metal in 2009, then buy platinum.

Relative to gold, platinum is cheaper now than it has been at any time during the past 10 years. Here, take a look...

Read full article...

The End of America

Posted: 04 Sep 2012 12:14 PM PDT

From DailyWealth:

The huge inflation underway right now will be what I call "The End of America." I don't mean an end to our political union – I mean an end to the special role America has played in the global economy since World War II.

The coming great inflation will destroy America's economic leadership. It will lead – eventually – to the return of settling international obligations in gold instead of paper dollars. And this will happen much faster than anyone expects. By the time Obama leaves office, you will not be able to exchange dollars for any sound currency in the world without permission from the U.S. government. The price of gold will be well over $2,500 per ounce. Most importantly, commodities will no longer be priced in dollars either, but instead in the currencies of the leading producer. Americans haven't experienced anything like this since the Great Depression.

Read full article...

Gold ETFs Test $1,700 On Central Bank Talk

Posted: 04 Sep 2012 12:10 PM PDT

By Tom Lydon:

Gold ETFs continue to rise as the precious metal touched $1,700 an ounce on Tuesday, to its highest level in about six months on speculation central banks will announce more easing measures to support the global economy.

Investors are using ETFs to position for higher gold prices.

"Investors hold more gold through exchange traded funds than at any time in the past, after hefty inflows of metal into these products in August," Reuters reports.

Last week, Fed Chairman Bernanke's concern over the country's unemployment level hinted at further accommodative measures, lifting gold exchange traded funds on the higher inflation outlook and pressuring the U.S. dollar assets.

SPDR Gold Shares (GLD) gained over 2.1% during Friday's session as traders hedged the greater prospects for inflation in light of Bernanke's hint on further action.

Meanwhile, the PowerShares DB US Dollar Index Bullish (UUP) dipped 0.6% as any policy stimulus would depreciate the


Complete Story »

Bernanke Plays it Perfectly

Posted: 04 Sep 2012 11:41 AM PDT

Excerpted from NFTRH 202:
Bernanke Plays it Perfectly
From last week's opening segment:
"Another way to look at it is that the market's fate appears to rest with the jawbone of the man about to speak at Jackson Hole on Friday."
From last week's closing 'Wrap Up' segment:
"I think the theme now is that if you are a trader and if you have profits it is a logical time to take some or all of them."
We know that the decelerating economic backdrop (with inflation measures in check) is supportive of a Fed going unconventionally dovish in unleashing QE style policy if it so chooses.  We also know that the political backdrop is not supportive, with Republicans sounding off about a gold standard and a soon to be former Fed chief.
Ben Bernanke walked a middle ground on Friday, giving the market – especially the precious metals segment of it – enough of what it wanted to hear without actually having to announce a policy move.  The implication is that bullish price activity can continue and if it doesn't – especially if markets decline along side a more acutely decelerating economy, the Fed stands ready, willing and able to attempt to inflate the system.
The Fed chief is stuck between a rock (poor economy and thus, a poor jobs picture) and a hard place (Republicans ready to lynch him if an announcement of unconventional and market-moving policy is made).  He chose to remain consistent as the Fed is on guard to do what it has always defaulted to; print money if needed to attempt to devalue the currency in the name of economic growth.
Election Cycle 
We are only two months from the election so it is time to start looking past it and that may be what Bernanke is doing.  Though the doomsayer websites (and emailers) would have us squatting in our homes with shotguns out the front windows at the ready for attacks by everyone from dispossessed former McMansion owners to government death squads, the market – and the world – not only refused to end this summer, they have been grinding onward and are well-intact.
Two months sounds like child's play after what we have been through since the Euro crisis first exploded well over a year ago.  Still, this newsletter continues to highlight the rising risk profile, although Bernanke's skillful walk of the fine line and the market's reaction on Friday force me to wonder if that was it; if that was the correction prior to the 1460 target on the S&P 500.
The US Presidential election year cycle highlights three potentials.  Once again we review the chart courtesy of Ned Davis Research.

Friday's post-Bernanke action implies the market seems to think that Barrack Obama will hold the White House.  When the incumbent party is to win, there is an August rise into an accelerated rise (top example).  We have been operating under the middle example, which is the average of all election years, to be on the safe side.  In that scenario, we prepare for the routine yet notable correction of the middle example as well as the severe correction and potential bear market that could follow the bottom example, when the incumbent party loses the Presidency.

To review where we have been, the blue box highlights the time period when market risk was low – as pervasive bearishness gripped most casino patrons market players – and a bullish risk vs. reward stance was appropriate.  A bottom was ground out into June and per the three examples (green box), it has been all bull all the time during a process of sucking the frightened players back in.  We are evidently still in that process, judging by the immediate market reaction after the nimble Fed chief spoke on Friday.
However, the green box can carry a few days into September.  Since the US market will not open until the 4th, we are basically there.  This week could be the pivot to an interim correction per the average cycle, a harsh correction or worse, or in the event of an incumbent victory, a continuation and upward acceleration.  This paints the coming one or two weeks as very important, don't you think?
Of course this is just election cycle analysis, which by no means has to continue working well with the current market situation.  I am not a gambler, but don't they have a saying about riding a hot hand?  The Presidential cycle has been taken seriously by this letter writer since May and that helped keep the analysis on the right side over a very difficult summer.  What more can you ask from an indicator?  We'll continue to respect it.
Back on Fed Watch
One continues to wonder if QE will even be necessary any time soon.  Sure, the current US financial system – along with those of so many other nations – is technically insolvent and is locked into a regimen of periodic and officially sponsored inflationary policy in order to service a massive debt load and continue to function normally; with "normally" defined as "kicking the can down the road as long as possible, but doomed to an ugly demise at the hands of a real and undeniable deflationary unwinding or an increasingly intense inflationary panic."
So never mind the talk about the Fed standing ready to aid the economy as if it just needs another boost to finally get the sucker humming again.  The economy is broken because it has been locked into a recurring nightmare of inflation onDemand ever since Alan Greenspan began using such policy in an ever more intense manner against the bear market of 2000-2002.  He initiated a massive credit bubble that is still being dealt with today, only with government debt having replaced free market debt as the major driver.
The full text of Bernanke's Jackson Hole speech is available at MarketWatch: http://goo.gl/WJokU, but here are some pertinent snippets that betray a massive ego on the part of intellectual monetarists:
"One mechanism through which such purchases are believed to affect the economy is the so-called portfolio balance channel, which is based on the ideas of a number of well-known monetary economists, including James Tobin [http://goo.gl/Am4Ib], Milton Friedman [http://goo.gl/cbir], Franco Modigliani [http://goo.gl/b9ZPi], Karl Brunner [http://goo.gl/OoThu], and Allan Meltzer [http://goo.gl/EZBia]. The key premise underlying this channel is that, for a variety of reasons, different classes of financial assets are not perfect substitutes in investors' portfolios."
These names are trotted out as gods instead of as economists.  They are trotted out like the great social, cultural and scientific thinkers who have actually changed the quality of peoples' lives as opposed to simply learned and taught about how to manipulate paper money.  Our dear Fed leader is reverential toward these men and cut from the same cloth.
It is all about mechanisms, theories and formulas to them.  Gold – the barbarous anchor to stability and one-for-one value retention – on the other hand, is much too simple.  Why have simple when you can have overly complex and fraught with risk?
"Large-scale asset purchases can influence financial conditions and the broader economy through other channels as well. For instance, they can signal that the central bank intends to pursue a persistently more accommodative policy stance than previously thought, thereby lowering investors' expectations for the future path of the federal funds rate and putting additional downward pressure on long-term interest rates, particularly in real terms. Such signaling can also increase household and business confidence by helping to diminish concerns about "tail" risks such as deflation. During stressful periods, asset purchases may also improve the functioning of financial markets, thereby easing credit conditions in some sectors."
What he does not mention is that the need for such measures is the direct result of decades of manipulation of credit conditions and thereby, paper money.  He does not mention that "tail risks such as deflation" only come to things that have first been inflated by being printed not only to excess, but right off any sane macro balance sheet and into the sublime.  He does not mention that the use of ever more powerful monetary tools toward new inflation will bring ever more powerful corrective forces into play down the road, just as current problems were brought into existence by previous inflationary monetary policy.
These people – and here we include the likes of today's "brilliant" thinkers like Paul Krugman, Larry Summers and the monetary rock star himself, Nouriel Roubini – actually believe their own bullshit, and that is dangerous because they are setting our policy.

This segment could go on and on, but I've got a newsletter to write.  They make the rules and we play by them.  So let's get to it… NFTRH then goes on to the functional analysis that has kept the letter on the right side of the markets over a difficult summer.  Stay updated with the free (and spam free) eLetter.

Gold Tests Your Mettle

Posted: 04 Sep 2012 11:36 AM PDT

Last week Friday was a big day for the precious metals sector as both gold and silver moved higher on above average volume. The GDX gold stock ETF is now threatening to breakout from a five-month base that is supported by strong volume.

How To Profit From Brazil's Coming Infrastructure Boom

Posted: 04 Sep 2012 11:33 AM PDT

By Tony Daltorio:

Ask emerging market investors what is the biggest problem Brazil faces (besides politics) and you likely get the same answer from all of them ... woeful infrastructure which causes unnecessary bottlenecks in the economy.

The country, unlike China, has been a chronic underspender - only about 2% of GDP - on infrastructure for decades. The cause of the underinvestment was the series of the financial crises which racked Brazil during the 1980s and 1990s. The poor infrastructure may cause Brazil major embarrassment in the next few years as it hosts the upcoming 2014 soccer World Cup and the 2016 Summer Olympics. The Brazilian government is well aware of that and plans to spend approximately $470 billion in an ambitious plan to upgrade the country's roads, ports, airports, power plants and telecommunications network.

