Gold Nov 30th + Peter Shiff

Gold received a nice $34.10 boost today for 1.98% after new of the central banks and the federal reserve mentioned that they will boost liquidity to the banks if needed.  Hmm, an increase in digital dollars again?

The financial markets liked it with huge gains to the upside.  Money that was sitting on the sidelines was put to use today with European debt uncertainty in the background for now.  But it is a temporary 'fix' as the debt issue will inevitably rise again, it's just a matter of time.

Chart of the World Gold Index from mid June 2011 with a fibonacci retracement from the low of the summer to the high in late August / September.  Today's rally sent Gold up to the 61.8 retracement level and closing just above the 20 day moving average.

Should the US Dollar continue to decline in the short term, Gold may be able to break above the upper trend line and make an attempt at a new high or a triple top.

The Gold and Silver miners had a good day as well, following the appreciation with the metals.  Money may start migrating into this sector as more solid earnings are released.  Watch the HUI index for a potential breakout in December.

Here is a message from Peter Shiff regarding an entry point into Gold:

Silver was up .85 today for 2.64%.  Return year to date is 6.03%.     Gold's return year to date is 22.64%.  

Gold, US Dollar, SF Hard Assets Conference

Gold was up $25.80 today after the Thanksgiving holiday week.  It has formed a wedge pattern which typically ends with a move up or a move down breaking one of the trend lines.  Based on the US Dollar declining this week (more on that below), Gold should be on the move up at least for the short term.

If Gold should break to the upside, it should not be long before it tries to break through to a new all time high. It's now above the 50dma and the stochastics may now start an upwards trend from an overbought state.

The US Dollar Index looks like it is continuing to produce lower highs (see the post the other week regarding this).  Here is a 2 year chart of the US Dollar Index and it did get close to taking out the last rally high of 80.43, but it could only get up to 79.88 which continues the lower high trend.  It may be on a short term decline with should rally the US financial markets and Gold / Silver.

I was at the SF Hard Assets conference on Sunday and listened to Rick Rule.  He mentioned that there will an increase in volatility within the markets and the people that are prepared to trade it will be rewarded. (Buy low, sell high............he did mention that it is easier said than done).  He mentioned all of the things we already know like European debt, US Debt and if the 30 year mortgage rises from 4% to 6.5%, housing may drop another 25%.

He likes Gold and Silver as a store of wealth and select miners.

Sprott to purchase 1.5 billion worth of Silver for PSLV

From Commodityonline:

Canadian billionaire Eric Sprott has filed for the purchase of $1.5billion in Silver bullion for covering an expected demand in his Sprott Asset Management's silver ETF- PSLV. A $1.5 billion in purchase will require about 45 million oz of silver.

Such a large purchase has normally Lead to higher prices. Sprott's $580 million silver purchase in 2010 was accompanied by an almost 175% gain in COMEX Silver when prices surged from $18 to $49! The current purchase of $1.5 billion is almost 3 times the 2010 purchase and as such prices could easily double or even triple.

Barclay's iShares Silver Trust issue also witnessed rapid price acceleration. COMEX silver had doubled from $7.50 to $15 within 6 months till the launch of the ETF.

Based on the info above, Silver _may_ start moving to the upside in the coming weeks as more physical Silver is removed from the market.  I say _may_ because the CME, CFTC and the bullion banks may have other plans for the remainder of the year...   Mr. Sprott can be seen as the Hunt Brothers of the 2010/2011 and going forward.

UDS Index Nov

Here is a 2 year daily chart of the US Dollar Index which has a long term downward trend, but short term upside momentum.


Even though it is moving up (and Gold/Silver going down), it should only be temporary as investors are parking their money into the US Dollar due to volatility in the financial markets.  The Index is still producing lower highs over the last two years:
$88.71
$83.52
$81.44
$81.31
$80.43 (Last peak)
Current rally ?

The last peak of 80.43 was very close to taking out the last high peak of 81.31 in January of this year which would have broken the downward trend of lower highs. Keep an eye on the current upside rally, if the downward trend continues, the current rally (78.44 and rising) should not take out $80.43. 

When the European debt issue is in the news, investors will flock to the dollar.  If it does not make headlines, the dollar will drop again...  risk on, risk off...

Long term Silver trend

Long term Silver trend is up for now...

Miner snapshot - Richmont Mines

Daily chart of Richmont Mines (RIC) from Sept 2010 to Nov 2011.

Richmont broke out to the upside in Feb 2011 and even though it has been through a rather bumpy ride since then, the medium term trend is up. The trading range between the upper and lower trend lines remains intact.....for now.

Some fundamental information from their website:

Quick Facts

• The stock is traded on the TSX and NYSE Amex under the ticker symbol "RIC".
• Fiscal year-end: December 31
• Head-office: Rouyn-Noranda, Quebec, Canada
• Shares Outstanding as of December 31, 2010: 31.2 million
• Number of employees as of December 31, 2010: 407
• Operating mines: 2
• Mine currently being developed: 1
• Number of wholly-owned mills: 2
• 2010 sales: 68,123 ounces of gold
• 2009 sales: 59,733 ounces of gold
• 2008 sales: 70,945 ounces of gold
• 2007 sales: 46,193 ounces of gold 

Richmont Mines has been successfully producing gold for over 20 years.

Our vision is to become an intermediate North American gold producer through a combination of organic growth, strategic acquisitions and partnerships.

We are…

• A profitable gold producer, operating in a safe political environment;
• Well-positioned to initiate partnerships and/or acquisitions.

We have...

• Operational expertise in underground, narrow vein gold mines;
• A portfolio of exploration properties in Quebec, Ontario and Newfoundland;
• A strong, flexible management team;
• A healthy balance sheet and underlying asset value.

We DO NOT have...

• Any long-term debt;
• Any hedging contracts. 

Our Mission: Building the Next Generation of Gold

Over 2010-2012, our focus will be on making the following key objectives and priorities a reality:

• To operate 4 to 5 mines;
• To increase our annual production to 200,000 ounces of gold;
• To build reserves of 1,000,000 ounces of gold;
• To reduce operating costs;
• To initiate strategic partnerships and/or acquisitions;
• To sustain a comprehensive Investor Relations marketing campaign;
• To achieve valuation parity with our peer group of Canadian junior gold producers.

Richmont Mines has one mine in development and 10 exploration properties. This company may be one to keep an eye on going forward.  Their website:  Richmont Mines


Disclosure: At the time of this writing, GSR does not hold any positions in the company.

Gold - Trading range / consolidation

Not much going on with Gold lately. It is in a consolidation period after the run up in August.

Here is a daily chart of the World Gold Index over the past 2 years.  White boxes indicate the consolidation periods after a run-up.

It's a stepping stone pattern that has been repeated over the past 10 years. Everyone that has been dollar cost averaging into Gold has done quite well.  Both physical and the ETF's. (Investors of the precious metals ETF's should know that they will need to exit the trade should there be a divergence with the ETF and the physical price)

You can see that the current box has the tallest range over the past 2 years.  Gold dropped $52.30 today for 2.95%.  Get used to these numbers as volatility is here to stay and will most likely increase. I heard one interview where investor Bert Dohman mentioned that Gold will go up more than $100 a day in the future. The way things are going, I think that statement is pretty much a fact.