OzCopper

Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:

Ozcopper, WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Londonthenews, Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTreport, Vantagewire, Indiatimes, ninemsn, ibtimes, businessweek.com and the Association of Mining Analysts.

If you’re interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us at www.aheadoftheherd.com

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission.

Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.

Richard does not own shares of Global Cobalt Corp. TSX.V: GCO

Global Cobalt is a paid advertiser on Richard’s site, aheadoftheherd.com

Golden Economics & Silver Surprise

OzCopper — Tue, 11 Jun 2013 22:40:20 +0000

1. The saying, “Close, but no cigar!” could probably be used now, to describe gold & silver investors trying to call a turn in the market.
2. Bank analysts are more bearish. UBS technical strategist Richard Adcock says, “The next leg of the bear trend is to be seen down to the long-term 50 percent retracement point at $1,303, which we would set as our objective.”
3. The action of my gold market stokeillator (14,7,7 Stochastics series on the daily chart) suggests that Adcock could be correct. Please click here now. Double-click to enlarge. In the short term, gold has broken down from a small but bearish rising wedge pattern.
4. The $1300 – $1320 area seems like a reasonable short term possibility, and it’s important to note that banks are rumoured to be aggressive gold buyers now.
5. Only gamblers (anyone using leverage is a gambler) should hedge now, to avoid further price declines. Everyone else should be engaged in very light buying.
6. In a super-crisis, severe account drawdowns are just part of the “great gold game”. You can’t avoid them anymore than you can avoid breathing air. What matters is being able to carry your head high, regardless of where gold is priced.
7. The action of bond prices has a lot to do with how the gold market moves. In the late 1970s, inflation began to spike, and the Fed started aggressively raising rates.
8. Banks then shorted gold aggressively, and bought bonds.
9. From 1980 – 2000, gold collapsed and stayed down, while bond prices moved steadily higher.
10. Are there parallels between that period and today? Well, bond prices stalled out in September of 2011, and so did gold.
11. There is now a large head and shoulders top pattern on the weekly T-bond chart. Please click here now. The technical target of that top pattern is roughly 126.
12. If interest rates are starting to rise now, shouldn’t the banks be shorting gold now, like they did in 1979 – 1980?
13. In fact, the opposite appears to be happening; the COT reports show the banks are buying gold aggressively, and here’s why they would do that: By 1980, interest rates on long term bonds were near 20%.
14. Today, those interest rates are only about 3%.
15. A decline in bond prices to the 126 area, or even to par (100), would hurt bond market investors who bought in 2008 and 2009, but it wouldn’t drive interest rates to anywhere near the levels that existed in 1979 – 1980.
16. What the current decline in bond prices suggests is that global quantitative easing policy, combined with the lightly strengthening economy, is creating inflation.
17. At this point, that inflation is very moderate. Everyone in the gold community knows that prices of what people really need are rising, while governments issue reports that seem to be “massaged”.
18. It would appear that banks are buying gold, rather than shorting it, because they believe the deflation cycle is ending, and a cycle of rising inflation is beginning. The action of the T-bond suggests they are correct.
19. The Fed believes the business cycle is approximately 8 years long. This would suggest the global economy that peaked in 2007 will peak again, in 2015. In the meantime, if the economy continues to strengthen and interest rates continue to rise, there will be more price inflation, but it should still be quite moderate.
20. After 2015, as the Fed’s business cycle transitions from “up” to “down”, substantial stagflation is likely to begin, because central banks may feel compelled to print vast amounts of fiat currency, to counter the downturn.
21. This could cause institutions to panic, and buy gold. At the same time, new Asian gold ETFs should be well-established, enabling hundreds of millions of Chindian (China & India) citizens to buy gold easily, likely without affecting the current account deficit of their country.
22. In contrast to almost every other gold analyst, I do not believe that physical gold markets will overwhelm paper gold markets. The price-setting mechanism will remain with paper gold markets, but it will be overwhelmingly bigger Asian paper gold markets that set the price. Not the comex! The comex is akin to a rotary phone, in a world of iPhones. The comex won’t blow up, but it will become irrelevant.
23. Silver doesn’t do very well in a deflationary super-crisis, as most of the silver community found out, the hard way. It couldn’t even rise above the 1980 highs, while gold soared. In a “stagflationary” crisis, which is likely to happen in the post-2015 period, silver could really shine. Please click here now. That’s the monthly silver chart. I like to keep things simple (the KIS principle). Silver touched the lower Keltner demand line at the 2008 lows, and then staged a huge rally. It recently touched that same Keltner line again.
24. Silver offers a lot of value at current prices, to investors who believe in my stagflation and cost-push inflation scenarios in the post 2015 timeframe. Having said that, this is not the same type of market situation that existed during the 2008 lows, and “parabola hunters” should look elsewhere. If you understand silver as an “ultimate asset”, and you can accept that Asian paper gold markets are set for massive growth, then perhaps today is the day that you press the buy button for silver, and hold your head high into 2015!

Special Offer For OzCopper Readers: Please send an Email to freereports@gracelandupdates.com and I’ll send you my free “Golden Goodies” report. Which gold stocks are likely to pay substantial dividends to investors, in the coming years? I’ll show you my favourite ones, and where I’m buying them!

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Cheers

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Risks, Disclaimers, Legal
Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualifed investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is: 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an investor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line:

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Ghost Empire

OzCopper — Sun, 09 Jun 2013 01:28:21 +0000

Drought is a normal recurring feature of the climate in most parts of the world. It doesn’t get the attention of a tornado, hurricane or flood. Instead, it’s a slower and less obvious, a much quieter disaster creeping up on us unawares.

Climate change is currently warming many regions, warmer temperatures increase the frequency and intensity of heat waves and droughts.

We can prepare for some climate change consequences with public education, water conservation programs, limiting pumping from our freshwater aquifers to recharge rates and putting in place early warning systems for extreme heat events.

Unfortunately some things cannot be prepared for…like the pervasiveness and persistence of a hundred year drought caused by climate change.

The collapse of the world’s earliest known empire was because of drought.

The Akkadians of Mesopotamia forged the world’s first empire more than 4,300 years ago. The Akkad’s seized control of cities along the Euphrates River and swept up onto the plains to the north – in a short period of time their empire stretched 800 miles, all the way from the Persian Gulf to the headwaters of the Euphrates, through what is now Iraq, Syria and parts of southern Turkey.

Tell Leilan was a small village founded by some of the world’s first farmers. It’s located in present day Syria and has existed for over 8,000 years. The Akkad’s conquered Tell Leilan around 2300 B.C. and the area became the breadbasket for the Akkadian empire.

After only a hundred years the Akkadian empire started to collapse.

In 1978, Harvey Weiss, a Yale archaeologist, began excavating the city of Tell Leilan. Everywhere Weiss dug he encountered a layer of dirt that contained no signs of human habitation. This dirt layer corresponded to the years 2200 to 1900 B.C. – the time of Akkad’s fall.

The Curse of Akkad

For the first time since cities were built and founded,

The great agricultural tracts produced no grain,

The inundated tracts produced no fish,

The irrigated orchards produced neither wine nor syrup,

The gathered clouds did not rain, the masgurum did not grow.

At that time, one shekel’s worth of oil was only one-half quart,

One shekel’s worth of grain was only one-half quart. . . .

These sold at such prices in the markets of all the cities!

He who slept on the roof, died on the roof,

He who slept in the house, had no burial,

People were flailing at themselves from hunger.

The events described in “The Curse of Akkad” were always thought to be fictional. But the evidence Weiss uncovered at Tell Leilan (along with elevated dust deposits in sea-cores collected off Oman) suggest that localized climate change – in Tell Leilan’s case a three hundred year drought, desertification, was the major cause.

“Since this is probably the first abrupt climate change in recorded history that caused major social upheaval. It raises some interesting questions about how volatile climate conditions can be and how well civilizations can adapt to abrupt crop failures.” Dr. Harvey Weiss, Yale University archeologist

Ghost Empire

Perhaps the most notable empire decline due to drought, or altered precipitation patterns, was the Maya empire. At the peak of their glory the Maya ranged from Mexico’s Yucatán peninsula to Honduras. Some 60 Maya cities – each home to upwards of 70,000 people – sprang up across much of modern day Guatemala, Belize, and Mexico’s Yucatán Peninsula.

“The early Classic Maya period was unusually wet, wetter than the previous thousand years… Mayan systems were founded on those [high] rainfall patterns. They could not support themselves when patterns changed.” Douglas Kennett, an environmental anthropologist at Pennsylvania State University.

During the wettest centuries, from 440 to 660, Maya civilization flourished.

Then things got worse, much worse. The following centuries, to roughly 1000 A.D., did not treat the Mayas as kindly, they suffered repeatedly from drought, oftentimes extreme drought lasting a decade and more.

Between 1020 and 1100 the region suffered the longest dry spell in many millennia. The Maya’s suffered crop failure after failure, famine, death and eventually mass migration.

“Yucatecan lake sediment cores … provide unambiguous evidence for a severe 200-year drought from AD 800 to 1000 … the most severe in the last 7,000 years … precisely at the time of the Maya Collapse.” Richardson Gill, The Great Maya Droughts

After 200 years of drought, in just an eye-blink of time, famine and drought held sway, most people walked away leaving behind a ghost empire.

Drought Today

Currently the percentage of Earth’s land area stricken by serious drought is intensifying. Widespread drying has occurred over much of Europe, Asia, North and South America, Africa, and Australia.

“Desertification, along with climate change and the loss of biodiversity, were singled out as the greatest challenges to sustainable development at the 1992 Rio Earth Summit. Unfortunately, desertification, land degradation and drought (DLDD) have accelerated during the 20th and 21st centuries to date, posing fundamental problems and challenges for drylands populations, nations and regions in particular.

Severe land degradation is estimated to be affecting 168 countries around the world, according to a first-of-its-kind cost-benefit analysis (CBA) of the global effects of desertification released during the UNCCD Conference and Committee Meeting held this past April (April, 2013 – editor) in Bonn, Germany. That’s up sharply from 110 as of a previous analysis of data submitted by UNCCD parties in the mid-1990s.” Andrew Burger, ‘Global Warming is Real’

“In April 2013, short-term global drought conditions intensified on all continents except Antarctica with little relief worldwide. In North America, the intensification was seen in the Central and Southern Plains of the U.S. and down into central Mexico. In South America, drought conditions changed little with severe drought conditions remaining in eastern Brazil and along the leeward side of the Southern Andes. In Africa, drought intensified along the equator, especially in the eastern part of the continent and across Madagascar. In Europe, drought intensified across most of the central part of the continent. In Asia, drought continued to intensify in southern China and across Southeast Asia, as well as across southern Russia and northern Kazakhstan and Mongolia. In Australia, drought intensification occurred in many inland areas.”drought.gov

“Namibia, already the driest country in sub-Saharan Africa, is experiencing a severe drought, with some regions receiving the lowest seasonal rainfall in three decades.” June 3rd 2013, Newsday

“Australians are some of the world’s greatest energy consumers, and people in Perth use more water than any other city in Australia. Yet theirs is also the driest climate in the world, and Perth sits right on the edge of a vast desert. Perth sits above a vast ancient aquifer of 40,000-year-old water that has traditionally been the main source of drinking water. But in the mid 1970s there was a dramatic shift in climate that resulted in a decline of between 15% and 20% in winter rainfall. The combination of rising temperatures and a lack of wet winters has meant a steady decline in water levels in the aquifer and they are not being recharged. By the mid 1990s, scientists realized they were facing more than a prolonged drought, that this was in fact climate change.” News.bbc.co.uk

Conclusion

As the earth warms some regions will get wetter, many much drier.

Climate change, global warming, drought and desertification. What’s happening in your particular region should be on your radar screen. Is it?

If not, it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

Source: http://oilprice.com/Interviews/Will-Saudi-Arabia-Allow-the-U.S.-Oil-Boom-Interview-with-Chris-Faulkner.html

Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:

OzCopper, WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Londonthenews, Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTreport, Vantagewire, Indiatimes, ninemsn, ibtimes, businessweek.com and the Association of Mining Analysts.

If you’re interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us at www.aheadoftheherd.com

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

Gold, Silver & Precious Metal Miners Signals

OzCopper — Fri, 07 Jun 2013 00:55:44 +0000

It has been a very long couple of years for the precious metal bugs. The price of gold, silver and their related mining stocks have bucked the broad market up trend and instead have been sinking to the bottom in terms of performance.

Earlier this week I posted a detailed report on the broad stock market and how it looks as though it‘s uptrend will be coming to an end sooner than later. The good news is that precious metals have the exact flip side of that outlook. They appear to be bottoming as they churn at support zones.

While metals and miners remain in a down trend it is important to recognize and prepare for a reversal in the coming weeks or months. Let’s take a look at the charts for a visual of where price is currently trading along with my analysis overlaid.

Weekly Price of Gold Futures:

Gold has been under heavy selling pressure this year and it still may not be over. The technical patterns on the chart show continued weakness down to the $1300USD per once which would cleanse the market of remaining long positions before price rockets towards $1600+ per ounce.

There is a second major support zone drawn on the chart which is a worst case scenario. But this would likely on happen if US equities start another major leg higher and rally through the summer.

Weekly Price of Silver Futures:

Silver is a little different than gold in terms of where it stands from a technical analysis point of view. The recent 10% dip in price which shows on the chart as a long lower candle stick wick took place on very light volume. This to me shows the majority of weak positions have been shaken out of silver. Gold has not done this yet and it typically happens before a bottom is put in.

While I figure gold will make one more minor new low, silver I feel will drift sideways to lower during until gold works the bugs out of the chart.

Silver Mining Stock ETF – Weekly Chart:

Silver miners are oversold and trading at both horizontal support and its down support trendline. Volume remains light meaning traders and investors are not that interested in them down where and it should just be a matter of time (weeks/months) before they build a basing pattern and start to rally.

Gold Mining Stock ETF – Weekly Chart:

Gold mining stocks continue to be sold by investors with volume rising and price falls. Fear remains in control but that may not last much longer.

Gold Junior Mining Stock ETF – Weekly Chart:

Gold junior miners are in the same boat with the big boys. Overall gold and gold miners are still being sold while silver and silver stocks are firming up.

Precious Metals Trading Conclusion:

In the coming weeks we should see the broad stock market top out and for gold miners along with precious metals bottom. There are some decent gains to be had in this sector for the second half of the year but it will remain very dicey at best.

If selling in the broad market becomes intense and triggers a full blown bear market money will be pulled out of most investments as cash is king. Gold is likely to hold up the best in terms of percentage points but mining stocks will get sucked down along with all other stocks for a period of time. This scenario is not likely to be of any issue for a few months yet but it’s something to remember.

Get My Daily Precious Metals Report Each Morning And Profit!
www.TheGoldAndOilGuy.com
Chris Vermeulen

Will Saudi Arabia Allow the U.S. Oil Boom? Interview with Chris Faulkner

OzCopper — Wed, 05 Jun 2013 00:10:50 +0000

Technology, technology, and more technology—this is what has driven the American oil and gas boom starting in the Bakken and now being played out in the Gulf of Mexico revival, and new advances are coming online constantly. It’s enough to rival the Saudis, if the Kingdom allows it to happen. Along with this boom come both promise and fear and a fast-paced regulatory environment that still needs to find the proper balance.

In an exclusive interview with Oilprice.com, Chris Faulkner, CEO of Breitling Energy Companies—a key player in Bakken with a penchant for leading the new technology charge—discusses:

How Bakken has turned the US into an economic powerhouse
What the next milestone is for Three Forks
What Wall Street thinks of the key Bakken companies
Where the next Bakken could be
What to expect from the next Gulf of Mexico lease auction
What the intriguing new 4D seismic possibilities will unleash
What the linchpin new technology is for explorers
How the US can compete with Saudi Arabia
Why fossil fuel subsidies aren’t subsidies
How natural gas is the bridge to US energy independence
Why fossil fuels shouldn’t foot the bill for renewable energy
Why Keystone XL is important
Why the US WILL become a net natural gas exporter

James Stafford: How important are Bakken and Three Forks to US energy in the big picture?

Chris Faulkner: The Bakken Shale has been the biggest driver in America’s reversal of decades of decline in oil production. It has transformed North Dakota into an economic powerhouse with the nation’s lowest unemployment rate and fastest-growing GDP—and an oil production level surpassing that of some OPEC nations. An added increment of almost 800,000 barrels per day of oil output, built in less than a decade, has helped the US reduce its dependency on oil imports from often hostile countries by 22% since peaking in the mid-2000s.

US oil production is at its highest level since 1992, and in another 5 years, it is projected to reach its highest level since 1972. More importantly, the US oil production surge will help tamp down the possibility of chronically recurring oil supply shortages and help keep a lid on oil price spikes for the foreseeable future. Additionally, the Bakken surge is helping to narrow the spread between WTI and Brent, providing even more economic incentive to develop the costly unconventional resource plays.

James Stafford: The US government recently more than doubled its estimates for Bakken and Three Forks to 7.4 billion barrels of undiscovered and technically recoverable oil and 6.7 trillion cubic feet of natural gas. How is the industry responding to this? How are investors responding?

Chris Faulkner: Some operators had already been developing the Three Forks formation ahead of the USGS revised estimate for the Greater Bakken play. That drilling in fact provided much of the knowledge about the Three Forks that led to the USGS upgrade. We’re already seeing stepped-up drilling in the Three Forks, and some of that will entail dual horizontal laterals, a real milestone that could yield spectacular IP rates. Accordingly, Wall Street analysts are upgrading their guidance on companies such as Continental Resources that are leading the Bakken charge.

James Stafford: What’s the next Bakken?

Chris Faulkner: That’s a tough one. In a sense, we’ve already seen it with the Three Forks reappraisal. But it would be exceedingly difficult to replicate the Bakken, with its vast areal extent and thick pays. Progress is being made with a modest level of drilling in the Tuscaloosa Marine Shale of southern Louisiana and Smackover Brown Dense Shale in southern Arkansas/northern Louisiana, but results have been somewhat spotty to date. Perhaps the best prospective candidate is the Cline Shale in the Texas Permian Basin. This shale covers a vast area, has very thick pay zones, and there is established infrastructure. Some estimates have put its technically recoverable resources at 30 billion barrels of oil. But it’s very early days in that play. Devon Energy is moving aggressively there, and we should get some hints of its true potential before too long.

James Stafford: How excited should investors be about the Monterrey Shale?

Chris Faulkner: Some restraint is in order. While preliminary estimates put potential Monterey Shale technically recoverable resources at more than 15 billion barrels, it’s hardly a slam dunk. There has been a flurry of leasing and some drilling to date, but as of yet no operator has “cracked the code” for the Monterey. Even apart from the substantial technical challenges and complicated geology and petrophysics, a bigger hurdle would be the widespread and entrenched anti-oil development attitudes industry faces in California, which already has the most stringent regulatory regime in the nation. Furthermore, that anti-oil stance will just gain momentum with the anti-frac campaign that the environmental pressure groups are pushing now.

James Stafford: The US government’s next auction of Gulf of Mexico acreage is expecting a bigger turnout than previous auctions. How is the bidding environment shaping up ahead of this sale?

Chris Faulkner: Excellent. Even with the near tripling of minimum bid requirements in deepwater areas, I expect brisk bidding. Operators are fine-tuning their exploration strategies in the deepwater areas, and some recent significant discoveries, such as ConocoPhillips’s huge Shenandoah find, will only stoke that enthusiasm. I think we’re also seeing the beginnings of a revival in shallow Gulf waters, judging from the high number of bids there in the last sale. Expectations of a gas price rebound were underpinned by the latest approval of another LNG export terminal—both positive for shallow-water drilling.

James Stafford: How important are Brazil’s pre-salt finds to a revival in the US Gulf of Mexico?

Chris Faulkner: The Gulf revival is proceeding quite nicely as it is with the string of big discoveries in the Inbound Lower Tertiary. However, the knowledge and best practices being accumulated in the pre-salt play off Brazil probably benefits the pre-salt plays emerging off West Africa more so than in the US Gulf, where success has been concentrated more in the subsalt. In fact, the advances gained in probing the Gulf subsalt—particular in seismic technology—laid much of the groundwork for decoding Brazil’s pre-salt. I think you’ll see the Gulf operators focus more on the Lower Tertiary as the flavor of the day.

James Stafford: How are drilling advancements contributing to a re-evaluation of old data and the collection of new data?

Chris Faulkner: There’s no doubt that MWD and LWD [Measurements-while-Drilling/Logging-while-Drilling] have helped operators gain a better perspective on old well logs. As accumulation of drilling data in real time makes even more technical advances, progress will continue. This may be the biggest contributing factor for the dramatic reductions in spud-to-release times that we’ve seen in the major unconventional plays.

James Stafford: What are the most recent major advancements in seismic imaging and data processing that are changing the way companies decide where to explore and where to drill next?

Chris Faulkner: 3D seismic is firmly established as a valuable exploration tool, especially for delineating reservoirs that have already been identified, and there are intriguing new possibilities for 4D seismic (essentially 3D seismic phases over time), especially for enhanced oil recovery and carbon sequestration applications. But in terms of pure exploration, the linchpin technology has been reverse time migration, which really got the ball rolling for subsalt and pre-salt plays in the Gulf and off Brazil and West Africa. Then explorers started using pre-stack depth migration to ultimately arrive at a fully defined 3D salt geometry, which has fueled much of the success in the Gulf.

James Stafford: What can we expect both from drilling technology and supercomputer data collection and processing over the next 5-10 years?

Chris Faulkner: We’ll probably see a growing convergence of microseismic data gathering and processing in real time and real-time drilling data gathering to enhance mapping of natural fractures in tight reservoirs that may help drillers better steer the well so as to optimize subsequent placement of frac stages.

James Stafford: Can the US really compete with Saudi Arabia in terms of production?

Chris Faulkner: Sure, just as long as the Saudis will allow it. Don’t forget the Kingdom is still the world’s swing supplier, a role it’s held since the late 1970s. It’s important to remember that the Saudis not only have the largest proved reserves of oil, it’s also the largest repository—by far—of low-cost oil reserves. Much of Canada’s oil sands and US tight oil requires $75 per barrel or more to be economically viable. Saudi Arabia also needs $75 per barrel, but that’s to support its current domestic budget. The Kingdom’s lifting costs are somewhere around $5 at last report. So Saudi Arabia could easily flood the market, as it did in the early ‘80s, if it lost too much market share, dropping oil prices to $50 or less, and US drilling and production would collapse. Ideally, growing demand from China and other Asian markets will help sustain Saudi production levels and oil prices even as the Americas become self-sufficient in oil.

James Stafford: Can we expect to see a gradual end to fossil fuel subsidies in the near or medium-term?

Chris Faulkner: Depends on what you mean by subsidy. Anti-oil factions erroneously claim that the standard tax incentives that the US oil and gas industry shares with most other American businesses are subsidies. But while these incentives are the target of some heated rhetoric, there are enough red-state Democrats in Congress to prevent them from being stripped away, especially for the independent oil companies that rely most heavily on them. A more likely development in the US would be incremental attempts to impose a “back door” carbon tax by proxy–essentially the Obama administration resorting to regulatory overreach to add to the costs of fossil fuel development, production, and consumption. This kind of disincentive essentially creates a subsidy-in-reverse.

James Stafford: Who benefits most from these subsidies and how?

Chris Faulkner: Again, if you mean standard industry tax breaks such as expensing of intangible drilling costs, expanded amortization for G&G costs, repealing the percentage depletion allowance benefit, pure-play E&P independents rely on them more heavily than integrated firms such as the majors or hybrid midstream/upstream firms. I’ve seen estimates that eliminating these incentives could slash as much as 15–20% of US drilling. But if you mean true subsidies such as those in Iran or Venezuela aimed at keeping gasoline and other fuel costs to consumers below their real costs, then the primary beneficiaries are the autocrats and dictators who might get ousted without them.

James Stafford: Is natural gas a feasible bridge to the US’ renewable energy future, and will the Obama administration’s plan to fund clean energy projects with oil and gas revenues work?

Chris Faulkner: Absolutely yes and absolutely no, respectively. The fact that US greenhouse emissions have fallen in recent years owing mainly to power plants switching from coal to low-cost natural gas illustrates the first point quite clearly. The fact that US LNG export projects are moving ahead underscores the point that there are abundant gas resources to support that bridge.

As to the second point, one word: Solyndra. How do you think Americans will react to their energy bills spiking so that more of their tax dollars can be flung down that rat hole? How reticent do you think the Republicans will be about pointing that out?

James Stafford: How important is Keystone XL to the US’ energy future?

