Gold just taking a break before next run this fall...

Gold went on a great one month run this summer which timed exactly with the cyclical season. Gold stocks then followed and we have seen some massive gains in a lot of stocks we follow including Creso Exploration going from .28 to $1, Kaminak going form $1.50 to $3.20 and several other hot gold plays that have seen steady increases over the last month to month in a half.

This is just the first part of this years run that should see gold push past $1300 for the first time ever this fall. Where it goes it is hard to predict when the yellow metal is making new highs but I would suggest an exhaustion price target of around 1330 -40 area before we see a serious sell-off again. I am not saying that the price won't go higher this fall but I am still expecting an extended gold bull market for years to come, contrary to quite a few analysts opinion's that this is the year that gold goes parabolic and that gold's bull exhaustion peak is close. I just don't buy it and will continue to go with the wall of worry that gold prices seemingly climb every year.

What makes me confident that POG is just resting is the current price level. As long as POG holds $1230, I am confident that the current gold run will continue with $1230 b e very key area to hold over the coming weeks.

Some high quality explorers that I think ave huge potential are KAM, NTR and ATC in the Yukon White Gold District. CXT at .72 is a great entry point after a huge run and FAU at .52 represents another good buy. Let me stress that CXT and FAU are investments that are at the opposite ends of the gold investing spectrum. CXT is an open deposit looking to add millions of ounces and looking for the huge discovery while FAU is a closed deposit with little chance at greatly increasing reserves, but is a fully functional turnkey mining operation that could be in production as early as next spring. The plan is to start up the mine and hopefully add ounces every year that will extend the mine life. Which is a very good possibility although what gives FIRE River gold an advantage is they are in highly prospective area for exploration and discovery. They may not add significant ounces to the Nixon Fork Gold Mine, but if they can make it profitable venture for the coming years then it gives them a good foothold to further explore and make discovery in Alaska.

There are several other stocks that I hold in high esteem and if you want to see what is on my gold watchlist... look no further than my HOT GOLD DISCOVERY Portfolio.

Click here to see what is high on my shopping list.

AG stocks surge on Potash Bid

Last Tuesday BHP Billiton announced an unsolicited bid for POTASH, for which the market promptly took POT 25% higher that day and has continued higher throughout the week. Firstly, this bid for Potash grossly misvalues Potash's 400 years worth of reserves and only gives value towards current earnings and not the insitu resource that will feed the world for centuries to come.

BHP Billiton is trying to take advantage of a pricing anomaly in this industry and buying centuries of reserves for practically nothing. BHP understands this and I believe will make another offer closer to the $200 range which will still represent very good value for POT as far as BHP is concerned.

What this all means for the industry is that while takeover speculation for POT is ripe and hot... it will continue to light a fire in the industry and give it momentum. Compile that with all the drought in the world, the natural disasters and producers refusing to buy Potash for the last 2 years has all complied into the perfect storm to push Ag stocks to all time highs this winter as a shortage of food becomes apparent this fall and winter.

A couple pennies that one could take advantage of the momentum are BOE.V and AMZ.V... Both are potential Potash operations. Another interesting company that may breakout of a downtrend is COIN. They produce organic fertilizers and has been in a terrible downtrend since spring of '08 from $12 and is currently sitting close to a year low at .47. It may be time for this company to reverse its fortunes or at least a relief rally.

Ags look like a great place to park some capital this fall as the world starves due to food shortages this year. I made up a portfolio of selected Ag stocks and added them the day BHP announced takeover intentions to track what the industry does over the coming months.

Gold Going Strong

Since Gold bottomed out 2 weeks ago and my correction buy target zone between my 2 targets of $1170 and $1140, it has gone on a steady rise to $1200, and today it broke through that barrier and all the way to the 50MA at $1200. With the way gold is trading today on Friday and only selling off slightly late day, it will break the 50MA next and start moving up to test the highs set earlier this year. Gold needed the currency hedge to unwind and now that it has and that fear trade has gone, gold can resume its cyclical bull trend.

Despite poor employment numbers both in Canada and he US and further revisions downward of last months numbers on a Friday; one thing that gives me confidence that such a move will continue even before it has broken the last area of resistance, is that on such a day the majors are giving POG positive affirmation by all being up significantly against the rest of the market. On a Friday, when everyone else is selling, investors are piling into Gold before the weekend!

Gold may test support of $1200 and a little under next week or it may not depending on market conditions Monday, but one thing for sure is that it is going to break the 50MA with authority sometime next week. Once POG is over $1200 again, investors will realize that Gold is the place to be.

With investor uncertainty in the markets, and most risk currencies set to retrace as well as a strong buying season for gold all combine to go up and break out to all time highs again in late summer early fall. One thing is certain, no matter the short term risk of deflation which I still don't believe, there will always be a long term hyperinflation environment which will drive gold higher over the long run.

