Why I Bought Junior Gold Miners This Morning -- & Banked Nice Gains

This morning, I took nice half-gains in the Guggenheim Solar ETF (TAN). 

Why? TAN is down while the market is up, always a warning sign.  I'm out on the first half of the trade with 28% gains -- not bad for a trade I entered in September. I've moved up my close-only stop a lot, too. 

Meanwhile, my India position seemed to have stalled. So, I exited all of my WisdomTree India Earnings (CPI) at a nickel-a-share loss, and HALF of my WisdomTree Dreyfus Emerging Currency (CEW) at a decent 5.75% gain. I moved up the stop on CEW, too.

Bottom line: Taking gains before the weekend makes me happy, and I have less to worry about. AND I'll have money to put to work next week, if I want to. I traded more than I wanted to this week, but the opportunities were there. We'll see what happens next week.

I also added a new position this morning. After yesterday's action in gold, I'd made up my mind to buy something in precious metals if we got a pullback. I was leaning more toward an ETF than a single stock, for reasons I'll get to.

First, some news and charts. Specifically, let's start with these charts from Mark O'Byrne at Goldcore.com. Mark writes ...

A deeper look into China's gold holdings warrants attention (see charts).
Its last reported gold holdings in April 2009 were 1,054 metric tons. After adjusting for net imports from Hong Kong and domestic output, the figure is closer to 5,086 metric tons. If one were to take away gold uses for jewelry, industrial, and other categories and only add implied bar demand to central bank holdings, the figure is likely closer to 2,710 metric tons according to Bloomberg Industries’ Andrew Cosgrove and Kenneth Hoffman.
In just 10 years, China’s gold holdings could catch up to the U.S., based on adjusted Chinese consumption for jewelry, industrial and other uses and using implied bar demand as the primary driver of incremental central bank additions. 

Some other interesting news ...

• Gold premiums in India, the world's biggest buyer of the metal, stayed at a record high of $120 per ounce. Thailand has now slapped a 15% import tax on gold and jewelry being shipped to India, as India's government cracks down on importation loopholes. I'm sure the gold smugglers applauded.
• Bloomberg reports that gold holdings in exchange-traded products fell 3 metric tons to 1,886.2 tons yesterday. So far this year, gold assets held by ETPs have dropped 28% reaching the lowest since April 2010 on Oct. 21. This reverses the build we saw on Tuesday. Gold holdings in exchange-traded products rose by 6.5 metric tons on Oct. 22, the most since October 2012, according to data compiled by Bloomberg. So, if fund demand for gold is bottoming, it's a bumpy bottom. 
• And The U.S. Mint sold 39,000 ounces of American Eagle coins so far this month, triple September’s total, data on its website show. Don't get too excited -- 39,000 ounces is only 1.21 metric tonnes. But this may be indicative of sentiment. In fact, we may be seeing a bottom in sentiment.

Now, let's look at one of the major drivers of the gold price -- the US dollar.  The US dollar index is heading down to test that support I talked about previously ...

(updated chart)

I put #3 on there because someone sent me a note trying to say that was a trend (and potential support). Good luck with that. Maybe you'll luck out.

Anyway, What happens when the US Dollar Index tests support #2 is anybody's guess, but the trend is your friend, and the trend is lower.

And as we know, the recent trend is lower dollar = higher gold + higher miners.

This brings me to my next pick. I was considering adding the Global X Gold Explorers (GLDX), because it popped hard yesterday.

But it worries me that a stock like Pretium (PVG) was one of the big gainers.

You can read Pretium's sad story HERE. Basically, the big deposit they were developing may not turn out to have nearly the gold they thought it did. In fact, a geologist hired to assay it said the Valley of the Kings deposit at the Brucejack Project has "no valid gold mineral resources."

But on Pretium's website, you can read that Valley of the Kings is "comprised of high-grade visible gold stringers within a lower grade gold quartz stockwork system. The Valley of the Kings hosts Probable mineral reserves of 6.6 million ounces of gold (15.1 million tonnes grading 13.6 grams per tonne gold)." 

To paraphrase the great Inigo Montoya, "I do not think the word 'Probable' means what you think it means."


  The scary thing -- for me -- is that Pretium's Brucejack Project was recognized earlier this year with a discovery award from the Prospectors and Developers Association of Canada.