Chris Faulkner: Keystone XL is important for several reasons. First, blocking the project will alienate our most important energy trading partner, Canada. Some folks talk about US energy self-sufficiency, but for oil that is a much taller hurdle; however, North American oil self-sufficiency could be achieved in less than a decade. Who knows how Canada will react to such a snub and an apparent violation of NAFTA? Retaliatory measures in energy trade are not out of the realm of possibility. The irony is that Canadian oil sands syncrude, bitumen, and heavy oil will continue to move south irrespective of Keystone XL’s fate, so any purported environmental benefits from stopping the project are a wash. And Gulf Coast refiners are eager to replace declining supplies of heavy crude from Mexico and Venezuela (not to mention the reliability of the latter’s supplies) with low-gravity feedstock from a friendly North American supplier whose supply will only increase.

Perhaps the most important impact of blocking Keystone XL is symbolic. If the administration caves to the environmental pressure lobby, it sends an unmistakable message to both sides; the result will be a perception of significantly heightened investment risk in the US oil sector and an emboldened opposition that will use the momentum of this “victory” (certainly a pyrrhic one for America) to step up opposition to oil and gas development everywhere in North America. Don’t forget: A hostile administration beset by a sluggish economy imposed the windfall profits tax that resulted in the migration of hundreds of billions of dollars of US oil and gas company E&P capex overseas; this was the single biggest factor in the US oil production decline of the past several decades. A regulatory stranglehold can have the same effect.

James Stafford: What can we expect in the next 1-2 years in terms of advanced fracking technology that could help remove some of the opposition to the process?

Chris Faulkner: The use of benign frac fluid constituents taken from food sources is certainly a significant advance and at least shows industry is trying to address the public’s concerns. Breitling Oil and Gas’ EnviroFrac™ program was founded in February 2010 to evaluate the types of additives typically used in the process of hydraulic fracturing to determine their environmental friendliness. After evaluations are completed, EnviroFrac™ calls for the elimination of any additive not critical to the successful completion of the well and determines if greener alternatives are available for all essential additives. EnviroFrac™ is a decisive move toward an even greener fluid system. By reviewing all of the ingredients used in each frac, the program identifies chemicals that can be removed and tests alternatives for remaining additives. To date, the company has eliminated 25% of the additives used in frac fluids in most of its shale plays.

But the truth of the matter is that the science and data have always been on industry’s side in this debate. So technology is less of a consideration in removing opposition than are efforts to educate the public about the science and data.

James Stafford: How important is technology versus acreage to a company’s success? How does this balance work out for Breitling?

Chris Faulkner: Given our size, Breitling’s focus on technology actually provides leverage for our investors against the huge scale of effort and capex that larger companies employ in amassing vast leaseholds in today’s resource plays. We rely on advanced exploration technology to help us find prospects others might have overlooked and help us be more selective in high-grading the best opportunities. For example, 3D seismic surveys—and earlier 3D surveys in particular—often contain information that is beyond visual resolution and thus escapes the interpreter. Signal processing on the workstation using what might be termed “geologically based seismic deconvolution” has the potential to enhance the resolution to the point that this hidden information can be made visible and incorporated into the interpretation. Breitling’s patent-pending Geo3D Seismic Filtering technology takes existing 3D seismic data and enhances it so that it is noise-free with a broad enough “zero phase” spectrum to represent fractional match points that could lead to oil and gas discovery. Within the limitations of the seismic data we can use this synthetic data to optimize our 3D data set and locate oil and gas reservoirs that were missing in previous low resolution interpretation.

James Stafford: There have been a number of hints by the Obama administration that the US could become a net gas exporter, with potential exporters eyeing lucrative Asian markets. What will this mean for gas prices at home? What will it mean for the US economy?

Chris Faulkner: I think this has gone beyond the “hints” stage with the administration recently approving a second LNG export terminal, although I expect more of that LNG will go to Europe than to Asian markets. The US would experience a net economic benefit occurring with unrestrained exports. Certainly US gas prices would increase but not nearly as much as EIA’s earlier study concluded, because global competition among established LNG suppliers would put a cap on US LNG exports at a certain price point. The US trade balance will improve. All energy-intensive industries combined would see a loss of jobs or output no greater than 1% in any year. If anything, putting a cap on LNG export volumes would probably push gas prices higher because it lessens that competition emerging in an increasingly global LNG trade.

James Stafford: Chris, thanks for taking the time to speak with us – hopefully we will get a chance to speak later in the year. For those of you looking to find out more about Chris and Breitlings operations please visit: http://www.breitlingenergy.com

Interview by. James Stafford of Oilprice.com

“Gold Bear Train Wreck?”

OzCopper — Wed, 05 Jun 2013 00:09:45 +0000

1. The gold bears may have gotten themselves into a bit of hot water. Please click here now. Double-click to enlarge.
2. That’s the daily chart for DUST-NYSE, which is a triple-leveraged bet against gold stocks. There’s a massive double top pattern in play now, featuring an important RSI non-confirmation. The technical target of that top formation is $30.
3. Please click here now. Double-click to enlarge. That’s the weekly DUST chart, which portrays the big picture. It looks like a technical “train wreck”; almost every technical indicator and oscillator on this chart is flashing a substantial sell signal.
4. The meltdown on the DUST charts should be good news for gold stock investors, and I think it is. Please click here now. Double-click to enlarge.
5. That’s the GDX weekly chart, and it looks superb. Note the red downtrend line, where the price is now. A move above that line could usher in a lot of momentum players.
6. Those traders are likely already noticing the powerful buy signals being generated on key technical indicators.
7. GDX could make a run towards HSR (horizontal support and resistance) near $38.68, and that could cause immense pain to the leveraged bears.
8. The domino effect of ongoing short covering could create a violent rally in gold stocks, much bigger than what has occurred so far.
9. I’m especially impressed with the GDX weekly chart volume, which exceeded 100 million shares in each of the last two trading weeks.
10. Some gold market investors wonder if technical analysis still works. Are algorithm trading programs run by the banks simply “painting” the charts?
11. Well, I don’t think anything has changed in recent years. Charting has always been imperfect, and I don’t see it as any better or worse now, than in the past.
12. The larger HSR zones are most likely to be used by the biggest market players, while the “small potatoes” chart patterns have always been a bit of a crapshoot.
13. So far, junior stocks are leading this rally, but most analysts are nervous, due to the enormous drawdowns that this sector has experienced.
14. I’m not too concerned, so I’ve been a solid buyer of GDJX and other junior-related plays, deep into my “personal surprise” zone.
15. The most wealth is likely built when brave investors place buys at prices they “know” are totally impossible. Buying your personal surprise zone is like using contrary opinion analysis, but I believe it’s a much more powerful tool.
16. Please click here now. You are looking at the GDXJ weekly chart. The volume isn’t as strong as on the senior and intermediate stocks, but it’s still very good, especially with most investors and analysts too afraid to buy.
17. GDXJ is up about 20% already, from the recent lows at $10.40. That’s a huge move; annualized, junior gold stocks are rallying at a rate of about 200%.
18. After that kind of upside performance, you should be prepared to experience some very vicious down days, but there’s no question that the weekly GDXJ chart suggests that much bigger gains are coming.
19. I think GDXJ can rally to about $16.73, before any of the weekly chart indicators turn negative. That is roughly a 60% move from the low.
20. Most investors in the gold community probably paid a lot more than $16.73 for GDXJ and their individual holdings, on a percentage basis, but remember that your entry prices are recaptured one price tick at a time. All upside price movement must be viewed as good news, because it is!
21. Traders that bought into the recent lows should try to book some light profits now. Hold some larger “swing” positions, in anticipation of a much bigger rally.
22. Please click here now. That’s the hourly bars gold chart, and you can see that gold has been grinding higher over the past couple of weeks. Take a good look at the six green arrows that I’ve highlighted on that chart. Those are minor bouts of short covering, and I think they are like tremors before a major earthquake. A short covering “super-rally” could literally wipe most bears right off the gold map.
23. All golden eyes should be focused on this Friday’s jobs report. Almost all the recent economic reports have been weak. The Japanese experiment with high-powered QE has been a total disaster. Their stock market has collapsed, because so many Japanese companies do not benefit from a lower Yen. The collapse in the Japanese bond market has cut off their funding.
24. Please click here now. Double-click to enlarge. That’s the weekly EWJ-NYSE chart, a Japanese stock market proxy fund. Technically, it’s horrific. Rather than ending, the decline may be only just starting. Instead of an economic boom, Japanese QE may create cost push inflation that spreads around the world. Is the Japanese stock market crash a precursor to a US market wipeout, and a gold stocks “super rally”? It could happen, and the only question may be, are you positioned to profit, if it does?

Special Offer For OzCopper Readers: Send me an Email to freereports4@gracelandupdates.com and I’ll send you my free “Natural Gas & Oil, What Now?” report. Which of these 2 key fuels should investors focus on now? I’ll show you how I’m playing both of them!

Thanks!

Cheers

Written between 4am-7am. 5-6 issues per week. Emailed at aprox 9am daily.

Rate Sheet (us funds):

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US Stock Market Foreshadows Another Rally – True Story!

OzCopper — Wed, 05 Jun 2013 00:08:07 +0000

Over the past couple week’s investors and traders have been growing increasingly bearish for the US stock market. While I too also feel this rally is getting long in the teeth there is no reason to exit long positions and start shorting.

My followers know I do not pick tops and I do not pick bottoms. This I explained in great detail in my previous report. There are more cons to that tactic and on several different levels (timing, volatility, emotions, lack of experience, addiction) than there are pro’s.

Keeping things simple, short and to the point here is my thinking for today and this week on the broad market. Remember my analysis is 100% technical based using price, volume, cycles, volatility, momentum and sentiment. I try not to let any emotions, gut feel, or bias flow into my projections. I say “TRY” because I am only human and at times when the market and emotions are flying high they still take control of me but that is few and far between.

So let’s get to the charts shall we!

SP500 Index Trading Daily Chart – SPY Exchange Traded Fund

The SP500 index continues to hold up within its rising trend channel and the recent pullback is bullish. Remember the trend is your friend and it can continue for very long periods of times ranging from days, weeks, and even months…

The US Stock Market MUSCLE Indexes

The charts below show and explain my thinking… But in short we need these two indexes to be strong if we want to see another major leg higher in the SPY, or to at least test the recent highs.

Today the market opened slightly higher and push up in the first 30 minutes with strong volume. Overall the market looks as though it needs a day pause/pullback before taking another run higher.

Small cap stocks are the ULTIMATE Risk On play and generate ridiculous gains in very short periods of time. I focus on these with my trading partner exclusively at ActiveTradingPartners.com where we have been making a killing on trades like: NUGT up 21% in 1 day and IOC up 11% in 2 days

Bullish Index Price, Volume & Candles

The SP500 has been very predictable the past couple weeks for both intraday trading during key reversal times in the market when price has pullback to a support zone, and also for swing trading. Last week we myself and followers bought SSO ETF when the market pulled back and we exited the next day for a 3.5% profit.

Yesterday was a perfect intraday example with the SP500 bottoming out at my 11:30am morning reversal time zone with price trading at support. Price then rallied into the close posting a 12 point gain on the SP500 futures for a simple momentum play pocketing $600.

US Stock Market Mid-Week Conclusion:

In short, I still like stocks as the place to be and will not get bearish until proven wrong. Once price reverses and the technical clearly paint a bearish picture with price, volume, momentum, cycles and sentiment will I start shorting the bounces.

This week is a pivotal one for the stock market so expect increased volatility and possibly lower lows still until the counter-trend flushes the weak position out before moving higher.

If you like my simple, clean and profitable market analysis join my NEWSLETTER: www.thegoldandoilguy.com/signup.php

Chris Vermeulen

Seven Keys in Timing Stock Market Tops – Part II

OzCopper — Tue, 04 Jun 2013 01:38:03 +0000

Timing stock market tops and bottoms is risky business and we all know the more the more risk we take the more potential gain would could also made. Correctly timing a top or bottom for any investment is flat out exciting not to mention financially rewarding. But this high risk trading tactic does come with some major issues which you must FULLY understand so that you can protect your capital and self-confidence.

On May 13^th I wrote a special report on how to spot market tops just before they happen and how to do it with a very high probability of success. I also explain the major pit falls to be aware of so you stay on the right side of the market.

I recommend you read this special report now: http://www.thegoldandoilguy.com/articles/how-to-spot-time-stock-market-tops/

That special report truly showed you what was going to happen a few weeks before it did. Much like how this report shows you what is likely to happen in June.

Looking at the market with my YOU ARE HERE type of using cycles, volume, price patterns and momentum to forecast what is likely to unfold in the coming weeks. Depending on the time frame used for my analysis I can figure out with a high probability where price will be in a few minutes, hours or days also.

Mall Market Directory – You Are Here

Stock market tops are tough to trade and time. That is because there are so many things happening in the media and emotions running wild that it’s tough to get a grasp on what you should really be focusing on to keep a level head trade around it.

Market tops are typically not an event but rather a progression that takes much longer than most individuals expect. I still find myself jumping the gun at times and I know this and have been through this process hundreds of times in various investments. The human brain is a powerful tool but emotions can force you to override your rules/strategy still.

Stop Fighting! – Bulls & Bears are BOTH Correct at this Stage

It does not matter where you go to get your stock market news and reports… Everyone is arguing their bullish or bearish case more than EVERY. There is a reason for this and it’s because the SP500, DJIA, RUT and NASDAQ appear to be entering a cycle top. What does this mean? It means the uptrend is almost over from a technical analyst point of view, and those who are have been bearish for a long time feel the market topping out more now than ever in their gut that this is the top.

Keeping it simple removing news, economic data, emotions and biases we are left with one thing which is technical analysis. This is based on price alone and that is important to remember because the only thing that pays you money for an investment is when price moves in your favor. Believe it or not price only has blips on the charts here and there which is based off news, economic data etc… In the big picture stock prices tend to lead economic data by several months and in some cases years.

So the big question is this… If price action is the only thing that pays you when trading why bother worrying about all the other opinions, news out there. That stuff only adds to the confusion and in most cases gets you on the wrong side of the market.

Timing the Market Top Conclusion:

In short, from a technical point of view the SP500 remains in an uptrend. But according to technical analysis the upside momentum is starting to slow. If we get a few more down days then the trend will flip and be down but it has not yet happened.

When the trend does reverse down you must remember that 80% of the time price will bounce back up to test near the recent highs before truly rolling over and collapsing. Think of it like a zombie movie. Just when you think you killed one it comes back to life for one last scare before its dead.

Just to touch on stock market bottoms so you do not get confused. Stock market bottoms are little different than tops so they are traded differently. I will cover them when the time comes.

Trading the market is not easy during this type of condition, which is why members and myself got long SSO on the 23^rd and two days later sold out for a 3.5% gain. I am now looking to reload this week for another bounce/rally play but only time will tell if we get another setup.

Download my FREE eBook on Controlling Your Trades, Money & Emotions: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

Civil Nuclear Energy Renaissance Restart

OzCopper — Sat, 01 Jun 2013 00:38:42 +0000

Richard (Rick) Mills

Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Concerns about climate change, carbon footprints, energy security and the rising cost of fossil fuels spurred a revival of interest in nuclear power generation. In early 2010 we saw the start of a of a global nuclear renaissance. It was derailed by Fukushima-Daiichi.

The nuclear renaissance, and a bull market you should be aware of, has been restarted.

State of nuclear power in the USA

The USA has 104 nuclear power reactors in 31 states. Since 2001 these plants have achieved an average capacity factor of over 90 percent, generating up to 807 billion kWh per year and account for 20 percent of total electricity generated.

In 2012, U.S. suppliers and civilian owner/operators (COO) purchased 56 million pounds U3O8e.

U.S. uranium suppliers:

Australia/Canada – 35 percent
Kazakhstan, Russia and Uzbekistan – 29 percent
Brazil, China, Malawi, Namibia, Niger, South Africa, and Ukraine – 19 percent

Seventeen percent of the U3O8e delivered in 2012 was U.S. uranium, 83 percent was foreign supplied uranium at a weighted-average price of $54.07 per pound – $2.4 billion sent out of the country to foreigners instead of creating new high quality mining, processing and transportation jobs in the U.S.

Ten percent, or just 4.9 million pounds, of the 49 million pounds U3O8e uranium loaded into U.S. civilian nuclear power reactors during 2012 was from U.S. mined uranium, 90 percent was foreign supplied uranium.

According to the World Nuclear Association (WNA) there are plans for 13 new reactors in the U.S., three reactor units are under construction, and as many as six may come online in the next decade for a total of 10,860 MWe.

The U.S. Department of Energy projects that U.S. electricity demand will rise 24 percent by 2035. Maintaining nuclear energy’s current 20 percent share of generation would require building about one reactor per year starting in 2016, or 20 to 25 new units by 2035.

Each GWe (1 megawatt = 0.001 gigawatts) of increased capacity (enough electricity to power one million homes) will require about 200 tU/yr of extra mine production and each reactor about 400-600 tU for the first fuel load.

Under the terms of the 1993 government-to-government nuclear non-proliferation agreement (Megatons to Megawatts program), the United States and Russia agreed to commercially implement a 20 year program to convert 500 metric tons of HEU (uranium 235 enriched to 90 percent) taken from Soviet era warheads, into LEU, low enriched uranium (less than 5 percent uranium 235). The HEU agreement ends late in 2013 and removes 24 million pounds of uranium supply from the U.S. market.

In 2012, the United States mined just 4.1 million pounds of uranium.

Global Demand

Current annual global uranium consumption is 190 million pounds, annual global mine production is 140 million pounds, inventory draw downs, the down-blending of weapons-grade material and the enrichment of tails material are a large portion of supply and currently make up the difference. However with inventories dwindling and the HEU agreement ending, the drying up of most non-mining uranium supply sources seems certain.

NuCap Ltd., a London-based industry consultancy, says the annual consumption of uranium will increase to 265 million pounds by 2020. According to The Australian newspaper global demand for uranium fuel is going to increase to 280 million pounds U308 by 2030.

According to the World Nuclear Association:

There are 439 operating nuclear power plants in the world
62 new plants are currently under construction
139 new plants are in the planning stage
326 new plants are in the proposal stage
China will build 50 new reactors by 2030 – a 500 percent increase over current reactor numbers – and by 2020 be consuming one third of globally mined uranium. The country currently has 26 reactors under construction and plans to increase installed capacity to between 70 and 80 GWe by 2020 and extend its nuclear capacity to 200 GWe by 2030
India is planning to build 35 new reactors, a 150 percent increase

Japan restarted two of its offline reactors in 2012 and is expected to restart another half dozen before the end of 2013.

Security of Supply

“Under the megatons-to-megawatts agreement, the U.S.’s uranium purchases from Russia have consisted entirely of uranium recycled from decommissioned Soviet warheads. This agreement did serve U.S. national security interests for nuclear non-proliferation. However, that agreement expires in 2013, at which time U.S. utilities will purchase Russian uranium from the country’s state-run nuclear company, Rosatom, and its affiliates. This uranium will be sourced from mines, not decommissioned warheads, and will therefore cease to serve any national security interest.

Reliance on the Russian state-run nuclear company for U.S. nuclear fuel supply poses serious challenges in terms of U.S. energy security. For instance, in the winter of 2008-09, the Russian state-run natural gas company, Gazprom, suddenly cut off all natural gas exports to Eastern Europe for more than a month, leaving millions of homes without heat or electricity in the middle of one of the harshest winters in recent history…

Given the growing demand for electricity and the number of new reactor builds planned, it is likely that the markets for uranium will only grow fiercer, placing the U.S. in a precarious position indeed if it does not develop domestic uranium deposits.” Virginia Uranium Inc.

Consider…

The Somair uranium mine in Niger, owned and operated by France’s Paris based Areva (a uranium miner and nuclear reactor builder), was very recently the site of a terrorist attack. Areva, the world’s leading nuclear company has been working in Niger for more than 40 years and obtains more than 30 percent of its uranium from the country. Areva produced more than 4,500 tonnes of U3O8 from the country in 2012 – 3,000 tonnes coming from Somair. According to the World Nuclear Association Niger ranks fourth in the world for uranium production and accounts for 10 percent of world supply.

Cameco (TSE: CCO), is the world’s largest uranium producer and is planning to increase its U.S. production in the Powder River Basin, Wyoming. Cameco president and CEO Tim Gitzel told an audience at the company’s 2013 annual general meeting that utilities will need to return to the market soon to full-fill their requirements beyond 2016, this resupply happening just as the Russian Highly Enriched Uranium (HEU) agreement ends late 2013. Gitzel also said Cameco, and many other companies, have put their greenfield projects on hold and with little new supply coming on stream the future remains strong for the uranium industry.

Uranium One (TSE: UUU), is one of the world’s largest publicly traded uranium producers with a primary listing on the Toronto Stock Exchange and a secondary listing on the Johannesburg Stock Exchange. Commercial in-situ recovery (ISR) mining has been ongoing in the Powder River Basin since 1987, with production coming from Cameco Resources Inc.’s currently operating Smith Ranch-Highland mine in the southern Powder River Basin and from Uranium One’s Willow Creek ISR mine also in the Powder River Basin. Uranium One’s major shareholder (50 percent) is JSC Atomredmetzoloto (ARMZ) which is a wholly owned subsidiary of Rosatom, the Russian State Corporation for Nuclear Energy.

Uranerz Energy Corp. (NYSE: MKT, TSX: URZ) is a U.S. mining company operating in Wyoming’s Powder River Basin where it controls a large strategic land position. URZ is expected to be in production (initial annual recovery targeted for 600,000 to 800,000 pounds after ramp-up) in 2013. Uranerz has a processing deal with Cameco and long term sales contracts for a portion of their production with Exelon (operator of the largest nuclear fleet in the U.S.) and an undisclosed U.S. utility. The Company’s Nichols Ranch ISR uranium project is licensed for a capacity of two million pounds per year of uranium yellowcake.

Conclusion

There is no shortage of uranium in the ground – there is enough to meet expected demand for the foreseeable future. Unfortunately, a lot of it is just not economic to dig up at current prices. Exploration for new deposits seems to be falling drastically and with lead times approaching a decade or more, the mining industry looks like it is not going to have enough supply to meet the increased demand.

Many analysts expect demand to start exceeding supply in early 2014, if so we should soon see spot prices start moving up towards the current long term contract price of roughly $60/lb. Most uranium, 80 to 85 percent, is sold directly under long-term supply contracts between buyers and sellers, just 15-20 percent of uranium is sold at the quoted spot price.

Supply price shocks and market disruptions could happen if there are problems (terrorist attack, NGO interference, natural disaster) with any of the major supply sources. A source of U.S. market vulnerability is the relatively low level of inventories held by buyers and sellers.

In 2012, U.S. suppliers and civilian owner/operators (COO) purchased 56 million pounds U3O8e – the United States mined just 4.1 million pounds of uranium. Current annual global uranium consumption is 190 million pounds, annual global mine production is 140 million pounds, stockpiles are dwindling and the HEU agreement with Russia ends this year.

The inevitable, the unpreventable U.S. and global mined uranium shortage should be on all our radar screens. Is it on yours?

If not, it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:

If you’re interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us at www.aheadoftheherd.com

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

Richard Mills does not own shares in any company mentioned in this report.

Uranerz Energy Corp. TSX: URZ is an advertiser on Richard’s site, aheadoftheherd.com

Gold And The Black Swan

OzCopper — Wed, 29 May 2013 11:20:08 +0000

1. Gold appears to be entering the “summer doldrums” season, but there are some black swan issues that could add a lot of volatility to the market.
2. Please click here now. You are looking at an article from The Economic Times of India, and it’s pretty clear that demand for gold has slowed down, as it often does at this time of year.
3. When demand for physical gold slows down in India, the price often tends to meander aimlessly, frustrating both the bulls and the bears.
4. Please click here now. That’s the daily T-bond chart. It’s difficult for gold to rise if bonds can’t move higher, and the bond chart seems to suggest that gold is heading for a period of lackluster price action.
5. You can see that my “stokeillator” (14,7,7 Stochastics series) looks terrible.
6. It’s oversold, but it looks tired, like a burnt-out athlete.
7. Please click here now. Double-click to enlarge. That’s the weekly chart of the Dow, and followers of the “sell in May and go away” mantra are extremely frustrated.
8. Many gold market investors are momentum-oriented, and they want to be where the action is, even if there is value in owning gold at the current price.
9. The relentless rise of general equities continues to attract money from gold. That’s unlikely to change unless the Dow “finally” takes a real hit. May has come, and it’s almost gone, and still there is no sizable sell-off!
10. At the end of the 1970s bull market, the Russian invasion of Afghanistan caused investors to pour into the gold market.
11. A geopolitical event like that could be a game-changer for the stagnant condition that gold is experiencing now, but how likely is such an event?
12. Well, the situation in Syria seems to be worsening, and the action of my stokeillator on the daily gold chart does suggest that some sort of rally is imminent.
13. To view that chart, please click here now. There’s a double bottom pattern in play, and the stokeillator lines have just crossed this morning, producing a “buy” signal.
14. I like to buy in anticipation of these crossover signals, focusing my buying around major HSR (horizontal support & resistance).
15. The stokeillator buy signal should come after I’ve bought, so it is really a “potential profits are coming” signal.
16. One geopolitical event that could be a game-changer for the gold price is the civil war in Syria. Syria and Israel both have enormous military forces, and President Assad seems to be having a hard time on the domestic front.
17. It’s unknown who would take Assad’s place if he were to lose the civil war. Regardless of who took over, it’s hard to see the Syria-Israel relationship getting better.
18. Other countries could also take sides in a Syria-Israel war, and many geopolitical analysts are concerned that a large conflict is imminent.
19. Perhaps the Syria-Israel situation explains why my bond market stokeillator is flat lining, while the gold one is hooking up into a crisp buy signal?
20. Please click here now. You are looking at the hourly bars chart for gold. Note how close the gold price is now, to the rising blue trend line.
21. That line represents demand. Aggressive swing traders should be heavy buyers now, with tight stop losses at about $1375. I don’t use stop losses, except in my day trading, which is a small part of my gold market activities.
22. Day trading does help eliminate boredom, but I’ll dare to suggest that a Syria-Israel war will do a much better job at eliminating it. Unfortunately, a war like that is likely to replace boredom with the blood of many innocent people. Governments are the most violent serial killers in the world, in my opinion.
23. Remember that the target of the double bottom on the gold chart is $1680, but it only “activates” if gold trades over $1500. The Syria-Israel conflict could be the geopolitical catalyst that makes it happen. Short covering by funds would reach almost surreal levels, in such a situation.
24. Please click here now. Double-click to enlarge. That’s the weekly GDX chart, and it almost looks like the Dow chart turned upside down. The RSI indicator is particularly oversold. Gold stocks offer value at this point, and they await a black swan event to catapult them higher.

