Sunday, July 30, 2006 8:20:59 PM
*** Gene Arensberg's "Got Gold Report" 7-30-06 ***
Got Gold Report - Gold Miner Bargain Hunting Season Open
By Gene Arensberg
30 Jul 2006 at 01:06 PM EDT
HOUSTON (ResourceInvestor.com) -- This week gold walked modestly higher largely on dollar weakness, the miners more or less answered, but the rest of the short term signals this report follows closely are anything but clear.
Players with positions based close to the action remain nervous and apparently trigger happy, bull or bear. The slightest spark can send the metal up or down a double sawbuck on, excuse the expression, “paper” thin trading. Nervous traders, mixed signals and light liquidity are the ingredients of uncertainty in a market looking for direction.
If recent history is any guide that uncertain market condition won’t last long. The question is when the incoming tide of liquidity will begin and whether it will arrive gradually or abruptly. Meanwhile, don’t feed the vultures. (Explained below.)
Please see largely expanded commentary in the Short Term Outlook section.
Scheduling note: It’s vacation time for your market watcher. The next full Got Gold Report is scheduled for the weekend of August 12-13, unless the fish are unusually accommodative!
Moving right into this week’s indicators:
COT Changes. Tuesday 7/25 commitments of traders report (COT). The large commercials (LCs) collective combined net short positions (LCNS) decreased by an invisible 602 to 139,489 contracts net short Tuesday to Tuesday while gold metal fell another $12.04 or 1.9% to $619.10. Since Tuesday gold clawed its way back up $15.22 for a last trade of $634.32 on the cash market.
Total COMEX gold open interest declined 8,641 lots to 315,635 open contracts. Long-term, June ‘07 and beyond COMEX forwards added still another 1,860 lots to 57,480 or a significant 18.2% of open contracts. Once again flashing caution, but the pace of additions to long-term forwards has noticeably slowed.
Over the past three weeks, two COT reporting weeks, from Tuesday 7/11 to 7/25, while gold metal dropped $23.71 we report that the largest paper gold traders on the planet actually increased by 7,442 contracts their collective net short positions (LCNS). This strongly suggests that as of Tuesday the LCs expected further gold weakness. Possibly important, the Tuesday COT cutoff this week followed by one day the weekly nadir for the metal set intra-day Monday at $602.61. That represents a significant $28.53 decline from the 7/18 COT cutoff and $20.04 less than the closing price of last Friday.
The fact that the LCs did not feel the need to reduce net short interest exposure on a significant decline for the metal puts this indicator on the short-term bearish side of the gold market ledger. It is this week’s most bearish of the conflicting signals.
Most COMEX positions have already been rolled to the December contract by now (with a much smaller number going to October) so for a little while a larger than usual gap will exist between the cash market and the most active COMEX contract. We should also expect to see much less in the way of long-term forward contract additions now that the widest contract migration of the year is nearly complete.
LCNS-Gold Graph as of Tuesday:
Gold ETF. For the week gold holdings at streetTRACKS Gold Shares, the largest gold exchange traded fund [NYSE:GLD], declined for the first time since May 19 by a small 2.78 tonnes to 384.78 tonnes of gold bars held by a custodian in London for the trust. This suggests a hint of negative money flow for the ETF or the need to shrink the float to match liquidity which is pretty much the same thing for our purposes.
What is particularly noteworthy in this week’s reduction in GLD gold holdings is the gold price level at which it apparently occurred. The reduction was booked and reported on Thursday, July 27, so it probably reflects activity from Monday or Tuesday. (Gold reductions and share redemptions take from two to three days to settle). So the small reduction in gold metal holdings occurred during the peak of the most recent sell-down with the metal closing both days below $620.
This is the reactionary opposite of bullish gold dip buying and would be troubling if it were to occur with more frequency, amplitude or consistency. It may be a one-off fluke soon to be reversed (like in June ‘05), reflective of typically weak mid-summer liquidity, but it could also be the start of a period of negative liquidity. Either way, traders ought to keep watch on gold holdings at GLD daily in the near term.
