Abet Chichi2

[bob3]

'Cockroaches are coming out of the closet'
The Gold Report caught up with Ian McAvity, editor of Deliberations On World Markets, a technical newsletter now in its 35th year, covering precious metals, currencies and global equity markets. McAvity doesn't pull any punches about his view of the economy: "there’s a new cockroach coming out into the daylight every week.

http://www.commodityonline.com/news/topstory/newsdetails.php?id=6048&cont=2

Excerpts, long read:

The ETFs were using Central Fund’s premium as a marketing tool. The difference is we converted Central Fund into a specialized bullion holding company to become the first stock exchange tradable bullion proxy. We did that in 1983. The ETFs came along 20 years later.

Central Gold Trust is a lot smaller; it’s about $160 to $170 million now, and it tends to carry a smaller premium. It is invested only in gold, so it has a little less volatility. I like to point out that it also has less liquidity, which on down days in the gold market could be quite attractive, in the context where you put a bushel basket under the specialist, under the market, and hope to catch some on a down day. Because if you look at the intra-day ranges, there are buying opportunities from time to time. But I’d never buy them on an up day in the gold market.
==============

IM: I’m not a stock picker per se, but in terms of the major gold stocks over the last several months, I’ve been pointing out that the gold stock that all the gold bugs hate is in fact the strongest of them all – and that’s Barrick. Barrick has been outperforming.

And on the other side of the coin, it’s looking increasingly prescient that Wayne Murdy, Pierre Lassonde and Seymour Schulich all left Newmont over the last year and a half, because Newmont is acting not well at all. I’ve seen some analysis that basically says they won’t really be turning around for a minimum of 18 months, maybe longer. And because of their size, they’ve also got, in a sense, geopolitical risk problems around the world. They’re getting beaten up a little bit in Indonesia right now. They were beaten badly in Uzbekistan. If you get the gold price up to $1,500 or so and have a couple of elections in South America, they may have problems there. So, whereas I once was rather partial to Newmont, I’m not any more.
======

Goldcorp is such a different entity now. I loved the old Goldcorp before Wheaton, when it was the Red Lake deposit basically, because that was the greatest deposit. Rob did a spectacular job. Wheaton I was never terribly partial to. It expanded the thing tremendously. Then subsequently the deal with Glamis has completely changed the company. I’m not a big fan only because I’m yearning for the past; I know a lot of people who have a great deal of respect for it. The recent sale of Silver Wheaton probably makes some sense. But in essence, it becomes more of a development company because I think that most of that money is going into expanding the mine in Mexico.

But largely by process of elimination, Goldcorp is going to be one of the leading stocks. The industry’s consolidated to such an extent that you haven’t got much selection.
=================

am still concerned by the fact that it hasn’t managed to get above its 2006 high. It has made higher highs lately, so relative to the South Africans, it looks good. The chart isn’t anywhere near as good as Kinross or Agnico-Eagle.

TGR: Or Barrick

IM: Or Barrick. Well, Barrick’s the number one gold stock. The sad part is that Barrick isn’t included in the S&P 500. None of the gold stocks except for Newmont are in the S&P 500. So all the index money flows support Newmont and nobody else. But, yeah, basically Barrick, Kinross, Agnico are the healthiest. Buenaventura’s got a good-looking chart, but I’m not as comfortable with South America.

The other one that is getting a lot of attention is Yamana, but it makes me a little bit nervous; in part, the president of Yamana keeps doing interviews in which he talks about Ian Telfer and the evolution of Wheaton and using the shares to acquire other projects and stuff. It seems like he wants to be a “deal junkie,” and I am not big on companies issuing a whole bunch of shares for mergers and acquisitions, because when they do the mergers, there’s a lot of stock that typically comes out. So I don’t share the general enthusiasm for Yamana. The chart did break out, but it’s been pretty heavy relative to the others over the last month or so. And basically just stay clear of South Africa.

TGR: A little power problem there. Multiple power problems.

IM: Power problems, tax problems, and royalty problems. Very few people made much of it, but having been to South Africa back in the ’70s and having had long ties to it, it was extraordinary to me, absolutely amazing to see Anglo American sell off control of AngloGold Ashanti. They basically pieced it off by shifting their focus really toward iron ore in Australia. And boy, that says something about the South African gold mining industry. I suspect that Ernest and Harry Oppenheimer would be spinning in their graves.