Thoughts on Gold... New Investing Theme

I have a few thoughts on gold tonight that tie into my investment theme of buying value. Value in meaning that I am looking at low grade deposits that had good economics before the financial crisis, but have been much ignored since because costs in the gold mining industry have outpaced the increase in POG. I beleive that around $1300 a lot of these low grade projects become viable, even at a cheaper price these mines will be viable over the long term, but scarcity of capital has really hurt these types of gold deposits. A combination of skyrocketing energy prices and labor outpaced gold to $1000 but since then has leveled off and now gold is starting to outpace rising costs. $1300 seems to be a psychological level for a lot of these projects at current costs and as more and more of the market starts to understand the real fundamentals driving POG, they will start to understand that POG will never trade under $1000 again. Not until we have a true mechanism for measuring value anyway. So getting in on these low grade projects early will reap some great gains as a lot of these stocks have been much maligned since, having barely moved off their bottoms and are a long ways from their all time highs before the financial crisis occurred.

Confidence in the trend of POG is a huge reason you will see a steady climb in these stocks. Most of the market still does not understand the dynamic that is driving gold. I hear weak USD, fear, inflation, alternative currency... etc etc... Well to some extent it is all... But the #1 factor driving gold right now is the world wide debasement of currencies, which does not look to stop anytime soon. The powers that be in this world are fighting trade wars through their currencies and as long as developed nations continue to position their dollars on a downtrend by printing money to strengthen exports, falsely stimulate the economy, as well as pay back debt at extremely discounted prices; gold will continue to go up. It may seem like a good idea at the time but in the end it will be the end for these developed nations if these policies continue. Every major currency in the world is weak except for a few. The Yen being one but at 1.20 the Japanese will continue to try and manipulate the Yen downward. So really there is no alternative currency in the world that anyone will trust eventually, except for gold. As long as countries continue a policy of making a mockery out of fiat currency... the world will go back to the gold standard and they are starting to do it in droves steadily driving up the price. Currently there is no alternative and as long as there is no alternative, the gold standard is back in play. Gold and silver is the only currency in the world that you cannot print! Gold is not in a parabolic bubble, like I have heard some people predict lately, these people do not understand the dynamic that is pushing gold higher. Nor do I see monetary or fiscal policy changing any time soon. So gold will continue to steadily rise, of course with some healthy pullbacks along the way. You just can't print gold, you can mine it, but even at that you are limited to a steady supply. And at that... gold is a finite resource. You just can't pull 10 M ounces out of the ground, it takes years.

I beleive gold can still double from here over the long term to at least $2500 and from my view I think that may be somewhat conservative as gold will enter into a parabolic phase at some point and go well past its fair value. I maintain that gold is still well below fair value, concerning developed nations' monetary and fiscal policies. I also beleive that this summer, many people are starting to get a real idea why gold is going up. Its not inflation, although printing $$$ does end up as inflation in the end, its not fear, although I think many investors are fearful of being long many currencies, its not the USD... b/c the USD has been much cheaper on the INDEX with gold at much lower prices... It's the worldwide debasement of fiat currencies, which is being done for a multiple of shortsighted reasons. Gold keeps going up because its showing the weakness of all developed nations' currencies.. not just the USD. I wouldn't be getting in front of this train.

Anyway... many people are just now starting to realize that the next leg up in gold is a result of what is an emerging trade war fought with tariffs and the debasement of currencies worldwide. $1200 to $1300 is a psychological level that we now broke through where these cheap cheap cheap deposits now will get a serious look with some serious dough.

Some value names that I have on my list and mentioned over the last 2 weeks that of course have exploration and discovery upside are...

• Rye Patch Gold RPM.V 4M+ low grade oz's in Nevada with an exciting high grade discovery at Wilco $5.50 per oz
  
• Kiska Metals KSK.V 5.75M oz's and growing at Whistler in Alaska with another large discovery at Island Mountain 23 km away $13 per oz
  

I will certainly be looking to dig up some more names in this category.


Happy Investing

Is Gold Due for a Pullback?

Well, its the end of the summer... The harvest moon is out. I think its time to take some profits. Reap in the summer's hard work for the fall season. :)

I've been calling the most recent gold bull since early July saying that gold was gearing up for a nice summer run and that it would start near the end of July. I had correction targets of $1170 and $1140 and gold hit right in the middle of that near $1155 before reversing and starting a new bullish trend higher. Since then gold stocks that I have been posting about have made record gains over that 2 month period. ATC has more than doubled from the $1.87 price its in the portfolio at to a high of $7.58 (305%). Kaminak over the same period went from $1.50 to $3.85 (157%). Northern Tiger we posted about went from .26 to .72 (177%) and is currently sitting near that high at .68 as drilling is progressing well on the 3 Acre property. I expect Northern Tiger will continue to push higher in anticipation of excellent high grade drill results. The Yukon explorers are doing well, very well indeed as they discover widespread gold on their properties.