A reduction of GLD gold holdings on a dip for gold argues against the short-term bullish case.
The reduction of gold holdings at GLD was partially offset by a ¼-tonne increase in holdings at the South African equivalent on the JSE, New Gold Debentures, which now reports holding 11.13 tonnes of gold.
Financial data for GLD updated daily at streetTRACKS Gold Trust.
http://www.streettracksgoldshares.com/us/value/gb_value_usa.php
Gold Charts.
Purely technically speaking the daily chart shows a bullish 50-day moving average recovery as gold reacted principally to dollar weakness. Please see the graph for additional commentary.
Similarly, the 2-year weekly version turned in a neat bounce off the medium term trending 28-week moving average for a bullish close above the 7-WMA after a very brief challenge Monday-Tuesday.
It is too soon for a bounce to be supported by momentum indicators.
Pencil in the technical signature of gold metal on the bullish side of the gold market ledger for the week.
U.S. Dollar. The LCs added gingerly to their net long position, adding 712 contracts to 806 NYBOT contracts net long while the USD index edged up 12 basis points to 86.67 Tuesday to Tuesday. That wasn’t exactly a lot of conviction on the long side and the total open interest for the USD remains quite low. A good thing for the LCs because since Tuesday the buck plunged 123 ticks closing Friday at 85.44.
Please see the 1-year daily USD chart for additional commentary and the 2-year weekly USD version for a bit longer perspective.
Light, choppy summer trade continues. We will have to wait for the next COT report to see how the largest currency traders (those not off frolicking on a yacht in the Mediterranean) are positioning following this week’s apparently dollar bearish GDP report. For now the fact that the LCs have not taken a firm stand one way or the other puts this indicator in the “flip a gold coin” category.
Gold Indexes.
Similar to the gold metal chart, the 6-month daily HUI chart has mining shares reclaiming chart real estate above the popular 50-day moving average. Last week’s commentary remains on the 3-year weekly HUI version.
Last week’s Gold Indexes section said, “As expected the roughly 349-350 collective resistance zone held serve setting up the potential retest of the 40-week moving average…”
As it happens that 40-WMA retest occurred Monday and was repelled upward smartly. From there the miners more or less tracked with gold for the rest of the week, with Thursday/Friday anomalies canceling each other out.
This particular indicator has to go on the bullish side of the gold market ledger for the week.
HUI:Gold Ratio.
The one-year daily HUI/Gold ratio chart has the mining shares more or less tracking with gold or perhaps slightly outperforming the metal for the week. Last week’s commentary remains on the 2-year weekly HUI/Gold version.
About the best that can be said about the ratio is that as gold metal moved toward a 28-WMA test and bounce, mining shares noticeably firmed up. Conversely, the activity has to be viewed as less than convincing so far as there was indecision (Thursday) where there could have been follow-through.
For now the fact that the miners firmed instead of folded on gold weakness puts this indicator on the bullish side of the gold market ledger, if somewhat tentatively.
Spot Gold-HUI. The Friday spot gold minus HUI indicator improved another 8.84 points to 304.11, which signals a slight out-performance of mining shares to the metal, but not enough to raise eyebrows. This indicator is still well over par which continues to suggest a collective expectation that shares can be had cheaper in the near future. Either that or it signals a general expectation by investors of further gold weakness. (With light summer liquidity and apparently modest negative money flow in the sector that should not be surprising.)
Short-Term Outlook: (Neutral, with a long term bullish bias. Add into strong dips.)
Looking ahead, the first reduction in the metal holdings at GLD since May and the LCNS increasing into a gold decrease are ordinarily potent bearish signals short term. On the other hand, the technical signatures for both the metal and the miners are in direct conflict with the bearish case. Combined short positions for the miners remained at high levels as of the latest reports, but the pace of insider selling relative to buying has improved dramatically over the past two months. This week the indicators are a mixed and conflicting bag in other words.