That indicates to me that the single-stock risk -- in explorers anyway -- is higher than average right now, or at least, higher than I had realized.

So I can't see buying any single explorer at this time. The risk is just too great.

I say that, but did you see what happened yesterday? Pretium rallied hard! Sure, many stocks rallied -- miners, developers, explorers. But who's buying Pretium? ...

(Updated chart)

Maybe it was short-covering, maybe we're seeing the Greater Fool theory at work.

Obviously, if Pretium can get a bid, viable explorers should get bids. And sure enough, yesterday, everything went up. But then I ran this next chart, comparing the gains made by the GLDX in the last (June 26 to August 26) rally. I compared the GLDX's performance against junior miners (GDXJ), silver miners (SIL), big gold miners (GDX), silver (SLV) and gold (GLD) ...

(updated chart)

You can see that the explorers did not significantly outperform junior gold miners or silver miners in the last rally.

So why would I buy a basket of explorers when I can buy a basket of producing junior miners? It seems to me that's where a lot of the value is anyway.

Why not buy a single junior miner?  Well, that's what I already did with Silvercrest, Primero and B2Gold. And if my thesis is correct, and precious metals and miners are on the cusp of a big rally, then we're at one of those rare stages in the market where you don't need to be as picky as you might be other times.

So, I bought the GDXJ at $40.72, right after the open.  It wasn't the low of the day, but it seems like a good price. We'll see if I'm crying in my beer come Monday.

So far, buying the dips has turned out to be worthwhile. I'm not your investment adviser -- do your own due diligence, and do what is best for your own investments.

Good luck, good trades, and have a great weekend.

Charts on Gold, Plus Who's Got the Mo-mo Mojo?

I'm going to write about gold today, because judging by my stats, EVERYBODY is interested in gold. But then I'm going to turn to other, more immediate ways to make money. Seriously, you should be checking out the action in other parts of the market. In fact, I'll show you a chart of Apple today that, if it were a chart of gold, would have the gold bugs flopping around in puddles of their own jizz.

Anyway, let's start with the central banks. Man, they have been buying a lot of gold, haven't they? Last week, I covered the latest statistics, which would seem to indicate that central banks are going to continue to add to their Smaug-worthy gold hoards at an avaricious clip -- as they have been doing for years.

This has continued despite the correction in gold. Since gold peaked, central banks have bought 884 metric tonnes of gold. Russia has bought the most, at 171 metric tonnes.

Well, now the central banks are saying they're through, dammit!

Speaking at the London Bullion Market Association in Rome, Juan Ignacio Basco, deputy general manager at the Central Bank of Argentina, said the 2013 volatility in prices had "definitely changed" attitudes among central bankers towards gold investment.

"We don't feel comfortable with gold's volatility," said Basco, "even though it's only a small part of the portfolio."

Another person on the panel with Basco added: "Many central banks are now prioritizing other assets over gold."

Who Are You Going to Believe, Me or Your Lying Eyes?

How unfortunate that Argentina's actions do not match its words.  That country has bought nearly 62 metric tonnes of gold for its central bank reserves over the last decade. It added the last 8 tonnes at record-high prices between July and October 2011. And this gold-buying came after Argentina sold down its 120-tonne gold reserves down to near zero in the late 1990s.

Well, if any central bank would have a reason to sell gold right now, it would be the U.S., right?  The U.S. has 8,133.5 metric tonnes of gold -- worth about $344 billion in today's market. That would cover some checks now that the Congress has de-funded the government.

But Uncle Sam has no intention of selling that gold. We know that because a Treasury official quoted by Marketwatch.com said: "Selling gold would undercut confidence in the U.S. both here and abroad, and would be destabilizing to the world financial system.” 

So, the Treasury considers U.S. gold holdings to be a key element in maintaining confidence in the financial system. Some "barbarous relic," eh?

Also, there's the embarrassing fact that $344 billion is only enough to keep the government going for a month. What then?

And then there's the fact that in January, Germany's Bundesbank confirmed that it plans to take 1,536 metric tonnes of its gold that is stored in the U.S.  That process will take a few years.

I wonder if Uncle Sam even has that gold to spare. I also wonder if Uncle Sam wants to buy that gold on the cheap. But I'll leave those thoughts to the tin-foil hat crowd ... for now. 

In any case, I'd say that the central banks have shown their hand ... and it's a hand that likes to own a LOT of gold.