Its not just the Yukon that is hot. Yes gold fever has certainly hit the Yukon in a big way but others that we have posted about have done extremely well. Creso Exploration was one of my first picks this summer went from a low of .28 in early July to a high of $1.07 (282%). Creso remains one of our top picks and at a current price of .90 looks like a juicy buy and bottomed today at $0.85. Gold Canyon was another I posted about in early August and went from a .36 low the following trading day to a high of .89 cents (147%) early Tuesday morning incidently GCU announced a .45 PP tonight so at .74, I expect it to sell-off significantly. Bayfield Ventures BYV.V, I also posted about in early august after they announced a 20,000 meter drill program and went from .41 to $1.38 (237%). Bayfield has had an excellent drilling program demonstrating that the ODM zone on Rainy River's property extends in a very economical way well onto Bayfield's Burns Block. BYV, its just a matter of time and at $1 is a solid buy knowing full well that its just a matter of time before RR has to buy them out to develop a mine.

On my scorecard... in 2 short months I have 6 stocks that have gone at least 100%. 1 went 300%, 2 went 200%+ and averaged 260%, 3 that went just 100% averaged 150%+... Its been a great summer for Western Investor and Beat the Market Stock picks, hopefully pointing you guys in the right direction, bringing you the best returns in the market.

I also have to give honorable mentions to FAU, PEM, DEC all pennies that I have posted about having successful programs that are still gearing up.

Also VEN and CSI have done exceptionally well with VEN almost doubling from a $6.50 low to its current $11. (77%) CSI hung with VEN for awhile but VEN has really takeover as a premium south american gold asset. EAS has gotten left in the dust even with a successful program expending Miwah because of the environmental ban in Indonesia right now. This ban is aimed at the notoriously bad pulp industry and not the mining guys. Once everything gets sorter out. I am sure EAS will become a mine in Indonesia. EAS is a solid buy on weakness and anywhere in the $5 to $6 range will pay huge rewards.

There are many more in my public portfolio on my blog and over there on stockhouse that have made similar gains. I can't talk about them all so I try and focus on the best. I brought you the White Gold District, first with Underworld last year and now this year with my favorites KAM, ATC and NTR. I showed you the emerging Rainy River Gold Camp. The Shining Tree camp where Creso made their discovery last year in the Timmins District.

Seasonally, after such magnificent 2 month run though, all good things must come to an end.

When stocks have made such huge gains and over the last 2 months you know that a serious pullback can be expected. Maybe not serious but lets say and extended 2 -3 week sell-off. Goldman's $1300 target is close to being hit so you know there will be a wave of sellers coming in at $1300 the first time it hits hit. Combine that with what will be market weakness going into the beginning of October but not a frantic sell-off.. I see all asset class weakness. So going into the next few days I would be a seller of gold as well as all asset classes. I expect that gold will resume its uptrend at a mark between $1260 and $1270 and peak at $1330 later this fall. Before it pulls back again time for Christmas. I could be wrong and maybe gold goes parabolic and hits my $1330 target in the next few weeks but I think because of the trend gold is taking for the long term as well as a psychological wall put in place by Goldman at $1300... I think it is almost time for a little sell-off. We will see next week. I bet it head fakes a little above $1300 next week before we go down.

As you can see most of my picks don't take off immediately... but when they do... they sky rocket!

Happy Trading... Happy Investing...

Hopefully a great summer for you all. :)

The Hottest Gold Discovery Area in the World....

Is the Yukon White Gold District.

Since Underworld's high grade discovery last year and Kinross's subsequent takeover at an early stage in development, suggesting that K thought there was huge potential in the area and wanted to get in early on the cheap. Underworld's Golden Saddle Discovery has great potential and was still largely undefined when Kinross pulled the trigger at $2.60+ a share earlier this year. A double from where I was recommending to buy it last fall.

Since the discovery at Golden Saddle, which indicated to the market that there was potential for numerous gold-silver-copper targets among this largely underexplored area of the Yukon. Last summer 2009 we saw a mad staking rush, and now the first initial results of these exploration programs are starting to come in. This summer Kaminak and ATAC have made subsequent material drilling discoveries while others are defining large mineral in soil anomalies (which has been a very successful way of exploring in this area with large amount of overburden and little outcropping). Still others like NTR and KS are discovering numerous high grade veins on their properties that are anxiously awaiting drilling. Since NTR announced drilling of their high grade vein discovery on their 3Acre property, the stock has more than doubled to .66 from where I originally said this stock was a great buy. Klondike has discovered widespread high grade silver veining throughout their property that they are exploring under option from ATAC.