It is this report’s conviction that there has been no change to the extraordinarily bullish long term fundamental metrics for gold. Given the current slate of indicators and the part of the annual cycle we find ourselves in today, it is this report’s opinion that short term traders should remain opportunistic, looking to add only into strong to very strong dips on gold metal and the ETFs, in measured increments, with the notion of scaling into the metal for the coming, usually higher-liquidity months.
However, due to the still large open short positions on many popular mining shares, a sudden pop in the metal could translate into surprisingly large percentage upward short-covering moves for the over-sold issues.
Bargain Hunting Season Is Open
It’s mid-summer again. Right now is traditionally the weakest part of the annual cycle for resource companies and not incidentally the traditional best time of the year to be patiently stalking them for bargains.
The market tends to reward opportunistic patience when bargain hunting, up to a point. That point is easily defined, but not necessarily easy to mark. It’s when the liquidity pendulum convincingly begins its move back from net outflow to inflow.
At any particular time, while most gold miners and explorers react with the price of gold to an extent, kind of like waves generated by wind, it is overall liquidity, or how much wealth is flowing into or out of the sector which controls the much more powerful overall bias, or gold sector tide.
Currently, based on the time of year and the action in the various indexes, it still feels more like a falling gold sector tide for now. It shouldn’t surprise anyone that is the case in the last week of July.
Subject to the ongoing caveat of global political and religious tensions and the potential at any time for another global conflagration, resource investors could normally expect the ebbing of the liquidity tide to continue for a little while longer. While anything at all is certainly possible under present conditions, and the history of the market is replete with examples of broken cycles, typically we could look for the outgoing tide of liquidity to increase in velocity just prior to a change in direction. That is usually when the better opportunities present themselves for the popular and high-flying mining companies, but don’t be surprised if a whole slough of beaten up down-the-food-chain miners and explorers refuse to answer the metals in proportion on even big red days.
Don’t Feed the Vultures
(The following is intended for the relatively small portion of the trading portfolio devoted to highly speculative but potentially rewarding juniors and explorers.)
Many, if not most, of the very thinly traded lower echelon companies were sold off first by big money players and longer term veteran swing traders. Having sold into strength earlier in the year, they now patiently and methodically sit like vultures ready to pick off whatever retail capitulation will allow them to consume.
Some of these market savvy professional bargain buzzards are certainly not above applying a little extra selling pressure at key technical points, when bids are thin, if they think that it will result in a panic sell-down offering a much better entry or reentry point ahead of the next general leg up for metals and resource companies. (Particularly for companies which have seen large numbers of cheap warrants recently exercised, private placement shares becoming “live” or companies nearing an equity financing. An enormously interesting topic to yours truly and probably a subject for a future report.)
Like an egg-sucking dog, once the manipulative buzzards get a taste of such tasty and easy pickings it is virtually impossible to break them of it. In the case of the dog a large caliber bullet behind the ear is the humane solution. (Some feel it’s just too bad that no similar solution exists for the manipulators!) The harsh truth is they actually perform a service to those who learn to recognize their movements and are calmly able take advantage. In that sense the manipulators work for us.
Usually, right near the end of the downward move, it is smaller, vulnerable retail shareholders that end up being buzzard fodder. The large number of little guys who have watched their highly speculative but newsletter recommended juniors and explorers sink from January-April highs in what looks like unexplained and frightening bleeding. They finally can’t stand the pain of seeing what is actually sector negative-liquidity-induced selling any longer. Then another big red day occurs, they lose confidence and get low-stopped or hit the red button, and their shares are accumulated by long-term minded and deep pocketed pros.
Each person has to decide for themselves what to do and when, but for those companies which have already given back most or all of their early year gains, provided the company has interesting prospects and the original reason for entry remains intact or has improved, then sector liquidity related selling pressure is not a good reason to sell now. This report’s advice is, (and always is) don’t feed the vultures. They’ll get plenty to eat without your shares. Better still; be on the lookout for their often obvious signs. In some cases they leave tracks like a 3-legged elephant, sometimes resulting in long-lower-tailed hammer candles on weekly charts. Sometimes more than one.
