Successful investing requires buying low before later selling high. And stock prices are the lowest when they are the most deeply out of favor. That perfectly describes gold miners’ stocks these days, this sector is loathed and despised after a horrendous year so far. But these battered stocks are now offering epic buying opportunities for contrarians who have steeled themselves to be brave when others are afraid. [Read more...]
Adam Hamilton: Contrarian Gold Stocks 2
Zeal: Specs Gold Shorts Most Extreme in Gold’s Entire Secular Bull!
Futures speculators are extraordinarily bearish on gold today. Their short positions on it are extreme and unprecedented, the highest seen by far in gold’s entire dozen-year secular bull. They expect downside gold momentum to persist indefinitely. But despite their reputation for sophistication, futures speculators are notorious for betting wrong at extremes. Their bearishness is a very bullish contrarian omen for gold. [Read more...]
Zeal: SLV Bullish Divergence
Silver has suffered horrendously in 2013’s opening months, plunging dramatically to miserable lows. This exceptional weakness has naturally kindled extreme bearishness. Predictions abound for silver to continue selling off indefinitely. But amidst this severe carnage, the silver bullion held by the flagship silver ETF has remained flat. This is an extraordinary bullish divergence in the face of rotten sentiment.
Silver is almost certainly the most volatile of the world’s more-popular markets. When silver starts moving, it often moves fast. Fortunes are won and lost in a matter of months, a very exciting or terrifying prospect depending on which side of the trade you are on. The key to silver’s price action has always been gold. Silver follows gold, usually dramatically leveraging the yellow metal’s fortunes. Silver is a gold play. [Read more...]
SPX Top Nears As There Are No Bears Left
The levitating stock markets continue to seductively entrance traders, powering to new nominal record highs day after day after day. No one believes a meaningful sell-off is even possible anymore, thanks to the vast deluge of central-bank monetary inflation. Sheer euphoria has set in as all perception of risk has vanished. This makes these stock markets extraordinarily dangerous, they are truly at topping extremes.
This move, particularly the one-sided 22.6% melt-up in the last 6 months, has bred unmistakable euphoria. Wall Street vehemently tries to deny this truth, but the definition of euphoria is “a feeling of great happiness or well-being, a feeling of great elation”. Does that not describe the outlook for the stock markets today? There are no bears left, everyone is incredibly bullish and expects no material selloffs.
Adam Hamilton: SPX Topping Valuations
Despite bulls’ assertions otherwise, stocks are very expensive today. In fact, the elite component companies of the flagship S&P 500 stock index now have average valuations matching the ones seen in October 2007 when the last cyclical bull topped. That led to a brutal cyclical bear that slaughtered the naive investors who chose to blindly believe Wall Street’s stocks-are-cheap claims then.
The general stock markets are now trading at valuations triple what we need to see before the past decade’s secular bear can end. This makes buying high into today’s widespread complacency and euphoria extraordinarily risky. It guarantees big losses as these overbought stock markets correct sharply at best, or roll over into a dangerous new cyclical bear market at worst. Buying into toppings is foolish. [Read more...]
Gold-Mining Margins 3
Submitted by Zeal
Gold mining is a very tough business. Not only is it highly capital-intensive and chock-full of environmental risks, its revenues are entirely at the mercy of a volatile commodity. It requires some serious mettle to succeed mining gold.
But despite super-high barriers to entry and the countless risk factors that come with mining, the world needs gold, and somebody’s got to produce it. And believe it or not, a lot of money can be made in this business.
At a high level gold mining is like any other business. Produce your product at costs less than what you sell it for, and you ought to prosper. And the wider that spread, the more you prosper. But unlike most other business, the “what you sell it for” is an uncontrollable variable that can violently move in either direction. [Read more...]
Gold-Stock Panic Levels
Submitted by Adam Hamilton, Zeal
Wall Street has always hated gold, so there has never been adequate or fair coverage of the secular gold bull or the resulting secular gold-stock bull. When gold stocks are strong, they are ignored. CNBC might spend a few minutes a day on them even if their gains trounce every other sector’s. And when they are weak, they are mocked. What kind of fools would want to grow their capital 18x in a secular stock bear? [Read more...]
Gold Panic!?!
Submitted by Adam Hamilton, Zeal
Holy cow, not even the most vociferous gold bears saw that one coming! Gold just suffered what can only be described as a panic. This metal plummeted so fast that its price surrendered a staggering 1/7th of its value in just two trading days! This blistering decline was so extreme it even dragged the general stock markets down with it. Shell-shocked gold investors are nervously wondering what to make of it.
Gold’s recent plunge was crash-like as well, but couldn’t have been a crash. While panics cascade from lows after long declines, crashes erupt from record highs after long rallies. Crashes, which are also ultra-rare, are only seen immediately after major multi-year bull runs where euphoria just drove a parabolic terminal ascent. That certainly doesn’t describe gold’s weak downward price action over the past 6 months or so. [Read more...]
