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Gold Bugs’ Hearts Are Beating Faster

by John Rubino on June 22, 2014 · 13 comments

Last Thursday was the kind of day that precious metals investors have been waiting (and waiting and waiting) for. Gold and silver popped 3.5% and 4.8% respectively and the junior miners, which have been universally unloved lately, took off. Some more-or-less random examples:

Junior miners June 19
One day does not of course make a bull market, but it does give a sense of what the bull market will be like when it comes. And long-suffering gold bugs like the feeling. Some snippets from articles that appeared in response:

From Jim Sinclair:

Dear CIGAs,
Here are the 30 reasons, 23 new and 7 set in cement, of why the Bear phase in the bull market for gold ends this summer without any new lows.

1. The New definition of warfare is economic. Sanctions against Russia and the implications for the Petrodollar.

2. FACTA and the universal long arm of the US government via any transaction internationally that passes even momentarily through the dollar as a contract settlement mechanism. The negative implications for the dollar’s future as a contract settlement mechanism internationally.

3. EU split over sanctions due to Russian energy demand and Russian business interests.

4. Middle East Western Hegemony and Arab Spring is defunct.


Richard Russell:

Chart of gold below. As I write an hour before the close, gold is up $41. Referring to the chart you can see this puts gold above its 50-day and 200-day moving averages. This should start squeezing the gold shorts. The bear market in gold is over, and gold again is in a bull market.

Gold Sinclair 2014


Grant Williams:

When you talk about who is left to sell these things, and how they (the mining stocks) have all been bombed-out and the shares are now being held by strong hands, flip that question around for a second: What happens if some real buyers come into these markets, some real buyers who want to own these shares? And they decide, ‘I want to own a big chunk of gold mining stocks.’ Where are they going to buy that stock? They are not going to buy that stock down here because it’s not for sale down here. As we’ve said, the people holding these shares now, for the most part, are die-hards.

For anyone (managing billions of dollars) who wants to establish a position here in something that they think is a three-year to five-year investment, if they do want to get ahead of a turn in the inflation around the world, they are not going to get a meaningful position in these things — not down here. It’s going to cost them a lot more money to do that. So we could see some very interesting moves in the next few weeks.

If inflation expectations are picking up, there are very few things better equipped to protect you from that than gold mining shares. And you’ve got the advantage that they are now so bombed-out that even if you are wrong, even if you get your timing wrong, your downside here (is minimal).


John Ing:

So not only is the rally in gold that we are seeing way overdue, but there are a lot of shorts in this market that will create a real scramble. We have already broken above the 200-day moving average. My sense is that between $1,330 and $1,360 there is a little bit of resistance. But after that there are some big vacuums higher in terms of the price and it wouldn’t surprise to see $100 to $200 up-days for gold. This leg of the bull market has just begun and the mining stocks seem to be the best bet. You get a multiplier of 2 to 1. We saw that unfortunately on the downside. Now we are going to see it on the upside.

It was like this on pretty much every sound-money website and a lot of the mainstream media over the weekend. Suddenly, the world looks like a much more dangerous, uncertain place and precious metals are back on the radar screen of worried people awash in paper stock, bond and real estate profits. The math was always theoretical but compelling: Let even 1% of the (fictitious) financial wealth that has accrued during the credit bubble be redirected to tiny, thin markets like gold and silver, and double-digit percentage gains will start to seem normal, while junior miners will behave like late-90s dot-coms.

Is this the start of that? Who knows. But it is coming eventually. And when it does, it will be spectacular.

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  • http://theyenguy.wordpress.com/ theyenguy

    John, I am sorry you are a precious metal stock enthusiast, and not a precious metal enthusiast.

    On Monday June 23, 2014, The loose monetary policies of the world central banks have finally stirred up inflation and have finally resulted in turning investment sentiment from greed to fear, specifically fear that the world central banks’ monetary policies have crossed the rubicon of sound monetary policy, and have “money good” investments bad. Excluding the Precious Metal Mining Stocks, GDX, GDXJ, SIL, SILJ, all forms of fiat wealth, World Stocks, VT, Nation Investment, EFA, Global Financials, IXG, Commodities, DBC, and Aggregate Credit, AGG, traded lower, causing the world to enter into the final phase of the Business Cycle, that is Kondratieff Winter, providing the perfect short selling opportunity of selling from an equity market top, more specifically an Elliott Wave 5 High.

    Wealth cannot be preserved by investing in any fiat asset. Gold Miners, GDX, such as EGO, Junior Gold Miners, GDXJ, such as ANV, Silver Miners, SIL, such as SLW, and Junior Silver Miners, SILJ, such as SSRI, traded higher, manifesting a blow off market top, in the Precious Metal Mining Stocks; these are no longer a viable investment opportunity.

    Soon the US Dollar, $USD, UUP, will buckle and trade lower with the rest of the World Major Currencies, DBV, as well as the Emerging Market Currencies, CEW, which will invigorate the investment demand for Gold, GLD, whose price will rise from its current range of $1,240 to $1,260. Gold is in the middle of an Elliott Wave 3 Up, and as such only God knows how high it will go.

    • MacFly1

      Its good to have gold already stored away (in my bunker) but its also good to get lots of extra cash for a decent supply of toilet paper at the end of time. Also, since land prices will collapse, you can buy a piece of land to grow some food on it. Although you should already have that too.

  • Bruce C

    First of all, I still think there will be a major stock market correction sooner then later, and the mining shares are going to drop along with all the others, at least initially. If the mining shares continue to rally then they will be the first to sell off if/when a broad based selloff occurs because they will be one of the categories in which profits will have been made. So, an even better buying opportunity may still be in the offing.

    Secondly, until the “financial authorities” lose control of the gold price I would be very concerned about how they might manipulate the mining shares. The mining shares have a relatively tiny market capitalization and so it would be very easy for that asset class to be both boosted and shorted by the very same financial organizations that are boosting the share prices of big DOW and S&P companies, and of the gold price itself. I suppose one could gamble and hope to sell out before any orchestrated sell-offs erase one’s paper profits but that is basically just gambling, to me at least.

    Thirdly, and ironically this may be my biggest concern, the PM mining share theme may be just too obvious and pat to actually pan out. It’s true that when the price of oil rises then the share prices of oil producing companies seem to invariably rise too, but I don’t know if it will work that simply with mining companies.

    Personally, I’m still on the fence.

    • Bruce C

      This was supposed to preface the above:

      “As far as I’m concerned the latest developments have simply added to the list of reasons why the gold price should rise and mining stocks with it.

      However, I’m still wary of the mining stocks.”

      • pipefit9

        Gold miner stocks have about the worst investment class on the planet for the better part of a decade. Gold was making a similar move as the current move, from 1200 toward 1400, about four years ago. Where was the hui index trading? Around 500 points.

        Today? 240 points. Gold has gone sideways, and gold stocks have been cut in half. This makes sense, because the cost to mine gold has gone way up.

        • MacFly1

          It worked for me in 2008. ‘Course, you’ll have to have the gut to sell when the time is right. Dang market timers.

      • MacFly1

        Buy high and sell low, bubba.

    • MacFly1

      In 2008, I made a 90% return on my investment in gold stocks. That was directly in the face of other stocks selling off. What you’re talking about is a few days or a week or so. You’d better get in now, butthead.

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