Special Offer For OzCopper Readers: Please send me an Email to freereports4@gracelandupdates.com and I’ll send you my free “Silver Stocks Non Confirmationist’s Dream” report. I’ll show you which key indicators I’ve focused on now, on 5 key silver stocks. These indicators are flashing a very big “non confirmation” with the silver stock prices!

Thanks!

Cheers

Written between 4am-7am. 5-6 issues per week. Emailed at aprox 9am daily.

Rate Sheet (us funds):

Lifetime: $799

2yr: $269 (over 500 issues)

1yr: $169 (over 250 issues)

6 mths: $99 (over 125 issues)

To pay by cheque, make cheque payable to “Stewart Thomson”

Mail to:

Stewart Thomson / 1276 Lakeview Drive / Oakville, Ontario L6H 2M8 Canada

Are You Prepared?

Precious Metals & Miners Start Bottoming Process

OzCopper — Tue, 28 May 2013 00:05:44 +0000

Precious metals and their related mining stocks continue to underperform the broad market. This year’s heavy volume breakdown below key support has many investors and trader’s spooked creating to a steady stream of selling pressure for gold and silver bullion and mining stocks.

While the technical charts are telling me prices are trying to bottom we must be willing to wait for price to provide low risk entry points before getting involved. Precious metals are like any other investment in respect to trading and investing in them. There are times when you should be long, times to be in cash and times to be short (benefit from falling prices). Right now and for the last twelve months when looking at precious metals cash has been king.

Since 2011 when gold and silver started to correct the best position has been to move to cash or to sell/write options until the next trend resumes. This is something I have been doing with my trading partner who focuses solely on Options Trading who closed three winning positions last week for big gains.

In 2008 we had a similar breakdown in price washing the market clean of investors who were long precious metals. If you compare the last two breakdowns they look very similar. If price holds true then we will see higher prices unfold at the end of 2013.

The key here is for the price to move and hold above the major resistance line. A breakout would trigger a rally in gold to $2600 – $3500 per ounce. With that being said gold and silver may be starting a bear market. Depending what the price does when the major resistance zone is touched, my outlook may change from bullish to bearish. Remember, no one can predict the market with 100% accuracy and each day, week and month that passes changes the outlook going forward.

The chart below is on I drew up on May 3^rd. I was going to get a fresh chart and put my analysis on it but to be honest my price forecast/analysis has been spot on thus far and there is no need to update.

Gold Daily Technical Chart Showing Bottoming Process:

Major technical damage has been done to the chart of gold. Gold is trying to put in a bottom but still needs more time. I feel gold will make a new low in the coming month then bottom as drawn on the chart below.

Silver Daily Technical Chart Showing Bottoming Process:

Silver is in a similar as gold. The major difference between gold and silver is that silver dropped 10% early one morning this month which had very light volume. The fact that silver hit my $20 per ounce level and it was on light volume has me thinking silver has now bottomed.

But, silver may flounder at these prices or near the recent lows until its big sister (gold) puts in a bottom.

Gold Mining Stocks Monthly Investing Zone Chart:

Gold mining stocks broke down a couple months ago and continue to sell off on strong volume. If precious metals continue to move lower then mining stocks will continue their journey lower.

This updated chart which I originally drew in February warning of a breakdown below the green support trend lines would signal a collapse in stock prices, which is exactly what has/is taking place. While I do not try to pick bottoms (catch falling knives) I do like to watch for them so I am prepared for new positions when the time and chart turn bullish or provide a low risk probing entry point.

While I focus more on analysis, forecasts and ETF trading another one of my trading partners who focuses on Trading Stocks and 3x Leveraged ETF’s has been cleaning up with gold miners.

Gold, Silver and Mining Stocks Conclusion:

Precious metals continue to be trending down and while they look to be trying to bottom it is important to remember that some of the biggest percent moves take place in the last 10% of a trend. So we may be close to a bottom on the time scale but there could be sharply lower prices yet.

The time will come when another major signal forms and when it does we will be getting involved. The exciting this is that it could be just around the corner. So if you want to keep current and take advantage of the next major moves in the market be sure to join our newsletters.

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Chris Vermeulen

Riding A Copper Horse

OzCopper — Sat, 25 May 2013 14:22:31 +0000

Richard (Rick) Mills

Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

My last article, ‘Give It A Doubt’ was about population growth, urbanization in developing countries and the one billion people predicted to join the consuming classes by 2025.

“One billion people will enter the global consuming class by 2025. They will have incomes high enough to classify them as significant consumers of goods and services…” McKinsey Global Institute, Urban world: Cities and the rise of the consuming class

Some of these new consumers are going to be Americans but the majority are in developing countries, they might not want to be Americans but they do want at least a modest piece of what we’ll call the American lifestyle, the cell phones, flat screen TV’s, a nicer apartment, a car or maybe a motorcycle, washer/dryer, a fridge, AC – the amenities of a modern society and all the necessary infrastructure that goes with a well functioning competitive modern economy.

But what if all these new one billion consumers were to start consuming, over the next 12 years, just like an American? What’s going to happen to the world’s mineral resources if one billion more ‘Americans’ are added to the consuming class? Here’s what each of them would need to consume, per year, to live the American lifestyle…

In 2010, more than 38,000 pounds (19 tons) of minerals and fuels were needed per person to maintain the American lifestyle.

Out of the 38,000 total pounds needed, 21,675 pounds were energy fuels – the coal, petroleum, natural gas, uranium – required for transportation and to heat, cool and light homes and businesses.

One billion new consumers by 2025. Can everyone who wants to, live an American lifestyle? Can everyone everywhere else have everything we in North America have?

The answer is a resounding NO!

“The data also show that nations such as South Africa and China will need to increase their average urban per-capita copper stock-in-use by seven or eight times to achieve the same level of services as the developed countries if they use existing technology.

Is there enough copper to meet this potential requirement?

Concern about the extent of mineral resources arises when the stock of metal needed to provide the services enjoyed by the highly developed nations is compared with that needed to provide comparable services with existing technology to a large part of the world’s population. Our stock data demonstrate that current technologies would require the entire copper and zinc ore resource in the lithosphere and perhaps that of platinum as well. Even a lower level of services could not be sustained worldwide because a continuing supply of new metal is needed to make up for inevitable losses in the recycling of the metal stock-in-use.

Substitution has the potential to ameliorate this situation, but one should not automatically assume that technology will produce a satisfactory substitute for every service at an affordable price and precisely when needed.

…anthropogenic and lithospheric stocks of at least some metals are becoming equivalent in magnitude, that world-wide demand continues to increase, and that the virgin stocks of several metals appear inadequate to sustain the modern ‘‘developed world’’ quality of life for all Earth’s peoples under contemporary technology…Do we really envision a developed world quality of life for all of the people of the planet…?” R. B. Gordon, M. Bertram, and T. E. Graedel, Metal Stocks and Sustainability

Copper ETF

The U.S. Securities Exchange Commission (SEC) approved the first copper exchange traded funds (ETF) to actually hold the physical metal. J.P. Morgan and Blackrock received approval to each start copper ETF’s that will allow speculators to buy and hold copper in warehouses – up to 183,000 tons – the more shares investors buy, the more copper is taken off the market.

JPMorgan’s fund would store LME copper valued at up to $499,761,150. BlackRock’s iShares Copper Trust – Goldman Sachs owns the warehousing company Metro BlackRock intends to use to store its copper – would use up to 121,200 tonnes of copper as guarantee against shares in its fund.

As of writing the two funds would equate to 30 percent of current copper stocks in LME-bonded warehouses.

Credit Suisse/Glencore, Deutsche Bank and Citigroup are also looking at physical copper ETFs. Goldman Sachs signed a copper off-take agreement with Spanish miner Emed in 2012.

“ETFs…can immediately take metal out of the market, potentially leading to physical scarcity. If investment in ETFs proves to be highly responsive to news, such as an earthquake in Chile for example, a relatively modest supply disruption could turn into a much larger one, directly impacting on the ability of consumers to buy the red metal.” Bloomsbury Minerals Economics’ Copper Briefing Service

Future Production

Some of the major copper projects either going into production or continuing to ramp up are:

Buenavista, Mexico
Antapaccay, Peru
Los Bronces, Caserones and Esperanza, Chile
Salobo, Brazil
Konkola Deep, Zambia
Morenci, U.S.
KOV and Tenke Fungurume, Democratic Republic of Congo (DRC)
Oyu Tolgoi, Mongolia

Two of the world’s largest existing mines – Escondida in Chile and Grasberg in Indonesia – should start seeing higher output again.

In April of 2013 the Chilean Copper Commission (Chile is the world’s largest producer of copper) predicted global demand for copper will rise by 1.4 percent this year to 20.829 million mt. Global mine production will rise 3 percent to 17.526 million mt to create an estimated world surplus of 68,000 mt, rising to 89,000 mt in 2014.

There are many reasons to be bullish on copper

Global surpluses of 68,000 mt in 2013 and 89,000 mt in 2014, are, in the world of copper supply, fairly tight conditions. Perhaps even more significant, no one is calling for much in the way of a price decrease.

Why are analysts not calling for much of a price decrease? Well, many mines do not come online on time and the disruption rate, the amount of promised copper that fails to materialize is now as high as 8 percent – operating mines can suffer production stoppages/slowdowns or move into lower grade ore.

A long term structural trend became evident in the industry in 2012 – shortfalls in targeted production were characterized by a fall in grades and recoveries rather than unexpected disruptions.

Chile produces a third of the world’s copper and has seen a seven fold increase in energy costs over the last ten years, also because of a severe water shortage in the high desert, where most of the country’s major copper mines are located, water must be pumped from the ocean to almost 800 meters above sea level and then pumped hundreds of kilometers to the mines, of course the seawater must also be desalinated.

CRU estimates Chile’s copper production costs have risen 60 percent over the last seven years compared to a world average of 30 percent. Chile’s state copper giant, Codelco, has seen a 57 percent cash cost increase between 2010 and 2012.

Chinese end demand is growing and consumer destocking has ended.

Many of the world’s largest mining companies have delayed or outright halted expansion plans – BHP Billiton, the world’s largest miner, has said it will not spend the $80 billion slated for expansion by 2015.

There is a lack of good substitutes, plastic piping replaces copper piping but this has been going on for years, aluminum can replace copper in electrical cables but more is necessary for the same effect and connections are poor which can cause fires, this has lead to municipal building codes actually banning aluminum from being used for residential wiring.

There has been a recent surge in warehoused copper stocks, the increases reflect incentives offered to store metal in those locations. Glencore owned Pacorini has been offering incentives of more than $100 to deliver copper to their warehouses. These incentives have drawn usually unseen stocks into the public’s eye perhaps distorting impressions.

Perhaps the biggest reason to get bullish on copper are the massive costs and risks involved in finding and opening new mines in often geo-political risky countries where a miners social license to operate is shaky at best.

Copper prices need to be significantly above marginal cost, in other words, prices need to stay high enough to provide miners with an adequate return on their investment for building today’s much more expensive and riskier new mines. There is also a significant additional cost in keeping production constant year over year.

If copper does not stay well above miners marginal costs the much needed new mines will not be build.

Conclusion

Global growth is on the path for continued improvement in 2013 – metal consumption will expand. Excess copper stocks are being taken up by traders, warehousing companies and soon ETF’s.

Copper, one billion new consumers, over 800 million people to be born between now and 2025 and a massive current, and future, infrastructure deficit should all be on our radar screens.

Is an investment opportunity in copper on your radar screen?

If not, maybe one should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

Source: http://oilprice.com/Interviews/Energy-and-Economic-Growth-Interview-with-Mark-Thoma.html

Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:

If you’re interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us at www.aheadoftheherd.com

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

The Headline Data that Financial Media Ignored on Wednesday

OzCopper — Fri, 24 May 2013 03:02:09 +0000

By: J.W. Jones

Wednesday was a wild trading session where we saw the largest intraday selloff in the S&P 500 E-Mini futures that we have seen in some time. Intraday price action was driven largely by statements made by Chairman Bernanke and the release of the Federal Reserve Meeting Minutes which saw some monster intraday moves and a large spike in the Volatility Index (VIX).

While the world is focused on when the Federal Reserve is going to taper their Quantitative Easing program and the impact those actions will have on financial markets, I wanted to look at another divergence in the economic data which is supported by market action.

Instead of trying to determine how or when the Federal Reserve will taper or end their monetary experiment, I wanted to juxtapose statements that were made today with the actual facts. Readers can draw their own conclusions.

Recently, we have been told that the housing market is in the early stages of recovery. Unfortunately due to low interest rates housing has turned back into a speculative market. Consequently, a lot of so-called fast money is flowing into housing which in many cases is either being purchased for rentals or by foreign investors as a speculative investment.

At present the housing market is not being driven by capital formation at the household level and data indicates that construction jobs are under pressure and affordability is reversing. The chart below illustrates what has recently transpired in the 10 Year Treasury Yield:

As can be seen above, the 10 Year Treasury yield has risen considerably since the beginning of the month of May. Normally when interest rates are rising and Federal Reserve policy is indicating that a form of tightening seems likely we typically see a rush of mortgage applications and home starts as borrowers try to lock in lower interest rates. Furthermore, the spring and early summer months are generally considered a very favorable time to sell existing homes in the United States.

In light of all of the above mentioned facts paired with our Federal Reserve Chairman stating that housing is starting to recover, readers would expect that housing starts and mortgage applications would be jumping higher.

Unfortunately the mortgage application data came out on a day when the Federal Reserve was controlling the headlines. The mortgage application data indicated the largest 2-week rate of decline in mortgage applications since the housing bubble popped.

Furthermore, this is supposed to be a strong seasonal time for real estate and interest rates are rising as shown above. If readers look at recent price action in the Spiders Homebuilders ETF (XHB) or Home Depot (HD) it would appear that all is well in the land of housing and Chairman Bernanke and the Federal Reserve are spot on with their bullish analysis.

Until the past few trading sessions, the homebuilders have been in an obvious bullish run to the upside. The rally that transpired since the late February 2013 lows tacked on close to 20% gains in XHB. However, as noted above, the past few trading sessions’ price action appears to have stagnated and we saw new recent lows on Wednesday.

Home Depot (HD) is another stock that relies heavily on home construction and improvement and would likely benefit from both new home building and existing home purchases which typically require immediate customization or improvements. The recent price action in Home Depot is shown below.

Home Depot has had an impressive rally since the beginning of 2013. HD has tacked on over 20 points on its share price representing a near 30% move higher year to date. However, exuberance on Tuesday after earnings were released saw a spike Wednesday morning which was promptly reversed intraday.

Based on the recent price action in both the homebuilders ETF (XHB) and Home Depot (HD) readers would tend to agree with Chairman Bernanke that housing was recovering and that the recent mortgage application decline was merely “transitory.”

However, there is one eye-opening concern that does not support Chairman Bernanke’s position about a housing recovery and unfortunately points to less demand in the immediate future. While many investors do not track lumber prices, the chart below demonstrates the sheer bear market that has befallen lumber futures prices.

As can be seen above, random length lumber futures have gotten crushed to the downside over the past two months. In early March, lumber futures were trading up around the 410 price point. At the close on Wednesday, random length lumber futures closed at 305.20, a more than 25% drop in price in roughly 2 months.

How is housing rebounding with lumber prices falling? While Home Depot sells many products, most major remodeling projects and even smaller upgrades require the purchase of lumber. Have logging companies discovered an untapped lumber resource?

I will let readers decide whether to believe the price of lumber and mortgage application data or a Federal Reserve Chairman that declared on January 10, 2008 that “The Federal Reserve is not currently forecasting a recession.”

For those paying attention, the macroeconomic data is crumbling in the United States and Europe. The printing press and monstrous liquidity can only fuel markets for so long. Can Chairman Bernanke and the Federal Reserve print Cap-EX spending increases and rising profitability? I think we all know the answer. In the end, when the Federal Reserve is printing $85 billion dollars per month to buy U.S. government debt perhaps fundamentals are largely irrelevant.

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This material should not be considered investment advice. J.W. Jones is not a registered investment advisor. Under no circumstances should any content from this article or the OptionsTradingSignals.com website be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.

Energy – Balancing the Bonanza: Interview with Mark Thoma

OzCopper — Fri, 24 May 2013 00:18:25 +0000

If you want an objective view of energy, ask an economist, who can tell you what to expect to pay at the pump in the coming years, and why, as well as what to expect from medium- and long-term economic growth and what the real drivers will be. These are questions that are crucial to a pending decision by the US government over natural gas exports, and while we know where big oil stands versus its manufacturing rivals—it’s the economist who can set things straight.

Mark Thoma is a macroeconomist and time-series econometrician at the University of Oregon. His research focuses on how monetary policy affects the economy, and he has also worked on political business cycle models. Mark is currently a fellow at The Century Foundation, a columnist at The Fiscal Times, an analyst at CBS MoneyWatch, and he blogs daily at Economist’s View.

In an exclusive interview with Oilprice.com, Thoma discusses:

What we can expect from gas prices this summer and beyond
Why clean energy won’t see an dramatic investment rival, for now
How political feasibility, not economic feasibility, drives the ethanol mandate
Why the ethanol mandate might eventually be nixed
How we weigh the free market against government intervention
Why there is little momentum for a US-wide carbon market
What we learned from the global financial crisis
Why our best hope for strong economic growth is in exports

Interview by James Stafford of Oilprice.com

James Stafford: What every regular consumer wants to know is why the price of gas at the pump continues to rise in the midst of a much-lauded oil and gas boom?

Mark Thoma: In the short-run, of course, the price of gas is quite variable. Recent forecasts, for example, indicate that prices will decline a bit over the summer, but at some point they will undoubtedly head back up again. The real question is how the underlying trend for gas prices, which has been increasing over time, will be affected by increases in the supply of energy from shale and other sources. Will the upward trend in gas prices continue? The answer depends upon the relative growth in the supply and demand for energy. I believe the new energy sources and the corresponding increase in supply will temper the upward trend, but the trend will continue due in particular to growth in demand from developing economies.

James Stafford: According to first quarter 2013 figures, clean energy investment is at its lowest since 2009. What do you see happening in terms of clean energy investment over the rest of 2013 and then in the next 2-3 years?

Mark Thoma: With all of the budget pressures we have seen in recent years, I have a hard time imagining increased support for new investment from the government, so any increase will have to come from the private sector. The incentive for the private sector to undertake these investments depends upon the price of energy – as the price of energy rises alternatives become more attractive – but as noted in the answer to the previous question I see the price of energy continuing to rise, but do not expect the dramatic, permanent spikes in prices needed to spur a substantial increase in investment.

James Stafford: Is the ethanol mandate economically feasible?

Mark Thoma: I think the ethanol mandate is economically feasible in the sense that it could persist, but I don’t think it’s the best way to address our reliance on imported energy or the environmental issues associated with energy use. It’s the political feasibility that seems to be most at issue, and the power struggle between states with grain interests and states with interests in traditional fossil fuels will determine the outcome. I expect the ethanol mandate will eventually be overcome, particularly since the discovery of new domestic energy supplies undermines one of the strongest arguments for it, energy independence.

James Stafford: On a broader level, is US energy policy missing the mark by interfering too much to boost renewable energy against fossil fuels? Should the free market reign?

Mark Thoma: When significant market failures are present, the free market does not produce the best possible allocation of resources and government intervention can help. Thus, the question for me is whether significant market failures exist in renewable energy research. I believe that they do, and that, if anything, we are not doing enough to promote new energy technology. This is not unique to renewable energy, such market failures are common and underlie government issued patents, research grants, and so on. However, let me be clear that I am not in favor of government “picking winners” by, say, favoring particular companies or products, but I am in favor of generous support for basic research in this area.

James Stafford: How do you see the US carbon trading market shaping up even though it is not on a national level, but remains the purview of states, most notably California?

Mark Thoma: Presently, there seems to be little momentum for a US carbon market, and I don’t see that changing in the near future. The necessary public and political support simply isn’t there. It will, sadly, probably take a natural disaster or extinction of an important species that can clearly be connected to climate change before any notable change occurs.

James Stafford: How are climate change and the climate change debate affecting the economy?

Mark Thoma: I don’t think it’s having a large impact, particularly since any action on climate change seems all but impossible with our present Congress. Some people claim that fear of regulation, e.g. on carbon emissions, is holding back the recovery but the data does not support this contention.

James Stafford: In general, what is your impression of the Fed’s handling of the economy, and attempts to drive the recovery?

Mark Thoma: I believe the Fed was essential in preventing an even larger collapse, and I applaud the creativity the Fed demonstrated in creating special facilities and the like to deal with various problems. With that said, the Fed has not been perfect in its reaction to the crisis. It was too slow to recognize the depth of the downturn, there was too much fear of inflation causing the Fed to under react – and when they did react they were often behind the curve – and they were far too eager to see “green shoots” just around the corner rather than make tough policy decisions.

Lately, however, the Fed has done better and though it still hasn’t been aggressive enough for my tastes, it has certainly helped to push the recovery along. The big problem presently is the lack of support from fiscal authorities, without such support there’s only so much the Fed can do.

James Stafford: Generally speaking, due to the close links among world economies most crashed following the US subprime mortgage crisis in 2008. Does this tight relationship mean that no one country can truly see an economic recovery until all/most countries are ready? How do you think the 2008 crisis will affect the way economies rely on each other in the future?

Mark Thoma: One of the interesting features of the recession is that developing economies did better (in a relative sense) than developed economies. Thus, one lesson from the crisis is that developing countries are more “decoupled” from developing countries than we thought. That’s not to say they weren’t affected, international trade collapsed during the recession and that didn’t help countries that rely upon export markets, but developing economies weren’t affected anywhere near as much as many observers predicted. Within the developed world, it’s a different story. Here, the linkages appear to be much stronger, both through the financial system and through the real economy, and a true recovery will require a general improvement in economic conditions. As for the future, I don’t think we’ll see much effort to reduce international trade as a way to reduce these linkages – that’s counterproductive – but I do think we’ll see much more concern about financial interconnectedness. However, turning that concern into effective regulation that can extend across national borders is a difficult problem and I’m not all that optimistic that we’ll be able to do as much as needed on the regulatory front.

James Stafford: What are your views on exporting US natural gas? Do you believe it could provide a cornerstone for economic recovery?

Mark Thoma: Growth in the demand for our goods and services can be divided into four components, growth of consumption, growth of investment, growth in government spending, and growth in net exports (exports minus imports). Which of these components will drive future growth? It’s hard to imagine consumption growth rising above where it was pre-recession when it was elevated by excessive credit growth, so this is an unlikely driver of higher future growth. Same for government spending, if anything this will be curtailed as we try to bring our long-run budget under control. Business investment might increase and drive future growth, but it is relatively high already and further increases seem unlikely. That means our best hope for strong growth in the future lies with increasing the growth in exports, and exporting natural gas could be an important component of growth in this area.

James Stafford: Oil is finite, and whilst many countries in the world have poorly developed economies, oil supplies already struggle to meet demand. Basically, not all countries can develop economically whilst the first world economies remain as large and demanding as they are. Do you think as more effort is made to develop third world countries, the first world countries must inevitably decline as a result?