What If They Gave a Crisis and Nobody Came?

People keep saying and writing that the budget battle/debt ceiling crisis is bullish for gold.  Unfortunately, gold doesn't agree. In fact, gold fell more than 2% last week despite the budget debacle.

Gold fell despite the fact that Treasury secretary Jack Lew told CNN on Sunday, "Congress is playing with fire!" Because "if the United States government, for the first time in its history, chooses not to pay its bills on time, we will be in default."

So why isn't gold up? I think part of the reason is the same one I laid out in September -- that this crisis is artificial and can end anytime House leader John Boehner feels like it.

By the way, let's revisit that chart I posted in my September article, "Your Next Buying Opportunity," in which I made the case that you should buy the pullback.

(Updated chart)

We haven't had much of a pullback at all. No wonder everyone is so freakin' calm. As far as the markets are concerned, there is no crisis.  So is it any wonder that gold is drifting sideways, despite the fact that the US dollar is near an 8-month low?

Investors are not very worried and do not expect any debt ceiling rupture to last long. Heck, just like me, they're all sitting in cash, waiting for that sell-off to buy it.

But listen, my friends. If you're focused on gold, then lift your myopic eyes out of the muck of US politics and focus on other parts of the world.

Bullish Forces for Gold Around the Globe

In India, gold prices are surging as demand picks up. Holiday season is around the corner.

In China, the physical gold deliveries on the Shanghai Exchange are growing ENORMOUSLY. 

Source

Look at that surge in gold sales! If this was happening in the U.S., I think CNBC would be broadcasting from the floor of the COMEX every damned day.

By the way, Sun Zhoaxue, president of China's biggest gold mine, says: "The average Chinese person only holds 4.5 gram of gold, that is far below an average of 24 grams per person globally."

Do you think the Chinese gold rush is over? I'd say it's barely started!  Just to get equal with the rest of the world China would have to import or mine another TWENTY-FIVE THOUSAND metric tonnes of gold and allocate the biggest part of this among the population.

And the Chinese have a cultural affinity for gold. They aren't settling for "average."

Gold has its problems.  And some people are focused on the wrong things -- like the obsession with gold eagle sales.  The markets for gold in India and China dwarf any gold eagle buying in the U.S. to mere molehills.

But if gold is your obsession, then focus on the big picture.  And the big picture is quite bullish for gold.

Chart Fiesta -- GLD, Alacer and More

In the short-term, gold and the GDX keep banging their heads on the 20-day moving average like a 7-foot guy walking through 6-foot doorways.

(Updated chart)

There's not much joy there, amigos. Not in the short-term. A wise man would wait for the trend to change.

That said, do you want to see some bullish gold miner charts? Sure ya do. You just can't help yourself.

(Updated chart)

First we saw Alacer break out of a lower range and move to a higher range. Now it looks like somebody keeps buying Alacer on the dips ... and they're getting impatient. You can credit rising production, project expansion, the sale of non-core assets -- it looks good.

Here's another that might surprise you ...

(Updated chart)

Remember when we'd all written Bear Creek Mining off for dead? Well, now the thinking that the geopolitics in Peru are turning more friendly. And that's breaking life into a stock, and pushing it toward a potential breakout.

I don't own either of these stocks.  You shouldn't either, unless you do your own due diligence and buy it for your own reasons.  Don't buy something just because a fat-head puts up a good looking chart. If you do something that stupid, let me know -- I'll reach right through the intertubes and slap the stupid off your face.

Now, I promised you a sexy chart of Apple, didn't I?  Here you go ...

(Updated chart)

You can see Apple put in a double-bottom. Then it broke through overhead resistance, which it retested as support. Now, it's coiling up. The next move should be a breakout. $600 could be in Apples' reach.

This is why the tech-heavy Nasdaq-100 is kicking the S&P-500's ass ... and running rings around the Dow.

Hell, I could go on about bull markets all day. I haven't even talked about the bull market in select energy stocks (a topic for another post).

The point is, if your investing universe begins and ends with precious metals, you're missing out. I like precious metals longer-term, and I think there are some incredible bargains you can pick up in the metals right now IF YOU HAVE PATIENCE.  I think the global trends point to much, much higher prices longer-term.

But if you want some boom-boom and vroom-vroom in the short-term, you need to look for the mo-mo mojo elsewhere.

When will gold miners finally find their mojo?  Stay tuned.