GLD Holdings Plunge
Gold has faced stiff headwinds lately as investors abandon alternative investments to chase record-high stock markets. Probably the most significant has been the major selling hammering the flagship GLD gold ETF. It has suffered such intense differential selling pressure that its custodians have been forced to dump enormous quantities of physical gold. What are the implications of this flood of new supply?
The amount of gold bullion GLD has hemorrhaged recently is amazing. To put it into perspective, earlier this week the rumor that embattled Cyprus may be forced to sell its official gold reserves made news. The Cypriot government owns 13.9 metric tons of gold. But on a single trading day alone in February’s gold capitulation, GLD had to sell 20.8 tonnes! The supply recently added by GLD dwarfs everything else. [Read more...]
Adam Hamilton: Real SPX Record Highs
Submitted by Adam Hamilton:
The US stock markets enjoyed an incredible first quarter, with the flagship S&P 500 stock index (SPX) surging 10.0%. New cyclical-bull highs were achieved on an amazing 3/7ths of all Q1’s trading days! But the most interesting one was certainly the last. On Q1’s final trading day, the SPX edged up to a new all-time record high. Though celebrated with great fanfare, adjusted for inflation it was far from a record.
Thanks to central banks rapidly inflating their fiat-money supplies, long-term price comparisons are problematic. As the Fed relentlessly injects new money into the US economy every day, the purchasing power of each dollar slowly erodes away. A dollar today buys less than a dollar did 5 years ago, and the farther back you go the greater the disparity. Considering inflation is essential in any long-term analysis. [Read more...]
Zeal: Junior Gold Producers 3
Submitted by Zeal:
It’s well known that a huge chunk of global gold production is performed by a small group of very large mining companies. These mega-miners own the world’s biggest mines, possess the deepest pipelines of projects, and for the most part have large coffers that easily support reserve renewal via organic development and acquisitions.
Incredibly just the 10 largest publicly-traded primary gold miners, Barrick Gold, Newmont Mining, AngloGold Ashanti, Kinross Gold, Goldcorp, Newcrest Mining, Goldfields, Polyus Gold, Harmony Gold, and Agnico-Eagle Mines, accounted for over one-third of the 88m or so ounces that were pulled from the earth in 2012.
While these companies are recognizable to most investors, and are usually the top gold-stock holdings of large institutionals and funds, most folks aren’t really aware of where the other two-thirds of production comes from. [Read more...]
Gold-Stock Spring Rally
Submitted by Adam Hamilton, Zeal
The loathed and left-for-dead gold miners look to have begun their usual spring rally. This sector has actually exhibited strong seasonality for its entire secular bull. For well over a decade, most years have enjoyed a major gold-stock rally between mid-March and early June. These favorable seasonals are a welcome tailwind for a sector that is radically undervalued fundamentally and overdue to explode higher. [Read more...]
Adam Hamilton: Gold Stock Valuations
Submitted by Adam Hamilton:
Gold miners have to be the most hated sector in the markets these days. At best they’ve been forgotten as the hyper-complacent general stock markets continue to inexplicably levitate. At worst they’re utterly despised. But the breathtaking bearishness choking them has left gold stocks incredibly cheap relative to their profits.
This is a dream come true for battle-hardened contrarians who really want to buy low. [Read more...]
Contrarian Gold Futures: Bearish Sentiment Peaking
Submitted by Adam Hamilton, Zeal
Gold’s technical breakdown suffered in its recent capitulation selloff naturally unleashed a flood of bearish sentiment. Traders are totally convinced gold’s woes are just starting, that the worst is yet to come. This pessimistic worldview is largely universal, even among futures traders. But their collective bets are actually a strong contrarian indicator. Their bearishness peaks right before major rallies erupt. [Read more...]
Zeal: Bullish Gold Supply As Central Banks Purchase Whopping 535 Tons in 2012
Submitted by Zeal:
It’s hard to believe that gold’s bull market is nearly a dozen years old. And boy has it been a delight watching it mature from its 2001 infancy. It’s also been fun observing the ever-changing dynamics of gold’s structural fundamentals, particularly how the supply side of this metal’s delicate economic balance has responded to fast-growing demand.
Until recently gold had three sources of supply, mining, recycling, and central-bank sales. However as a result of the world’s governments collectively realizing the folly of their ways, CB sales have recently dried up. And provocatively not only have the CBs stopped selling their gold, they’ve flip-flopped to become major net buyers of the metal.
In the World Gold Council’s latest Gold Demand Trends publication, which is compiled by Thomson Reuters GFMS, it was reported that central banks purchased a whopping 535 metric tons of gold in 2012. Incredibly this level of CB accumulation hadn’t been seen in nearly 50 years. [Read more...]
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