Brazil will need every dollar of that investment. Take just one example of the poor infrastructure ... Brazil's


Complete Story »

5 Small Cap Basic Materials Stocks With Strong Profits And Projected EPS Growth

Posted: 04 Sep 2012 10:52 AM PDT

By ZetaKap:

When a company has steady growth, especially at the small cap level, it usually draws in attention. But when this company has also produced strong profits, it sends an even stronger positive message. This typically signifies that a company is well positioned to utilize the profits to fuel growth. For our list today we ran a scan to find small cap stocks with these traits in the basic materials sector. They all have returned strong profits in the past year and have EPS growth rates of 25% or better for the coming year. We think you will enjoy learning more about these small cap stocks listed below.

The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company


Complete Story »

Sirius XM: A Close Look At Q3 And The Impact Of Retiring Debt

Posted: 04 Sep 2012 10:46 AM PDT

By Crunching Numbers:

Many investors look at the recent announcements by Sirius XM Radio (SIRI) to redeem some of its higher interest debt early as great news. The redemptions in September are $186.1 million of its 9.75% debt on September 1st and $681.5 million of its 13% debt on September 20th. This debt - frequently called toxic debt because of the high interest rates - has been an eyesore on the balance sheet and a flash-point for many critics of the company and its stock.

In other debt related news during the third quarter, the company floated a $400 million dollar bond issue maturing on August 15, 2022 at 5.25%. The low, long-term interest rate is a testament to the company's improved operating performance, cash balance and the overall low interest rate environment. The interest rate is a far cry from the $530 million 15% loan from Liberty Media (LMCA) that had Sirius


Complete Story »

The Truth About Competitive Devaluation

Posted: 04 Sep 2012 10:21 AM PDT

It is common knowledge that the U.S. dollar has lost approximately 98% of its value since 1913. That was the year that a private bank called the "Federal Reserve" was given a monopoly to print all U.S. currency; and in exchange for that colossal privilege it was given a statutory mandate to protect the value of the dollar.

How/why has the Federal Reserve been such a total failure in its statutory mandate? The most obvious reason was that these private bankers never had any intention of protecting the value of the dollar. As I explained in "Crime of the Millennium"; it is the printing of these paper currencies (in grossly excessive amounts) which has allowed bankers to perpetrate all of History's greatest acts of collective theft. The more they print; the faster they can steal.

Naturally the other Corporate Oligarchs are wholeheartedly in favor of this institutionalized program of theft-by-currency-dilution, since they are also big winners. As the value of these paper currencies are (deliberately) destroyed by banker over-printing, the inevitable (and immediate) consequence is that the wages of all workers are rapidly driven lower (in real dollars).

Regular readers will recognize the chart below, showing how (in real dollars) the average wages of U.S. workers have been falling steadily/rapidly for over 40 years. The result of that massive devaluation of wages is that average U.S. wages have fallen by more than 50%, all the way back to (literally) Great Depression levels. Meanwhile, management hand themselves raises many times in excess of the actual rate of inflation – effectively stealing the wages out of their own workers' pockets.

[chart courtesy of http://nowandfutures.com/index.html]

As a result of this corporate Robin Hood mentality of robbing from the poor (workers) to fatten the rich (management); the average wage differential between the wages of senior management and the median worker wage has risen from the traditional range of between 3:1 and 10:1 to a ratio (in North America) of between 100:1 and 1000:1.

Translating the above numbers is simple. While ordinary workers have seen their own paycheques slashed by more than half, some members of U.S. management are being paid in excess of 30,000% more than their actual worth – based on hundreds of years of wage data. Yet while today's corporate executives are the most grossly overpaid individuals in the history of human commerce, all efforts by our politicians (and all propaganda from the media) has focused on the "need" to slash wages, benefits, and anything else received by the Little People even further.

Argonaut Gold Announces Updated PEA for the San Antonio Project, Projected Gold Production of More Than 1 Million Ounces

Posted: 04 Sep 2012 09:19 AM PDT

TORONTO, ONTARIO–(Marketwire – Sept. 4, 2012) - Argonaut Gold Inc. (TSX:AR) ("Argonaut", "Argonaut Gold" or the "Company") is pleased to announce the results from an updated Preliminary Economic Assessment ("PEA") for the 100% owned San Antonio gold project, located in Baja California Sur, Mexico. The updated PEA was completed by SRK Consulting Inc. ("SRK") of Denver, CO; Kappes, Cassidy and Associates ("KCA") of Reno, NV and Argonaut Gold's management team.

Project and Financial Highlights

  • Pre-tax Net Present Value ("NPV") of $294 million using an 8% discount rate.
  • After tax NPV of $206 million using an 8% discount rate.
  • After tax Internal Rate of Return ("IRR") of 66%.
  • Life of mine pre-tax cash flow from operations estimated at $729 million.
  • Average annual pre-tax cash flow of $48 million over 15 years (excludes pre-production years).
  • Initial $84 million capital expenditure ("CAPEX") investment is expected to be fully funded by internal cash flow and treasury.
20121
 20102
 % Change
Life of mine "LOM" (years) 15 9 +66 %
M&I Gold ounces recovered (000′s) 1,037 673 +54 %
Inferred Gold ounces recovered (000′s) 8 - -
Cash cost per ounce $ 553 $ 513 +8 %
Capital costs: (000′s)
Initial $ 84,2003
 $ 79,000
Sustaining $ 13,300 $ 28,000 -9 %
After tax Net Present Value ("NPV")@ 8% discount rate (000′s)4 206,000 57,000 +261 %
After tax IRR4 66 % 26 % +154 %
1SRK PEA incorporating work by KCA and Argonaut Gold to be filed within 45 days of this release.
2AMEC PEA released August 2, 2010
3Initial Capital costs of $84 million includes $17.6 million in contingency and EPCM, as well as $4.5 million in pre-production stripping costs for the project.
4NPV and IRR calculations are based on after tax expectations with a long term Au price of $1250.
The preliminary economic assessment is preliminary in nature; it includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary economic assessment will be realized.

Production Specifications

  • Total processed Measured and Indicated ("M&I") Resource includes 60.1 million tonnes containing 1,643,000 ounces of gold with an average grade of 0.85 g/t.
  • Total processed Inferred Resource includes 0.5 million tonnes containing 14,000 ounces of gold with an average grade of 0.84 g/t.
  • Total production of 1,037,000 ounces of gold from M&I Resource and 8,000 ounces of gold from Inferred Resource.
  • Average yearly production of 69,700 gold ounces over a 15 year mine life.
  • Throughput estimate of 4 million tonnes per year from an open-pit mine, three stage crush and a recovery process using cyanide heap leaching and carbon adsorption.
Production Statistics: 2012 2010 % Change
Life of mine (years) 15 9 +66 %
Total M&I Resource tonnes processed (000′s) 60,100 31,112 +93 %
Total Inferred Resource tonnes processed (000′s) 500 - -
Total tonnes waste (000′s) 173,414 80,943 +114 %
Life of mine strip ratio (waste: ore) 3.1 2.6 +19 %
Overall average gold grade (g/t) 0.85 0.98 -13 %
Overall average recovery 63 % 60 % +5 %
Gold ounces M&I Resource recovered (000′s) 1,037 673 +60 %
Gold ounces Inferred Resource recovered (000′s) 8 - -
Average annual production (ozs.) 69,700 82,500 -13 %
Cost / tonne $ 9.86 $ 11.10
Mining $5.95 $6.49
Processing $3.28 $3.80
G&A $0.63 $0.81 -11 %
Cash cost per ounce $ 553 $ 513 -2.5 %
The production mine plan utilizes an in-pit resource at a $1200 Au price.
Capital Costs (millions) 2012 2010 % Change
Mine $ 4.5 $ 18.9 -76 %
Process1 $ 53.6 $ 16.4 +227 %
Infrastructure $ 15.9 $ 27.0 -41 %
Total Capex $ 74.0 $ 70.3 +5 %
Contingency $ 10.2 $ 8.7 +17 %
Sustaining Capital1 $ 13.3 $ 28.0 -52 %
1AMEC estimate for capital provided for Run-of-Mine material processing, and the addition of a crushing circuit in the third year, which was included in sustaining capital. Argonaut anticipates constructing the 3-stage crushing circuit upon commencing operations. SRK sustaining capital consists mostly of heap leach pad capacity.

New National Instrument 43-101 ("NI 43-101″) Technical Report on Resources

The updated Canadian NI 43-101 mineral resource estimation from SRK for Argonaut's San Antonio project shows an updated M&I resource of 1,735,000 gold ounces, based on 101,894 meters in 590 holes. Recent drilling added approximately 200,000 gold ounces while the redefining of the high grade Los Planes core reduced the resource by 150,000 gold ounces, for a net gain of 50,000 ounces. The total M&I resource now exceeds 1.7 million gold ounces contained within 65 million tonnes of mineralized material at an average grade of 0.83 g/t gold.

Updated Mineral Resource Summary of the San Antonio Project as of May 8, 2012

Area Product Class Tonnes (000′s) Au (g/t) Au Ounces
Total Oxide/Transition Measured 12,351 0.76 303,000
Indicated 10,961 0.64 227,000
M&I 23,312 0.71 530,000
Sulfide Measured 6,649 1.17 250,000
Indicated 35,129 0.85 955,000
M&I 41,778 0.90 1,205,000
Oxide/Transition Inferred 4,257 0.27 37,000
Sulfide Inferred 1,957 0.47 30,000
All types Measured 19,000 0.91 553,000
Indicated 46,090 0.80 1,182,000
M&I 65,089 0.83 1,735,000
Inferred 6,215 0.34 67,000
(1) Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resources estimated will be converted into Mineral Reserves.
(2) Resources are stated at cutoff grades of 0.11 g/t Au for oxide and transition and 0.15 g/t Au for sulfide and are contained within a pit optimization shell.
(3) Pit optimization is based on an assumed gold price of US$1,500/oz, metallurgical recovery of 70% for oxide and transition and 50% for sulfide, mining cost of US$1.45/t of material moved, processing cost of US$3.09/t processed and G&A cost of US$0.63/t processed.
(4) Mineral Resource tonnage and contained metal have been rounded to reflect the accuracy of the estimate, and numbers may not add due to rounding.
(5) Mineral Resource tonnage and grade are reported as diluted.
(6) Gold assays were capped prior to compositing.