Happy Trading

Gold The One Investment You Can Always Count On

When reading into and trying to understand the markets it is important to know a few things well. One cannot be an expert at everything and if you try, you will end up being good at nothing. One must find a place in the markets to park their butt, and learn.

Since I have entered the markets in late 2005, one of my first trends I identified was gold. I hopped on the gold bandwagon at the last time gold dipped below $500 and took off. That is almost 5 years ago and 150% return later, Gold is still going strong. Since that time I learned everything I could about gold, its fundamentals, its trading patterns anything and everything that has to do with gold. I learned the arguments for gold and arguments against gold. Over the last 4.5 years, basically memorizing everything to do with gold.

Now some may call me a gold bug because I believe gold is still far from peaking. But how can I be a gold bug when I have only been in the industry for 5 years? I am certainly not a gold bug and will jump off the train when the time is right, but that time is not now.

More often than not, (and after a bit of nail biting) my calls in gold are usually right. Last summer I called a breakout in gold the day Gartman claimed he sold all his gold and gold promptly went on a 4 month run from a breakout at $1000 to $1250...

This summer I called for a correction in gold, and though it wasn't as dramatic as I though it would be and it had to fail a breakout before it came down below $1200 and settle halfway in between my correction targets of $1140 - $1170 before promptly moving back to $1200. I heard so many people over the last week to get out of gold, on BNN, on Stockhouse, I even heard someone say short below $1170????

Really you can' fault these people because they don't follow gold like I do, but it proves you can't know everything and you need to defer to the experts instead of trying to know it all like most of those 'cases' on BNN. In the end they all look like fools... 3 analysts on BNN called for a major sell-off in gold. To the journalists credit, most of them gave the analysts a way out, asking about seasonal trades and timing, but all said the same thing... Sell gold. Don't buy it here.

I could not find a gold bull anywhere last week... except me. The fundamentals driving gold just won't relent and will stay in place for the time being.

I don't know much about the markets, and can often put my foot in my mouth, but one thing I know for sure is BUY GOLD!

The last 2 weeks were an excellent opportunity to buy like I said and now that we have confirmation that gold has bottomed and another breakout to all time highs is imminent, The time to buy Gold and Gold stocks is NOW!!! There is one area of resistance that needs to be broken before confirmation of this continuation pattern. This week or next, gold must beak through this last area of resistance between $1200 and $1210 to confirm the bottom that developed in gold over the last month.

I hope you took the last 2 weeks to load up on your favorite gold stocks because this fall is going to be another major run. If you haven't yet, there are still some good value for some great gold stocks.

EAS, VEN, CSI,SAS, SGR all have great growth profiles for a midcap names.

If you want more leverage and can assume more risk... CXT, PEM, DEC, and FAU are great smallcap names.

Happy Trading

30 year Bond Bull Coming to An End?

I was looking through the newswires tonight and I noticed in my mining feed that TECK has announced pricing of $750M worth of 7 and 30 year notes priced at 3.85% and 6.00% respectively. They are using the funds to retire 9.75% and 10.25% notes which gives them quite a bit of savings on the interest which would be in excess of $100M for sure. Not chump change by any means, but still, really quite a bit of mundane news in itself.

What I am taking from this news more than anything is that TECK's decision to issue new longterm notes and retire higher interest debt, has more to do with where the company sees future interests going. If one thinks that interest rates are going to rise in the future then companies are going to start making these types of corporate decisions and locking in while paper is as cheap as it is.

Are interest rates going up tomorrow? I doubt it, but as you see more and more companies making these types of decisions you know that general attitude in the corporate sector is that rates will rise. Once the global economy gets through this uncertain economic stretch and economies return to more normal levels of growth, rates will rise to keep the economy from being overheated. On the other hand, if the currency crisis reappears, rates will go up in order to support the currencies. It will become a choice of saving buying power versus stiffling economic growth at home.

At this point in time, countries are trying to debase their currencies and as long as this strategy stays in place, interest rates will remain artificially low, but doesn't mean they cannot rise from the absolute rock bottom prices where they are without that strategy being affected too much. Interest rates have to go up. If the economy gets used to cheap paper. Like a highly addictive drug. It will never get off, and when it does, you will see severe pain.

One trade that I am researching to take advantage of when it happens is to short the bond market. Interest rates have been on the decline since the early 80's to a point where they can't get any lower and as a result the bond market has been in a super bull which I believe is nearing an end. Don't go out and short the bond market just yet as a correction this fall will push the bond market up as a place to hide, but once economies return to normal or countries are forced to raise rates because of downward spiraling currencies, The SuperBull in Bonds will be over!