Bargain hunting season is open. It is tremendous fun for resource investors so long as you are the hunter and not the game.
(Returning now to normal weekly commentary.)
Repeating the closing portion of last week’s Short Term Outlook section, “It is not at all too early for bargain minded investors to be watching their favorite mining and exploration companies for signs of capitulation or for rock solid technical bottoms to form, where the individual issues refuse to answer further general gold market weakness and generally outperform when the gold sector sells off strongly.
Between right now and about the end of August the weakest part of the annual cycle will give way to gradually increasing liquidity once again. That’s when the vacation corps of portfolio and fund managers return en masse presumably tanned (or sunburned), refreshed and ready to take new positions in their favorite resource companies.”
With that said, good hunting and as always MIND YOUR STOPS.
Long-Term Outlook
No change. A secular bullish perfect storm trend for precious metals continues. Rapidly escalating global investor demand, easier participation by investors via ETFs, conversion of Middle East petroleum dollars to gold, rising new demand from Asia, possible central bank buying partially offsetting central bank selling, conversion from dollars to gold by large U.S. dollar denominated foreign exchange reserves, declining gold production, increased political and NGO interference to bring new sources on line, rapidly escalating costs to produce, delays and shortages of equipment and manpower, previous two-decade bear-market-induced shortage of intellectual capital for miners, safe-haven buying to hedge strong, reckless, competitive dilution of under-backed fiat paper currencies and continued troubling global political and religious tensions are just some of the factors contributing to the bullish winds now blowing. In real terms gold remains undervalued versus nearly all other commodities and strongly undervalued as measured by the world’s fiat paper promises.… The Great Gold Bull has a long way to go. It just won’t go straight up.
The above contains opinion and commentary of the author. Each person should study the issues carefully and, as always, make their own informed decisions. Disclosure: The author currently holds a long position in streetTRACKS Gold Shares and iShares Silver Trust, and holds various long positions in mining and exploration companies.
http://www.resourceinvestor.com/pebble.asp?relid=22088
Got Gold Report - Gold Miner Bargain Hunting Season Open
By Gene Arensberg
30 Jul 2006 at 01:06 PM EDT
HOUSTON (ResourceInvestor.com) -- This week gold walked modestly higher largely on dollar weakness, the miners more or less answered, but the rest of the short term signals this report follows closely are anything but clear.
Players with positions based close to the action remain nervous and apparently trigger happy, bull or bear. The slightest spark can send the metal up or down a double sawbuck on, excuse the expression, “paper” thin trading. Nervous traders, mixed signals and light liquidity are the ingredients of uncertainty in a market looking for direction.
If recent history is any guide that uncertain market condition won’t last long. The question is when the incoming tide of liquidity will begin and whether it will arrive gradually or abruptly. Meanwhile, don’t feed the vultures. (Explained below.)
Please see largely expanded commentary in the Short Term Outlook section.
Scheduling note: It’s vacation time for your market watcher. The next full Got Gold Report is scheduled for the weekend of August 12-13, unless the fish are unusually accommodative!
Moving right into this week’s indicators:
COT Changes. Tuesday 7/25 commitments of traders report (COT). The large commercials (LCs) collective combined net short positions (LCNS) decreased by an invisible 602 to 139,489 contracts net short Tuesday to Tuesday while gold metal fell another $12.04 or 1.9% to $619.10. Since Tuesday gold clawed its way back up $15.22 for a last trade of $634.32 on the cash market.
Total COMEX gold open interest declined 8,641 lots to 315,635 open contracts. Long-term, June ‘07 and beyond COMEX forwards added still another 1,860 lots to 57,480 or a significant 18.2% of open contracts. Once again flashing caution, but the pace of additions to long-term forwards has noticeably slowed.