The stated Mineral Resources have been prepared in accordance with the CIM classifications of Canada's NI 43-101 Standards of Disclosure for Mineral Projects. The Qualified Person, as defined by NI 43-101, for the mineral resource estimation, is Principal Resource Geologist Leah Mach of SRK, Denver, Colorado.

Peter Dougherty, President and CEO of Argonaut Gold stated:

"The San Antonio PEA is the culmination of the Company's efforts over the past two years. The PEA incorporates over 55,000 meters of drilling, several rounds of metallurgical testing, process enhancements and refinements. The very robust economics for the project provide a high return on investment of 66% for our shareholders. The strong economic viability of the project is further supported by plans to finance development and construction of the mine through internal cash flow."

Mr. Dougherty added:

"With the increased resource and improved economics of the project, we have been able to further refine the ore body. (By reducing the influence of the higher grade core of the Los Planes (North Pit) deposit, we have increased our confidence in the deposit). While the Company is very pleased with where the project stands today, we recognize that further optimization and exploration may have the potential to add even greater value to the project."

Path forward:

Argonaut continues to work towards permitting the project and has engaged the community, regulators, and various agencies toward defining a project within the jurisdictional guidelines that will be acceptable to all parties.

About Argonaut Gold

Argonaut is a Canadian gold company engaged in exploration, mine development and production activities. Its primary assets are the production-stage El Castillo Mine in the State of Durango, Mexico, the La Colorada Mine in the State of Sonora, Mexico, the advanced exploration stage San Antonio project in the State of Baja California Sur, Mexico, and several exploration stage projects, all of which are located in Mexico.

Creating Value Beyond Gold

Cautionary Note Regarding Forward-looking Statements

This press release contains certain "forward-looking statements" and "forward-looking information" under applicable Canadian securities laws concerning the proposed transaction and the business, operations and financial performance and condition of Argonaut Gold Inc. ("Argonaut"). Forward-looking statements and forward-looking information include, but are not limited to, statements with respect to estimated production and mine life of the various mineral projects of Argonaut; synergies and financial impact of completed acquisitions; the benefits of the development potential of the properties of Argonaut; the future price of gold, copper, silver; the estimation of mineral reserves and resources; the realization of mineral reserve estimates; the timing and amount of estimated future production; costs of production; success of exploration activities; and currency exchange rate fluctuations. Except for statements of historical fact relating to Argonaut, certain information contained herein constitutes forward-looking statements. Forward-looking statements are frequently characterized by words such as "plan," "expect," "project," "intend," "believe," "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are based on a number of assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Many of these assumptions are based on factors and events that are not within the control of Argonaut and there is no assurance they will prove to be correct.

Factors that could cause actual results to vary materially from results anticipated by such forward-looking statements include changes in market conditions, variations in ore grade or recovery rates, risks relating to international operations, fluctuating metal prices and currency exchange rates, changes in project parameters, the possibility of project cost overruns or unanticipated costs and expenses, labour disputes and other risks of the mining industry, failure of plant, equipment or processes to operate as anticipated. Although Argonaut has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Argonaut undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements. Statements concerning mineral reserve and resource estimates may also be deemed to constitute forward-looking statements to the extent they involve estimates of the mineralization that will be encountered if the property is developed. Comparative market information is as of a date prior to the date of this presentation.

Qualified Persons

Preparation of this press release was supervised by Mr. Thomas Burkhart, Argonaut's Vice President of Exploration and a "Qualified Person" as defined by NI 43-101. Mr. Alberto Orozco, Argonaut's Mexico Exploration Manager, supervised the drill program and on-site sample preparation procedures at San Antonio. Mr. Richard Rhoades, Argonaut's Chief Operating Officer and a "Qualified Person" as defined by NI 43-101 provided contributions in regards to mining methods, market studies and contracts as well as the economic analysis. Leah Mach from SRK Consulting, who is an "Independent Qualified Person" as defined by NI 43-101 and the lead person responsible for completing the updated San Antonio resource has reviewed this press release as it relates to the San Antonio project. Carl Defilippi from KCA, who is an "Independent Qualified Person" as defined by NI 43-101 has overseen the metallurgical and recovery methods, infrastructure, operating costs and capital costs.

For sample analysis the Company utilizes a system of Quality Assurance/Quality Control that includes insertion and verification of standards, blanks and duplicates consistent with industry standards.

Samples from the San Antonio project are shipped by commercial courier from the city of La Paz to either Inspectorate or ALS Chemex preparation laboratories in Hermosillo, Sonora, which are independent of the Company. After preparation in Hermosillo, pulps are sent to assay in North Vancouver for ALS and to Sparks, NV for Inspectorate. Samples are analyzed for gold by fire assay with atomic absorption, method code Au AA-23 for ALS Chemex, and Au-1AT-AA for Inspectorate; detectability limits for assay methods in both laboratories are 0.005 to 10ppm. Samples over 10 g/t Au are assayed with gravimetric finish (Assay code AU-GRA21 for ALS Chemex and Au-1AT-GV for Inspectorate). All samples are also assayed by ICP-MS (code ME-ICP41 in ALS Chemex and 30-AR-TR in Inspectorate) for a suite of 30 to 35 elements.

For further information on the Company's properties, please see the reports as listed below on the Company's website or on www.sedar.com

Comstock Samples 3.31 g/t Gold Over 95 m at VG Zone on QV Project

Posted: 04 Sep 2012 09:18 AM PDT

VANCOUVER, BRITISH COLUMBIA, Sep 04, 2012 (MARKETWIRE via COMTEX) -- Comstock Metals Ltd. (TSX:CSL.V, or CMMMF in the U.S.) ("Comstock" or the "Company") is pleased to announce additional results from its ongoing exploration program on the QV Project in the White Gold district, Yukon, following the discovery trench QVTR12-06 at the VG Zone which returned 3.74 grams/tonne gold (g/t Au) over 75.0 metres (m).

Trench Results Highlights
       
 3.31g/t Au over 95 m in QVTR-06 extension
 2.18 g/t Au over 85 m and open to the north in QVTR12-13
 3.77 g/t Au over 45 m and open to the east in QVTR12-15
 1.63 g/t Au over 95 m and open in both directions in QVTR12-12
 1.07 g/t Au over 55 m and open to the north in QVTR12-16
 0.31 g/t Au over 55 m and open in QVTR12-14
 0.81 g/t Au over 65 m in QVTR12-03 extension
 The VG mineralized zone has now been confirmed by trenching over 390 metres of strike length and remains open to the west and east
 

Comstock has completed infill and offset trenches at the VG Zone following the discovery of gold mineralization in trench QVTR12-06 (3.74 g/t Au over 75 m, see July 25, 2012 News Release). The trench-indicated gold mineralization extends over 390 m of assumed strike length and is considered open to the west and east. Mineralization at the VG Zone is oriented in a northeasterly direction and is associated with quartz veins and stockwork, silicification, and brecciation, accompanied by pyrite. See Figure 1 for trench locations, visit the following link: http://media3.marketwire.com/docs/CSLmapNR904.jpg

Comstock Metals press continues at the link below.

Source: Comstock Metals via MarketWatch
http://www.marketwatch.com/story/comstock-samples-331-gt-gold-over-95-m-at-vg-zone-on-qv-project-2012-09-04-111735656

Comment: Note comments on the comparison to the Golden Saddle and Coffee deposits.  QV may actually be a more robust system judging by these early returns.     

Disclosure:  Comstock Metals Ltd. is a Vulture Bargain Candidate of Interest (VBCI).  Members of the GGR team are actively accumulating and may hold long positions in CSL.V or CMMMF. 

 

Bernanke’s ‘Operation Crashproof’ & Gold’s Rally

Posted: 04 Sep 2012 08:59 AM PDT

Clearly Bernanke and Co. are doing more and more of everything they can to prevent another 2008 from occurring. But is more QE truly the answer our economy needs, or do we need something that addresses more deeply-rooted behavior of banks, corporations and law-makers?

September And November Best Months To Own Gold

Posted: 04 Sep 2012 07:47 AM PDT

gold.ie

Near-Term Targets for Gold, Silver & Mining Shares

Posted: 04 Sep 2012 07:43 AM PDT

It's amazing. Suddenly, everyone is bullish again. Two months ago you couldn't give away mining shares or silver. No one wanted to buy. After back-to-back weekly gains (for essentially the first time since January) the gold bugs are back and proud.

Has QE3 Begun? Gold & Commodities May Say Yes

Posted: 04 Sep 2012 07:39 AM PDT

Corvus Gold Appoints Quentin Mai – Vice President, Business Development

Posted: 04 Sep 2012 06:31 AM PDT

Vancouver, B.C……..Corvus Gold Inc. ("Corvus" or the "Company") – (TSX: KOR, OTCQX: CORVF) announces the appointment of Quentin Mai as the Company's new Vice President of Business Development.  Mr. Mai has over 15 years of mining industry experience in both exploration and development companies specializing in corporate strategy and shareholder value creation.  Prior to his current appointment, Mr. Mai has been providing consulting services to Corvus as well as Investor Relations support.  Mr. Mai also played key roles in the growth and success of companies such as International Tower Hill Mines Ltd. (ITH), Cardero Resource Corp. and First Quantum Minerals Ltd.  His extensive experience across a spectrum of companies with capital markets, major resource investor groups and corporate growth initiatives will significantly complement Corvus's already strong marketing and finance team.

Jeff Pontius, Chief Executive Officer of Corvus, stated, "The addition of Quentin Mai as our Vice President of Business Development marks an important step for our Company as we move to our next stage of shareholder value creation.  My past experience working with Quentin on strategic growth initiatives in companies such as ITH has proven to be very effective and we look forward to bringing that same intensity and dedication to Corvus.  The Corvus story is just beginning and with the excellent team we have now assembled we are ready for the main act of value creation."

About Corvus Gold Inc.

Corvus Gold Inc. is a resource development and exploration company, focused in Nevada, Alaska and Quebec, which controls a number of exploration projects representing a spectrum of early-stage to advanced gold projects.  Corvus is focused on advancing its 100% owned Nevada, North Bullfrog project towards a potential development decision and continuing to explore for new major gold discoveries throughout North America.  Corvus is committed to building shareholder value through achieving cost effective, timely gold production and new world class gold discoveries while leveraging noncore assets via partner funded exploration work into carried and or royalty interests.