Mark Thoma: I’m an optimist when it comes to world growth and I do not believe that developed countries must decline as developing countries rise. Technology – digital technology, the rise of robots, and advances in energy production in particular – will allow both the developed and developing world to prosper. My big worries lie with distribution, i.e. whether and how the problem of rising inequality can be solved.

James Stafford: What will Obama’s economic legacy be? Has he helped or hindered economic development?

Mark Thoma: That’s a tough question since we don’t yet know what’s ahead, but a big part of his legacy will certainly be connected to Obamacare, particularly if it eventually evolves into some type of single payer system with universal coverage. A second legacy is more uncertain, but I believe Obama would like to produce a Grand Bargain that will bring our long-run budget under control. Whether he’ll be remembered fondly by liberals for this will depend upon the degree to which he protects important social insurance programs, Medicare and Social Security in particular. Then there’s the legacy I hope he’ll have, but doubt he will. This may be mostly wishful thinking, but if the deficit continues to decline as it has recently, if government spending as share of GDP is no higher post-recession than it was pre-recession, and if inflation remains subdued (as I believe it will), then perhaps his third legacy will be an important lesson. We worried far too much about debt and inflation, and far too little about the most important and most costly problem, the unemployed. We could have and should have done much more than we did to help the unemployed, and if we can somehow learn that lesson, that will be an important legacy of the Obama years.

Buy Gold On QE Exit News

OzCopper — Wed, 22 May 2013 05:29:54 +0000

After the 1929 crash, the US Treasury & the Fed worked together. They revalued gold, and began a program of quantitative easing (QE).
Eight years later, in 1937, the Fed started tightening credit by raising interest rates, and America plunged back into economic depression.
After the 2008 crash, America entered into a very severe recession, and the Fed began a new quantitative easing program.
Recently, the mainstream media and bank economists have been quite emphatic that the economic recovery is solid enough for the Fed to begin reducing the size of the QE program.
While it’s unknown whether a reduction or exit from QE would create an economic crash like 1937, institutional owners of gold have been selling hard, and shorting it. They believe that a reduction in QE would cause gold prices to fall, regardless of whether the economy faltered or not.
Sentiment data shows that most gold analysts are very negative now. They are convinced that the price of gold is likely going much lower, and maybe it is, but I’m not so sure about that.
The timeless market adage, “Buy the rumour, and sell the news!” may be something to carefully ponder, at this point in time.
Here’s why: A lot of the anticipation for a reduction in QE may already be factored into the current gold price.
The question you may need to ask yourself is, have the bears dropped the ball, by overplaying their QE reduction card?
The daily charts of both gold and silver are beginning to show some bullish signs. On Sunday night, silver plunged about two dollar an ounce, but there wasn’t much volume, which is bullish.
On Monday, Moody’s warned they would chop America’s credit rating if more action is not taken to reduce government debt. That caused a “skyrocket” move in silver, and all of Sunday night’s losses were recovered.
Monday’s trading volume was truly enormous, and there is now a “key reversal” day apparent on the daily silver chart.
To view that chart, please click here now. Look at that volume bar!
Note that while the price of silver went to a new low on Sunday night, my stokeillator did not, and the two lines are beginning to show signs of a “budding buy signal”.
There is also a potential inverse head & shoulders pattern forming on this chart. If it is completed, silver could blast all the way to $30.
The daily gold chart is equally impressive. Please click here now. You can see that the lead red line of my stokeillator has arrived at the 20 level, and is beginning to display a bullish hook.
There is also a classic double bottom forming, and I’m sure that many technical analysts at the major banks may soon begin talking about it, in their daily commentary to investors.
For this double bottom pattern to “activate”, gold must trade at $1490, but if it does, the technical target is…. $1680! There are probably very few gold investors who believe such a move is even possible, let alone likely, but markets have an odd habit of doing what is least expected.
There is a big wall of technical resistance in the $1500- $1550 area, but if most of the QE-exit news is already priced into the market, is it possible that gold’s upside action could shock a lot of people? I think so.
Traders can sell lightly at $1400, $1420, and $1440, if the price gets there. It’s good to take regular profits, like pruning a tree, regardless of how high any analysis suggests the price will go.
To view the short term price action for gold, please click here now. That’s the one hour bars chart, and you can see that a possible inverse head and shoulders pattern is forming now.
Please click here now. Double-click to enlarge. You are looking at the 2 hour bars chart for GDX. Most investors in the gold community own a lot of gold stock. GDX must rise over the highs at $31.27, to trigger technical buying from momentum traders.
There may be an inverse head and shoulders pattern forming, which could help push GDX to the early April price of $33.71 this week.
Is it possible that just as QE itself is producing “diminishing returns” for the US economy, QE-exit news will soon have minimal effect on the gold price? I think so. Any further QE exit news may be a buy signal for gold!

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Gold Stocks: Its Time To Be BRAVE!

OzCopper — Wed, 22 May 2013 05:27:43 +0000

By David Banister, Chief Strategist www.themarkettrendforecast.com

I used to half joke with some of my investing friends that the best time to buy stocks is during or right after a crash. Think 1987, 2000-2002, 2008-09, and now perhaps Gold Miners?? Well, before we get too far ahead of ourselves, lets examine evidence of a “Crash”: I like to use crowd behavioral, empirical, and technical evidence in combination.

1. In a recent money managers poll, virtually nobody was bullish on Gold or Gold stocks, and over 80% of those polled were bullish on the SP 500 and US stocks.

2. The percentage of Dumb Money traders (non-reportable traders) in the futures markets with short positions on Gold is at all time highs, they tend to be very long at the highs and very short at the lows.

3. The insider buying ratio of Gold Mining stocks to sellers is running over 10 to 1, the highest since October 2008 when Gold bottomed out at $685 per ounce from $1030 highs. Quoting Ted Dixon, CEO of Ink Research, “such a high level of buying interest among officers and directors within their own businesses in the resource sector has correctly foreshadowed a recovery in share prices in the past: That high point of nearly five years ago came about six weeks before the Venture market bottomed on Dec. 5, 2008…While the excitement that surrounded mining stocks as recently as two years ago has waned, experienced value investors recognize that such periods of investor neglect often give rise to the best deals” Source: Theglobeandmail.com

4. The ratio of the HUI Gold Bugs Index to the SP 500 is at multi year lows and in near crash mode on the charts. The RSI Index (Relative strength) on the weekly charts is at 10 year lows at -13.71, which is off the charts low!!

5. Most trading message boards I view at Stocktwits and others are universally bearish on Gold and Gold stocks.

6. Gold is in a wave B or Wave 5 down re-testing the 1322 lows which we have discussed here for weeks as very likely if 1470 was not taken out on the upside… this is a normal sentiment pattern and re-test.

7. Gold has been in a 21 Fibonacci month correction pattern off a 34 Fibonacci month rally from 686-1923. In August of 2011 I penned articles from 1805 right up to 1900 warning of a massive wave 3 top forming. Everyone was bullish, now it’s the complete opposite.

8. Currency debasement continues around the world with negative real interest rates. This is bullish for Gold once this correction has run its course.

9. Hulbert Digest Gold Sentiment index is at an all time low (gold newsletters at -35 sentiment readings!!)

10. Gold -Silver put to call ratios are at all time highs

I could go on and on with headlines and such, but you get the idea. This is the same type of sentiment I wrote about on the stock market on Feb 25th 2009, here is that article... and nobody on the planet was bullish.

Below is a chart showing the Bullish % index for Gold Miners, as you can see the last time we were at 0% was late 2008 when Gold had bottomed out and insiders were also buying like crazy like now:

The GLD ETF chart also shows a likely re-test or slightly lower of the 1322 futures lows of April, when Insider buying hit 10 year record levels:

Obviously Gold could end up going a lot lower than we think, and the Gold Mining stocks could sink further yet. But for those with a 3-6 month horizon, we expect the 21-24 month Gold correction to complete by no later than October 2013. During the next several months the opportunities to buy some miners on the cheap will potentially make some investors a lot of money in the coming few years.

Join us at www.markettrendforecast.com for occasional free reports or sign up for our daily updates on the SP 500 and Precious Metals.

By David Banister
www.markettrendforecast.com

Inflation Is The Lifeblood Of A Healthy Economy

OzCopper — Tue, 21 May 2013 00:16:55 +0000

Vronsky

Inflation Is To An Economy What Blood Pressure Is To The Human Body

It is a well-known medical fact that more people die from LOW BLOOD PRESSURE then from high blood pressure.

Therefore, if one accepts the premise that Inflation is to an Economy what Blood Pressure is to the Human Body, it then logically follows that low inflation rate over a protracted period will eventually and inevitably destroy a heretofore healthy economy.

The best, most effective ‘medicine’ to combat DEFLATION is inflation. This is what democrat President Franklin D Roosevelt did from 1934 to pull the nation out of the devastating morass of the GREAT DEPRESSION.

We Need More Inflation

It looks like we’ll be stuck in a low-growth, high-unemployment economy for many more years, but there is a way out of our troubles if only we’d be willing to buck 35 years of conventional wisdom that’s taught us that inflation is always and everywhere bad for the economy.

The truth is, right now the U.S. economy needs a little more inflation, not less. It’s sacrilege, I know, but our heretofore slavish devotion to low-inflation policies is keeping us mired in a SLOW GROWTH ECONOMY.

Already, politicians have demanded that the Federal Reserve cease and desist from any recovery efforts, arguing that inflation might explode out of control. Never mind that the dire and immediate emergency is an unacceptably high 7.5% Unemployment Rate.

RECENTLY HOWEVER, we have started to hear more voices characterizing higher inflation as a solution, rather than as a problem. Charles Evans, president of the Federal Reserve Bank of Chicago, spoke recently about the dangers of “fighting the inflation ghosts of the 1970s.” Instead, Evans is worried about “repeating the mistakes of the 1930s.”

As well he should be worried. Our difficulties resemble the depression of the 1930s much more than the stagflation of the 1970s.

Why We Need Inflation

Some economists believe some modest, sustained inflation is just the tonic for our global recessionary hangover.

That’s no typo. Some serious people believe a modest, sustained inflation is just the tonic for our global recessionary hangover, starting with Japan’s new prime minister. After winning last fall, Shinzo Abe has pursued a campaign promise to expand the money supply and trigger higher prices. The markets have applauded: the Nikkei stock index has been galloping, while lenders are rewarding Japan with low interest demands.

HISTORY IS TESTAMENT THAT INFLATION IS GOOD

And what does history have to say? Inflation helped slay both the Great Depression of the 1930s (the worst in history) and the runner-up for worst economic calamity, the depression of the 1890s. Moreover, one must remember President Franklin Roosevelt called for higher prices to fight the deflation of the 1930s. Specifically, it was President FDR’s inflationary policies that paved the way for the nation rising out of the depths of the 1930s Great Depression.

US INFLATION FROM 1927 TO 1934

The USA from 1927-1930 was sowing the seeds of its self-destruction by allowing the US Inflation Rate to flat-line below ZERO percent. Subsequent to the Stock Market Crash of 1929, the US government compounded its error by allowing the Inflation rate to ‘feed’ the 1930s Great Depression , when it plummeted to -10% by 1932. See chart:

Finally in 1933 the new democrat President Franklin D Roosevelt made the decision to stimulate the nation’s economy by fostering an accelerating Inflation Rate. Although FDR used several policies to achieve this, by far the most effective was when he decreased the value of the US dollar by increasing the value of gold by 69% from $20.67 to $35.00/oz.

From this historic date the US economy began to climb out of the 1930s Great Depression. ..fueled mostly by a growing inflation. To be sure the US Inflation Rate remained POSITIVE from 1934 through 1937. And the rest is history (see study “DOLLAR DEVALUATION IS INEVITABLE…just like in 1934” at the end of this editorial).

As history is indelible testament, INFLATION is good and vitally necessary for a healthy, growing economy.

Dr Janet Yellen To The Rescue…DEVALUATION IS THE GOAL

Meet Janet Yellen, Who Will Probably Replace Ben Bernanke As Fed Chair.

Yellen says lower US dollar has helped narrow deficit.

http://www.huffingtonpost.com/2013/04/25/janet-yellen-fed-chair_n_3154852.html

Yellen emphatically asserts in support of continued Quantitative Easing:

• Significant part of US budget deficit is due to weak economic growth

• Fed has tools to remove stimulus when needed, can pay interest on bank reserves

• Will rely heavily on interest on reserves during eventual exit from stimulus

• Fed could even take losses if it decides to sell securities

In the Fed taking ‘forceful action’ on economy, Yellen says:

The Federal Reserve’s aggressive easing of monetary policy is warranted given the still-battered state of the U.S. labor market, Fed Vice Chairman Janet L. Yellen said recently.

In an address to the politically influential AFL-CIO, Yellen bemoaned the unusually weak nature of the economic expansion.

http://blogs.cfed.org/cfed_news_clips/2013/02/fed-taking-forceful-action-on.html

Paul Krugman’s Approval of Dr Janet Yellen

Good News: Janet Yellen is now the Fed’s new #2. She’s open-minded, a good counterweight to the inflation hawks who think that any day now we’ll be partying like it’s 1979. She’s also a distinguished scholar with much of her work in New Keynesian macro. In fact Dr Yellen is proudly well-known as An Inflationist.

She’ll provide exactly the kind of intellectual flexibility the Fed needs. Furthermore, Dr Yellen is first in line to succeed Dr Bernanke as Fed Chairman, when his term ends in 2014.
WASHINGTON — In July 1996, the Federal Reserve broke the metronomic routine of its closed-door policy-making meetings to hold an unusual debate. The Fed’s powerful chairman, Alan Greenspan, saw a chance for the first time in decades to drive annual inflation all the way down to zero, achieving the price stability he had long regarded as the central bank’s primary mission.

But Janet L. Yellen, then a relatively new and little-known Fed governor, talked Mr. Greenspan to a standstill that day, arguing that a little inflation was a good thing. She marshaled academic research that showed it would reduce the depth and frequency of recessions, articulating a view that has prevailed at the Fed. And as the Fed’s vice chairwoman since 2010, Ms. Yellen has played a leading role in cementing the central bank’s commitment to keep prices rising about 2 percent each year.

http://www.nytimes.com/2013/04/25/business/janet-l-yellen-possible-fed-successor-has-admirers-and-foes.html?pagewanted=all&_r=0

DEFLATION IS THE DEATH KNELL FOR ANY ECONOMY

It is self-evident that DEFLATION is the antithesis of INFLATION.

It is also intuitive that the absence of INFLATION in any economy will relentlessly cause its own decline. Ergo, PROTRACTED DEFLATION IS THE DEATH KNELL FOR ANY ECONOMY. The most outstanding example of this lethal phenomenon is JAPAN from 1990 to 2010.

From 1990-2012 Japan’s Inflation Rate had relentlessly fallen from nearly +4% to a low of -2% in 2010…and it still grovels below zero percent today. Consequently, the once vibrant Nippon Economy has suffered horrific DEFLATION, as demonstrated and caused by two factors: The relentless appreciation of the Yen currency; and the equally dogged decline of the NIKKEI Stock Index. Specifically, from 1990-2012 NIKKEI Stock Index unremittingly fell from 37,000 to only 7,500 (-80%), while their Yen currency appreciated +90% in the same time period…almost a 1:1 inverse relationship. ..for more than two decades.

Here is the actual Price basis (1990-2013):

http://tinyurl.com/b7xywdv

Here is the Performance (percent basis 1990-2013):

http://tinyurl.com/a8qexx5

In December 2012 Shinzô Abe became the new Prime Minister of Japan via a landslide victory. His savvy monetary policy was to INCREASE INFLATION by devaluating the Yen. He is achieving this glorious goal via an aggressive program of Quantitative Easing (QE), whereby the Bank of Japan (BOJ) is buying the country’s Treasury Bonds. The BOJ earlier this month committed to open-ended asset buying to nearly double the monetary base to 270 trillion yen ($2.72 trillion) by the end of 2014 to end 15 years of deflation and in order to achieve its 2 percent inflation target in two years.

AND HERE ARE THE SPECTACULAR RESULTS OF JAPAN’s QE YEAR TO DATE:

NIKKEI Stock Index has soared +45% (as of May 17, 2013)

Yen Currency has fallen -17% (as of May 17, 2013)

http://tinyurl.com/axtjeg7

TWO DECADES of Japanese DEFLATION is out as The Rising Sun of INFLATION appears.

THREE CHEERS for Prime Minister Shinzô Abe and QE.

Would that our President Obama could learn from Minister Shinzô Abe.

********

“DOLLAR DEVALUATION IS INEVITABLE…just like in 1934″

http://www.gold-eagle.com/gold_digest_08/vronsky040209.html
********

I.M. Vronsky

GOLD-EAGLE

www.gold-eagle.com

Give It A Doubt

OzCopper — Sat, 18 May 2013 06:46:04 +0000

Richard (Rick) Mills

Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Many, many years ago during a lengthy argument with a friend he told me to ‘give it a doubt’ – he meant I was wrong.

The herd is convinced the commodities boom is over. Doom and gloom, the sky is falling, the bears argument sounds convincing - growth has stopped, economies are slowing. Looking at the TSX.V’s performance (most of the world’s mineral exploration firms call the Venture Exchange home) it’s as if people are convinced the need to search for, develop and mine new mineral deposits is over.

According to Bloomberg the U.S. economy may cool to a 1.6 percent pace in the second quarter, after growing at a 2.5 percent rate in the first three months of 2013.

U.S. industrial production fell by the most in eight months – a gauge of factories in the New York area fell to minus 1.4 this month from 3.1 in April.

“The drop in factory output, which accounts for more than 70 percent of industrial production, was broad-based and in keeping with data earlier this month that showed factory payrolls failed to expand last month.

Industrial capacity utilization, a measure of how fully the nation’s mines, factories and utilities are deploying their resources, dropped sharply from a more than 4-1/2 year high.” Reuters,Factory, wholesale price data flag economy’s woes

Manufacturing has been hit hard by the $85 billion in across the board spending cuts – the ‘fiscal cliff’ that started in March. U.S. GDP growth is predicted at 1.9 percent for 2013.

There’s a record six quarter recession in Europe, GDP growth there is expected to contract by 0.1 percent, GDP growth for Japan is predicted at 0.8 percent for 2013.

Sounds ominous, it’s obvious the commodities boom has gone bust and economic growth has disappeared.

Give it a doubt.

In the Latin American and Caribbean region 2013 GDP growth is predicted at 3.5 percent, in the East Asian and Pacific region growth is predicted at 7.9 percent. China’s GDP growth outlook for 2013 is 8.6 percent while India’s outlook clocks in at 6.1 percent.

Reddit.com

Wikipedia.com

Prb.org

Developing countries account for 97 percent of population growth because of the dual effects of high birth rates and young populations.

Below is list of the twenty most populous countries in the year 2050:

1. India – 1,692,008,000
2. China – 1,295,604,000
3. United States – 403,101,000
4. Nigeria – 389,615,000
5. Indonesia – 293,456,000
6. Pakistan – 274,875,000
7. Brazil – 222,843,000
8. Bangladesh – 194,353,000
9. Philippines – 154,939,000
10. Democratic Republic of the Congo – 148,523,000
11. Ethiopia – 145,187,000
12. Mexico – 143,925,000
13. Tanzania – 138,312,000
14. Russia – 126,188,000
15. Egypt – 123,452,000
16. Japan – 108,549,000
17. Vietnam – 103,962,000
18. Kenya – 96,887,000
19. Uganda – 94,259,000
20. Turkey – 91,617,000

A new report from the McKinsey Global Institute, Urban world: Cities and the rise of the consuming class, finds that:

The 600 cities making the largest contribution to a higher global GDP – the City 600 – will generate nearly 65 percent of world economic growth (worth $30 trillion) by 2025.
One billion new people will enter the global consuming class by 2025.
Cities are expected to build floor space equivalent to 85 percent of today’s space – an area the size of Austria. The urban building boom will require cumulative investment of $80 trillion.
Nearly an 80 billion cubic meter increase in municipal water demand is expected by 2025.
Over 2.5 times today’s level of port infrastructure is needed to meet rising container shipping demand.
Consumption and capacity building in the developing world are already straining the global supply of capital and natural resources.

With a current population of 4.3 billion, Asia will add about one billion people to the global population by 2050 – most will live in urban areas.

Under new Chinese leadership China is going to spend a massive 40 trillion yuan to urbanize the rural outskirts of some 270 cities – China estimates that 400 million additional people will move to its cities in the next 30 years.

By 2025, nearly 2.5 billion Asians will live in cities, accounting for almost 54 percent of the world’s urban population.

India and China alone will account for more than 62 percent of Asian urban population growth and 40 percent of global urban population growth from 2005 to 2025.

It took India nearly 40 years to add 230 million urban residents, but it will take only half that time to add another 250 million.

Africa’s population can be expected to at least double from 1.1 billion to about 2.3 billion by 2050 – most will live in urban areas.

Africans, on a per capita basis, are richer than Indians and a full dozen African states have higher gross national income per capita than China.

“The incomes of these new consuming classes are rising even faster than the number of individuals in the consuming classes. This means that many products and services are hitting take-off points at which their consumption rises swiftly and steeply. By 2025 urban consumers are likely to inject around $20 trillion a year in additional spending into the world economy. Catering to the burgeoning urban consumer classes will also require a boom in the construction of buildings and infrastructure. We estimate that cities will need annual physical capital investment to more than double from nearly $10 trillion today to more than $20 trillion by 2025, the lion’s share of which will be in the emerging world.” McKinsey Global Institute, Urban World: Cities and the rise of the consuming class

UN Department of Economic and Social Affairs

Today Africa has 15 percent of the world’s population and by 2050 one in every four people on the planet will be African – by 2027 Africa will have more people than does China or India.

From the World Bank comes the following:

Cities, large and small, are at the heart of a fast changing global economy — they are a cause of, and a response to world economic growth.

The world’s cities are growing because people are moving from rural areas in search of jobs, opportunities to improve their lives and create a better future for their children.

This is the first time in human history that the majority of the world’s population lives in urban areas:

60% of all people will live in cities by 2030. In 1800, only 2% of people lived in cities and towns, in 1950 only 30% of the world population was urban (it has been predicted elsewhere that by 2050, 64.1% and 85.9% of the developing and developed world respectively will be urbanized).
Almost 180,000 people move into cities each day.
60 million people move into cities each year in developing countries. This rate of movement will continue for the next 30 years

Another report from the McKinsey Global Institute says the world will need to spend $57 to $67 trillion between now and 2030 – that’s not counting what it will cost to upgrade networks to get them to where they need to be today nor do the costs factor in climate change.

Representing 43 percent of the world’s population and 17 percent of trade the BRICS – Brazil, Russia, India, China and South Africa – have agreed to create a development bank to provide initial funding for infrastructure projects worth $4.5 trillion. Other developing countries will eventually be invited to join the bank, India has offered $50bn of seed capital to get the initiative started.

What about the present day global infrastructure deficit, what about the deficit that already exists never mind the trillions of dollars and massive resources needed for newly minted and future urbanites, the exploding consumer class?

Back to the present

The news isn’t good…

Infrastructure is the physical systems – the roads, power transmission lines and towers, airports, dams, buses, subways, rail links, ports and bridges, power plants, water delivery systems, hospitals, sewage treatment, etc. – that are the building blocks, the Legos, that fuel a countries, a cities or a community’s economical, social and financial development.

Cairo, Los Angeles, Beijing, Paris, Moscow, Mumbai, Tokyo, Washington, Sao Paulo: Each major city has its own story of electricity, transportation, or water systems in crisis. Although the circumstances vary from one urban area to the next, they all have one thing in common: The critical infrastructure that is taken for granted by both their citizens and their government leaders is technologically outdated, woefully inadequate, increasingly fragile, or all of the above. In some cities, the quality of water, power, and transportation infrastructure is noticeably declining. In others, it was never very good to begin with. And few cities have enough of it to meet future needs.” Lights! Water! Motion!, strategy-business.com

There is an undeniable, an unarguable connection between the quality of a countries economic competitiveness and its infrastructure. Yet study after study shows the global economy currently running an infrastructure deficit of anywhere from US$ 40 trillion to $70 trillion.

The World Economic Forum’s Positive Infrastructure Report finds that the world faces a global infrastructure deficit of $2 trillion per year over the next 20 years.

The American Society of Civil Engineer’s (ASCE) New Report Card concludes that to raise the grades, from the current D+, and get U.S. infrastructure to an acceptable level, a total investment of $3.6 trillion is needed by 2020. Currently, about $2 trillion in infrastructure spending is projected.

A major new Canadian study by the Federation of Canadian Municipalities (FCM), showed that a significant amount of municipal infrastructure ranks between “fair” and “very poor.” The report provides an assessment of the condition of four primary asset categories of municipal infrastructure: drinking-water systems, wastewater and storm water networks, and municipal roads. The replacement/upgrade cost of just these assets total $171.8 billion.