Over the past three weeks, two COT reporting weeks, from Tuesday 7/11 to 7/25, while gold metal dropped $23.71 we report that the largest paper gold traders on the planet actually increased by 7,442 contracts their collective net short positions (LCNS). This strongly suggests that as of Tuesday the LCs expected further gold weakness. Possibly important, the Tuesday COT cutoff this week followed by one day the weekly nadir for the metal set intra-day Monday at $602.61. That represents a significant $28.53 decline from the 7/18 COT cutoff and $20.04 less than the closing price of last Friday.
The fact that the LCs did not feel the need to reduce net short interest exposure on a significant decline for the metal puts this indicator on the short-term bearish side of the gold market ledger. It is this week’s most bearish of the conflicting signals.
Most COMEX positions have already been rolled to the December contract by now (with a much smaller number going to October) so for a little while a larger than usual gap will exist between the cash market and the most active COMEX contract. We should also expect to see much less in the way of long-term forward contract additions now that the widest contract migration of the year is nearly complete.
LCNS-Gold Graph as of Tuesday:
Gold ETF. For the week gold holdings at streetTRACKS Gold Shares, the largest gold exchange traded fund [NYSE:GLD], declined for the first time since May 19 by a small 2.78 tonnes to 384.78 tonnes of gold bars held by a custodian in London for the trust. This suggests a hint of negative money flow for the ETF or the need to shrink the float to match liquidity which is pretty much the same thing for our purposes.
What is particularly noteworthy in this week’s reduction in GLD gold holdings is the gold price level at which it apparently occurred. The reduction was booked and reported on Thursday, July 27, so it probably reflects activity from Monday or Tuesday. (Gold reductions and share redemptions take from two to three days to settle). So the small reduction in gold metal holdings occurred during the peak of the most recent sell-down with the metal closing both days below $620.
This is the reactionary opposite of bullish gold dip buying and would be troubling if it were to occur with more frequency, amplitude or consistency. It may be a one-off fluke soon to be reversed (like in June ‘05), reflective of typically weak mid-summer liquidity, but it could also be the start of a period of negative liquidity. Either way, traders ought to keep watch on gold holdings at GLD daily in the near term.
A reduction of GLD gold holdings on a dip for gold argues against the short-term bullish case.
The reduction of gold holdings at GLD was partially offset by a ¼-tonne increase in holdings at the South African equivalent on the JSE, New Gold Debentures, which now reports holding 11.13 tonnes of gold.
Financial data for GLD updated daily at streetTRACKS Gold Trust.
http://www.streettracksgoldshares.com/us/value/gb_value_usa.php
Gold Charts.
Purely technically speaking the daily chart shows a bullish 50-day moving average recovery as gold reacted principally to dollar weakness. Please see the graph for additional commentary.
Similarly, the 2-year weekly version turned in a neat bounce off the medium term trending 28-week moving average for a bullish close above the 7-WMA after a very brief challenge Monday-Tuesday.
It is too soon for a bounce to be supported by momentum indicators.
Pencil in the technical signature of gold metal on the bullish side of the gold market ledger for the week.
U.S. Dollar. The LCs added gingerly to their net long position, adding 712 contracts to 806 NYBOT contracts net long while the USD index edged up 12 basis points to 86.67 Tuesday to Tuesday. That wasn’t exactly a lot of conviction on the long side and the total open interest for the USD remains quite low. A good thing for the LCs because since Tuesday the buck plunged 123 ticks closing Friday at 85.44.
Please see the 1-year daily USD chart for additional commentary and the 2-year weekly USD version for a bit longer perspective.
Light, choppy summer trade continues. We will have to wait for the next COT report to see how the largest currency traders (those not off frolicking on a yacht in the Mediterranean) are positioning following this week’s apparently dollar bearish GDP report. For now the fact that the LCs have not taken a firm stand one way or the other puts this indicator in the “flip a gold coin” category.
Gold Indexes.
Similar to the gold metal chart, the 6-month daily HUI chart has mining shares reclaiming chart real estate above the popular 50-day moving average. Last week’s commentary remains on the 3-year weekly HUI version.