On behalf of
Corvus Gold Inc.

(signed) Jeffrey A. Pontius
Jeffrey A. Pontius,
Chairman and Chief Executive Officer

Contact Information:
Ryan Ko, Investor Relations
Email:  info@corvusgold.com
Phone: 1-888-770-7488 (toll free) or (604) 638-3246 / Fax: (604) 408-7499

The Fake Election: 10 Arguments The Republicans Aren’t Making

Posted: 04 Sep 2012 06:30 AM PDT

Matt Stoller is a fellow at the Roosevelt Institute. You can follow him at https://twitter.com/matthewstoller and he can be reached at stoller at gmail.com.

Even authoritarian systems require legitimacy to retain the support of the governed, and the new authoritarian America is no exception. Since 2004, the brilliant public journalism advocate Jay Rosen has been asking, what is the point of a political convention? No news is made, yet over 15,000 journalists show up, ostensibly to cover the pomp. But everyone knows that coverage isn't so much the point; these conventions trade shows for the political class, where party insiders, journalists, politicians, celebrities, corporate types, and lobbyists mingle to organize political hierarchies. The public is simply irrelevant, a mass of jeering and cheering message imbibers or apathetic and cynical former citizens, people who are unseen behind their TV screens. The only fresh elements are protesters, and they are met by a police state, lest they disrupt the insider deal-making.

In fact, elections, over the past few years, have become mechanisms for sustaining the legitimacy of this political class, not contests designed to be won by either side. Neither side would ever admit to not trying to win, at least publicly. Privately, political consultants will count their winnings happily after each election, regardless of the outcome. So the way to see the lack of competitiveness now is to examine the moves that both parties are not making.

The Republicans have a clear strategy to win, which they are not using. Obama is liked but unpopular, seen as a pseudo-honest lightweight who can't govern, even as the GOP are considered more competent but downright evil. In politics, you have to get more votes than the other guy; you don't have to prove you're an angel. You can even change the voting universe, rather than persuading people of your merits. And indeed, a small but significant minority of Obama voters don't really want to vote for Obama, they are unenthusiastic but feel they have to pick the lesser evil.  They can be pushed into apathy. So the Republicans' best strategy would be to dampen enthusiasm for Obama among these voters, while pulling a few weak Obama voters over to their side with a populist campaign. Would it be dishonest for Republicans to promise populist policies they have no intention of following through on? Sure! Has that ever stopped them before? Of course not! Remember George W. Bush and compassionate conservatism? Now that was some artful lying. The Republicans were really trying to win that time. This time, not so much.

If the Republicans were interested in winning, you'd see a very different campaign. Here are ten ironclad arguments you'd see. These are arguments the Republicans could make, but aren't.

1) The Tax Cheat Administration – When the Obama campaign brought out Bain and tax avoidance, the GOP would have gone after health care czar Tom Daschle 's tax cheating and Treasury Secretary Tim Geithner tax problems. Daschle didn't pay over $120,000 of taxes, and had to withdraw from consideration for the cabinet. Yet Obama still used him as a health care czar, even as he was on the payroll of big law firms. And Geithner's problems were worse. As Neil Barofsky noted in Bailout, Geithner's tax problems weren't simple mistakes, they were more ominous than that, and revealed someone willing to cheat to keep a few more bucks. Geithner hadn't been paying his full amount of taxes for several years. This was discovered, and he paid back taxes. But at first, he only paid back taxes for the years the statute of limitations hadn't expire, keeping his tax cheat winnings for prior years. Only when prodded by the administration did he make up the full amount.

2) Obama Doesn't Keep His Promises to You – During the 2008 primary, Obama promised to renegotiate NAFTA. He didn't. Obama also promised to raise the minimum wage, and index it to inflation. He didn't. The NAFTA promise is especially powerful, because anti-NAFTA sentiment cuts across party lines, and Obama pretty clearly was lying in 2008 when it emerged that his campaign economist Austan Goolsbee had assured the Canadians that Obama did not intend to honor his campaign promises.

3) Obama Administration, Brought to You By Wall Street – The Obama administration has very few high level Treasury officials who don't have significant experience in large too big to fail banks. His chief of staff Bill Daley came from JP Morgan, an Jack Lew came from Citigroup. The revolving door argument is a natural television advertisement. The Republicans even cut an ad to portray Obama this way, but never put any real dollars behind it.

4) Obama Administration's Handling of the Foreclosure Crisis – The Obama administration said that its main housing program would help 4 million homeowners. It came nowhere close. Recently, we've learned that the entire premise of the administration's housing efforts was based on helping the banks, or "foaming the runway", as Geithner put it, rather than stopping foreclosures. This is directly at odds from what the administration presented to the public. This is particularly significant in certain swing states, like Florida, Nevada, and Ohio. The Republicans could simply make this a broken promise argument, and again, the ad writes itself.

5) Inequality Skyrocketing Under Obama – Growth of inequality is higher under Obama than under Bush. This is because Obama reflated financial assets and not housing assets, and has compounded that by legalizing fraud among elite financial actors. The lack of prosecution angle isn't just an ad that writes itself, it was an Academy Award winning documentary (Inside Job).

6) Obama Administration Is Corrupt – The examples here are numerous. There was the secret deal with pharma to spend money on elections if pharma got certain multi-billion dollar concessions in Obamacare. There's the pay to play revolving door, such as Peter Orszag going to Citigroup after running OMB. In the first chapter of Bailout, Herb Allison essentially offered a bribe to Neil Barofsky if he'd go easier on Treasury around TARP. This is corruption. It's not hard to prove.

7) Obama Pushing Offshoring of American Jobs – The massive Trans-Pacific Partnership, or NAFTA on steroids, is a global secret deal to subordinate American sovereignty to international tribunals of private corporate lawyers and offshoring whatever jobs are left in America. I'm not kidding. It's that bad. And it's being negotiated right now.

8) Subversion of the Rule of Law - This is everything from refusing to prosecuting Wall Street bankers to having a kill list to destroy real estate law through the mortgage settlement. Any number of eminent lawyers or thinkers could, or has, made this point.

9) Suppression of Dissent - The administration's DHS collaborated with local and state law enforcement to get rid of Occupy encampments.

10) Endless war – Obama's national security apparatus has been keeping us in Afghanistan, at higher troop levels, than Bush did.

These arguments, if put into widespread play, could keep voters at home, or even shift some groups away from Obama.  And because of outside SuperPACs, none of these arguments have to be made by Romney himself, there are a host of groups that could make them. Though you might think it would be appallingly hypocritical if the Republicans made these arguments, when has that ever stopped them before? It isn't honesty and integrity preventing the GOP from going there. Or if it is, then one would have to concede that the Republicans are running a principled campaign, on plutocracy. More likely, the answer is that winning the race isn't as important as ensuring that the political class is protected from democracy.

The Republicans don't want to discuss tax cheating, offshoring, corruption, inequality, dissent, the rule of law, endless war, or Wall Street criminality. They'd rather lose. It's not that they want to lose in 2012, it's just that they aren't going to go after every vote. It's the same reason no one talks about how Romney is a flip-flopper anymore, or points out that Romney is the architect of Obamacare, or was a moderate Republican governor in Massachusetts. Those arguments are worse for the political class, and better for the public. And that is how elections operate in authoritarian America. The secondary goal is to win the election, the primary goal is to keep the public out of the deal-making.

No Mr. Bond, I Expect You To Die!

Posted: 04 Sep 2012 06:30 AM PDT

007: "Do you expect me to talk?"

Goldfinger: "No Mr. Bond, I expect you to die!"

Friday's reaction to "Jackson Hole" was superficially bullish. After a very nasty initial take on Ben Bernanke's speech, the storyline immediately reversed as unofficial but widely recognized Fed leaker Jon Hilsenrath put out a bullish interpretation in the WSJ.

Bulls can be glad the market did not tank on the Fed's "more of the same" stance, and they can look forward to some kind of policy continuation when the Fed meets again in mid-September. Precious metals surged on the Jackson Hole reaction – but the strange thing is bonds did too.

CLICK TO ENLARGE

Treasuries are a safe haven asset oriented to "risk off" and global slowdown. A significant confirming factor of the recent risk-on rally was thus the decline in the 10 and 30 year vehicles (IEF and TLT).

To see treasuries surge again, then – even as the major indices flounder and act weak below the resistance of multi-year highs – is a significant non-confirming sign.

If this rally were strong and gaining momentum – as opposed to potentially fading – bonds would still be in a confirmed downtrend, not finding their footing and roaring back. We expect that equity bulls will be disappointed, as Goldfinger was, when Mr. Bond refused to die.

We remain skeptical of this rally and skeptical of the staying power of this whole stimulus meme. To be blunt, the idea that central banks can keep juicing assets with impunity seems a combination of hope and foolish holdover from paradigms past that no longer apply.

The thing about stimulus as a juicing mechanism is that, like any other drug or artificial stimulant, it comes at the cost of diminishing returns. You have to use more and more to get the same "kick," and if you are depleting energy as you go then eventually you get no kick at all, but instead set yourself up for a crash.

In addition to all the Europe stuff coming back – welcome back from vacation, Brussels bureaucrats! – it should also be noted that September is historically a terrible month for equities, going back at least a century.

As Bespoke Investment Group reports, over the past 100 yrs, the Dow averaged a 0.87% decline and was positive in September only 42% of the time. Over the past 50 years the probability of a winning month has worsened, to only 38% of the time.

In the Mercenary Live Feed we have a solid roster of shorts on, as we feel the opportunity at this inflection point is asymetrically skewed to the downside. A move higher is likely to be decelerating and precarious, like a car with no gas trying to roll up hill on waning momentum, whereas a potential downside move, even if lower probability, could swiftly gain momentum and strength as volume comes back into the market along with awareness of real and growing macro risks.