These are some exciting times for the Yukon White Gold District and the companies exploring these vastly rich mineral properties. The sp of almsot every company explorign no matter what stage is in a bull trend and as the discoveries continue to happen in this mining friendly jurisdiction of the Yukon, you will expect a premium to continue to build into the sp of these explorers.

Other companies that we have in the portfolio concerning the Yukon White Gold District are Western Copper which we added at $1 because it was extremely cheap, considering they have a total of 6.8B lbs of copper, 11.1M oz's of gold and 495M lbs of Moly.... Measured and indicated!!! At their porphyry Casino project in the Yukon White Gold District alone, they have 8.8M oz's of gold, 4.4B lbs of Copper ad 475M lbs of Moly, the project has an NPV of $1.9B alone and the stock was trading at under $100M market cap at the time. The Casino project is still open to exploration and are currently drilling another 15,000m in 2010. At its current $124M market cap, this company is cheap for what they have and with copper stock to move towards its highs of $4, copper stocks will start to move. Some already have, like companies we have followed since blog inception such as Copper Fox.

Other companies that we keep an eye on that are currently exploring at various stages in the Yukon but we think you should be aware of and to beware of... are Brookemont capital (BKT.V) who has claims that are bordering Underworld's property and are initiating early stage exploration on. BKT also announced recently they acquired claims that are bordering Canaco's discovery. Although I do recognize some management and wouldn't advise to buy this company on managements track record. Another company we watch but would be hesitant to buy is Habanero, pretty much for the same reasons. HAO.V was supposed to be a serious O & G player in the Oil Sands and became pretty much a pump and dump, so until some serious work is shown, are companies that tend to be driven be promotion rather than results and should be treated as such. Another company in the area I may wait for results before getting down and dirty with would be Cloudbreak Resources CDB.V, another land package grabber that cares little about real success as long as they are pumping a new story to gullible investors.

4 other much more serious companies that I have my eye on...

Are Arcus Development Group ADG.V which has optioned 4 properties from Atac and have identified several gold in soil anomalies as well and have further prospective results from trenches that hit mineralization over economical widths. ADG.V is very early stage and probably won't get into a serious drilling program until next summer, but have the right early stage exploration properties to work off of.

AM Gold AMG.V is currently awaiting assays from a 6,000 meter drill program at Red Mountain in the Yukon aimed at expanding their 542,000 oz inferred resource at 0.7 g/t. At that grade they will have to significantly expand the resource to even be considered for a mine. AM Gold also has 498,000 oz's gold and 269M lbs of copper indicated and another 168,000 oz's gold and 115M lbs of copper inferred at a project in Peru. At $18M market cap, AM Gold is cheap and has potential to expand their project in the Yukon.

Taku Gold Corp TAK.V is another highly prospective Yukon stock that has acquired the 2nd largest land package in the area. They are not as ahead as some of the other companies, but sometimes good things take time to put together and in Taku's case, have some extremely prospective properties.

The Yukon White Gold District is hot and will continue to be hot for the following few years as the area is seeing aggressive exploration like it has never seen before. A smart investor will position himself in the discoveries now like ATAC, KAM, NTR that are sure to have multiple massive deposits on their properties... and after delineation... reposition into the next round of plays that have had successful exploration programs, discovered viens and large gold in soil anomalies. That will be drilled in the following years.

Silver Quest Resources SQI.V is another very prospective stock that has a very large land package in the White Gold District, they are exploring.

If a company like BKT, HAO, or CDB actually makes a discovery, then I may buy, but those guys I take a show me attitude first. The others are much better buys on much more solid fundamentals than those 3 area play P & D's.

Silver about to get its due?

I am posting tonight because I want to talk about silver. It is the precious metal that still hasn't broken out and whose 3 year chart looks more like its cousin copper than its big brother Gold. Silver has grown very cheap when compared to gold as its historical ratio of silver to Gold 50:1 has now crept up to 62:1. With this current currency debasing strategy that has happened worldwide, the safe currency of choice has been gold.

At its peak in early of 2008 before the meltdown silver was trading at highs of $21 while gold was peaking at $1000.... that is a ratio of 47:1. Today while silver is just challenging those highs of 2008, gold has surpassed those highs by $275 or 27.5% and currently has a ratio of over 62:1.