Markets Confirm Further Upside

Last week I wrote twice that the markets were going to go up further despite weaker than expected economic numbers and worries about high unemployment. I reasoned that earnings were just too good so far, with the majority of companies beating expectations and most expected to beat for the rest of earnings season. This set the stage for the uptrend from July 1st lows to continue. I wrote that the Dow needed to break 11600 with confidence and today it opened above that resistance level setting the stage for a continued rally to resistance of 11,900 and then a heavy bit at the 11,200 level.

It should be a good month for stocks as the global economy is still alive and well and until China and India both show signs of significantly slowing to paces under 6% growth the money will follow the earnings. Most of the companies that are beating are beating on strong international sales so with the global nature of our companies today you need to have an international outlook as opposed to just looking at fundamentals on just home soil.

What looks more certain to me than deflation, is poor to flat economic growth in the face of rising prices, which is what will ultimately happen if the developed world economies don't resume a reasonable pace of growth again soon.

One problem the US has is that it needs to encourage spending on home soil as well get credit moving through the system again. The system was designed to run a certain way and now that they are changing it all of a sudden to run a different way the the economy can't take it. It needs the spending to run, it needs it until it can encourage its industry to expand. It needs that spending to bridge the gap until industry can come and reinvest in the US economy.

I think you can have poor economic conditions and positive earnings in this day in age. Its very easy to see how. A lot of people are talking that the markets have to follow US economic conditions, I don't think so and for the first time in history you will see a disconnect between the US economy and the US stock markets because of the international nature of most major companies.

I think the markets push to at least 11,200 but in all probability may go as high as 11,500 - 12,000 where possibly in the fall a further slow down in China as well as further negative revisions of economic data could combine to take us lower.

Happy Trading :)

Extended Deflation? The China Wild Card

Today I read an article that Chinese manufacturing is slowing further. With North American economic recoveries stalling and Euro nations struggling to recover at all, this is expected. What I find significant though is that Chinese manufacturing should be stalling much more in tandem with developed nations, but this is not the case hinting at underlying strength in the global economy and the strength of developing consumer nations.

I hear many people calling for deflation because of a whole bunch of factors including decreased spending in developed nations, a tapped out consumer that has changed habits, and a China bubble because of tapped out developed economies, I don't buy it. Here is why...

I think there is a dynamic shift happening in the global economy, I can see it, I think by US policy, they see it, and are trying to line up their cards to profit from it and not become a dinosaur. Here is the big card that people don't understand and can't see more than 6 months into the future. There is only 1.3 billion people in what we call the developed world that is cutting back and changing household behavior. The rest, 4B+ live in the developing world with 2.5B living in 2 countries, China and India.

The developing world, especially in those 2 fast growing economies are starting to develop voracious consumer appetites of their own. A blatant example of Chinese materialism and consumerism is their plastic surgery reality tv show. This is an example of how these 2 economies are starting to shift from manufacturing and selling cheap goods abroad to becoming much more consumer like nations. This is just the start of a shift to consumerism that has started after creating many wealthy individuals in their respective countries. The trend for economies such as India and China is to continue to grow at a rapid pace and fill the void that the developed nations are leaving in the global economy, and in most cases expand the global economy.

This is why the Chinese are buying up commodities and investing in mining and energy projects around the world. Because their own economy is starting to develop a voracious consumer component that is going to grow and they will need the raw materials to supply this growing segment of their economy.

The arrangement of unhinging the Yuan from the USD has a mutually beneficial arrangement for both countries as the Chinese will be able to take advantage of a strong Yuan to basically horde the worlds resources to satisfy future consumer demand that will continue to grow as more and more people are demanding the 'Western Lifestyle', especially among the younger generation in the developing world. For now it will give the US a break by paying back its debt at a much cheaper rate and give US industry a chance to reinvent itself on a global scale with a cheaper buck, but ultimately we will all be dependent on China as they continue to buy up the world's resources.

There may or may not be a lull depending on if the growth in developing countries doesn't keep up with lagging demand in the developed world, but with a 2:1 ratio in China and India alone to the developed world, I doubt that the demand loss will be significant, especially over an extended period. Major consumer cultures are developing in these countries, especially among the younger generations.

I expect that if the global economy stays strong (indicating the the developing world is starting to drive the global economy), US earnings will be good although the economy may not recover at the same rate. Which will put me in the camp of a market correction this fall but not double dip. If global numbers start to decline badly, indicating that the engine still is the developed world, depending on how badly those numbers dip and don't pick up, we could see a double dip and a bit of deflation.

The Baltic Dry index is a great key indicator to watch and it took a huge break downward recently. If t continues to break below 1700 then I may be worried about the global economy.

A very negative outcome if developed nations can't grow their economies and add value is if the developing world continues to grow at a rapid pace and developed nations who can't adapt will be facing declining currencies and economies in the face of rising prices for raw materials. Not a great scenario if developed economies continue stagnant over an extended period of time.