NEWS FLOW

It was a nice reprieve, but now Europe's politicians are coming back from vacation and the serious macro risks of Europe are potentially coming back to the fore. Last week was the Jackson Hole show, this week it will be the Mario Draghi show. Remember what happened last time this guy opened his mouth?

We continue to feel that unabashedly bullish investors are basically taking a gambler's stance here, calling and even raising on a very dangerous flop in the vain hope that their weak Ace holds up.

This is crazy:

Bank of America Merrill Lynch has looked into filling trucks with cash and sending them over the Greek border so clients can continue to pay local employees and suppliers in the event money is unavailable. Ford has configured its computer systems so they will be able to immediately handle a new Greek currency.

No one knows just how broad the shock waves from a Greek exit would be, but big American banks and consulting firms have also been doing a brisk business advising their corporate clients on how to prepare for a splintering of the euro zone.

That is a striking contrast to the assurances from European politicians that the crisis is manageable and that the currency union can be held together…

For the Federal Reserve, the political dynamic could get very interesting if Romney / Ryan win. It is already an important consideration that, though the Federal Reserve is not operationally constrained – in the sense the Fed can never "run out of money" – they are politically constrained, and those constraints could grow stronger and more restrictive in the event of Republican dominance in Washington.

For these reasons, we suspect a Republican wind could be a bullish tailwind for the US dollar… and a greater contributing factor to "austerity" outlook than might be expected (although the stimulative jawboning of tax cuts might be a partial replacement for ideologically neutering the Fed at the margins in line with Tea Party desires)…

Why is China refraining from stimulus?

Perhaps because they know it is a fool's errand that could potentially make things worse?

Keep a weather eye on food and energy prices… it seems almost remarkable to us that the painful impact of rising food and energy prices on the middle class is a little discussed subject that the easy monetary advocates have gotten away with completely ignoring. At some point this will change.

Well there's a surprise (not)… as John Mauldin recently pointed out, a great irony is that Democrats who support the Federal Reserve actually support a dumber, meaner, more destructive version of "trickle down economics" than the staunchest of Reagan Republicans ever dared. If you are a Krugmanite or one of those who believe stimulus is somehow a cure-all, then you de facto advocate policies that directly benefit the rich, while screwing the poor through cost of living increases, in the hope that just a little bit of that stimulative benefit via paper asset price rises will "trickle down" to the masses. Ironic, that.

CHART FLOW

  • Major U.S. indices weak at multi-year highs
  • Long bonds surging on Friday, indicating risk off transition
  • Precious metals, gold stocks surging – too far too fast though?
  • Emerging markets universally bearish now, rolling over
  • Australian dollar (AUDUSD) confirming rollover
  • Euro (EURUSD) daily uptrend, but descending weekly channel
  • US dollar (UUP) wedging out?

In the Mercenary Live Feed we are meaningfully short here, as we still see excellent "pot odds" in the event of an inflection point resolution to the downside. Our risk points are relatively tight, however, so we don't have a lot of open risk on the books. The Aussie dollar (via short AUDUSD) remains our highest conviction position by far.

p.s. Like this article? For more, visit our Knowledge Center!

p.p.s. If you haven't already, check out the Mercenary Live Feed!

New Vigor in The Markets

Posted: 04 Sep 2012 05:52 AM PDT

We believe the  markets will begin slow to sideways trading as we digest data from the market close as of August 30.

Dow Jones Industrial Average:  Closed at 13000.71 -106.77 on lower volume and pre-holiday skidding momentum. We had multiple tops above 13250 and now this new bearish signal has taken hold for more selling. The 20-day average at 13100.36 is resistance and new support is the close at 13000.  Three events stalled stocks this week: (1) month end close outs to go flat, (2) a Monday holiday, (3) all are waiting for the Wyoming FOMC announcement on Friday, tomorrow. We expect zero news from that event and expect stocks to be flat to down on the holiday weekend.  Expect new vigor in the markets to begin next Tuesday, September 4.

S&P 500 Index: Closed at 1399.48 -11.01 with the 20-day average being resistance and new support is near the same number at 1400. The selling bear head and shoulders top pattern was a small move compared with some of the other stock index chart patterns. Price is above the 50 and 200-day moving averages and a recent continuation triangle breakout to the high side.  Momentum has peaked but is stabilized, and is moving sideways, probably until next Tuesday.  There is a clear reluctance to sell in both this stock index and in the leading signal Nasdaq markets.

S&P 100 Index: Closed at 643.25 -5.39 on lower volume and peaking momentum. Price has hard resistance at 650 a major number. The 20-day moving average is just above the close, showing resistance at 644.56. Price recently popped-up above a very long continuation triangle showing considerable strength. In actuality, the only negative on this chart pattern is the shallow peaking action at 650 price resistance. This chart is signaling a reluctance to sell as the investors are holding on for more gains expected between September 4 and September 21 on our technical forecasts.  That potential stock rally could be the fall peak before our expected correction. Then, normally stock investors after taking earlier September profits, will re-enter long near November 1. With the election on November 6, this trade might be reluctantly affected.

Nasdaq 100 Index: Closed at 2753.74 -30.26 at the chart posted a very wide double bear top near 2800. The earlier top was in March and the current one is in August. This is an ominous signal for a wide spread major sell-off this fall, which we have frequently predicted. On the technicals, when that selling event arrives, we can see a drop from 2800 to 2500-2450 support as a minimum.  For now, the bull side remains intact with price above all moving averages on peaking momentum and lower volume. New support is 2741.34 on the 20-day moving average. Resistance is the nearby former high at 2800. There are so many bearish fundamentals in place we forecast a  -300 point corrective drop for this fall.  Further enhancing this negative is the uncontrollable situation in Europe coming to a head in this 4th quarter. We would suggest the traders might be safe being long in this index until about September 14th.

30-Year Bonds: Closed at 149.90 +0.65 on based and rising momentum. Bonds have good support at 148.50 on the 20 and 50 day moving averages. Resistance is the price of 150.00. This market has been reactive to credit problems in Europe from central bankers to corporate bonds to GDP reports on failing sales. Hard lower resistance is 145.50. As stocks regain footing and rise through the middle of September, bonds go weaker but not much weaker as US Treasuries are perceived to be the best paper on the planet other than German Bunds for now. Watch for sideways trading between 149.00 to 150.00 until at least next Tuesday or Wednesday. Volumes for most all markets including bonds and other credit instruments should be softer on very light trading for Friday. Normally, Tuesday is an up bonds day. With a holiday Monday, we could see an up Tuesday for stocks and down for bonds. Bonds rise mildly next Wednesday.

Gold: Closed at 1655.20 -1.00 with support at 1655 and resistance at 1665. The price continues to move up and sideways in a very long continuation triangle. Higher resistance is the falling upper triangle resistance line. Once the price can breakout up and through that barrier, gold should achieve 1736.50 on a longer term 50% retracement. Higher performance above that retracement would be near 1800-1807. When a market is selling for so many months and is so suppressed, it takes some time to regain solid footing and get moving again. With the convergence of numerous major fundamental problems coming this fall, we forecast a major breakout.  That cycle date is difficult to forecast with so many major problems. Some are saying 2,000 gold in the 4th quarter and that is possible. However, depending upon how control of credit and the stock market is maintained, it could be something less with a higher price in 2013. Next week gold could touch 1650-1675.

Silver: Closed at 430.42 -0.29 on rising momentum and a price supported on the 200-day moving average at $30.28. Today, the close was above all moving averages, and it was in a pattern rising up quickly from a many weeks long doldrums position. There is a lot of price congestion with stop and go resistance points up through $35.85.  September is the best month for being a silver buyer. Our current silver price positioning is in place for the next rising rally. Silver volatility is often double or triple that of gold. With the expectations of new inflation, more debt, and the troubles in Europe as well as a major slow-down world-wide, precious metals are the last asset market of solidity offering no counter party risks. Our next objective is 30.85 and higher resistance at 32.48.

XAU: Closed at 162.88 -1.61 on peaking momentum and a peaking metal to shares ratio.  Recently price resisted at 170.00 on the 200-day moving average. Yet, price remains above the 20-day and 50 day averages. With mildly rising gold and silver and the broader stock markets rising next week for about two weeks, the XAU should regain some strength and move back-up again toward 170.00 resistance. The minimum objective for the XAU would be 180.00 after the next breakouts above the 200-day average and the top trading range channel line just under 180.00.

US Dollar: Closed at 81.69 +0.15 on falling momentum and a rising Euro currency supported for now on higher hopes for Europe. The dollar remains above the 200-day moving average at 80.64 and just under the 20-day and 50 day averages as currency trading moves, for the most part, sideways. The dollar touched a high of 84.00 before selling back toward major support at 80.00. The new and slightly higher broader support is for 81.50. This slightly higher moving average and longer range support is the result of the Euro, having so much difficulty. The Euro is going to sell lower in our view in the 4th quarter giving more buying support to the US Dollar. The rising dollar will make commodities more expensive holding down the prices for a few weeks. The intermediate trend for the CRB is higher but a more costly dollar can stop or curtail some of this growth over the next few weeks.

Crude Oil: Closed at 94.82 -0.46 on rising but peaking momentum. The new trading range is 94.50 to 98.50. Price remains firmly supported by the 200-day moving average at 93.81 and the 50-day average at 92.01. Further, the 20-day average is just pennies away for further support. So, while oil is toppy, the price is firm and we should be moving sideways to up for crude oil on weather, inflation, Gulf of Mexico problems and a refinery fire in Venezuela. Later on this fall, oil should be rising on a breakout above 98.50 resistance; a top trading line in a continuation triangle. Look for sideways prices for about 10 days to two weeks.

CRB: Closed at 306.51 -0.61 on flat-lined momentum trading as commodities had a rally and then peaked and stalled on profit-taking. Trading is confined to a very tight channel between 310 and 305. Price is solidly above all  moving averages. Once the CRB can rise again after the forthcoming profit-taking-selling, the price can rise on grain, energy, precious metals and few other markets. Base metals should be down -10% this fall on slowing commerce throughout the world. We think copper can hold-up but not advance much beyond 3.50 for the intermediate term. This can change next year when new inflation kicks in on more stimulus for credit. -Traderrog


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September & November Best Months To Own Gold

Posted: 04 Sep 2012 05:40 AM PDT

Gold inched up to its highest level in five months after poor manufacturing data from across the globe increased speculation that central banks will again vainly employ quantitative easing measures in order to prevent recessions and or depressions.

