Aug 13, 2010
1. When you do math at 4am, sometimes it works, and other times you think 1200/20 is 600, when it is 60. 600 times awaits us, in the future… Regardless, I met with a prominent gold dealer last night and his view, using similar calculations to mine, told him that the VALUE of gold, TODAY, is:
2. $85,000 an OUNCE. When Jim Sinclair did his gold valuation model years ago, he got $1600. I got $6000 when I did it a few years later. Now it’s $85,000.
3. Just because the fundamental value of gold is $85,000 does NOT mean it’s going there, at least not today, any more than the bond market is going down simply because the US govt is technically bankrupt. It may do the opposite. The worst investors I know are the MOST SURE of their analysis. ANALYSIS determines VALUE. LIQUIDITY FLOWS DETERMINE PRICE. Don’t assume that all the players in the markets will act as you do with your liquidity flows. They might, or they might not.
4. Speaking of value, as valuable as the Pgen is in the major markets, it’s “only” a BILLION times more valuable with juniors. Paid subscriber GoldLion told me yesterday, “I could probably name you 100 gold juniors that are trading 80% below their 2006 highs. Most of them are NOT coming back because of dilution.” When you bought a stock at $2 a share, and it had 100 million shares outstanding, and now it is 50 cents a share with 600 million shares outstanding, do you know how hard it is to get that stock back to $2, let alone to the pot of gold at the end of the gold bull market rainbow?
5. Here’s the good news: There are a mountain of juniors trading at prices 50-80% below their 2006 highs right NOW. Those who think gold $2000 or whatever is going to make those underwater juniors soar are likely dead wrong. At $2000 an ounce the public will be POORER than they are now. At $3000 they will be even poorer. If we get to $5000, buying gold is the last thing that will be on the public’s mind. HUNGER will be their consuming thought all day long. Not GOLD. This isn’t 1979, it’s the OPPOSITE of 1979. 1979 was a greed market. Gold is rising this time on fear, and I believe it will become TERROR. Institutions and central banks will provide the liquidity flows that take gold higher, not the impoverished public.
6. There is so much volatility in the juniors on a regular basis that without the Pgen you are playing the lotto. I don’t buy lottery tickets.
7. Elmer Fudd Long Term Investor versus the Gold Community: I’d urge those of you focused on wealth building (should be all of you) to SEPARATE the issue of the current debt implosion crisis from the long term demand picture for commodities based on the industrialization of the rest of the world.
8. It is HIGHLY LIKELY that by the time the response of liquidity flows to the crisis wanes, that industrial revolution will be in play in a major way. What is coming down the pipe is the CONSEQUENCES of printing money (inflation of the gold price) AND inflation of goods and services AFTER the crisis ends. The industrial revolution of Asia has DECADES to go. For those interested in long term investment, commodity prices are the best place to be. You don’t have the risk of the item blowing off the board that you have with stocks and junk bonds, and the upside is solid.
9. Gold continues to attack the 1220 (basis dec) resistance area. I totally reject the idea of “another 2008”. Here’s a look at the daily chart. Notice there is an upsloping head and shoulders.
11. Regardless of any short term hit, the gold chart looks positive, and the gold stocks charts look even more positive. That does NOT change the fact that WE sell strength.
12. Gold is UP now aprox $65 from the 1155 area lows. Thought[s] about buying now need to filed in the GARBAGE CAN.
13. Here’s the GDJ. GDXJ Aug 13 This chart shows the technical indicators overbought but with a bullish hook.
14. GoldLion told me yesterday that while ONE DAY DOES NOT MAKE A MARKET, the VOLUMES he’s seeing on the juniors were HIGHLY impressive in YESTERDAY’S trading. When you add his view my view of being blown away by the strength of GOLD on Wednesday as the DOW was MAULED as the USD soared, you have TWO reasons to think we might have “something” in the “golden air” here.
15. What DESTROYED a mountain of gold investors in 1979 was the rally in the US Dollar. They saw gold rallying, and then the dollar started to rise. Thinking they were golden smarty pants, they started shorting gold, believing that gold had to fall if the dollar rose. Their free money gold short Kachingos become burnt on fire KachingNO’s.
16. DON’T LET THAT BE YOU, HERE AND NOW. Gold is the punisher, not ANY paper money, and this entire crisis will be marked to MARKET by the PUNISHER, not the PHOTOCOPY MACHINE!!!
17. Play the dollar rally….YES.
18. Sell your gold because team photocopy machine MIGHT enjoy a moment in the sun? NO!!!
19. What is a confused investor to DO watching all the “darling” asset group links being twisted apart and not working? The answer is: Answer to PRICE and nothing else. If the dollar falls, buy the dollar but remember you are buying a paper currency during a period where the reserve currency of the world is on the edge of going into crisis mode.
20. We are on the very edge of a MAJOR breakout in gold stocks to the upside and the time is NOW to get IN THERE and buy, with your Pgen, the junior golds that have solid FINANCING & MANAGEMENT, with a decent project, but are down hard in price.
21. It doesn’t matter if some junior stock has been diluted and is down 70% from the 2006 highs if YOU are buying it now with your pgen. Throw the fantasy of making 10 billion percent on your juniors in the garbage and TAKE the REALITY of BOOKING profits consistently of 3%, 5%, 10%.... in a WEEK with various PORTIONS of your pgens.
22. Some of the stocks I’ve highlighted on Graceland Juniors have started to move already. If you get a 5 or 6% move on a stock you want to be taking some risk money off the table, not dreaming about millions of the public lined up down the street and gold $5000 to buy your junior golds at 10,000% profit to you. At $5000 gold, they’ll more likely be coming in an armed mob to steal your food and junior golds will be the last thing on the planet on their mind, which is why you MUST own PHYSICAL GOLD, so you manage risk, not just reward.
23. Generally speaking, when a junior gold becomes a 100,000 ounce producer per year, with a decent reserve, the bigger boys and girls are going to come looking. I’m talking: TAKEVOVER.
24. Some juniors, like Sangold, have the potential to become the next Eldorado, but a lot depends on how they manage the BUSINESS, as much as the asset they are sitting on. That’s why you need the Pgen.
25. Jaguar mining is another stock that’s been pounded by earnings. It’s part of the gdxj and NYSE traded! At $6 nobody wants it. At $14 everybody wanted it. You have to be able to buy “something”, even ONE SHARE, at $6. Don’t think about it going to $14 to $140. Think about $6 to 6.50 and what kind of percentage that is in what amount of time!
26. There is BIG money in the juniors, but it is booked NOT in the way that 99% of investors think.
27. The big money is in the small money…. Think about that.
28. See you out there. Keep in fresh. Maybe Friday the 13th plays out as the “unlucky” day, and you DON’T get to buy MORE GOLD before price blasts thru 1220.
See you out there,
S “the gold grid stalker” t… out.
Thank-you
Stewart Thomson
Graceland Updates