Last week’s Gold Indexes section said, “As expected the roughly 349-350 collective resistance zone held serve setting up the potential retest of the 40-week moving average…”
As it happens that 40-WMA retest occurred Monday and was repelled upward smartly. From there the miners more or less tracked with gold for the rest of the week, with Thursday/Friday anomalies canceling each other out.
This particular indicator has to go on the bullish side of the gold market ledger for the week.
HUI:Gold Ratio.
The one-year daily HUI/Gold ratio chart has the mining shares more or less tracking with gold or perhaps slightly outperforming the metal for the week. Last week’s commentary remains on the 2-year weekly HUI/Gold version.
About the best that can be said about the ratio is that as gold metal moved toward a 28-WMA test and bounce, mining shares noticeably firmed up. Conversely, the activity has to be viewed as less than convincing so far as there was indecision (Thursday) where there could have been follow-through.
For now the fact that the miners firmed instead of folded on gold weakness puts this indicator on the bullish side of the gold market ledger, if somewhat tentatively.
Spot Gold-HUI. The Friday spot gold minus HUI indicator improved another 8.84 points to 304.11, which signals a slight out-performance of mining shares to the metal, but not enough to raise eyebrows. This indicator is still well over par which continues to suggest a collective expectation that shares can be had cheaper in the near future. Either that or it signals a general expectation by investors of further gold weakness. (With light summer liquidity and apparently modest negative money flow in the sector that should not be surprising.)
Short-Term Outlook: (Neutral, with a long term bullish bias. Add into strong dips.)
Looking ahead, the first reduction in the metal holdings at GLD since May and the LCNS increasing into a gold decrease are ordinarily potent bearish signals short term. On the other hand, the technical signatures for both the metal and the miners are in direct conflict with the bearish case. Combined short positions for the miners remained at high levels as of the latest reports, but the pace of insider selling relative to buying has improved dramatically over the past two months. This week the indicators are a mixed and conflicting bag in other words.
It is this report’s conviction that there has been no change to the extraordinarily bullish long term fundamental metrics for gold. Given the current slate of indicators and the part of the annual cycle we find ourselves in today, it is this report’s opinion that short term traders should remain opportunistic, looking to add only into strong to very strong dips on gold metal and the ETFs, in measured increments, with the notion of scaling into the metal for the coming, usually higher-liquidity months.
However, due to the still large open short positions on many popular mining shares, a sudden pop in the metal could translate into surprisingly large percentage upward short-covering moves for the over-sold issues.
Bargain Hunting Season Is Open
It’s mid-summer again. Right now is traditionally the weakest part of the annual cycle for resource companies and not incidentally the traditional best time of the year to be patiently stalking them for bargains.
The market tends to reward opportunistic patience when bargain hunting, up to a point. That point is easily defined, but not necessarily easy to mark. It’s when the liquidity pendulum convincingly begins its move back from net outflow to inflow.
At any particular time, while most gold miners and explorers react with the price of gold to an extent, kind of like waves generated by wind, it is overall liquidity, or how much wealth is flowing into or out of the sector which controls the much more powerful overall bias, or gold sector tide.
Currently, based on the time of year and the action in the various indexes, it still feels more like a falling gold sector tide for now. It shouldn’t surprise anyone that is the case in the last week of July.
Subject to the ongoing caveat of global political and religious tensions and the potential at any time for another global conflagration, resource investors could normally expect the ebbing of the liquidity tide to continue for a little while longer. While anything at all is certainly possible under present conditions, and the history of the market is replete with examples of broken cycles, typically we could look for the outgoing tide of liquidity to increase in velocity just prior to a change in direction. That is usually when the better opportunities present themselves for the popular and high-flying mining companies, but don’t be surprised if a whole slough of beaten up down-the-food-chain miners and explorers refuse to answer the metals in proportion on even big red days.
Don’t Feed the Vultures
(The following is intended for the relatively small portion of the trading portfolio devoted to highly speculative but potentially rewarding juniors and explorers.)