I am saying that silver is very cheap compared to gold and over the next few months while gold gets psychologically more expensive, investors will turn to silver as a cheaper more volatile alternative and bid up the spot price closer to the historical level. At today's current gold price of $1275 a 50:1 ratio would imply a $25.50 silver price and at 2008 's peak would imply a spot price of 26.50. At today's prices and the current bull move that should take us over $1300 this time. Silver is about to breakout and will outperform gold over the next while.

I have 2 huge blue sky silver picks that are primed for discovery...

One in the Yukon...

Klondike Silver

KS.V is a mover that has momentum with major volume over the last couple days and at .065 is still very cheap for the potential. The momentum should follow through for good reason as they announced multiple discoveries on a property that they are exploring as jv with ATAC Resources in the Yukon and recently announced a discovery of 3 veins within a huge 600m x 1100m multi element in soil anomaly with best samples grading 3 g/t silver and 1660 g/t silver... that is almost 1 oz /t gold equivalent at current metal prices. One high grade vein they have traced for 80 meters which is significant before it disappears under overburden. At .065 this stock is cheap, has the right joint venture and is exploring in the right area in the Yukon. The story at KS is just developing and as the more investors buy silver because of its relative cheapness when compared to gold, they will start looking for high quality silver deposits that may be mines one day and Klondike Silver gives you a great chance at discovery in the Yukon.

in soil anomalies have been a very successful way of exploring in the Yukon with so much overburden and tend to be very indicative of the potential size of the project. With such very prospective silver-gold project the market is just awakening up to KS's potential.

One near Revelstoke in BC...

Mineral Mountain Resources MMV.V has a host of mineral occurrences on their property (200+) and previous mining at the turn of the century that yielded ore worth $3454 in today's prices. MMV.V is a brand new company and has Nelson Baker heading the operation who was the guy that started Rainy River Resources and responsible for bringing the project to the company. The guy has a nose for finding quality, undervalued projects with huge potential and that is what we have here with Mineral Mountain Resources and their flagship property in the Kootenay Arc. There are numerous veins that have been previously mined on the property averaging 1 - 10 meters in width and grading up to 1200 g/t silver as well as other minerals such as Pb, Au, Zn...

Mineral Mountain Resources is another must have silver stock for the coming silver revaluation to more historical levels. MMV.V is currently selling a 10M shares @ .25 or .30 for flow through so I don't think the price will go to far for now but word on the street is that these guys are drilling in October. Not sure how accurate it is as it came from an anonymous poster on Stockhouse. No matter if it is or not true because with Nelson Baker at the helm, you know he is serious about building serious shareholder value.

Time to Short the Yen...?

Or is this a bull market you don't want to get in front of?

The Japanese Yen has been in a major bull for the last 3 years and has had a few cycles within this trend but the major longterm trend for the YEN is up. It has gone from 85.0 in October of 2008 to 119 as of today. That is a 40% gain in this 3 year trend. An important factor in identifying changes in trends is to know what fundamentals are driving the price and to identify if those fundamentals are still in place to drive the price higher or if there has been a material change.

Now there are four basic factors that drive currencies: yield differential, relative economic growth, current account deficit/surplases, and relative inflation. Certainly investors aren't buying the YEN for the first 2 reasons. One reason explained for the limited selling of the YEN is that the majority of Japanese debt is held by its own citizens, thereby limiting the selling of the YEN, but certainly is not a factor in the recent buying of the YEN to its recent highs. So that leaves inflation.

Considering that the Japanese are one of the few that aren't rapidly debasing their currency, and on top of that deflation in Japan that could be as high as 2.5%... this seems to be the major factor. In a sense the the 2 safe haven currencies are the YEN and GOLD. So if I think Gold is going higher but looking for a top in the YEN... WHY?

B/c with increasingly higher YEN prices, Japanese companies are at an even greater competitive disadvantage to their Asian counterparts that are tied to the USD. At some point there will be a breaking point where authorities will have to intervene to reduce the YEN prices. An increasingly popular view in Japan is to start creating $$$ to reduce the price and since the Japanese would rather be in control of their own economy and not adjust to a speculative high priced YEN that in a normal world prices would not support, I would suggest that at some point in the future the Japanese will join the global currency debasement party.

And as more countries turn to printing money as a tool for various economic reasons, it will just push gold higher. And until developed nations stop debasing their currencies on a massive scale, I remain a solid gold bull.

At 120.00 the YEN looks exhausted, it may not be the end of the rise in the YEN, but it looks like a great trade for short term momentum to the downside to the 20MA.

Happy Trading