Conclusion

Add it all up, the global infrastructure deficit, today’s and tomorrow’s, the incredible amount of urbanization and population growth still to take place, the addition of a billion and more consumers, piece it altogether and you have to see it equals an enormous demand that’s going to be placed on the world’s finite supply of increasingly conflicted mineral resources.

The scale of resource use is unprecedented in magnitude, the number of people we’re talking about is well over a billion – all to be new urbanized consumers by 2025. The world’s population is suppose to number 9-10 billion (another 2-3 billion in just a few decades) by 2050 increasing even further the demand for the globes resources.

Bull markets climb a wall of worry. Today the dollar is up and commodities are down but more money creation, on a massive scale, an unprecedented level, a “you ain’t seen nothing yet’ kind of scale is both necessary and coming – central bank monetary policies have been an abysmal failure, time for governments to step in with fiscal policy geared toward generating jobs from urbanization/infrastructure programs.

This is extremely bullish for minerals and other commodities.

Are minerals, and the mining of, on your radar screen?

If not, they definitely should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:

If you’re interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us at

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

Gold’s Long Term Chart

OzCopper — Wed, 15 May 2013 03:20:04 +0000

“India’s wholesale price index, the country’s main gauge of inflation, rose just 4.89 percent year on year last month – far below expectations for a rise of 5.4 percent – and slower than 5.96 percent rise in March.” – CNBC News, May 14, 2013.
Many economists are already predicting that this shocking drop in Indian inflation will lead to further cuts in interest rates.
India’s government (aka “The Gman”) views imported gold as an expenditure, while the citizens view it as an investment asset. Indian gold imports increased in April, to over $7 billion, and both the government and the central bank claim this surge in gold imports is causing the nation’s trade deficit to soar.
On May 13, 2013, the central bank of India announced curbs on gold imports, but today the World Gold Council (WGC) stated that 2013 imports will rise to above 900 tons.
WGC India Managing Director, Somasundaram PR, said in an interview to “The Hindu” newspaper yesterday, “Any attempt to curb import will activate unauthorised channel.”
In plain English, India’s citizens buy gold, any way they can get it, to protect themselves against government stupidity and theft.
Western bank economist price targets of $1100- $1300 mean absolutely nothing to these gold market champions.
If the average Indian is not afraid of lower gold prices, should you be afraid? The answer is clearly… no!
Every “card carrying” member of the gold community wants to see higher gold prices, and it will happen, but patience is required.
It’s quite sad that hundreds of millions of Asians are lined up in the streets to buy physical gold, while many Western gold analysts are doing nothing other than pasting “long term trend is down” annotations on every gold chart they can find.
If the long term trend for gold was down, Asians would not be lined up in the street to buy it. Gold is not a dollar-bug’s whipping boy. It’s the greatest investment asset in the history of the world, and the only one that should never be sold at a loss.
Long term charts should be used to identify potential buying areas, not to terrify gold investors.
In the shorter term, gold’s price moves like an ocean tide. Please click here now. You are looking at the daily gold chart. Gold is trading in a range between $1400- $1480.
Traders should buy a little in the $1400 area, and sell a bit in the $1480 area.
Note the position of my “stokeillator” on that chart. It’s not flashing a “run, hide, sell everything!” signal. The stokeillator simply suggests that gold could rest a bit, after rallying about $160.
We all wish the $160 rally was from $1800 to $1960, but it isn’t. Cheer for gold, 24-7, but be realistic about the need for rest, after a $160 rally.
Please click here now. That’s an even shorter term chart, using hourly bars. Sell-side HSR (horizontal support & resistance) sits in the $1440 area, and buy-side HSR is near $1400. Gamblers can use leveraged vehicles, with some degree of confidence, to trade these shorter term charts.
KIS. Keep it simple. Sell a little paper gold in the $1440 area, and buy physical gold in the $1400 area.
Unlike most gold analysts, my view is that gold stocks can perform well, even if the dollar rallies and gold falls.
The cost of production is in the $1100- $1250 area for many mining companies, and many value-oriented fund managers will want to buy gold stocks in anticipation of those prices.
Please click here now. Double-click to enlarge. That’s the GDX daily chart. If you look carefully at each blue box, you’ll notice that volume has generally been declining on down days, and rising on up days.
That’s a positive sign, but note the red circles that I’ve drawn on some of the technical indicators and oscillators. In my trading service, I’m short gold stocks now, but in all my other investment accounts, I’m accumulating them.
Trading should always be a small venture. It creates excitement during down markets, and compartmentalizes “action trades”, while leaving the much larger core positions alone.
To view my special long term chart for gold, I’d like you to please click here now. A picture speaks a thousand words, and it tells you why the long term target is not $600. It’s $6000.

Special Offer For OzCopper Readers: Send me an email to freereports4@gracelandupdates.com and I’ll send you my free “Silver Technicals” report. I’ll show you why I think a head and shoulders bottom could be forming on silver stocks now, and what actions I’m taking in that market.

Thanks!

Cheers

Written between 4am-7am. 5-6 issues per week. Emailed at aprox 9am daily.

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Are You Prepared?

Will Oil Futures Stop the Fed’s QE Program?

OzCopper — Sun, 12 May 2013 08:10:05 +0000

The sell-side analysts and economists are reminding retail investors that risk assets in the United States have been on quite a tear to the upside recently. A correction now lasts a matter of days, if not hours before the bulls push equity prices even higher.

The Federal Reserve is winning the reflation war using cheap money and massive levels of liquidity to help drive risk assets higher and interest rates artificially lower. Unfortunately for domestic investors searching for yield, they find that they are forced to incur higher levels of risk in order to satisfy their growth and income needs. There are significant risks associated with higher than average fixed income returns and the cost will be felt should we see any correction in the future.

However, the Federal Reserve has a history that is littered with dismal results. The purchasing power of the U.S. Dollar has been reduced by more than 90% since the Fed’s inception in late December of 1913. Since that time, the Federal Reserve has stolen more “real” wealth from the American people than any other institution in the history of mankind.

The Federal Reserve has two primary functions. One function is to maintain price stability or in other words to moderate inflation. Clearly over the past 100 years their inflation track record has been horrific. However, the Fed’s recent track record regarding the value of the U.S. Dollar Index has been dismal the past 15 years as shown below.

As can be seen clearly above in the Dollar Index Futures monthly chart, at present levels the Dollar’s overall value has diminished well over 31% since late 2001. I would also draw readers’ attention to the selloff that occurred from late 2005 until the early part of 2008. The selloff during that period of time is important to reinforce my next consideration.

Recently the flow of liquidity has primarily been seen in record low interest rates and a surging U.S. equity market. Nearly every day the Dow Jones Industrial Average or the S&P 500 Indexes make a new all-time high. The question that I would like to posit for readers is how long will it be before the so-called smart money starts looking at the attractiveness of commodities relative to equities?

If the Federal Reserve continues to print money at this pace, what will ultimately stop them dead in their tracks? The short answer is energy prices. The easiest way to stop the Fed’s printing press is to see a massive spike in energy prices. While we often hear that history does not repeat but it often rhymes, consider the price action in oil futures during the same 2006 – 2008 selloff in the U.S. Dollar Index.

It is readily apparent that once oil futures were able to push above the $78 / barrel highs in mid-2006, prices exploded while the U.S. Dollar came under strong selling pressure. The timing could not be more impeccable for the explosive nature in the move higher in oil.

Furthermore, if we move forward to present day price action in oil futures we have a large triangle pattern on the long-term charts. The pattern offers the inflation versus deflation argument that so many economists and strategists are plagued by presently in their analysis.

My suggestion is that watching the price of oil futures is likely going to tell us the intermediate expectation by the market of what lies ahead in the inflation versus deflation debate. The movement of oil futures prices in the intermediate term is likely to be based on which direction the triangle pattern ultimately breaks.

What is obvious about this pattern is that a move that could hurdle $100 / barrel will open up a strong move toward $112 – $120 / barrel. If we were to see a move higher in oil futures that could push above the $120 / barrel price level set back in early 2011 a fierce rally in oil futures could play out.

A strong rally in oil futures will ultimately put the final nail in the coffin for U.S. equity markets and the U.S. economy. Gasoline prices would obviously rocket higher and the U.S. economy would quickly be brought to its knees. The Federal Reserve would be forced to either print more money and run the risk of higher oil prices, or do nothing and run the risk that the equity selloff could intensify.

I want to be clear that I am not calling for a rally in oil futures. Price action could go either way depending on market conditions, but the real question is regardless of which way price breaks in the future, how does it help equity markets? Those evil oil speculators run down by politicians seeking air time on television and radio could be the final straw for Ben Bernanke and the Federal Reserve.

Whether the future is full of inflation, deflation, or stagflation I am confident that energy prices will play a critical role in price discovery for not just oil and oil distillates, but for the overall domestic economy.

If the Fed does not show constraint at the appropriate time, oil and other commodity prices are likely to remind Chairman Bernanke that the Federal Reserve’s future track record is likely to be as dire as its historical performance.

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JW Jones

Correction near but Bull Market has LONG waves to Go!

OzCopper — Sun, 12 May 2013 08:08:49 +0000

David Banister- www.MarketTrendForecast.com

The SP 500 has been on a tear as we all know especially since the SP 500 bottomed at 1343 several months ago. My work centers around forecasting using Elliott Wave Theory along with other technical indicators. This helps with projecting the short, intermediate, and longer term paths in the stock market and also precious metals. This larger picture Bull Cycle started in March of 2009 interestingly after an exact 61.8% Fibonacci retracement of the entire move from 1974 to 2000 lows to highs. At 666, we had completed a major cycle bottom with about 9 years of movement to retrace 26 years of overall bull cycle. That was a major set of 3 waves (Corrective patterns in Elliott Wave Theory) from the 2000 highs to 2002-3 lows, then 2007 highs to 2009 lows. Once that completed its work, we were free to have a huge new bull market cycle off extreme sentiment and generational lows.

It’s important to understand where we were at in March of 2009 just as much as it is today with the market at all-time highs. Is this the time to bail out of stocks or do we have a lot more upside yet to go? Our short answer is there is quite a bit more upside left in the indexes, but there are multiple patterns that must take place along the way. We will try to lay those out for you here as best we can.

Elliott Wave theory in general calls for 5 full wave cycles in a Bull pattern, with 1, 3, and 5 bullish and 2 and 4 corrective. We are currently in what is often the most bullish of all the patterns, a 3^rd of a 3^rd of a 3^rd. In English, we are in Primary wave 3 of this bull cycle which will be 5 total primary waves. We are in Major wave 3 of that Primary 3, and in the Intermediate wave 3 of Major wave 3. That is why the market continues its relentless climb. This primary wave 3 still has lots of work to do because Major wave 3 still has a 4^th wave down and a 5^th wave up to finish, then we need a major 4, then a major 5. That will complete primary wave 3. This will then be followed by a Primary wave 4 cycle correction that probably lasts several months, and then a Primary wave 5 cycle to finish this part of the bull market from March 2009 generational lows… and all of that work is going to take time. Once that entire process from March 2009 has completed, then we should see a much deeper and uglier correction pattern, but we think that is at least 12 months or more away.

What everyone wants to know then is where are we at right now and what are some likely areas for pivot highs and lows ahead? We should complete this 3^rd of a 3^rd of a 3^rd here shortly and have a wave 4 correction working off what will likely be almost 300 points of upside from SP 500 1343. We could see as much as 90-120 points of correction in the major index once this wave completes. Loosely we see 1528-1534 as a possible top and if not then maybe another 30 or so points above that maximum into early June. This should then trigger that 90-120 point correction, and then be followed by yet another run to highs.

We could go on but then we will lose our readers here for sure, and as it is… this is all projections and postulations, so it’s best to keep the forecast to the next many weeks or few months. Below is a chart we have put together showing the structure of Major wave 3 of Primary 3 since the 1343 lows. Once that Major wave 3 tops out (see the blue 3) then we will have Major 4, then Major 5 to complete Primary wave 3 since the 1074 SP 500 lows. Whew!

Join us to get daily updates on nearer term directions of the SP 500 and Gold at www.MarketTrendForecast.com

Mining the Ogallala

OzCopper — Sat, 11 May 2013 01:49:43 +0000

Richard (Rick) Mills

Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Freshwater aquifers are one of the most important natural resources in the world today but we are pumping the groundwater out so fast nature can’t keep up. Some places we’re literally mining the water – once the water is pumped out its gone forever, it isn’t coming back anymore than the gold in a mined out deposit.

These fast shrinking underground reservoirs are essential to life on this planet. They sustain streams, wetlands, and ecosystems and they resist land subsidence and salt water intrusion into our fresh water supplies.

Many people think of aquifers as underground lakes but that’s not the case – the water is held between rock particles. Water infiltrates into the soil through pores and cracks until it reaches what is called the zone of saturation – all of the spaces between the rocks are filled with water, not air. This zone of saturation occurs because water infiltrating the soil reaches an impermeable layer of rocks it can’t soak through.

There are two types of aquifers: replenishable (a permeable layer of rock above the water table and an impermeable one beneath it) and non-replenishable (also known as fossil aquifers, no recharge) aquifers. Most of the aquifers in India and the shallow aquifer under the North China Plain are replenishable. When these are depleted, the maximum rate of pumping is automatically reduced to the rate of recharge or refill.

For fossil aquifers – such as the vast U.S. Ogallala aquifer, the deep aquifer under the North China Plain, or the Saudi aquifer – depletion brings pumping to an end.

The Ogallala Aquifer (a south to north trend consisting of thick sands and gravels) is the leading geologic formation in what is known as the High Plains Aquifer System. The Ogallala has a total water storage capacity about equal to that of Lake Huron. The entire system underlies about 450,000 square kilometers (174,000 square miles) of eight states – Colorado, Kansas, Nebraska, New Mexico, Oklahoma, South Dakota, Texas, and Wyoming.

On the High Plains there is very little water surplus – evaporation levels are almost the same as precipitation levels meaning there is little recharge of groundwater from precipitation. What little recharge there is for the Ogallala comes from ground water percolating very slowly eastward from Rocky Mountain snowmelt.

The Ogallala waters more than one-quarter of all irrigated acreage in the U.S., provides water for some of world’s largest cattle feedlots and four of five people living above it count on the aquifer for their drinking water.

In April 2012, 37 percent of the contiguous U.S. was experiencing at least moderate drought conditions, a number that shot up over 63 percent by mid-summer. Currently 47 percent of the U.S. is experiencing moderate drought conditions.

The main problem with groundwater in the High Plains is that the water is being withdrawn at a rate greater than the recharge rate. The Ogallala Aquifer’s recharge rate is approximately 22 to 25 mm/year with a net overdraft of 54.864 mm/year – when pumping from an aquifer extracts water faster than it can be recharged the aquifer is said to be in overdraft.

If the Ogallala Aquifer does dry up (since large-scale irrigation began in the 1940s, water levels have declined more than 30 meters in parts of Kansas, New Mexico, Oklahoma, and Texas) America would need the equivalent of 20 percent of the flow of the St. Lawrence seaway each and every year just to replace the water needed to irrigate the mid-western corn crop – U.S. corn farmers are growing high water demand crops in a desert.

Aquifer depletion would significantly impact crop production in the United States because 60 percent of irrigation relies on groundwater and 94 percent of the total groundwater usage from the Ogallala is for irrigation.

“Ogallala water allowed the agricultural transformation of the High Plains in the 1950s. Renewed drought led to major well drilling, especially on the Texas High Plains. With the technology now well established, the water pumped and the acreage irrigated increased dramatically. Center-pivot methods of irrigation were patented in 1952, and spread over much of the High Plains in the 1970s. By the mid-1970s, 12 million acres were irrigated, largely for feed corn, with cotton as a major crop in West Texas. Production of feed grains on the High Plains tripled between 1954 and 1973, and the grains were fed to beef cattle in feedlots all over the Plains.

In 1980 about 170,000 wells were pumping 18 maf/yr (more than the flow of the Colorado River) from the Ogallala Formation to irrigate over 13 million acres, compared with 2 million acres in 1949. The Sand Hills of Nebraska, long a wildlife refuge because crops could not be grown on it, now contained some of the most intensive central-pivot irrigation systems in the United States. 20% of the irrigated land in the United States overlay the Ogallala, 30% of the irrigation ground water in the United States was being pumped from it, and 40% of the grain-fed beef cattle slaughtered in the United States were being fattened in the six states of the High Plains. Large feedlots were set up, and slaughtering and meat-packing centers were built to create a significant economic infrastructure. Kansas is the leading state in the US for wheat production and beef-processing.

The mathematics is inexorable. An aquifer does not contain 100% water, because the water is held between the grains in the sediment. Surface tension dictates that not all the water can be pumped out: an aquifer yields only a specific yield, which for the Ogallala is 10-20% of its volume in water.

Over the entire Ogallala region, 23 maf/yr were being pumped in 1978, but that had dropped to 18 maf/yr in 1980 (still more water than flows down the Colorado River!). Finally, with the water table dropping precipitously, the end was in sight. The water table dropped more than 50 feet over a large area in the southern High Plains, and dropped more than 200 feet in West Texas. Nebraska, Kansas, and Texas were pumping 88% of all the Ogallala water between them. It became clear that this underground water was not a renewable resource, and that once pumped out, that would be the end of irrigated farming.” mygeologypage.ucdavis.edu

Conclusion

“They have substituted rain-fed agriculture along the Atlantic coast — because good farmland is being covered up by urban sprawl — for an unsustainable irrigation-based agriculture in the Midwest. When the aquifer runs dry, which it absolutely will, what will they do?” Peter Brown, director of the McGill School of Environment

Think of pumping most underground water to the surface as mining water. When it’s gone – like when a gold, copper or rare earth mine runs out of ore – it’s gone.

This fact should be on all our radar screens. Is it on yours?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:

If you’re interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us at www.aheadoftheherd.com

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

Top 3 Trading Indicators for Profitable & Simple Trading

OzCopper — Fri, 10 May 2013 02:04:37 +0000

Many investors and traders make the same mistakes assuming that one needs a complex trading system to consistently profit from the stock market. On the contrary, some of the top performing strategies are the ones with the least amount of moving parts and are simple. Because their simplicity they can be easily and consistently followed.

The methodologies we use for timing the market, picking stocks and option trades are very simple because we focus mainly on price, volume and momentum. These three indicators are the key to success. When these are used together you are able time your entries and exits during key turning points, clearly define risk and reward levels while maintaining a clear unbiased state of mind which allows one to trade almost emotionless.

As my Trading System Mastery coach (Brian McAboy) taught me, if you do not have a detailed trading plan which a five year old could trade, then you do not have a solid strategy and will have unnecessary losses and emotional stress.

So here are a couple tips to keep things simple and emotionless:

Our recent trade in Infoblox Inc. (BLOX) with our ActiveTradingPartners Newsletter:
This stock was flashing several signals (price, volume and momentum) that a bounce or rally was likely going to happen within a few weeks. This is a good example of a swing trade based purely on our main indicators.

Our Broad Market Outlook:

Current stock market prices are starting to warn us that a market correction is near. You can read more about this in detail in our last report “Stocks Preparing for a Pullback, Buy Bas News, Sell the Good”.

We all know the market works with the saying:
“If the market doesn’t shake you out, it will wait you out”.

How does this work? Simple really, during down trends and just before a market bottom we tend to see capitulation spikes in selling. These scare the last of the long positions out of the market and suck in the greedy shorts after the move has already been made.

During an uptrend which is what we are in now the market makes spike highs designed to scare out the shorts and get greedy long traders to buy more. Once again after the move has already been made and likely near the market top.

If you are the type of trader who always tries to pick tops and bottoms against the current trend then you may like to know this little tip… The largest percent moves typically happen during the last 75% of the trend. What does this mean? It means when you take your position against the trend trying to pick the dead top or bottom you are most likely going to get be caught on the wrong side of the market in a big way.

Most traders I know based on recent emails have been short the market for 1-3 weeks and many keep emailing me that they are adding more shorts each day because they feel the market is going to top. So me being a contrarian by nature in terms of what the masses are doing, if everyone is still holding on to their shorts we likely have not seen the top just yet. Another 1-2% jump from here should be enough to shake them out though…

If you like this article join my free newsletter to receive more timely trading insight at: www.TheGoldAndOilGuy.com

Chris Vermeulen

Gold $1400 or $1550

OzCopper — Wed, 08 May 2013 03:49:06 +0000

Gold has stalled in the $1485 area. Is the rally in gold over, or about to accelerate?
Please click here now. You are looking at the daily chart for gold. Technically, the gold price is moving sideways in a rough congestion pattern, between $1440 and $1480.
I’ve highlighted the trading range with blue and red HSR (horizontal support and resistance) lines. These types of patterns have a 2/3 chance of consolidating the existing trend, which means there is a 2/3 chance of an upside breakout.
Please click here now. That’s also a daily gold chart. You can see that the next key HSR areas are near $1400 and $1540.
If gold can trade above $1485, it’s got a realistic chance of rising to $1540.
Note the position of my “stokeillator” (14,7,7 Stochastics) series on both those charts. It’s not overbought, but it’s high enough that investors need to be somewhat cautious.
The media has reported substantial “mom and pop” gold buying, around the world. Chinese, Japanese, and Indian households are accumulating gold, but so are households in America, Canada, England, and Australia.
That buying is being countered by ETF selling, and this “battle” is likely creating the range between $1440 and $1480.
Please click here now. That’s a shorter term look at gold, over the past month. Gold is trading in an uptrend. A break under $1425 would be a negative event, but a minor one.
Obviously, the decline from $1500 to $1320 has left a lot of gold investors stunned. In a situation like this, I think it’s important to keep things very simple, or you can create a panic in the “gold building”, when there is no fire.
Not all bank brokerages have a negative outlook for gold, and those that do are mostly from outside of Asia. TD Securities, for example, is forecasting an average 3^rd quarter price of $1550.
To view their opinion in detail, please click here now.
Obviously, if the price were to average $1550, it would almost certainly trade quite a bit higher than that, at some point during Q3!
While gold has fallen by a greater percentage than it did during the recent crash, Mid-East dealers believe it has never crashed so “hard”.
The violence of the crash has resulted in Mid-East dealers hoarding gold bars. Some people are calling the crash the biggest in 70 years. They believe much higher prices are coming after such an ordeal, and refuse to sell.
Please click here now. That’s a link to a Daily Telegraph article that shows the incredible demand for physical gold in the Mid-East.
There’s a global “show of hands” for physical gold, but what about silver?
Please click here now. You are looking at the hourly bars chart for silver. It’s drifting sideways in a range between roughly $21 and $24.50, but it will likely be the price action of gold that determines the next big move for silver.
I think that silver will grind its way higher, towards the $27 area, while many bears think it is headed towards $18.
Gold stocks are struggling, and some analysts believe they are a leading indicator for gold.
Please click here now. Double-click to enlarge. You are looking at the daily chart of GDX. On May 6, the gold stocks market traded like it was a holiday; the lights were on, but nobody was home.
Note the declining volume. That’s bearish. GDX is also barely above the 10 day moving average, which is negative.
Still, there is hope; double bottom patterns tend to show very little volume on the 2^nd bottom.
If GDX drifts down towards the $27.27 area lows, over the next few weeks, it’s quite possible that a small double bottom pattern could be in play. GDX needs to close over $30 on strong volume, to reinvigorate the entire gold stocks sector!

Special Offer For OzCopper Readers: Please send me an email to freereports4@gracelandupdates.com and I’ll send you my free “Riding The Rails” report. I show you how to apply slanted trend lines to the current precious metals markets, so you can see where prices may hesitate, and surge!

Thanks!

Cheers

Written between 4am-7am. 5-6 issues per week. Emailed at aprox 9am daily.

Source: http://oilprice.com/Energy/Energy-General/New-Wyoming-Lithium-Deposit-could-Meet-all-U.S.-Demand.html

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Are You Prepared?

How to Trade Gold, Silver & Precious Metal Miners

OzCopper — Tue, 07 May 2013 01:13:32 +0000

How to trade Gold and other precious metals related investments is not that complex. But you must be willing to wait for price to provide low risk entry points before getting involved. Precious metals are like any other investment in respect to trading and investing in them. There are times when you should be long, times to be in cash and times to be short (benefit from falling prices).

Since 2011 when gold and silver started another major bull market correction the best position has been to move to cash or sell/write options against your positions to protect your investment until the next trend resumes.

If you take a look at the chart below of gold you will notice that in 2008 we had a similar breakdown in price which purged the market of investors who where long gold. And if you compare the last two breakdowns they look very much the same. If price holds true then much higher prices are likely to unfold at the end of 2013.