Iran central bank grabs major chunk of Gold from Turkey

Posted: 04 Sep 2012 05:36 AM PDT

Iran central bank grabs major chunk of Gold from Turkey

Iran's gold purchases have no direct affect on the local market, as Turkey is a buyer of scrap gold and this trade causes no shortage in supply.




ANKARA(BullionStreet): Gold imports from Turkey is most probably ended up with Iran central bank, according to Istanbul Precious Minerals and Jewelry Exporters' Association.

The Association said it was not sure whether it is independent investors buying Turkish gold or the Iranian central bank using middlemen.

However, it agrees that Iran's gold purchases have no direct affect on the local market, as Turkey is a buyer of scrap gold and this trade causes no shortage in supply.

Turkey's gold exports to Iran totaled $4.4 billion in the first half of the year.

Most gold sector representatives in Turkey are still unsure about where a large amount of gold exports to Iran, some $1.83 billion in July alone, have gone.

Analysts said Iranians may increasingly be preferring to keep their savings in gold as the country is facing an inflation pressure and people may see gold as a safe haven.

They added that both state institutes and individual investors from Iran are buying Turkish gold as the country is facing money transaction difficulties because of the continuing Western sanctions.

Turkish gold prices have been rising since the start of the month, one gram of 24 carat gold is now valued at 97 Turkish liras on Aug. 31, up from 92 liras seen the first day of the month.

Global prices determine the gold market in Turkey as the local production is too small when compared with the gold giant.

Turkey buys only 100 tons of scrap gold in a good year. The local gold extraction is at 25 tons.

http://www.bullionstreet.com/news/ir...om-turkey/2744

Buying by the Kilo?

Posted: 04 Sep 2012 05:28 AM PDT

Please don't dime yourself out. I don't want to know if you do or "who," specifically, but rather, what kind of a gold bug? What's their profile?

I never had enough FRN's for a Kilo even before my divorce wiped me out, financially. But those gold Kilo coins from Perth Mint that APMEX sells always had me wondering how sweet such a big chunk must feel to hold. But who buys that?

Even if I had the pesos I'd still be afraid to buy such a big piece. Can't hide it, too big of a loss if stolen, plus the seller reports the buyer to the Federales, right? Plenty of paper records to track that bad boy down at a future date, if desired.

So how is it that these coins sell? What's the demographic for coins of this type? The risk I associate with owning anything over 1 Oz. leaves me thinking these Kilo coins won't move.

And yet, move they do. Is it that the very rich prefer them? Just wondering (always have wondered), as my curiosity got the better of me...

Gold & Silver 'Continuing Their Upswing' in Global Trade

Posted: 04 Sep 2012 05:24 AM PDT

Wholesale prices to buy gold bullion hovered above $1,690 an ounce Tuesday morning in London, in line with where they started the week, while stocks and commodities were broadly flat.

Commodities Look to ISM Data after Bernanke Speech

Posted: 04 Sep 2012 04:59 AM PDT

An upside surprise may weigh on risk appetite while boosting the US dollar as hopes for accommodation fade. Such an outcome is likely to see growth-geared crude oil and copper prices following shares lower while gold and silver pull back.

View From the Turret: September Trading Introduces New Risks for Bulls

Posted: 04 Sep 2012 04:44 AM PDT

With the summer officially over, traders are returning to a challenging environment.

Equity indices are within striking distance of 52-week highs, having spent the summer grinding higher on incredibly light volume. At the same time, the global economy is teetering on the brink of recession, with a number of serious macro risks lurking.

The political spectrum creates just as much uncertainty as the economic picture (can one really separate the two?) as politicians around the globe struggle to come up with credible solutions to the various situations.

In Europe, Germany is now entering a recessionary environment, and yet the country is expected to be instrumental in bailing out their debt-ridden neighbors. Chinese politicians have limited resources to fight an increasingly likely hard landing. And in the US, the Fed is trying to determine whether another round of quantitative easing would be worthwhile.

Sentiment has been steadily moving higher with AAII (American Association of Individual Investors) readings now decidedly bullish. The Barron's cover story this week "Tough as Teflon" depicts a bulletproof bull, and the market's lethargic price action has essentially lulled investors into a state of complacency.

Ironically, confidence levels have risen despite the fact that markets have not broken to new highs. While the short-term path of least resistance still favors the bulls (a grind to new highs is still a high-probability outcome), a bearish break is still very much in the cards.

Moreover, while a grind higher environment offers modest profit opportunity for traders, a major price dislocation would catch investors off-guard and could lead to tremendous trading opportunities for the bears, as fearful investors and traders try to reduce exposure quickly – in a period of extremely low liquidity.

We're entering the new month with moderately bearish exposure, given the asymmetrical reward-to-risk profile of the current environment. We still have plenty of room to add additional exposure, whether through traditional equity trades, futures or forex positions, or structured option setups.

We're looking forward to the new month of trading, with the potential to break out of this listless environment of low volume, low volatility price action. Below are a few of the areas we are focused on for the week ahead…

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Emerging Markets Moving From Bad to Worse

The global economic slowdown is hitting emerging markets especially hard…

With demand from developed markets under pressure, the export-based emerging market economies are struggling to maintain growth levels.

Given the heavy infrastructure investments that many of these countries have made (such as entire Chinese cities built and yet to be populated) the global slowdown comes at a particularly challenging time.

While US equities have been steadily advancing, emerging market equity indices have been severely underperforming. We are currently short the iShares MSCI Emerging Markets (EEM) with unrealized profits already built into the position.

Any stall for US equities would only exacerbate  the situation for emerging market equities, as a flight from risk assets would certainly include additional liquidation of emerging equities as well.

The ripple effect from slowing developed countries, to emerging markets, also extends to resource-rich Australia…

We've been discussing the danger to the Australian Dollar for some time now, booking profits earlier in the year on a short trade, and building a material short position in the currency again over the last few weeks.

Our position (as documented in the Mercenary Live Feed) is in the AUD/USD currency pair which allows for very efficient use of capital in expressing the trade. The Currency Shares Australian Dollar (FXA) - or related option contracts – can also get the job done, but these securities require significantly more capital per unit of true exposure.

At any rate, the price action in the Aussie is once again turning south with plenty of potential for acceleration as we enter September. Just a few months ago, the AUD/USD pair was trading in the 0.96 range, and in 2008, the pair hit a low near 0.80.

Dividend Plays Overvalued and Sinking

Last week we talked about how investors' reach for yield has pushed prices of utility stocks to vulnerable valuations.

Both retail and institutional investors have migrated to equities that pay high dividends, which is a direct result of the Fed's zero interest rate policy – leading to high fixed income prices, and correspondingly low yields.

In addition to utilities, many consumer staple bellwether stocks are also trading at high historical valuations, and heading lower as fixed income yields start rising (adding more competition for yield-oriented capital).

Altria Group Inc. (MO), the former Philip Morris, is a great example of an over-valued dividend stock – now heading in the wrong direction.

The stock pays a 5% yield, but also trades at nearly 15 times earnings. This is the type of multiple you would typically see from a stable growth company – not a mature cash-cow operation.

As interest rates begin to edge higher, and both corporate as well as treasury security yields follow suit, investors will have to weigh the additional risk of holding equity (versus debt), and determine if the additional income from dividends justifies the underlying capital gain / loss risk.

Altria's chart looks particularly ominous after years of steadily trending higher. Last week, we initiated a new short position after the stock broke down and then briefly drifted higher. All trades are documented in real-time via the Mercenary Live Feed.

'Safe' Capital Rotating Into US Domestic Stocks

As the global economy downshifts into neutral, and emerging market valuations continue to drop, portfolio managers are looking for stability in US domestic stocks.

Large-cap multinational companies may offer broad diversification, but with weakness around the world, this diversification winds up being a liability rather than an asset.

Ironically, this trend favors niche US small and mid-cap stocks that operate stable businesses and can demonstrate the ability to grow even in this challenging environment.

The retail apparel group has been a mixed bag lately in terms of stock performance. Stock prices for a number of over-valued retailers have dropped as brands have fallen out of favor, while other retailers such as TJX Cos Inc. (TJX) and Ross Stores Inc. (ROST) have continued to push to new highs.

More specifically, the footwear area has been improving in recent months as evidenced by a 33% rise in Steve Madden Ltd. (SHOO) as well as a 15% rebound for Nike Inc. (NKE).

One potential bull candidate on our roster is Deckers Outdoor Corp. (DECK). The company has several well-respected footwear brands, and generates more than 2/3 of its revenue in the US.

DECK is currently trading at a single digit forward PE (listed at 9.43) with an expected growth rate close to 19%. The stock has rebounded 25% from its July low, but still sits at less than half its valuation from late last year.

As capital rotates into safe domestic plays – companies that are generating strong cash flow and have reasonable valuations – Deckers should continue to rebound, advancing significantly before raising any red flags for value investors.

Precious metal prices, along with stock prices for PM miners, have been moving sharply higher over the last few weeks.

Despite the recent strength, we're skeptical of the action and remain on the sidelines. The precious metal advances are largely fueled by expectations for additional liquidity injections (from both sides of the Atlantic), and are certainly helped by the tailwind of a weakening US dollar.

But taking an objective view of the situation, it's difficult to see how the Fed could justify a massive liquidity program with equities hitting new highs, and the presidential election just around the corner.

This isn't to say that there won't be any action during the Fed meeting later this month, but the magnitude of any announced program could turn out to be underwhelming – sparking a sharp selloff for precious metals. Considering this risk, the current rally looks quite dangerous and we're content to watch the action from afar.

In terms of catalysts this week, traders will be particularly attuned to the ADP and August payroll reports – scheduled for Thursday and Friday mornings respectively. We're still in a situation where bad news could be perceived as a positive (forcing the Fed's hand), while continued improvement in the job market could raise concern for the bullish camp.

