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