The key here is for the price to move and hold above the major resistance line. If it can do that then we are looking at a possible breakout to $2600 – $3500 gold. With that being said gold and silver may just be starting a bear market. Depending what the price of gold does when my resistance level is touched, my outlook may change from bullish to bearish.

Also with last weeks economic numbers getting better in the USA I do have concerns that gold may be starting a bear market but we will not know for several more months yet.

How to Trade Gold Daily Technical Chart:

Major technical damage has been done to the chart of gold. This can be seen as bullish or bearish price action but until price and volume pattern unfolds which puts the odds on the bullish or bearish side I remain neutral.

How to Trade Silver Daily Technical Chart:

Silver is in the same position as gold. The question is if this is a shakeout or breakdown…

How to Trade Gold Mining Stocks Monthly Chart:

Gold mining stocks broke down a couple months ago and continue to sell off. If precious metals continue to move lower then mining stocks will continue their journey down. The chart below made in February and it has in most part played out as expected. While I do not try to pick bottoms (catch falling knives) I do like to watch for them so I am prepared for a new position when the time and chart become bullish.

How to Trade Gold, Silver and Mining Stocks Conclusion:

In short, precious metals continue to be in a down trend. While they look to be trying to bottom it is important to remember that the largest moves take place in the last 10% of a trend. So we may be close to a bottom but there could be sharply lower prices yet.

The time will come when another major buy or short signal forms and when it does we will be getting involved. The exciting part is that it could be just around the corner. If you want to keep current and take advantage of the next major move be sure to join me free newsletter here: http://www.GoldAndOilGuy.com/

Chris Vermeulen

New Wyoming Lithium Deposit could Meet all U.S. Demand

OzCopper — Sat, 04 May 2013 06:13:34 +0000

The U.S. currently imports more than 80% of the lithium it uses, with the silvery metal winding up in batteries from cell phones to electric cars.

According to a United States Geological Survey publication on lithium, “The only commercially active lithium mine in the United States was a brine operat ion in Nevada. The mine’s production capacity was expanded in 2012, and a new lithium hydroxide plant opened in North Carolina. Two companies produced a large array of downstream lithium compounds in the United States from domestic or South American lithium carbonate, lithium chloride, and lithium hydroxide. A U.S. recycling company produced a small quantity of lithium carbonate from solutions recovered during the recycling of lithium ion batteries.”

The bad news?

Last year virtually all of the major brine and mineral-based lithium producers increased their prices, which in turn has spurred prospecting. In the U.S. exploration has been largely centered in Nevada, but the growing worldwide market for lithium has also spurred exploration in Argentina, Australia, Bolivia and Canada.

And now, the good news.

University of Wyoming researchers found the lithium while studying the idea of storing carbon dioxide undergro und in the Rock Springs Uplift, a geologic formation in southwest Wyoming. University of Wyoming Carbon Management Institute director Ron Surdam stated that the lithium was found in underground brine. Surdam estimated the located deposit at roughly 228,000 tons in a 25-square-mile area. Extrapolating the data, Surdam said as the uplift covered roughly 2,000 square miles, there could be up to 18 million tons of lithium there, worth up to roughly $500 billion at current market prices.

As a yardstick, the lithium reserves at Silver Peak, Nevada, the largest domestic producer of lithium total 118,000 tons in a 20-square-mile area. The University of Wyoming stated that in a best-case scenario, the Rock Springs Uplift’s 18 million tons of potential lithium reserves is equivalent to roughly 720 years of current global lithium production. UW researchers suggest th at the lithium mining could be part of a carbon dioxide sequestration operation, since the lithium-bearing brine must be pumped to the surface from the underground rock formation to extract the lithium, creating space to store the CO2 in its place. Surdam highlighted the economic advantages to the combined lithium-CO2 storage operation, commenting, “You get paid to put the carbon in the subsurface and that’ll pay for the wells to remove the lithium.”

Carbon Management Institute senior hydrogeologist Scott Quillinan said, “Due to their high salinity, brines from the CO2 storage reservoirs would have to be pumped to the surface and treated – often an expensive process. Recovering and marketing lithium from the brines would produce significant revenue to offset the cost of brine production, treatment and CO2 storage operations.” < /p>

Several fortunate factors converge to make the lithium- CO2 storage reservoir concept more than merely feasible. While lithium production from brines requires sodium carbonate (soda ash), transporting soda ash to lithium production facilities is often a significant expense the Rock Springs Uplift CO2 storage site is located 20-30 miles of the world’s largest industrial soda ash supplies, so costs of soda ash delivery would be minor. While magnesium must be removed from brines before they can be used for lithium recovery, the Rock Springs Uplift reservoirs contain much less magnesium than brines at existing, currently profitable lithium mining operations. While brines must be heated and pressurized before lithium can be extracted, the Rock Springs Uplift brines lie so far underground, they are already at a higher pressure and temperature than brines at existing lithium operations, allowing any potential operators largely eliminate the step, further lessening costs. Finally, the treated water resulting from the recovery process could benefit local communities, agriculture and industry.

It will be interesting to see if any investment entities step up to the plate on this.

By. John C.K. Daly of Oilprice.com

Stock Preparing for Pullback, Buy Bad News, Sell the Good

OzCopper — Sat, 04 May 2013 06:12:02 +0000

The SP500 remains in a strong uptrend, but the index has posted a sizable gains for 2013 thus far so it’s only logical that a pullback within this bull market takes place sooner than later.

With May now upon us and historically prices fall more times than not I feel a 3-4 weeks correction is on the verge of starting. This Friday we just had very strong economic numbers confirming the economy is recovering. This news has sent stocks sharply higher as shorts cover their positions and investors who are not yet long get into position to profit from higher prices. But the herd psychology and their trades are typically incorrect as they invest based on fear and greed. The old saying is buy on negative news and sell on positive news will typically get you on the correct side of the market more times than not if used with price, volume and cycles.

The Technical Traders – SP500 Index Weekly Chart

If we look at the price of the SP500 we need it to breakdown below the recent pivot low before I become bearish.

Volume which is not shown on this chart is below average as price moves higher and this is a bearish sign also.

Looking at a basic cycle using the stochastics indicator we can see that the current cycle is starting to turn down. Cycles tend to lead price during an uptrend so we could still have stocks move higher for another week or so but be aware that when price starts to drop its likely a market top. But until then you must respect the uptrend. Stocks can remain overbought and toppy looking for months… so done be gambling and trying to pick a top until we see breakdown start.

SP500 Stocks Trading Above 200 Moving Average – The Technical Traders View

Stocks trading above the 200 day moving average is a great indicator for helping spot broad market underlying strength/weakness. It does lag the market but is still very powerful. The chart below shows this info and my thinking of what is likely to unfold sooner than later though price may still rise for several days yet.

I also use a similar chart for timing swing trades and market tops which are based on stocks trading above the 20 day moving average. This chart is not shown here but is now trading at a level which generally triggers selling/market top.

Stock Market and SP500 Trading and Investing Conclusion:

In short, I am still bullish on the market as I focus on trading with the trend. I do not pick market tops and I do not pick market bottoms. Knowing that stocks make their biggest moves at the end of their uptrend and at the end of a down trend it’s only common sense that risk is extremely high if you are betting against the current trend.

The best thing to do is wait for a technical breakdown and reversal which puts the odds more in your favor with much less risk and typically a clear line in the sand to exit the position if you are incorrect.

The last major stock market top which formed in September of last year had a series of strong news and strong price action persuading the herd to buy stocks. Instead it was the last impulse wave up just before a strong correction took place. That is much like what we see now with the economic news.

Join my free newsletter and stay on right side of the market while reducing your trading/investing stress. My simple yet effective analysis walks you through the market each week without bias. Remember Price and Volume is what makes you money trading NOT news or forecasts.

Join My Newsletter Free Today: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

Richer Than You

OzCopper — Fri, 03 May 2013 13:50:44 +0000

Richard (Rick) Mills

Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Income inequality in Canada and the United States is on the rise. Read on to learn the real reason why…

The Canadian Centre for Policy Alternatives (CCPA) analysis of income inequality data shows the richest one percent of Canadians make $180,000 more today – adjusted for inflation – than they did in 1982.

The bottom 90 percent of Canadians saw income gains of only $1,700 over the same time period. In Vancouver, Toronto, and Montreal – Canada’s three largest cities – the bottom 90 percent actually make less today than they did in 1982.

Most Canadians living in these cities have seen drops in income of:

Vancouver = $4,300
Toronto = $1,900
Montreal = $224

The richest one percent of Canadians in these three cities cities saw pay increases of:

Vancouver = $189,000
Toronto = $297,000
Montreal = $162,000

There are shocking disparities in income inequality in America…

David Cay Johnston, a Pulitzer Prize winner writing for Tax Analysts says that between 1966 and 2011, average inflation-adjusted income of the bottom 90 percent of US workers grew by just $59 while the income of the top 10 percent of workers grew by $116,071 – an astonishing, and frightening, 1,967 times the bottom 90 percent income growth rate.

The top one percent have enjoyed 81 percent of all the increased income since 2009.

The truly astonishing fact here is that it takes only $110k a year to be a top 10 percent earner in the U.S.! Getting into the top one percent is a stretch being over three times higher at $366k while joining the exclusive top .01 percent takes a whopping $8 million yearly income. In Canada, to join the top one percent club of 255,000 taxpayers, your income would have to have exceeded $200k. The threshold for the 25,475 Canadians that make up the top 0.1 percent was $685,000.00 of income.

Why such growth in income inequality?

Most would tell you, are telling you, it’s because…

Stocks and bonds are going up while the housing market remains flat. The top 10 percent have most of their wealth concentrated in stocks etc., less affluent households have their wealth in the value of their home – housing prices remain well below their 2006 peak while U.S. stock indices have all recently hit records.

Some will say falling top marginal tax rates in Canada explain part of the wealth disparity and income rise for the richest one per cent in that country.

A few will point out that the increase in inequality, in both countries, can also be attributed to institutional forces:

Declines in unionization rates
Stagnating minimum wage rates
Deregulation
National policies that favor the wealthy

All the reasons above show why the bottom 90 percent are getting poorer or at best have stagnating incomes but at best they explain only partially why the income gap is widening.

Consider what Stephen McNamee and Robert Miller, authors of The Meritocracy Myth have to say:

20% of American households receive 50% of all available income
The lowest 20% of households receive less than 4%
The top 5% of households receive 22% of all available income
The richest 1% of households account for 30% of all available net worth
Economic inequality in the U.S. is the highest among all industrial countries

The Wall Street Journal reported the top .01 percent (14,000 American families) hold 22.2 percent of wealth, and the bottom 90 percent (133 million families), just 4 percent of the nation’s wealth.

In 1980 the richest one percent of America took home 1 of every 15 income dollars. Now they take home 3 of every 15 income dollars. Over the last 30 odd years the share going to the richest 0.01 per cent quadrupled, from one percent to almost five percent.

Why are the rich getting so much richer? It’s obviously more of a long term trend then something that just recently started to happen, what’s going on?

Executive Compensation: A New View from a Long-Term Perspective, 1936–2005

Carola Frydman, M.I.T. Sloan School of Management and NBER, Raven E. Saks Federal Reserve Board of Governors

Lavish Compensation

The super affluent have historically relied mostly on unearned income from financial assets, stocks and bonds etc., but for the last three decades that income has slowly taken a backseat to the compensation they are paid.

Canadian Centre for Policy Alternatives researcher Armine Yalnizyan found

“the income of the richest 1 per cent is due mostly to the lavish sums they are paid for the work they do.”

Paul Krugman, winner of the 2008 Nobel Prize in Economics says asset ownership by the super-rich “Is no longer the main source of elite status. These days even multimillionaires get most of their income in the form of paid compensation for their labor…Needless to say we’re not talking about wage slaves toiling for an hourly rate. If the quintessential high-income American circa 1905was an industrial baron who owned factories, his counterpart a hundred years later is a top executive, lavishly rewarded for his labors with bonuses and stock options. Even at the very top, the highest 0.01 percent of the population—the richest one in ten thousand—almost half of income comes in the form of compensation.”

USA Today’s 2012 CEO’s Compensation analysis focused on 170 S&P 500 companies that filed proxies since Jan. 1, 2013, and were processed by March 22.

The median amount CEOs took home in 2012, including cash bonuses and stock and options awarded in previous years that vested or were cashed in, was $10.2 million.

Pay and total compensation numbers listed in USA Today’s report are incredible, here’s just four of the many:

Miles White, Abbott Labs, $19 million

David Pyott, Allergan, $19.4 million

Kenneth Chenault, American Express, $28 million

Randall Stephenson, AT&T, $21 million

CEO Pay and You, aflcio.org

Conclusion

It would seem the rich, in both Canada and the U.S., are getting richer while everyone else is getting poorer.

“Only twice before over the last century has 5 percent of the national income gone to families in the upper one-one-hundredth of a percent of the income distribution…Such concentration at the very top occurred in 1915 and 1916, as the Gilded Age was ending, and again briefly in the late 1920s, before the stock market crash…The great fortunes today are largely a result of the long bull market in stocks, Mr. Volcker said. Without rising stock prices, stock options would not have become a major source of riches for financiers and chief executives. Stock prices rise for a lot of reasons, Mr. Volcker said, including ones that have nothing to do with the actions of these people. The market did not go up because businessmen got so much smarter.” Louis Uchitelle, The Richest of the Rich, Proud of a New Gilded Age

The truth of, and the consequences from, such lopsided income inequality and wealth disparity should be on all our radar screens. Is it on yours?

If not, it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

Source: http://oilprice.com/Alternative-Energy/Wind-Power/UK-Ministry-of-Defense-Deems-Wind-Towers-a-National-Security-Threat.html

Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:

If you’re interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us at www.aheadoftheherd.com

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

UK Ministry of Defense Deems Wind Towers a National Security Threat

OzCopper — Wed, 01 May 2013 02:32:38 +0000

Twenty-plus years on, the collapse of the USSR in 1991 threatened massive Western defense budgets, bereft of a major enemy like the “Evil Empire.”

Western militaries conveniently found a new global enemy a decade later following the terrorist attacks on 11 September 2001, and since then, they have struggled in the light of invasions of Iraq and Afghanistan to adapt their strategies to cope with the new threat, making defending the “homeland” the highest priority.

While the U.S. created the “Department of Homeland Security,” Washington’s less prosperous European allies have been forced to seek solutions to indigenous defense largely by themselves beyond NATO.

Except that the NATO charter Chapter 5 stipulates that an attack upon a member state will be met by the entire coalition.

European democracies have scrambled to define both national and European Union security issues, particularly since the global economic downturn, which began in 2008, forcing hard choices amongst European defense ministries.

Furthermore, many European nations now have significant post-colonial immigration populations, ramping up security concerns, from both indigenous citizens and ongoing concerns of foreign aggression. Defending the United Kingdom’s territorial, maritime and aerial space is the primary mission of Britain’s Ministry of Defense.

A laudable objective, but, in a time of declining MOD revenues amid energy imports, perhaps, a wind farm too far?

Needless to say, security encompasses protecting the country access to energy, so anything that reduces the kingdom’s dependency on foreign energy imports must be a good thing, correct?

Apparently not.

The latest threat to Britain?

Wind power, apparently.

The MOD has come out against two proposed 115 foot wind power towers in Cornwall, which they assert are so big they could look like planes on monitoring equipment.

The MOD assert that the wind towers green energy devices could confuse computer systems designed to protect the UK and identify the turbines as a threat , triggering the MOD to send in fighter aircraft to investigate, and while the RAF was preoccupied, allowing real enemies to sneak into British airspace, and accordingly, are against their construction.

The unpatriotic British citizens attempting to undermine British aerial defense are Richard and Ian Lobb, who want to install the 50 kilowatt towers on their adjacent farms in St Ewe, Cornwall. The ever vigilant MOD which warned the installation would cause “unacceptable interference” to an air traffic control radar 30 miles away in Wembury, Devon.

According to the MOD, “Wind turbines have been shown to have detrimental effects on the performance of MoD ATC radars. These effects include the desensitisation of radar in the vicinity of the turbines, and the creation of ‘false’ aircraft returns which air traffic controllers must treat as real. The desensitisation of radar could result in aircraft not being detected by the radar and therefore not presented to air traffic controllers. The creation of ‘false’ aircraft display on the radar leads to increased workload for both controllers and aircrews and may have a significant operati onal impact. Furthermore, real aircraft returns can be obscured by the turbine’s radar returns, making the tracking of conflicting, unknown aircraft much more difficult.”

A tad of history and geography here.

Radar installations along the English Channel were crucial in Britain winning the crucial Battle of Britain in 1940 against Hitler’s Luftwaffe, so Britain’s RAF is hardly unfamiliar with the principles of radar, more than seventy years later.

Secondly, how does a stationary object generate a hostile radar signature, unlike an incoming aircraft moving at hundreds of miles per hour?

Thirdly, virtually all of the RAF’s interception missions during the Cold War and after were against Soviet, and now Russian military aircraft approaching from the northeast, across the North Sea.

Cornwall, in Britain’s extreme southwest, is geographically rather distant from this area.

So, who’s to send the threats?

France?

Spain?

Argentina?

The people of Cornwall deserve their green energy, and the MOD officials should be chastised for their ramping up of a non-existent problem.

The Armada was over four centuries ago, World War Two over 70 years ago – the people of Cornwall deserve electricity from renewable energy sources, as it hardly seems to be a threat to national security beyond those MOD boffins who have apparently spent too much time at the pub over lunch hour.

By. John C.K. Daly of Oilprice.com

Gold Fights For $1500

OzCopper — Wed, 01 May 2013 02:31:18 +0000

Recently, many bullish gold analysts have started questioning their own theory that money printing causes inflation.
Commodity prices have fallen, despite accelerated QE. I would argue that money printing does cause inflation, but only if what is printed overwhelms the assets that are destroyed, in global markets.
The Fed continues to buy billions of dollars of illiquid and arguably-worthless OTC derivatives each month, with printed money. If the Fed printed more money than what is required to purchase those assets, inflation would likely be much higher than what it is now. So far, that’s not happening.
Quantitative easing is not the same thing as just printing money and pushing it into the banking system.
The inventory of marked-to-model OTC derivatives held by commercial banks is gigantic, so it could be many years before serious “cost push” inflation envelops America.
The Fed believes in a business cycle that lasts for about 8 years. The last cycle probably ended in 2007, which means that the current upswing could continue to about 2015.
From 2015 onwards, the Fed is likely to become much more dovish than they already are, in an attempt to counter a likely downturn in the business cycle.
The actions of global central banks, in the 2015-2022 timeframe, are likely to usher in cost push inflation. Clearly, investing in gold requires lots of patience!
Please click here now. You are looking at my monthly “big picture” HUI chart. I’ve lighted the price zones where gold offers value with blue HSR (horizontal support & resistance) lines.
Also, note the action of the Stochastics indicator. I call this situation, “Close, but no cigar!” A crossover buy signal for long term investors has not yet been generated, but it’s very close.
Many bank economists and technical analysts are stating that the current gold rally will fail, and gold will break the lows near $1320. It’s hard to know how such a decline would affect gold stocks, but I doubt it would be a positive experience for investors.
Put options are like fire insurance; nobody likes to pay the premiums, but if there is a really serious fire, you’ll be glad you bought them.
If you are afraid that gold could fall and break the $1320 area lows, you may want to consider looking into this type of insurance policy, for your portfolio.
Cash is another form of insurance. The gold market is probably many years away from offering a “back up the truck” type of market to investors.
I wouldn’t be overly concerned about drawdowns (gold is a high quality asset), but some cash should be kept on hand, so you can buy more gold if it goes surprisingly lower.
In the short term, gold stocks are grinding higher, but volume is a big concern. Please click here now. That’s the GDX daily chart. Some technical analysts see a bearish flag pattern in play.
On up days, volume has been stronger than on down days, but the overall pattern is one of declining volume, and that’s bearish.
My “stokeillator” is highlighted at the bottom of the chart. It suggests that even if gold stocks are “doomed” to make fresh lows, the rally could continue further.
Please click here now. This chart provides a closer look at GDX, using 2 hour bars.
Note the top of the price gap at about $32. If you were able to buy some stock at lower prices, I would book some profit at $31.90, $33.50, and $35.25.
Many physical metal enthusiasts have noted the enormous surge in demand in Asia and at mints around the world, but most bank analysts are projecting lower prices.
I think gold needs to consistently trade above $1500 to put some real fear into the bears. So far, that hasn’t happened.
From the $1590 area highs, gold fell about $270, to the $1320 zone. It’s retraced about 60% of that decline now, and Fibonacci traders are probably quite aggressive sellers in the $1480-$1500 area. I suggest very light selling now, and more between $1500 and $1550, if we get there.
Gold probably can get over $1500 on this move, but only if both the FOMC meet and Friday’s job reports provide more bullish fuel to the “golden race car”!

Special Offer For OzCopper Readers: Please send me an Email to freereports4@gracelandupdates.com and I’ll send you my free “What’s Up With The Phizz?” report. I discuss why the gold price is stagnant while buyers in Asia line up to buy, and the tactics to use to profit from this bizarre market!

Thanks!

Cheers

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Are You Prepared?

Gold Traders and Investors Get Ready To Rumble!

OzCopper — Tue, 30 Apr 2013 03:22:51 +0000

On April 12^th I wrote a blog post titled Precious Metals Melt-Down, and How To Manage It. I talked about how gold, silver and gold mining stocks have been flying under the media radar for over a year and that they were not catching the attention of traders, investors and the public anymore. I also said it would take some sharp price action (breakdown or rally) for it to be front and center again on TV, Radio and Newspapers.

But since gold has plummeted 17.5% dropping from $1600 down to $1320 per ounce with silver and gold stocks falling also they are now headline news once again. This move has caused some serious damage to the charts when looking at it from a technical analysis point of view. Below are some basic analysis points that show a new swing trading entry point.

The Technical Traders Chart Analysis:

Broken Support – Once a support level has been broken it becomes resistance. Gold is trading under a major resistance level.

Momentum Bursts - Since the April 15^th low, gold has been setting up for another short selling entry point. Remember the market tends to move in bursts of three, seven or ten days then price reverses direction or pauses. It has now been 10 days.

Moving Average Resistance – Gold has worked its way up to the 20 day moving average which can act as resistance.

Bearish Inside Bars – This type of chart pattern points to lower prices. When there is a big down day followed by 3, 7 or 10 up days inside the price action of the down bar we can typically expect another sharp drop which tests the recent lows as shown with the arrow on the chart.

Gold Short Selling Conclusion:

In short, gold is setting up for a low risk entry point that should allow us to profit from lower gold prices. Using an inverse ETF like DZZ or even the gold mining stock inverse ETF DUST could be played. These funds go up in value as the price of gold falls.

While I expect gold to pullback, I do not think it will make another leg lower. Instead, a test of the recent low or pierce of the low by a few bucks then reverse and start building a bullish basing pattern before going higher.

Get My Book Free and Learn How To Manage Your Trades, Money & Emotions: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

Chains of Fiscal Discipline

OzCopper — Sat, 27 Apr 2013 09:07:56 +0000

Richard (Rick) Mills

Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Alan Greenspan was chairman of the Federal Reserve from 1987 to early 2006. Greenspan used monetary policy to ignite one of the longest economic booms in history. Of course booms can soon turn to bust and nowhere was the boom more evident than in the housing industry – the sub-prime crisis collapsed the housing boom just after Greenspan left the Fed.

Sub-Prime Crisis

“The banking problems of the ’80s and ’90s came primarily, but not exclusively, from unsound real estate lending.” L. William Seidman, former chairman of both the Federal Deposit Insurance Corporation (FDIC) and the Resolution Trust Corporation

Between 1997 and 2005 mortgage fraud increased by 1,411 percent. In 2001 the US Federal Reserve lowered the Federal funds rate eleven times, from 6.5 percent to 1.75 percent. Mortgage denial rates were 28 percent in 1997, in 2002 – 2003 they were 14 percent for conventional home purchase loans. “Fog the mirror loans” were common, if you breathed you got a loan.

In June 2002 President George W. Bush set out to increase minority home ownership by 5.5 million. Bush’s lofty goals would be accomplished by tax credits, subsidies and Fannie Mae committing $440 billion to establish Neighbor Works America.

In June 2003 Federal Reserve Chair Alan Greenspan lowered the federal reserve’s key interest rate to one percent – the lowest rate in 45 years.

Throughout 2003 Fannie Mae and Freddie Mac bought $81 billion in subprime securities. President Bush signed the American Dream Down payment Act – the Act provided a maximum down payment assistance grant of either $10,000 or six percent of the purchase price of the home, whichever was greater.

U.S. homeownership rate peaked to an all time high of 69.2 percent in 2004.

From 2004 to 2006 Fannie Mae and Freddie Mac purchased $434 billion in securities backed by subprime loans.