We're locked and loaded with our bearish exposure in play and our risk points giving positions some wiggle room but keeping our total risk in check.

Trade 'em well this week!

Mike McD (mike@mercenarytrader.com)

p.s. Like this article? For more, visit our Knowledge Center!

p.p.s. If you haven't already, check out the Mercenary Live Feed!

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Why Silver Will Outperform Gold 400%

Posted: 04 Sep 2012 04:32 AM PDT

Why Silver Will Outperform Gold 400%

Franklin Sanders

And how you can join the party

Over the course of the present bull market in silver and gold, probably another 10 years, silver should rise about four times as fast as gold. That forecast arises from silver's historic performance, especially during the 20th century, as well as its present fundamentals. The best way to profit from that trend is to swap back and forth from silver to gold with the rise and fall in the gold/silver ratio. That strategy will convert a sterile investment into one that pays dividends, and possibly double the ounces you own over the life of the bull market.

GOLD vs. SILVER

Alas, poor silver is the Rodney Dangerfield of precious metals—it can't get no respect. It certainly should merit respect, since its 20th century performance has far outpaced gold. It's volatility and superior fundamentals ought to make it much more attractive than gold.

The fact is, gold bugs (with their blind, monomaniacal devotion to gold) miss the point. They are so ideologically wedded to the yellow metal that they overlook both history and facts. It is not a monometallic gold standard that history overwhelmingly demonstrates, but bimetallism. Shortly after I wrote Silver Bonanza for Jim Blanchard in 1993 but before it had been published, Jim teased this gem out of Nobel Laureate economist Milton Friedman: "The major monetary metal in history is silver, not gold." (I remember it well because the statement struck Jim so strongly that he had it printed up on a sticker and inserted it on the flyleaf of the original 8-1/2 by 11 version.) Friedman was right, of course. For most of mankind throughout most of history, silver has been the much more important monetary metal, familiar as the metal of daily commerce. Gold was used only for very, very large payments, which most people make only rarely, if ever.

Both silver and gold are monetary metals, i.e., they both benefit from monetary demand. (Monetary demand is also called "investment" demand. It is demand for silver as silver, and as an ingredient making something.) Most analysts miss silver's monetary demand because they focus on silver's use in industry. Certainly, since silver was politically demonetized beginning in the mid 1870s a vast amount of purely monetary demand disappeared. Today, most silver is used in fabrication, roughly split three ways among silverware and jewellery, photographic, and other industrial uses. But when confidence in central bank issued fiat money begins to fade, when fear strikes investors' hearts, they run not only to gold, but also to silver. Especially in America.

That demand profile makes monetary demand for silver more important, not less. Why? Because all of that monetary demand hits silver at the margin. Fundamental demand changes only slowly, but monetary demand comes out of nowhere, adding huge, insistent demand for silver at the margin. Because the silver market is so much smaller than the gold market, a new dollar invested in silver also has a much greater affect on the price. That makes silver more volatile than gold, which wears on your nerves but swells your profits.

Be advised, I am not arguing for investing in silver only, but rather for a more subtle strategy. I want to show you a way to invest in both metals, swapping them back and forth at the appropriate time, possibly doubling your return over the life of the bull market, which is probably another 9-10 years.

When I began musing over this article, the gold/silver ratio was hovering around 60 (it took 60 ounces of silver to buy one ounce of gold). By the end of this bull move, I expect that ratio to drop to 16:1 (16 ounces of silver will buy one ounce of silver). In the meantime, the ratio will zig and zag, and we'll take advantage of those moves, too, by trading the ratio.

THE ONE GREAT SECRET OF INVESTING

There is one Great Secret of Investing that you must not ignore: always invest with the primary trend. Look at Chart 1, Silver, 1963 - 2006. It offers a good picture of a primary uptrend ("bull market") and a primary downtrend ("bear market").

WhySilver_Chart1.jpg

What is the primary trend? Like the tide in the ocean, the primary trend is the long term—10 to 20 year—move where the general trend is up or down. Just as you wouldn't want to try to launch your boat against the tide, you never want to launch your investment boat against the primary trend. Within that trend, like waves on the tide, are zigs and zags up and down. We can also ride these waves to profits, but must be much more careful with them since they move so much faster. Our strategy keeps your money invested with the tide, but takes advantage of waves on the tide as well.

Stocks' primary trend turned up in 1982. Without exercising a great deal of discriminating brain power, you could have bought almost any stock in 1982 and made huge profits by 2000. How could you have helped it? Measured by the Dow Jones Industrial Average, stocks rose 12,000% over that 18 years. A rising tide lifts all boats, even the garbage scows.

Likewise, it makes no sense to buy stocks now. A primary downtrend ("bear market") commenced in 2000, and it must work itself all the way to exhaustion. That process will take from 10 to 15 years, and not even the almighty Federal reserve creating tidal waves of money out of thin air will keep the stock market up. The rule of thumb says that a bear market will give up 50% to 95% of the foregoing bull market rise. Do the math, and you will come to a Dow target of roughly 6,000 to 1,250. Do you really want to buy stocks now, and hang around for Dow 6,000? Or Dow 1,250?

IS SILVER IN A PRIMARY UPTREND?

First we have to answer this question: Is silver in primary uptrend? Let's look at the charts. Chart 2, Silver, 1998 - now, cents per ounce, shows a very long, rounding bottom. This formation is typical of bear market bottoms, and very reliable. Not only did silver emerge from that rounding bottom in an uptrend, it has also now burst through the top of that uptrend.

WhySilver_Chart3.jpg

Now look at Chart 3, Silver, January 1979 - June 2004, arithmetic scale. Again, notice the long rounding formation beneath $8.25 resistance. For about 20 years that $8.25 resistance turned silver back time and again. You can see that in April, 2004, when silver first touched that line, it fell back, corrected, and then challenged $8.25 again. When it finally broke through $8.25, it ran away to the next resistance at $15.

WhySilver_Chart3.jpg

Comparing silver's performance to stocks' over the last 6-1/2 years offers us another witness that silver is in a primary uptrend. Chart 4 shows Stocks versus Silver, 8/25/99 - 5/3/06. The little flat pancakes (and drooping slag-sickle) on the left show how various stock indices have performed. The towering stacks on the right depict the performance of silver & gold. While stock indices have dropped by as much as a third, or done nothing at all, gold has risen 150.3% and silver has risen 169.2% (2.69 times where it began).

WhySilver_Chart4.jpg

Lest I be accused of bias, let's see how silver and gold have performed against some other investments. Look at Chart 5, Investment Performance as of 30 April 2006. Only the HUI, the unhedged gold stock index, has outperformed silver in the last one, three, or five years. What about the Dow, the S&P 500, and the US Dollar Index? Silver has left them in the dust.

WhySilver_Chart6.jpg

HISTORICAL OUTPERFORMANCE

If I had a chart 45 feet long on which every foot represented 100 years of human history, the gold/silver ratio would remain under 16:1 for all but the last 15 inches. In fact, for the first 40 feet (until about 1500) the ratio oscillated under 12:1, and spent most of its time between 8:1 and 12:1. Only after the discovery of huge silver deposits in the Americas does the ratio begin to climb above 12:1. I can only speculate about the reasons for the ratio's relative stability. Probably it arises from the relative ratio of silver to gold in the earth's crust, which geologists estimate at 17.5:1.1

BIMETALLISM AND ALL THAT HOGWASH

Reading the standard economics and history texts you would think that bimetallism led the 19th century into a riot of monetary confusion, but that is hogwash. It wasn't bimetallism, but state action that caused the problem. Rather than following the market ratio (as the US monetary system was designed to do) England and France set their official mint ratios at different levels, so whichever metal was temporarily cheaper in one country would drain out to the other country. This chronic misevaluation tended to drive out of circulation the more under-valued metal—generally silver. After about 1815 the ratio began to fall (silver gained value against gold). Though small by today's standard, that drop sped up in the 1830s and 1840s as huge new gold deposits were discovered in Carolina, Australia, and California. The price of silver in gold dollars ($1.00 in gold = 0.048375 troy ounce) rose from $1.29 in 1848 to 1.35 by 18572 (the ratio fell because it took fewer ounces of silver to buy an ounce of gold). Silver's rising price forced the US to make its fractional coin (half dimes, dimes, quarters, halves) subsidiary. Since silver bought more gold as bullion than at its face value, speculators were melting the small silver coin. Dollar coins had already disappeared. Congress reduced the silver content of the fractional coin by 6.5% (from 0.7734 ounce per dollar to 0.7234 ounce) just to keep small coin from disappearing.

So the cause of the bimetallic problems was not a rising supply of silver from the Comstock Lode (the red herring usually trotted out), but a rising supply of new gold. More disruptive than that, however, was the policy of setting official mint ratios politically rather than following market determined prices. After the US demonetized silver in 1873, followed shortly by Germany and other nations, the ratio of course rose. The loss of monetary demand for silver sharply reduced overall demand, and therefore price, although silver didn't fall as quickly as you might expect.

Chart 6, Gold/Silver Ratio 1792 - 2005, yearly averages, shows how the ratio behaved during two centuries. What interests us most as we try to devise an investment strategy is the pattern. The ratio trades in a range, with tops at 100:1 separated by 50 years, and bottoms at 16:1 or lower in 1919, 1968, and 1980.

WhySilver_Chart7.jpg

From this chart we can draw tentative conclusions about the ratio's behaviour. (I say "tentative" because nothing is sure in markets until after it has happened.) In bull markets, silver always outperforms gold; in bear markets, silver always underperforms gold.3

A closer look at price action refines our perspective. Look at Chart 7, Gold/Silver Ratio Daily, 6/1963 - 5/2006. In the five year bear phase of the market from 1968 to 1973, the ratio rose from 13.76 to 46.96. However, in the following seven year bull phase the ratio returned to 14.91 at the very top of the metals bull market in January, 1980. In the following bear market, for eleven years the ratio rose to 99.81 in 1991 as money drained out of silver and gold. From there it turned down and has steadily fallen.

