Gold thoughts and points

  NAPOLEON BONAPARTE… Napoleon Bonaparte once advised to “never interfere with an enemy when he is making a mistake.” Some gold companies’ shareholders may now be making serious mistakes by selling shares in stocks that they have lost patience with; yet that is normal at low prices. They might ask themselves “who is buying?” as there is a strong possibility that they are giving away undervalued stocks at very low prices. It may prove to be a serious mistake as incredible bargains in gold stocks occur at price lows. Today value oriented investors can find many companies that are exceptionally undervalued on the basis of various valuation gauges.

Our analysis suggests that we are about to commence further price moves up in Gold, Silver, mining and exploration stocks. Many of them should move up to price levels that will amaze investors. Because there is so little comprehensive research coverage for most metals companies, many remain undervalued. The coming price moves up in the precious metals stocks’ prices should far exceed investors’ expectations.

  Cycles…Maybe the most important ingredient of all

Cycles can be very useful when trying to make timing decisions. It is important for investors to recognize that several important cycles are projecting that Gold should soon have a large move up….very large. At the same time, several cycles forecast bad times for the industrial stock market. ……very bearish times coming for industrial stocks which is positive for gold, silver, mining shares and hard assets.

Our analysis indicates that a long-term bull market for gold began in 2015. While the majority of gold stocks have languished, some have performed exceptionally well. While some analyst (clowns) said that investing in gold was for fools, we had some here that moved up 500% to 1400%. Three were takeovers.

Key: The very best time to accumulate gold mining and exploration stock is during a bear market; that is when the stocks are incredibly cheap. Look at the charts for mining stocks and note the huge price ranges from low to high. You can see gold companies that have gone from 5 cents or 10 cents to $4.00 and more.

Key: There is very little research coverage and support for mining stocks. Therefore, the stocks drop to even lower prices than they did in the past during bear market periods. Only a small percentage of investors ever take advantage.

The American brokerage industry will not acknowledge a bull market in gold (gold and silver stocks) as that indicates that there is an ongoing or oncoming bear market in the industrial stock markets. During bear markets, the brokerage houses often see enormous drops in profitability. They cannot tolerate bull markets in gold and most commodities.

When a frustrated Gold company stockholder says “just get me out of this stock” a value investor may say “what a great opportunity the seller and the weak metals market have given me.”  Price weakness offers value investors opportunities to invest in mining shares while they are literally “on sale” as well as being exceptionally cheap.  Someone’s mistake is often another investor’s opportunity.

It is late but investors can still find overlooked stocks at low prices and they can “double up” (dollar cost average) on companies that they own if the fundamentals remain positive. Experienced value investors have been accumulating many exploration and mining shares during the last five years that are exceptionally undervalued. At lower prices? They often buy more.

Officers and directors of gold and exploration companies are buying their own companies’ shares! They have been buyers throughout the bear market with little selling. Note that today there is very little insider selling at all. Their insider activity suggests to us that they expect strong gold prices.

What is a most important ingredient for a bull market in gold? We have said it time and again; we need a lower value in the US Dollar for a bull market in gold. We have seen it developing. According to an IMF report of summer 2017, the dollar still needs a further decline of about another 8%.

Are the gold and silver mining stocks undervalued? Yes, based on the value of resources per share as well as exploration potential, many legitimate mining and exploration stocks are now carrying their lowest valuation levels ever. Furthermore, today the gold and mining sector is carrying the lowest valuation of all investment sectors. Yet, we recognize again that many of the gold type companies will fail. Successful exploration is expensive and difficult, thus many companies do fail.

Why are they carrying such low valuation levels? The brokerage industry suffers during bull markets in gold and hard assets as it usually occurs concurrently with a bear market in industrial stocks. That brings the brokerage industry large drops in profitability. Any increase in trading volume and activity in mining stocks is insufficient to make up for the losses. Thus, brokerage houses oppose bull markets in gold and discredit indicators that suggest a bull market in gold and commodities.

 “Is there still manipulation in the price of gold bullion?”  The manipulation has been so obvious in the futures contracts which are paper not the gold bullion. One recent afternoon’s volume (paper contracts) would be equal to seven months of total world gold production. A true gold bullion sale of that size would be physically impossible. However, the futures markets paper sales create the appearance of weak gold prices. It’s not gold they are selling-it’s paper! We would like to see the true gold delivered. Recall when the Germans asked for their gold bullion held in safekeeping in New York four years ago? It took over three years to get it.

Little research is being done by brokerages for most precious metals stocks….  Some claim that it is too expensive to have research coverage on smaller stocks despite the fact that many are undervalued and offer investors opportunities for exceptional capital gains. Many brokerage houses do not permit their brokers to buy most mining stocks despite the extreme undervaluation of the shares.

Disappearance of the brokerages’  “Market Makers”   In the past, market makers helped bring balance in the sales and buys in stocks, offering buying support when needed and offering shares when necessary. They would hold large positions in the stocks that they made markets in. At the same time, the market makers’ research departments would provide research to create investor interest in the stocks.  Most brokerage research has disappeared and investors must look for other sources for research.