In late 2004 the Securities Exchange Commission (SEC) suspended net capital rule for five firms – Goldman Sachs, Merrill Lynch, Lehman Brothers, Bear Stearns and Morgan Stanley. Free from government imposed limits on the amount of debt they could assume, they all levered up, as much as 40 to 1.

The United States housing market bubble burst in the fall of 2005. By year-end a total of 846,982 properties were in some stage of foreclosure. From the fourth quarter of 2005 to the first quarter of 2006, median prices nationwide dropped off 3.3 percent.

The U.S. Home Construction Index was down over 40 percent as of August 2006. A total of 1,259,118 foreclosures were filed in 2006, up 42 percent from 2005. Homeowners were going underwater (they owed more than the house was worth) and many had had questionable credit to start with.

In 2007, lenders started foreclosure proceedings on nearly 1.3 million properties, a 79 percent increase over 2006.

Foreclosure proceedings increased to 2.3 million in 2008, an 81 percent increase over 2007 and increased by another half million in 2009 to 2.8 million. By January 2008, the mortgage delinquency rate had risen to 21 percent and by May 2008 it was 25 percent.

By August 2008, 9.2 percent of all U.S. mortgages outstanding were either delinquent or in foreclosure. By September 2009, this had risen to 14.4 percent.

From September 2008 to September 2012, there were approximately 3.9 million completed foreclosures in the U.S. As of September 2012, approximately 1.4 million homes, or 3.3 Percent of all homes with a mortgage were in some stage of foreclosure compared to 1.5 million, or 3.5 percent, in September 2011.

Causes

The Great Recession started in December of 2007 and took a sharp downward turn in September 2008. It was started by the U.S. sub-prime crisis which burst the housing bubble. Businesses failed, consumers lost wealth estimated in the trillions of dollars and economic activity and international trade slowed.

So what caused the real estate crisis? Three things stand out:

Irrational exuberance – irrational exuberance was caused by a deliberate easy credit fueled boom.

“Most economists now believe that low, stable, and—most important—predictable inflation is good for an economy. If inflation is low and predictable, it is easier to capture it in price-adjustment contracts and interest rates, reducing its distortionary impact. Moreover, knowing that prices will be slightly higher in the future gives consumers an incentive to make purchases sooner, which boosts economic activity.” Ceyda Oner,Inflation: Prices on the Rise

In other words, economic growth – prosperity at the national level – can be driven by consumption. Saving is bad because money sitting in bank accounts will not stimulate the economy. The world’s central bankers believe inflation is necessary because it discourages the hoarding of money and encourages consumers to consume.

“In January of 1959, the personal savings rate in the United States was 8.3 percent – this means that, on average, Americans were able to save 8.3 percent of their disposable incomes. In the early 70s, the average savings rate started to spike, hitting a peak of 14.6% in May of 1975. The spike in personal savings rates from 1973 to 1975 coincided with the deep recession that was ravaging the country over the same period of time…The recession of the early ’80s was a particularly nasty mix of high inflation and weak economic activity, otherwise known as “stagflation”.

The average savings rate spiked to 12.2% in November of 1981, which was right when the national unemployment rate in the country really started to trend higher.

The average savings rate pulled back when the economy started to recover, spiked over 10% once again in 1984, and then really started to noticeably pull back in the mid ’80s. Consumer confidence was rapidly improving in the country, Ronald Reagan swept to victory on the back of a strengthening economy, and people were starting to spend their money once again. It was “morning in America”. There was another recession in the early ’90s, but no noticeable increase in the average savings rate. As a matter of fact, the savings rate of the average American held steady during the recession of the early ’90s, and then proceeded to fall like a stone throughout the rest of the decade.

By January 2000, the average savings rate was 3.5% – it would end up falling below 1.0% multiple times between 2000 and 2010.

Why the dramatic drop in the average rate of savings between 1990 and 2008?

The mindset of the average US consumer changed. There was greater access to credit and increasingly sophisticated marketing campaigns that had people cracking open their wallets or purses in droves.

Due to the surge of available credit, many people actually maintained negative savings rates. I’m sure that we all have known somebody who has spent more than what they made – this was all made possible through the explosion of available credit.

This access to credit made people want to spend, and marketers exploited this to the nth degree. People were flush with cash (and credit) in the post 9-11 economy. Interest rates were low, the real estate market was strong and many people were in a mood to spend. And spend they did.” Savings Rates In The United States Have Collapsed Since Mid ’80s, Manuel.com

The personal saving rate for Americans was a record low at the height of the housing bubble.

Moral hazard – in economic theory, a moral hazard is a situation where a party will have a tendency to take risks because the costs that could incur will not be felt by the party taking the risk. In other words, it is a tendency to be more willing to take a risk, knowing that the potential costs or burdens of taking such risk will be borne, in whole or in part, by others – Wikipedia.

Almost 100 international banking crises have occurred during the last 20 years, according to the World Bank all were resolved by bailouts at taxpayer expense.

“The risks inherent in mortgage lending became so widely dispersed that no one was forced to worry about the quality of any single loan. As shaky mortgages were combined, diluting any problems into a larger pool, the incentive for responsibility was undermined.” Mark Zandi, Moody’s Analytics

Forbearance – banks, mortgage underwriters and other lenders abandoned any pretense of having loan standards and having applicants meet any normal level of criteria such as:

Employment history
Income
Down payment
Credit rating
Assets

Q: Who cared or asked about property loan-to-value ratio and debt-servicing abilities?

A: No one.

“Where the Fed really failed was as a regulator. It could have gone after the predatory lending in the subprime world, if it had wanted to. At least one Fed governor suggested doing so. Greenspan rebuffed him. Counter-factuals are always tricky, but if the Fed had clamped down on the endemic fraud in the mortgage market, it’s not difficult to imagine the run-up in housing prices being much more muted. After all, if the problem had been low interest rates, prices should have skyrocketed across the board. That prices only skyrocketed for housing tells us that something peculiar was going on there, namely an abdication of any regulatory oversight.” Matthew O’Brian, Happy Birthday, Alan Greenspan, the Atlantic.com

This was an overall decline in regulatory oversight known as forbearance.

“During a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of the risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions.” Declaration of the Summit on Financial Markets and the World Economy. dated 15 November 2008

The U.S. Financial Crisis Inquiry Commission, in January 2011, concluded “the crisis was avoidable and was caused by: Widespread failures in financial regulation, including the Federal Reserve’s failure to stem the tide of toxic mortgages; Dramatic breakdowns in corporate governance including too many financial firms acting recklessly and taking on too much risk; An explosive mix of excessive borrowing and risk by households and Wall Street that put the financial system on a collision course with crisis; Key policy makers ill prepared for the crisis, lacking a full understanding of the financial system they oversaw; and systemic breaches in accountability and ethics at all levels.”

The sub-prime mortgage crisis and collapsing housing industry threatened the U.S. economy, as the crisis started to spiral out of control and go global, the Fed had to act, and it did.

Economic Stimulus Goes Steroidal

After Fed chairman Greenspan left office, the Federal Reserve, under the stewardship of new chairman Ben Bernanke, started easing monetary policy aggressively. By December of 2008, the federal funds rate was between 0 and 1/4 percent. The Fed had used up its traditional stimulus, all the ‘Creature from Jekyll Island’ had left was the ability to print money so they started throwing cash at everything.

By January 2000, the average savings rate was 3.5% – it would end up falling below 1.0% multiple times between 2000 and 2010.

Why the dramatic drop in the average rate of savings between 1990 and 2008?

The mindset of the average US consumer changed. There was greater access to credit and increasingly sophisticated marketing campaigns that had people cracking open their wallets or purses in droves.

The personal saving rate for Americans was a record low at the height of the housing bubble.

Almost 100 international banking crises have occurred during the last 20 years, according to the World Bank all were resolved by bailouts at taxpayer expense.

Forbearance – banks, mortgage underwriters and other lenders abandoned any pretense of having loan standards and having applicants meet any normal level of criteria such as:

Employment history
Income
Down payment
Credit rating
Assets

Q: Who cared or asked about property loan-to-value ratio and debt-servicing abilities?

A: No one.

“Where the Fed really failed was as a regulator. It could have gone after the predatory lending in the subprime world, if it had wanted to. At least one Fed governor suggested doing so. Greenspan rebuffed him. Counter-factuals are always tricky, but if the Fed had clamped down on the endemic fraud in the mortgage market, it’s not difficult to imagine the run-up in housing prices being much more muted. After all, if the problem had been low interest rates, prices should have skyrocketed across the board. That prices only skyrocketed for housing tells us that something peculiar was going on there, namely an abdication of any regulatory oversight.” Matthew O’Brian, Happy Birthday, Alan Greenspan, the Atlantic.com

This was an overall decline in regulatory oversight known as forbearance.

“During a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of the risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions.” Declaration of the Summit on Financial Markets and the World Economy. dated 15 November 2008

The sub-prime mortgage crisis and collapsing housing industry threatened the U.S. economy, as the crisis started to spiral out of control and go global, the Fed had to act, and it did.

Economic Stimulus Goes Steroidal

Additional stimulus was injected into the economy by:

The System Open Market Account (SOMA) purchased mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae (agency MBS).

The Term Auction Facility was $40 billion in loans to rescue the banks. It wasn’t near enough, the Treasury department got authorization to spend $150 billion more to subsidize and eventually take over Fannie Mae and Freddie Mac, they also bailed out AIG.

Dollar Swap Lines exchanged dollars with foreign central banks for foreign currency to help address disruptions in dollar funding markets abroad.

The Term Securities Lending Facility auctioned loans of U.S. Treasury securities to primary dealers against eligible collateral.

The Primary Dealer Credit Facility provided overnight cash loans to primary dealers against eligible collateral.

The Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility provided loans to depository institutions and their affiliates to finance purchases of eligible asset-backed commercial paper from money market mutual funds.

The Commercial Paper Funding Facility provided loans to a special purpose vehicle to finance purchases of new issues of asset-backed commercial paper and unsecured commercial paper from eligible issuers.

The Term Asset-Backed Securities Loan Facility supported the issuance of asset-backed securities (ABS) collateralized by loans related to autos, credit cards, education, and small businesses. In March 2009, the Fed announced that it was expanding the scope of the TALF program to allow loans against additional types of collateral.

The Troubled Asset Recovery Program was proposed and $350 billion was approved by Congress – the money was used to buy bank and automotive stocks.

Late in 2008 there was a run on ultra safe money market accounts – according to AMG Data Services a record $140 billion was pulled out in one day.

In response to the continuing crisis and a stalling economy the US Federal Reserve initiated Quantitative Easing and Operation Twist.

Quantitative Easing

In September of 2008 the $1.7 trillion QE1 was started. The Fed purchased mostly mortgage backed securities and established a commercial paper lending facility.

In October of 2010 QE2 started. At $600 billion, QE2 was much smaller then QE1 and its buying was mostly confined to purchasing long term government bonds.

QE1 & QE2 failed to restart the economy and housing market.

Operation Twist

Operation Twist is the Fed’s initiative of buying longer-term Treasuries while simultaneously selling shorter-dated issues in order to bring down long-term interest rates.

By purchasing longer-term bonds, the Fed drives up prices which forces yields down – price and yield move in opposite directions. Selling shorter-term bonds causes their yields to go up because their prices fall. These two actions “twist” the shape of the yield curve, hence the name Operation Twist.

Quantitative Easing Three, QE3

On September 13, 2012, the Fed announced that it would buy $40 billion a month of mortgage-backed securities until the unemployment rate fell below 6.5 percent, or the expected inflation rate rose above 2.5 percent. In December the Fed added buying $45 billion/month of longer-term Treasury securities per month – QE3 is more than one trillion dollars a year.

In 1Q2013, which comprised the first three months of QE3, the Fed increased the size of its balance sheet by $285 billion, or 9.8 percent.

During the first 3 months of QE3, the Fed increased the monetary base by 10.83 percent.

Report Card

U.S. labor force participation is now down to where it was in 1979 – 63.3 percent. The unprecedented 2.5 percentage point decline in labor force participation under President Obama amounts to 6.2 million Americans being pushed out of the job market – 6,200,000 have stopped looking for work, these people have been forced to give up.

If labor force participation had remained at the 65.8 percent level it was at when Obama took over from Bush the unemployment rate for March would have been reported at 11.1 percent – that equates to a 3.1 percentage point rise during Obama’s presidency.

In the final quarter of 2012, the US economy expanded at an annual rate of 0.4 percent. The 0.4 percent growth rate for the gross domestic product (GDP) was the weakest quarterly performance in almost two years.

For all of 2012, the economy grew 2.2 percent, that’s after a 1.8 percent increase in 2011 and a 2.4 percent advance in 2010. Since the recession ended in the summer of 2009 the economy has been expanding at sub-par rates.

The Congressional Budget Office (CBO) has estimated that the combination of tax increases and spending cuts (the much talked about fiscal cliff) could trim economic growth this year by 1.5 percentage points leaving just 1.4 percentage points for growth in 2013. If the CBO’s estimates of just 1.4 percent real GDP growth this year prove true, America will have experienced its worst four consecutive growth years of GDP in the Bureau of Economic Analysis’ data going back to 1930.

There can’t be anyone even remotely thinking the Fed’s, or Obama’s, policies are a success, here’s just a few facts:

Medium household income has declined
Inflation is climbing much higher and faster than officially reported statistics
Few Americans own any significant amount of financial wealth
Housing has not recovered
U.S. Employment rate is not recovering
Consumer goods prices are not stable
The number of Americans living in poverty has now reached a level not seen since the 1960s. There are 50 million poor people in America
There are over 47 million Americans on food stamps
U.S. national debt is $16+ trillion
Adjusted for inflation markets are lower than they were in 2000
Student debt totals over $1 trillion
The Federal Reserve’s balance sheet is plus $3.2 trillion and the Fed is continuing to purchase assets at a rate of $85 billion a month
Consumer sentiment is at crisis levels last seen in 2008
The banking system backs $7.4 trillion in insured deposits with $32 billion, that’s just .43 percent – when the U.S. was on the gold standard your dollar was backed 40 percent with gold
The largest city bankruptcy in US history was just announced for Stockton, California – population 300,000

Blue Collar Man

Give me a job, give me security
Give me a chance to survive
I’m just a poor soul in the unemployment line
My god, I’m hardly alive

Styx

Conclusion

Is it fair to say the Federal Reserve has failed America? I was watching TV the other night when an ad came on touting some drug. The disease could be cured by diet and exercise, of course most today would rather take a pill then responsibility. Anyway the announcer started reeling off all the side effects of this drug, it wasn’t long before I was staring up at the ceiling and the speakers voice had become Lucy’s teachers voice, yada yada yada blah blah blah, cancer, stroke, heart disease. I found myself thinking I’d rather have the disease then take the cure, it was fixable with some lifestyle tinkering.

The next thing I thought of was the Gold Standard was like the disease – not so bad compared to the drug. The Gold standard was fixable and amenable to today, it would work, and it’s certainly preferable to the cure, the pill represented by fiat currency, the Federal Reserve, stock market crash’s, banking and sovereign crises, yada yada yada.

I think we all need to ask ourselves if the U.S., and the world, were better off when the dollar was backed by gold, and politicians, along with their bankster brethren, had to operate under the burden of gold’s chains of fiscal discipline. Or are we all doing so well now, are things so great, has the Fed with its limited monetary policies worked out so well that we don’t need gold backed money?

Perhaps we don’t need the Federal Reserve, maybe what we need are gold’s chains of fiscal discipline. Perhaps the fiscal discipline of a gold standard needs to be imposed on our dear leaders. This question should be on all our radar screens. Is it on yours?

If not, it ought to be.

Richard (Rick) Mills

rick@aheadoftheherd.com

Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:

If you’re interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us at www.aheadoftheherd.com

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

Where is the Larger Bubble: the S&P 500 Index or U.S. Treasuries?

OzCopper — Sat, 27 Apr 2013 09:03:18 +0000

Today we have a plethora of companies reporting earnings and are moving through the 1^st Quarter earnings season at a rapid pace. Thus far, earnings have been far from exciting and have made the previous 2013 forward earnings estimates laughable.

The only way we get to the proposed valuations is through multiple expansion which is simply going to require the Federal Reserve to continue to pump $85 billion into Treasury’s and MBS securities each month. I am confident they will comply.

There are a few analysts out there who are discussing the potential bubble forming in equities and other risk assets as Bernanke’s plan is working to the extent that asset prices are rising. However, even fewer analysts are pointing out that both retail and institutional money is constantly chasing yield at this point.

Simply take a look at the 2013 price action in high yield dividend paying stocks, high yield bonds, preferred stocks, and master limited partnerships. It is safe to say that a bubble has formed not just in equities, but in various fixed investments as well. Consider the following chart of the S&P 500 Index (SPX) shown as the dotted trendline and Johnson & Johnson (JNJ) shown as the solid black line.

Obviously from looking at the chart above, JNJ has outperformed the S&P 500 Index year to date. Has JNJ suddenly become a growth giant? Is it all about earnings growth and/or forward earnings potential or anticipated growth?

Or is the rally in JNJ really about the fact that Johnson & Johnson has a long history of paying strong, rising dividends. I am sure there are plenty of sell side analysts who will tell you that JNJ is going to $100 / share in the future for a variety of macro or quantitative reasons.

The sell-side analysts will tell you the economy is strengthening or that large cap multinational companies are seeing strengthening fundamentals and earnings growth. They are called the sell-side for a reason; they want to sell you stock.

Furthermore, my favorite recent discussion is about future earnings projections and the new strength that we are going to see in earnings. The following chart was posted at www.zerohedge.com and originally came from Standard & Poors. The chart below illustrates the trailing 12 month operating earnings per share of S&P 500 companies.

Based on the above data, how is the stock market fundamentally sound when earnings are collapsing? I guess the Federal Reserve is going to print profits for the S&P 500 companies. Actually earnings are irrelevant when central banks all over the world including the Federal Reserve are juicing the markets with a sea of liquidity and where multiple expansion trumps real earnings or value.

Furthermore, these same central banks are openly purchasing equities and allocating sizable portions of their balance sheets to stocks. Several central banks around the world have more than 10% of their reserves allocated to stocks at this point in time. The world is long risk and money is still flowing into bonds at the same time. Simply look at the recent price action in Treasury’s for the past few weeks or note the strength in municipal bonds in aggregate since mid-March.

This brings me to my final point. For the past several years, bonds and stocks in the United States have rallied together. U.S. treasuries and domestic equities have been trending higher for more than three years as shown below. The S&P 500 is shown as the dotted line and the 30 Year Treasury Bond Price Index is the black solid line.

It is without question that both the S&P 500 Index and the 30 Year Treasury Bond have been trending higher for the past 3 years overall. Both underlying assets have produced strong gains during the same period of time. Now this brings me to my final question for readers to ponder. If both the S&P 500 Index and the 30 Year Treasury Bond can rally together, what happens if they selloff together?

The answer to that question is the real problem. Many sell-side analysts and economists ignore the bubble that the Federal Reserve has created in equity valuations. The bubble continues to be fueled by the monstrous liquidity injections that they have conducted beginning with the original quantitative easing. However, what is even less acknowledged by the sell-side is the massive artificial bullish valuations that have been created in the bond market.

Long dated treasuries are being purchased by the Federal Reserve to artificially hold down interest rates. This ongoing practice is causing a separate bubble to form in fixed income investments. So now we have a bubble in equities and long-dated treasuries forming and the sell-side continues to trumpet that higher prices are likely. Ultimately the sell-side may be right in short to intermediate time frame, but the end game has a finality that few want to consider.

When these bubbles finally pop as all excessively valued assets do, the result is going to devastate financial markets. It may be in 6 months or it may be in 10 years, but history will not be thwarted. The central banks can try to outsmart history, but they will ultimately fail.

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Gold Price Is Stablizing

OzCopper — Wed, 24 Apr 2013 11:58:37 +0000

Many economists believe the price of gold has fallen because institutional investors have become more interested in owning the general stock market.
May is a time when institutional investors often sell stocks. Please click here now. An ominous head & shoulders top pattern appears to be forming on the Dow.
“If you look at the economic growth story, it’s just not really there” –David Bloom, head of FOREX for HSBC, April 23, 2013.
Gold imports in India are surging. “Imports have been phenomenal since April 15. Banks are getting the lion’s share in this profit,” -Daman Prakash Rathod, MNC Bullion, Chennai, India.
The banks have an “interesting habit” of making the largest profits in most markets, most of the time. Since gold crashed, dealer spreads have increased dramatically, benefitting the bullion bank dealers.
Last year, gold bottomed in May. Will it bottom there again, this year?
I want you to take a look at the daily gold chart, through the eyes of a bear. Please click here now. The gold bears believe there is a flag pattern in play, and prices of $1100, and lower, are coming very quickly.
I view the market more as a fight, than an “investment”, so I like to know what’s in the mind of my opponent. There is a bearish flag pattern in play, at least on that chart, but that doesn’t necessarily mean the bears will make any profits from their analysis.
Why would that be? Well, please click here now. That’s another view of the daily gold chart, highlighting the action of my “Stokeillator” (14,7,7 Stochastics series).
The Stokeillator gave a very clear sell signal several days in advance of this gold crash. It’s beginning to turn up, and a crossover buy signal seems imminent.
Most investors want to avoid pain. Traders can use my Stokeillator to do that, but longer term investors can also use my sell signals to simply grit your teeth, and get ready for a bit of a rough ride.
The current position of the Stokeillator suggests, at bare minimum, that a pause in the bearish price action is very near.
In the bigger picture, I’ve always asked subscribers to act as “investing marines”. That entails looking at the long term weekly and monthly charts, and defining key HSR (horizontal support and resistance) areas.
When the gold price arrives (whether gently or in a wild crash is irrelevant to the marine) at one of these key HSR zones, the marine goes into action, and buys gold in a pyramid formation.
Please click here now. You are looking at the weekly gold chart. Since the August 2011 highs near $1923, my view is that only 2 long term buying opportunities have occurred.
The first occurred almost immediately after that August top, at $1577. Numerous rallies occurred from that key HSR zone.
I maintain a “3 strikes and you’re out” HSR-area rule, for gold. It’s critical to buy the first time that price arrives at an HSR zone. Put the fear demon aside, and just buy. Analyse the situation later, but make sure you do some immediate buying, even if it is just a little bit.
When gold crashed, it happened after the fourth touching of the HSR at $1577. Gold struck out, and so did investors who called the bottom there.
Focus on buying an asset that is timeless, without hesitation, analysis, or procrastination. If you try to predict a parabola for gold, long after HSR is first touched, you are more likely to strike out than hit a home run.
I have some minor concern that the violence of the crash into massive HSR in the $1432 area may be enough to send gold down to the next zone of key HSR, at $1266.
That’s not far below the current $1320 area lows, so it’s very important that investors don’t panic. Instead, prepare to start buying at $1266, if gold goes there.
For investors who can’t fight their personal fear of lower prices, put options are the best solution.
The key fundamental question right now is, “what demand factor can overwhelm the ETF selling?” Well, if gold were to decline to the $1200 area, Indian scrap sales, which are already dropping, could cease altogether.
What about the short term? Please click here now. I think a test of the $1400 area is coming, but not yet. First, I think gold will retest the highs near $1435. This chart also provides a closer look at the supposed “bear flag” pattern. I don’t see a flag at all. I see a bottoming process, fuelled by dwindling Indian scrap sales and central bank purchases. You should be ready to buy at $1266, but $1470 is the more likely price objective, in the immediate term!

Special Offer For OzCopper Readers: Send me an Email to freereports4@gracelandupdates.com and I’ll send you my free “GDX & GDXJ Rise From The Ashes” report. Learn why I’m an aggressive buyer of gold stock here, and how to use put options to protect your positions!

Thanks!

Cheers

Written between 4am-7am. 5-6 issues per week. Emailed at aprox 9am daily.

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Australian Gold Stocks & A Gold Perspective

OzCopper — Tue, 23 Apr 2013 08:31:12 +0000

Australian Gold Stocks & a Gold Perspective

By Neil Charnock

www.goldoz.com.au

The gold bull is in a deep correction phase, the first in the 1999 to 2013 bull to date. The Aussie dollar has remained stubbornly high as our extensive research predicted this indicated many months back. This is exacerbating woes for many local miners. The dead cat bounce in the gold stocks is pathetic on the ASX, even worse than gold indicating further falls to come.

Things are getting further and further out of hand in the global financial system as gold commentators have been warning for over 12 years. There is also bull dust of all descriptions flying in all sorts of directions in the media at present. Chinese GDP growth has suddenly become another reason to sell gold yet it is still astounding when you look at the value of the expansion. Only a few years back in 2007 the total Chinese GDP was US$3.4T. To put a scale to this a 10% growth rate would have amounted to $340B only six years ago right before the GCF event.