WhySilver_Chart8.jpg

For a closer, more recent view, look at Chart 8, Gold/Silver Ratio Daily, 1/1/1991 - 5/6/2006. Today's chart shows a falling wedge pattern, that usually resolves in a breakout to the upside. That implies that after the recent fall to 43.6, the ratio should spend a long time rising to the upper side of the trading channel. (In fact, that's what it has indeed done, through July 2006.)

WhySilver_Chart8.jpg

Our swapping strategy takes advantage of the ratio's moves from the top to the bottom of this trading channel. Near the channel's top, where silver is cheap in terms of gold, we swap gold into silver. Near the channel's bottom, where gold is cheap in terms of silver, we swap silver into gold.

From Chart 7 you can tell that the upper line of the trading channel has moved outward. When the ratio first began declining from its 1991 peak, it declined at a steeper rate. Because that top channel line lay lower down on a steeper angle, we began making trades out of gold into silver at 60:1, and continued all the way up to 82. That proved to be the uppermost extent of the move, and enabled us to draw a new upper channel line for the downtrend. Now glance at Chart 9, Gold/Silver Ratio Daily, 1 June 2000 - 3 May 2006. The ratio plunged fairly quickly to 51, and I made a big mistake. Not realising how many hedge funds had put on the long silver/short gold ratio trade, I was waiting for the logical target, 50:1, to swap silver for gold.

WhySilver_Chart9.jpg

However, all the big players bailed out at 51. the ratio turned around on a dime and never looked back, so we missed our silver-to-gold trade in 2004. A long sideways correction followed, from April 2004 through August 2005, ending at 64.93:1. I was targeting 43 or 40 to 1 for the bottom of the next move, but my friend Bob Ladone (see his article, "Ode to Beauty," in the January 2006 Moneychanger) made such a persuasive argument for 46:1 that I moved my target there. As it turned out, we had only four (4) days to make the trade at 46:1 or better, and wouldn't have gotten to do them if we had waited for 43.
SILVER SET TO OUTPERFORM, AND ALREADY OUTPERFORMING

Silver will always show greater volatility—the violence and size of moves and their sudden reversals—because it is so much smaller market than gold.

In the teeth of the common wisdom that there's plenty of silver available, there is far less silver aboveground and ready to come to market than there is gold. According to Gold Fields Mineral Services in Dec. 2005, Central Banks claim 29,000 tonnes gold reserves, about 935 million ounces ("moz"). Call that "ready to come to market" stocks.

My guess is that that at most there is about 900 moz aboveground, ready-to-come-to-market silver stocks, or about same as supply of gold. (Others whose opinions I respect estimate as little as 300 moz.) Valued at the 3 May 2006 market (665.90 & 13.704), the gold was worth about $622.3 billion, the silver only about $12.3 billion, or about 2% of the gold. Therefore only a small amount of money flowing into silver has a huge impact. A billion dollars flowing into gold would raise the price of an ounce only about 90 cents or about 1/10 of one percent. The same billion bucks flowing into silver would raise the price 90 cents an ounce, but that amounts to 6.5% of the current price.

NOT FUNDAMENTAL BUT MONETARY DEMAND

As I pointed out before, it is not fundamental but monetary demand that drives silver and gold prices. Keep that point in mind and never forget it. It is monetary (or investment) demand that drives both silver and gold, not fundamental.

Fundamental demand only needs to be neutral or favourable to silver, and not negative, because it only changes slowly. In other words, we don't want to see any big silver surpluses or hoards overhanging the market, as Indian silver and the US silver hoard did in the 1960s and 1970s. Neither of those is a problem any longer.

Monetary demand really drives silver's price crazy because it hits at margin as incremental demand, and changes very quickly—so suddenly that supply has no time to adjust, so only the price can adjust—upwards. (It takes 5-10 years to bring a new silver mine into production.)

WhySilver_Chart10.jpg

WhySilver_Chart11.jpg

At present we have all those conditions. Total Silver Demand (Chart 10) runs around 800 million ounces yearly, and is not dropping. Moreover, since 1989 silver has been in structural deficit ("more silver consumed than produced"), as Chart 11, The Silver Sinkhole, plainly shows. Over those 16 years the yearly shortfall has averaged 12% of consumption. By now that shortfall has consumed some 1.5 billion ounces, far and away enough to consume the surplus brought to market during the 1980s. We know that monetary demand has already hit, because of silver's performance in the last couple of years. Refer back to Chart 5, Investment Performance.
JOINING THE PARTY—OUR INVESTMENT STRATEGY

If silver is going to rise faster than gold, then we want to own more silver than gold. If the Gold/Silver ratio (the price of gold in terms of silver) rises and falls within an overarching downward trend, we can also use that to our advantage.

Our goal is (1) to own and hold physical (not paper) silver and gold throughout the bull market and (2) to increase the number of ounces we hold while we wait for prices to rise. Our tool is arbitrage.

Arbitrage is "the simultaneous purchase and selling of an asset in order to profit from a differential in the price." Usually it involves buying in one market and selling in another to take advantage of price discrepancies. (Actually, we are doing exactly what the arbitrageurs did in the 19th century when they shipped silver from England to France to take advantage of its higher gold price there.) We either trade from gold to silver, or from silver to gold. I admit, arbitrage is, strictly speaking, simultaneous, but we trade from gold to silver and silver to gold over time based on the primary trend. (Remember trading from top to bottom in the ratio trading channel?)

When silver is relatively cheap to gold (ratio is relatively high), we buy silver with gold.
When gold is relatively cheap to silver (ratio is relatively low), we buy gold with silver.

On Chart 8, Gold/Silver Ratio Daily, 1/1/1991 – 7/18/2006, look at the trading channel. We trade gold for silver toward the top of channel, and silver for gold at the bottom.

THE TEST

Does it work? As always, the proof is in the pudding. In Chart 12, Realised Swaps from Gold to Silver, you will see some actual swaps that we executed. They include all expenses except taxes. What taxes you pay depends on too many variables for me to predict. In fact, if you sold gold or silver you had bought at higher prices, you would actually have a capital loss on your trade-in. If you pay taxes, they will range from 10% to 28% of the gain. However, don't take my word for it, but see your tax expert.

WhySilver_Chart12.jpg

In these three actual trades we averaged gains from 28% to 47%. The first half of these trades (swapped from gold into silver) was done two to three years ago, so some patience is needed with this strategy. Observe that the strategy works for large investors or small.

Our goal is to convert a sterile investment—silver or gold—that throws off no dividend or interest into a paying investment. While we are waiting for the price to rise, we make that sterile investment fertile by swapping back and forth from silver to gold to increase the total number of ounces we hold at the bull market's end.
GOLD/SILVER RATIO SWAPPING STRATEGY

Here's my strategy in a nutshell:

We always own and hold precious metals, for the duration of bull market. We swap gold for silver or silver for gold when the price is right, to increase the total number of ounces we hold.
Worst risk: we swap too soon, and end up holding gold instead of silver when the ratio reaches its low at 16:1.
Another refinement: As silver market offers opportunity, we swap from one form of silver to another, increasing the number of ounces we hold. (From 25 years experience in the silver and gold market, I know one thing is true: "Premium always disappears." Therefore whenever any form of silver or gold develops a large premium over its metal content, I'm going to swap that off for something cheaper to increase the number of ounces I hold.)
Goal: To end the bull market holding mostly silver (70% or more), because it will rise faster.
Goal: To double the number of ounces we hold over life of the bull market.

So far, so good.

1 American Geological Institute Data Sheets for Geology in the Field, Laboratory, and Office, Third Edition, Data Sheet 57.1, "Abundance of Elements," on average the naturally occurring ratio is 17.5:1.
2 James U. Blanchard III & Franklin Sanders, Silver Bonanza: How to Profit from the Coming Bull Market. Jefferson, Louisiana: Jefferson Financial, Inc., 1993.
3 I find that 1968 bottom very curious. The US government probably precipitated that bottom. In a silver bull market the government was trying to escape its obligation to redeem silver certificates for physical silver. In 1967 Congress decreed that silver certificate holders had only one year to cash in their certificates for silver. That loosed a feverish speculation in silver certificates and silver. The ratio bottomed at 13.76 on 11 June 1968, just ten days before silver certificate redeemability expired.

the-moneychanger.com

http://www.silverbearcafe.com/privat...utperform.html

As Bonds Are Proven Right Once Again, Is 400 The Next Stop For The S&P?

Posted: 04 Sep 2012 03:13 AM PDT

from zerohedge.com:

Once again it seems Japan has a lot to teach the Europeans and Americans of the unstoppable reality that bond markets again and again are "correct in the 'end'". As risky- and 'non'-risky-assets become more scarce (thanks to a central bank bid to monetize or collateralize any and all of it), so equity (and risk) markets become more and more distorted – temporarily suspending normal market relationships – until something triggers the reversion to reality. We discussed regime changes in detail regarding gold and bonds over the past 40 years in the past, but the US and European 'survival' tactics appear to be accelerated (and larger) versions of Japan's balance-sheet-recession-fighting game-plan. Their analog, therefore, provides defensible insight into the bond market's anticipation and equity market's inevitable confirmation that it's not different this time. The question we ask is this: "when TOPIX was at 1800, and JGBs implied it 'should' be 1000 (in 1999 and 2007) – how many people said it was 'different' then?"

Keep on reading @ zerohedge.com

Silver Price History and “The Hunt Effect”

Posted: 04 Sep 2012 03:04 AM PDT

from silverseek.com:

History remembers the last nominal high in the price of silver before the more recent high of $49.77 seen in April of 2011 as an anomaly that was largely induced by the Hunt brothers' purported attempt to corner the market by buying large quantities of silver and silver futures to the point where they held rights to over half the global amount of deliverable silver.

This remarkable event began in the late seventies and led to a sharp rise in the price of silver to a then-all time high of $48.70 per ounce. The dramatic rally culminated in early 1980 after COMEX silver exchange trading rules were changed to make margin purchases more difficult, thereby forcing the Hunt Brothers to miss a $100 million margin call. The price of silver then collapsed in a traumatic market event that occurred on March 27th of that same year, which has since been dubbed Silver Thursday.

Keep on reading @ silverseek.com
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