Many, if not most, of the very thinly traded lower echelon companies were sold off first by big money players and longer term veteran swing traders. Having sold into strength earlier in the year, they now patiently and methodically sit like vultures ready to pick off whatever retail capitulation will allow them to consume.
Some of these market savvy professional bargain buzzards are certainly not above applying a little extra selling pressure at key technical points, when bids are thin, if they think that it will result in a panic sell-down offering a much better entry or reentry point ahead of the next general leg up for metals and resource companies. (Particularly for companies which have seen large numbers of cheap warrants recently exercised, private placement shares becoming “live” or companies nearing an equity financing. An enormously interesting topic to yours truly and probably a subject for a future report.)
Like an egg-sucking dog, once the manipulative buzzards get a taste of such tasty and easy pickings it is virtually impossible to break them of it. In the case of the dog a large caliber bullet behind the ear is the humane solution. (Some feel it’s just too bad that no similar solution exists for the manipulators!) The harsh truth is they actually perform a service to those who learn to recognize their movements and are calmly able take advantage. In that sense the manipulators work for us.
Usually, right near the end of the downward move, it is smaller, vulnerable retail shareholders that end up being buzzard fodder. The large number of little guys who have watched their highly speculative but newsletter recommended juniors and explorers sink from January-April highs in what looks like unexplained and frightening bleeding. They finally can’t stand the pain of seeing what is actually sector negative-liquidity-induced selling any longer. Then another big red day occurs, they lose confidence and get low-stopped or hit the red button, and their shares are accumulated by long-term minded and deep pocketed pros.
Each person has to decide for themselves what to do and when, but for those companies which have already given back most or all of their early year gains, provided the company has interesting prospects and the original reason for entry remains intact or has improved, then sector liquidity related selling pressure is not a good reason to sell now. This report’s advice is, (and always is) don’t feed the vultures. They’ll get plenty to eat without your shares. Better still; be on the lookout for their often obvious signs. In some cases they leave tracks like a 3-legged elephant, sometimes resulting in long-lower-tailed hammer candles on weekly charts. Sometimes more than one.
Bargain hunting season is open. It is tremendous fun for resource investors so long as you are the hunter and not the game.
(Returning now to normal weekly commentary.)
Repeating the closing portion of last week’s Short Term Outlook section, “It is not at all too early for bargain minded investors to be watching their favorite mining and exploration companies for signs of capitulation or for rock solid technical bottoms to form, where the individual issues refuse to answer further general gold market weakness and generally outperform when the gold sector sells off strongly.
Between right now and about the end of August the weakest part of the annual cycle will give way to gradually increasing liquidity once again. That’s when the vacation corps of portfolio and fund managers return en masse presumably tanned (or sunburned), refreshed and ready to take new positions in their favorite resource companies.”
With that said, good hunting and as always MIND YOUR STOPS.
Long-Term Outlook
No change. A secular bullish perfect storm trend for precious metals continues. Rapidly escalating global investor demand, easier participation by investors via ETFs, conversion of Middle East petroleum dollars to gold, rising new demand from Asia, possible central bank buying partially offsetting central bank selling, conversion from dollars to gold by large U.S. dollar denominated foreign exchange reserves, declining gold production, increased political and NGO interference to bring new sources on line, rapidly escalating costs to produce, delays and shortages of equipment and manpower, previous two-decade bear-market-induced shortage of intellectual capital for miners, safe-haven buying to hedge strong, reckless, competitive dilution of under-backed fiat paper currencies and continued troubling global political and religious tensions are just some of the factors contributing to the bullish winds now blowing. In real terms gold remains undervalued versus nearly all other commodities and strongly undervalued as measured by the world’s fiat paper promises.… The Great Gold Bull has a long way to go. It just won’t go straight up.
The above contains opinion and commentary of the author. Each person should study the issues carefully and, as always, make their own informed decisions. Disclosure: The author currently holds a long position in streetTRACKS Gold Shares and iShares Silver Trust, and holds various long positions in mining and exploration companies.
http://www.resourceinvestor.com/pebble.asp?relid=22088
Dan 
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