Tuesday, November 3, 2009

Some Golds

Goldcorp, ticker GG weekly view (above)
GG daily view (above)
Agnico Eagle Mines, ticker AEM weekly view (above)

AEM daily view (above)
Kinross Gold, ticker KGC weekly view (above)

KGC daily view (above)

Royal Gold, ticker RGLD weekly view (above)

RGLD daily view (above)

Regular readers know my affinity for gold. I believe gold is money. Gold is also peace of mind. Gold is insurance. Gold also cannot be turned into a collateralized piece of toxic garbage, (though many would vehemently argue an Ivy league MBA with a large enough carrot ($$$) dangled in front of his/her nose by Goldman Sachs may very well succeed)

When I place a bet with a bookie, I want to make sure he can pay if I am right cause you can bet your ass I will have to pay if I am wrong. So unlike AIG and all the other assorted fictitious wanna be playaz, gold is the ultimate bookie. It always pays!! It always honors it obligations. It always pays its claims, it always cashes its withdrawal slip.

That said, and this is not new news to regular readers, I am extraordinarily concerned with gold here.

Yes I know the gold bulls are pounding the table and rightly so. Forget for a moment that buy, buy buy Jim Cramer is bullish on gold. The difficulty I have is that we are in a deflation depression and every time in history every inflationary or hyperinflationary scenario was immediately preceded by a deflationary depression.

The current mantra is to de-leverage, (in spite of Wall St. trying in vain to lever up with their government via taxpayer sponsored back stop) and pay down debt. Wealth destruction is vastly outpacing money creation by the Fed and Treasury.

I fully accept the argument that gold can and should go to $1200, $1300, $1800, $2200 or even much higher. The issue I have is that gold may do this, only it may do it via a scenic detour down thru $720 or $770 first. I know the bulls don't want to hear this but the fact remains it could do it, all without damaging the longer term picture.

I bring this up because the average market participant cannot sit thru this type of event, emotionally nor financially. I bring this up because the bullish gold drums are being beaten quite loudly. This is happening in the face of a massive negative divergence between gold and the gold stocks which continues today, ( re: my post Gold and the Buck) in which bullion is making new high yet the stocks, as measure by GDX and $HUI are not.

I continue to remind speculators that in a healthy gold bull market, the stocks should be leading the bullion not the other way around which is exactly the scenario we have currently. Now this may correct itself with gold shares busting to new highs but I humbly counsel that you can ignore this if you wish but it could very well come at a high cost.

I have hi-lighted some of the leading gold stocks (above) along with some comments on their current state(s). I would also encourage some of the gold bulls to consider how they would analyze their charts if they didn't know what they were looking at was a gold stock. Just a thought.

Good speculating to you all and please remember to never forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 1 unit Direxion Large Cap 3X Bear ticker BGZ @ $19.34
Long 1 unit Direxion Small Cap 3X Bear ticker TZA @ $11.35
Long 1 unit Direxion Emerging Mkts 3X Bear ticker EDZ @ $6.05
Long 1 unit Direxion Financial 3X Bear ticker FAZ @ $19.09
Long 1 unit Ultrashort Xinhua China ticker FXP @ $8.32
Long 1 unit Ultrashort Real Estate ticker SRS @ $9.82
Short 1 unit i-shares Russell 2K ticker IWM @ $61.70 stop @ $63.80
Short 1 unit Vornado ticker VNO @ $68.30 stop @ $70.71
Short 1 unit Bed Bath ticker BBBY @ $37.75 stop @ $38.41


Anonymous said...

Hi, I went back to your Oct 6th post where you did state that the stock should lead over bullion.... but I'm sorry I still don't understand why you think so! People can hold bullion or coins and trade it for other things of value, but a stock is nothing but paper - well, not even a paper certificate these days, a digital blip stating your shares. Could you please re-state so this newbie can "get it"? Thanks

Harleydog said...


thx for reading and your post. stocks should lead due to their leverage to the underlying commodity. All other concerns being equal, coal stks should lead coal, nickel stks should lead nickel.

A $10 dollar rise in bullion should lead (in an unhedged producer) to significantly magnified profits for that gold company.

Imagine the cost stucture of a company you run that finds and sells widgets.

Now imagine that the widget price just went up 50%. Think of what this now does to you profit margin and further, what investors will now do to your multiple in the market. Hope this helps.

as for being a newbie, the mkt makes us all feel that way when we refuse to stop learning.

Good speculating to you,

Mike said...

Thanks for providing that list of gold stocks. You highlighted mostly large cap miners, so I'd like to draw your attention to several small and mid cap gold mining companies, all of whose stocks have done considerably better this year than the large caps because of the considerable leverage they offer to the gold price:

San Gold (ticker SGR on the TSX Venture Exchange)

Aura Minerals (ticker ORA on the TSX)

Claude Resources (ticker CGR)

Golden Star Resources (ticker GSS)

Premier Gold (ticker PG on the TSX)

Fortuna Silver (ticker FVI on the TSX Ventures Exchange) ; this one is actually a silver mining company that I particularly like as well

There is a lot of good news and analysis on these companies at http://www.goldalert.com too which provide details on the risks and potential rewards of each company, including projects in development, geographic and political risk, company history, description of company management and their personal experience, and much more.

Harleydog said...


thx for the note and your list, much appreciated. I will keep an eye on them.