The IMF estimate for 2012 Chinese GDP is $8.23T so the “disappointing” 7.7% annual rate for the last quarter is now equivalent to $633B. This is a staggering increase at nearly double the gross 2007 figure at the current rate of growth. The gross value of growth is falling however and this is a valid concern however you need to keep this in context. Do economists and the media honestly expect China to grow the world’s second largest single economy at a constant percentage rate on an ever increasing scale? This is a ludicrous idea in a finite world. Demographic and economic factors aside the demand for metals is still increasing over the longer term in China.

Of course there is considerable concern about structural imbalances in the Chinese economy and how this affects their consumption of certain metals and so there should be. The world has been increasing supply, clamouring to meet the expected demand so it is all a matter of balance. The Chinese are also pro-active in developing Africa and elsewhere also for their future needs. Their demand for metals will change as their economy evolves, and at times falters, however I would not expect gold to lose its appeal in Chinese culture or from the perspective of their geopolitical agenda.

Make no mistake the Chinese government will continue to lift their gold reserves throughout this gold bear phase. The Chinese themselves are unlikely to lose their appetite for gold at lower prices either. Buyers are price sensitive in India and everywhere else, physical demand will rise significantly however in the short term not as fast as liquidation so rather than providing an immediate floor this will merely soak up supply more gradually.

At GoldOz we have questioned the ability of the Chinese economy to grow at recent rates given austerity in Europe which is after all their largest market. There is also another issue with how countries calculate GDP which is another topic I have covered for clients to assist their understanding of what we are dealing with here on the macro scene and the Australian economy. Policy has been disadvantageous in the face of changing economic headwinds for the past few years and yet this is only now hitting the headlines here.

The Chinese are a one Way Street when it comes to gold supply – barely any gold leaves their shores and therefore their increased production does not add to new gold supply except in China. The near term fall in gold is certainly real however and the price is screaming this fact at all of us.

Australia’s premier ASX gold producer (not largest) is highly profitable even at US$900 gold and they are expanding as they gear up to pay a maiden dividend, yet the share price is falling along with the sector. This is because computers are used to run algorithms which are based on the gold price and the related value of companies; and so market capitalization needs to be reset on each move on gold. This is not criticism they have to model this somehow and yet savvy investors will be able to pre-empt and use this to their own advantage as we find the bottom of this market.

The modelling is never going to be complex enough to allow for the multitude of variables in any single given company. Believe it or not the odd gold stock will be paying a dividend and these earnings will force yield seeking investors to take a look. That is especially when gold bases and starts to move back up as earnings will again increase. Disaster is opportunity if you know how to play the game. Remember liquidity drives prices and sentiment drives liquidity. Sentiment is influenced by price, then the brokers and media.

I have been deliberately off the radar for many months in the public arena. I have been in close contact with clients however as I run a member only service and so felt it is was not appropriate to broadcast my views or research very often. If I really needed to promote I would have. Many people I respect were setting themselves up for a fall of late and now I see they are copping some isolated blame for the market action. Investors are hurting and this is bad. I greatly respect many of the gold commentators so this is not a criticism. Just to provide perspective on my record on this; I write a newsletter and run an educational portfolio that sold half the position in September and October last year. In hindsight I should have exited completely.

Apart from a few isolated and incorrect purchases earlier this year and one recently I have been searching for a re-entry point to deploy those funds, and had not found one. I cover top down analysis and teach these systems and discuss them in detail for members. Despite believing that the bottom may have been in back in July last year (which I called as early as March 2012) my systems kept me relatively safe. It was ‘a’ bottom not ‘the’ bottom yet it created solid profits. After October I was looking for a correction and at that time I did not know the magnitude of what was to come.

The only fault of most commentators was to get too married to their fundamental thesis and they failed to listen to the warnings in the market. I do not believe they were not sincere for one moment. Their big picture analysis is correct and their cycle analysis worked firstly to predict the long gold rally. It also worked within the trend of the gold bull up until the last two weeks. The problem was however that we were overdue for a real shake out as I will discuss.

In Newsletter 72 (March 15^th 2013) I stated:

When you spend enough time in the markets you realize that [their] emotions are the worst enemy of investors and traders alike. Well opinions are probably the next worst influence to bring people undone. This is why my emphasis is on technicals however I do believe the big picture is also extremely important as a back drop. This generally provides the longer trend.

In Newsletter 71 (11^th March 2013) I stated:

Should the XGD pierce the 50 day moving average I will review the situation. I believe we could top this week and head down for the following few weeks into early April. The final level will depend on the size of this rally. Be careful a repeat of the February 11^th fall is possible into that time frame.

At times and certainly at some short term bottoms I have been over optimistic on the chances of a turn around. I was also guilty of hoping things would not unwind however I have been constantly warning that things could really unwind and that was because we were just above critical supports. As a trader you have to be cautious in such circumstances and so I was pointing out that volumes and price action were not supporting a bottom.

The final analysis on this is that the Funds I run did not deploy that capital and they still have not because the reversal signals had not and still have not been confirmed. We may have to base lower and then find the signals at the end of the base formation. The lack of bounce and the continued heavy selling indicates this is so.

A few of the miners here are low cost so their business model is secure so there is life and potential for investing and trading in these few stocks when the dust settles. Savvy investors are watching in anticipation at the bargains that will eventuate. Unlike 2008 the bids are not being pulled as fast and therefore you have to consider who is buying this very large volume?

I have also been pointing to one contrary (to gold analysts) analyst and discussing his views – one Martin Armstrong who deserves great credit for courage and analysis. I have looked at some other detractors on gold before and dismissed them but not Martin. So we have been looking at his supports and comments for comparison and very glad I did not dismiss him.

So here we are at last, standing in the stark light of reality. Gold is in a major and much needed correction; now proven. Up until now the ‘corrections’ have been consolidations. Before you think I have joined the “other side” may I point out there is only one side and that is “you and our mutual survival” here. Gold it not dead and the gold bull is not over longer term even MA agrees with this and states it on the public record. For now however we are correcting and things are not good in the world of gold. This does not mean we walk away however as gold is a much needed hedge at minimum.

Just lately I see a significant lift in visits to my web site whereas you might expect people would run in the opposite direction from anything to do with gold. This is not the case here or in China, India and the rest of Asia where buyers are lining up to buy physical. The drop in prices has also enticed all sorts of turmoil and stories and new “analysis” (loosely used) such as the gold / CPI ratio.

What a load of hog wash, it is as bad as the “gold bubble” argument when in fact gold was not that far ahead of the real cost of production. That can hardly be called a bubble. Like a broken clock certain main stream commentators on our media would occasionally proclaim “look gold, it’s a bubble” and all because the price had gone up.

Gold started to rally in 1999 – 2001 off a double bottom which in my view was contrived below US$400 because of paper shorting, selling of gold at uneconomic levels that had not yet been mined. True or not that was still a fact and facts are what we have to deal with in markets.

I have been warning my clients that the supports in gold could fail and providing research on lower cost producers and the Aussie dollar. Last year I made use of my contacts from the bond markets to validate certain research on the RBA and economic analysis by the authorities here in Australia because it really does not add up. People are being duped, slowly simmered in a pot of warm water just like the frog story.

The employment numbers do not add up. The expected surplus was always a joke. The MRRT here was badly timed and will be repealed just like the carbon tax which was merely political not practical despite all the hype. It was inflationary as the entire cost to carbon emitters was passed on via higher prices. Therefore no improvement to the environment except at best to limit power usage due to the excessive cost rises. Miners do not have the ability to reduce power in most cases. This has been bad for business at the worst possible time just as I complained and explained over the last two years. This has ramifications for offshore investors and local investors alike.

The RBA here is not pre-emptive; they will only react after the event. They have always reacted too late and moved too far. There is no point appropriating blame the research warned offshore investors that the AUD would remain higher than it should be and it has caused great structural harm to the local economy.

This article is provided to update you on the Australian perspective during this crisis, as has always been my purpose. Firstly to gold which was not in a bubble yet it was overdue for a correction and yes some promoters get over enthusiastic about the king of metals. I do not believe that the ratio of gold to money in circulation or the POG correlation with the Dow is relevant in these times, merely interesting and perhaps a guide to some degree. The applicability is limited; this is my point look at where we are right now. I am more about practicalities in surviving these difficult times.

With that in mind I was not offended when I spotted Martin Armstrong warning about gold this year and so held back as I agreed with much of his analysis. He was not saying what gold bugs wanted to hear and was attacked for telling it the way he saw it. Well my hat is off to him for his brilliant research and systems yet again. Credit where credit is due for reading the market correctly MA.

At GoldOz we discuss markets and systems to profitably trade the gold stocks and managed to protect our capital in a model portfolio up until recently. It is not decimated and will recover. I do not consider myself a perma-bull just an analyst with broad based knowledge of mining and markets. Wishing investors at all levels a steady head and safe passage through this gut wrenching correction.

Good trading / investing.
Neil Charnock
www.goldoz.com.au

GoldOz has now introduced a major point of difference to many services. We offer a Newsletter, data base and gold stock comparison tools plus special interest files on gold companies and investment topics. We have expertise in debt markets and gold equities which gives us a strong edge as independent analysts and market commentators. GoldOz also has free access area on the history of gold, links to Australian gold stocks and miners plus many other resources.

Neil Charnock is not a registered investment advisor. He is an experienced private investor who, in addition to his essay publication offerings, has now assembled a highly experienced panel to assist in the presentation of various research information services. The opinions and statements made in the above publication are the result of extensive research and are believed to be accurate and from reliable sources. The contents are his current opinion only, further more conditions may cause these opinions to change without notice. The insights herein published are made solely for international and educational purposes. The contents in this publication are not to be construed as solicitation or recommendation to be used for formulation of investment decisions in any type of market whatsoever. WARNING share market investment or speculation is a high risk activity. Investors enter such activity at their own risk and must conduct their own due diligence to research and verify all aspects of any investment decision, if necessary seeking competent professional assistance.

America’s ‘Exorbitant’ Privilege Will Continue

OzCopper — Sat, 20 Apr 2013 01:53:27 +0000

Richard (Rick) Mills
Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

In July 1944, delegates from 44 nations met at Bretton Woods, New Hampshire – the United Nations Monetary and Financial Conference – and agreed to “peg” their currencies to the U.S. dollar, the only currency strong enough to meet the rising demands for international currency transactions.

Member nations were required to establish a parity of their national currencies in terms of the US dollar, the “peg”, and to maintain exchange rates within plus or minus one percent of parity, the “band.”

What made the dollar so attractive to use as an international currency was each US dollar was based on 1/35th of an ounce of gold, and the gold was to held in the US Treasury. The value of gold being fixed by law at 35 US dollars an ounce made the value of each dollar very stable.

The US dollar, at the time, was considered better then gold for many reasons:

The strength of the U.S. economy
The fixed relationship of the dollar to gold at $35 an ounce
The commitment of the U.S. government to convert dollars into gold at that price
The dollar earned interest
The dollar was more flexible than gold

There’s a lesson not learned that reverberates throughout monetary history; when government, any government, comes under financial pressure they cannot resist printing money and debasing their currency to pay for debts.

Lets fast forward a few years…

The Vietnam War was going to cost the US $500 Billion. The stark reality was the US simply could not print enough money to cover its war costs, it’s gold reserve had only $30 billion, most of its reserve was already backing existing US dollars, and the government refused to raise taxes.

In the 1960s President Lyndon B. Johnson’s administration declared war on poverty and put in place its Great Society programs:

Head Start
Job Corps
Food stamps
Medicaid
Funded education
Job training
Direct food assistance
Direct medical assistance

More than four million new recipients signed up for welfare.

During the Nixon administration welfare programs underwent major expansions. States were required to provide food stamps. Supplemental Security Income (SSI) consolidated aid for aged, blind, and disabled persons. The Earned Income Credit provided the working poor with direct cash assistance in the form of tax credits and welfare rolls kept growing

Bretton Woods collapsed in 1971 when Nixon severed (known as the Nixon Shock because the decision was made without consulting the other signatories of Bretton Woods, even his own State Department wasn’t consulted or forewarned) the link between the dollar and gold – the US dollar was now a fully floating fiat currency and the government had no problem printing more money. With gold finally demonetized the US Federal Reserve (Fed) and the world’s central banks were now free from having to defend their gold reserves and a fixed dollar price of gold.

The Fed could finally concentrate on achieving its mandate – full employment with stable prices – by employing targeted levels of inflation. The Fed’s ‘Great Experiment’ had begun – the objective being a leveling out of the business cycle by keeping the economy in a state of permanent boom – gold’s “chains of fiscal discipline” had been removed.

But there was a problem – because of the massive printing of the US dollar to cover war and welfare reform costs Nixon worried about the strength of his country’s currency – how do you keep the U.S. dollar as the world’s reserve currency, how do you keep demand strong, if one you remove gold’s backing and two print it into oblivion?

Recognizing that the US, and the rest of the world, was going to need and use more oil, a lot more oil, and that Saudi Arabia wanted to sell the world’s largest economy (by far the US) more oil, Nixon and Saudi Arabia came to an agreement in 1973 whereby Saudi oil could only be purchased in US dollars. In exchange for Saudi Arabia’s willingness to denominate their oil sales exclusively in U.S. dollars, the United States offered weapons and protection of their oil fields from neighboring nations.

Nixon also abolished the International Monetary Fund’s (IMF) international capital constraints on American domestic banks. This allowed Saudi Arabia and other Arab producers to recycle their petrodollars into New York banks.

Global oil sales in U.S. dollars caused an immediate and strong global demand for US dollars – the ‘Petrodollar’ was born.

By 1975 all OPEC members had agreed to sell their oil only in US dollars in exchange for weapons and military protection.

“In a nutshell, any country that wants to purchase oil from an oil producing country has to do so in U.S. dollars. This is a long standing agreement within all oil exporting nations, aka OPEC, the Organization of Petroleum Exporting Countries. The UK for example, cannot simply buy oil from Saudi Arabia by exchanging British pounds. Instead, the UK must exchange its pounds for U.S. dollars…

This means that every country in the world that imports oil—which is the vast majority of the world’s nations—has to have immense quantities of dollars in reserve. These dollars of course are not hidden under the proverbial national mattress. They are invested. And because they are U.S. dollars, they are invested in U.S. Treasury bills and other interest bearing securities that can be easily converted to purchase dollar-priced commodities like oil. This is what has allowed the U.S. to run up trillions of dollars of debt: the rest of the world simply buys up that debt in the form of U.S. interest bearing securities.” Christopher Doran, Iran and the Petrodollar Threat to U.S. Empire

As developed economies grew and prospered, as developing economies took center stage with their massive urbanization and infrastructure development plans their need for oil grew, and so too did the need for new U.S. dollars, as demand grew the currency strengthened. The U.S. Dollar quickly became the currency for global trades in almost every commodity and most consumer goods, it wasn’t used just for oil purchases anymore. Countries all over the world bought, had to buy, more and more dollars to have a reserve of currency with which to buy oil and ‘things.’ Countries began storing their excess US dollar capacity in US Treasury Bonds, giving the US a massive amount of credit from which they could draw.

There’s no disputing the U.S. greenback is the world’s currency – the dollar is the currency of denomination of half of all international debt securities and makes up 60 percent of countries foreign reserves.

The Petrodollar replaced the Gold Standard

Currently the only source of backing for the U.S. dollar is the fact that oil is priced in only U.S. dollars and the world must use the Petrodollar to make their nation’s oil purchases or face the weight of the U.S. military and economic sanctions. Many countries also use their Petrodollar surplus for international trade – most international trade is conducted in U.S. dollars.

It’s very obvious that the United States economy, and the global economy, are both intimately tied to the dollar’s dual role as the world’s reserve currency and as the Petrodollar.

“Trade between nations has become a cycle in which the U.S. produces dollars and the rest of the world produces things that dollars can buy; most notably oil. Nations no longer trade to capture comparative advantage but to capture needed dollar reserves in order to sustain the exchange value of their domestic currencies or to buy oil. In order to prevent speculative attacks on their currencies, those nations’ central banks must acquire and hold dollar reserves in amounts corresponding to their own currencies in circulation. This creates a built-in support for a strong dollar that in turn forces the world’s central banks to acquire and hold even more dollar reserves, making the dollar stronger still.” Harvey Gold, Iran’s Threat to the U.S. – Nuclear or the Demise of the Petrodollar?

It’s also very obvious that if global Petrodollar demand were ever to crumble the use of the U.S. dollar as the world’s reserve currency would abruptly end.

The consequences:

Energy costs would rise substantially. American’s, because their dollar is the world’s reserve currency and they control it, have been buying oil and gasoline for a fraction of what the rest of the world pays.

There would be substantially less demand for dollars and U.S. government debt. All nations that buy oil and hold U.S. dollars in their reserves would have to replace them with whatever currency oil is going to be priced in – the resulting sell-off would weaken the U.S. currency dramatically.

Interest rates will rise. The Federal Reserve would have to increase interest rates to reduce the dollar supply.

Foreign funds would literally run from U.S. stock markets and all dollar denominated assets.

Military establishment collapses.

There would be a 1930s like bank run.

Dollar exchange rate falls. The current-account trade deficit would become unserviceable.

The U.S. budget deficit would go into default. This would create a severe global depression because the U.S. would not be able to pay its debts.

Why some might think the Petro dollar is history, consider:

Several countries have attempted to, or have already moved away from the petrodollar system – Iraq, Iran, Libya, Syria, Venezuela, and North Korea.

Other nations are choosing to use their own currencies for inter country trade; China/Russia;China/Brazil;China/Australia;China/Japan;India/Japan;Iran/Russia; China/Chile; China/The United Arab Emirates (UAE);China/Africa Brazil/Russia/India/China/South Africa (the new BRICS are plus S.A.).

Countries began storing their excess US dollar capacity in US Treasury Bonds, giving the US a massive amount of credit from which they could draw. But by keeping interest rates excessively low for so long a period of time, and with no relief in sight, the rate of return on U.S. interest bearing securities has been so low it’s not worth holding them to generate any kind of return for your U.S. foreign reserves, the very same reserves you want to hold to buy oil.

The U.S. does not need its Arab Petrodollar partners as much since the invasion of Iraq with its immense oil resources (second largest in the world) and discovery of how to obtain oil from unconventional sources – shale oil, oil sands etc. Saudi Arabia and other OPEC countries in the region might be less needy for U.S. protection now that Iraq has been neutralized and Iran is in the crosshairs.

Russia is the number one oil exporter, China is the number two consumer of oil and imports more oil from the Saudis then the U.S. does. Chinese and Russian trade is currently around US$80 billion per year. China has agreed to lend the world’s largest oil company, Russia’s Rosneft, two billion dollars to be repaid in oil.

U.S. federal debt is close to 17 trillion dollars and is 90 percent of GDP. The deficit is a horrendous 7 percent of GDP. Political infighting and bickering has made cooperation nearly impossible and effective measures just aren’t being taken. The Federal Reserve is increasing its reserves by over a trillion dollars a year, the Fed is out of tools, its measures are not working. The ‘recovery’ is false, jobs are scarce and 6.2 million Americans have dropped out of the workforce.

Exorbitant Privilege

Valéry Giscard d’Estaing referred to the benefits the United States has due its own currency being the international reserve currency as an “exorbitant privilege.”

“Reserve currency status has two benefits. The first benefit is seigniorage revenue—the effective interest-free loan generated by issuing additional currency to nonresidents that hold US notes and coins… The second benefit is that the United States can raise capital more cheaply due to large purchases of US Treasury securities by foreign governments and government agencies…The major cost is that the dollar exchange rate is an estimated 5 to 10 percent higher than it would otherwise be because the reserve currency is a magnet to the world’s official reserves and liquid assets. This harms the competitiveness of US exporting companies and companies that compete with imports…

There is no realistic prospect of a near-term successor to the dollar. Although the euro is already a secondary reserve currency, MGI finds that the eurozone has little incentive to push for the euro to become a more prominent reserve currency over the next decade. The small benefit to the eurozone of slightly cheaper borrowing and the cost of an elevated exchange rate today broadly cancel each other. The renminbi may be a contender in the longer term—but today China’s currency is not even fully convertible.” McKinsey Global Institute,An exorbitant privilege? Implications of reserve currencies for competitiveness

The Alternatives

There has lately been a lot of talk about the demise of the Petrodollar. Fortunately, or unfortunately (depends what side of the debate your on) there exists no viable alternative to the U.S. dollar, not today, not tomorrow, not for a very long time.

The EU is a waste land, will the deeply flawed Euro even survive?

“The euro’s major weakness comes from its political base. If the entire 27-country strong European Union (EU) were backing the euro, its long-term international standing would be considerably enhanced. With only half of the E.U countries backing it, the euro zone is vulnerable in the future to a possible dissolution under the pressures of economic hardships. This is more so since the statutes of the European Central Bank are unduly rigid, not only freezing exchange rates between member states, which is OK, but also de facto freezing their fiscal policies, while the central bank itself has the goal of fighting inflation as its only objective. It seems that the objective of supporting economic growth was left out of its statutes, with the consequence that it may be unable to ride successfully future serious economic disturbances.” Prof Rodrigue Tremblay, Nothing in Sight to Replace the US Dollar as an International Reserve Currency

Well what about China you ask?

One of the preconditions of reserve currency status is relaxing capital controls so foreigners can reinvest their accumulated yuan back into a countries markets. China has strict capital controls in place. If they were to be relaxed to the level needed then market driven money flows, not China’s Communist leaders, would drive exchange and interest rates. Communist leaders would be facing the thing they fear the most – instability because they lose control over two of their main economic levers.

China has well over US$3.2 trillion in its foreign reserves. They’ve accumulated this massive amount of money over the years by maintaining the yaun’s semi fixed peg to the dollar.

Think about it; the euro-crisis makes the US dollar the preferred safe-haven, this lowers US borrowing costs. This in turn means China has to continue to lend to the US in order to hold-up the value of its current reserves, pushing down US borrowing costs.

A massive shift as many envision – China out of the U.S. dollar – would destroy the dollar and cause the instability the Communist Party fears so much. Why would China deliberately destroy its own wealth and why would Chinese communist leaders set themselves up for discord among its citizens?

“China, itself as a country, has a very limited moral international stance. It is still a totalitarian, authoritarian and repressive state regime that does not recognize basic human rights, such as freedom of expression and freedom of religion, and which crushes its linguistic and religious “minority nationalities. It is a country that imposes the death penalty, even for economic or political crimes…Only a fundamental political revolution in China could raise this country to a world political and monetary status. This is most unlikely to happen in the foreseeable future and, therefore, no Chinese currency is likely to play a central role in financing international trade and investment.” Prof Rodrigue Tremblay, Nothing in Sight to Replace the US Dollar as an International Reserve Currency

Conclusion

U.S. assets are free from default risk, free from political risk, the U.S. has never imposed capital controls and has only frozen funds once – Iran’s in 1978.

Fact; the United States of America, and only the United States of America, controls the fate of the Petrodollar. Not communist China, not Russia or Saudi Arabia or the EU.

The questionable ‘exorbitant’ privilege (the interest-free loans, U.S. Treasury purchases by foreign governments versus the loss of business competitiveness and all that entails) bestowed upon America for having the world’s reserve currency is going continue for the for-seeable future. This fact, and what it means to the U.S. and the world, should be on all our radar screens. Is it on yours?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:

If you’re interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us at www.aheadoftheherd.com

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

Don’t Panic, Buy Silver: Rick Mills

OzCopper — Tue, 16 Apr 2013 11:19:33 +0000

It looks bad for precious metals. Gold prices have fallen hard. Explorers are hurting for money. Slim treasuries mean fewer drill programs. Scarce discovery news could lead to fewer listings on the Toronto Stock Exchange. But all is not lost. In this interview with The Gold Report, Rick Mills, owner and host of Ahead of the Herd, points to the fundamentals of silver and the opportunities for stock pickers willing to invest in small bites and wait out the inevitable market ups and downs.

Companies Mentioned :Great Panther Silver Ltd. : Kootenay Silver Inc. : Terraco Gold Corp.

The Gold Report: Precious metal bullion and equities are taking a hit right now in the market. Why do you feel silver is an interesting investment today?

Rick Mills: There is a disconnect this year between silver and gold. They usually trade in lockstep, and their market prices are doing that.

As of April 2, more than 140 tons of gold has flowed out of various exchange traded funds (ETFs) this year, while silver ETFs have added more than 20 million ounces (20 Moz). Maybe that is because silver is more affordable than gold or because silver also has industrial uses.

TGR: But the ETFs do not reflect a price disparity between gold and silver.

RM: It is hard to figure out. In Q1/13, U.S. mint silver coin sales reached an all-time high of 13.2 Moz. Annualized, that is 52.8 Moz silver sold in 2013, another record. The $10 billion spent to buy those ounces would be a record as well. Investors are buying 56 times more silver ounces than gold ounces.

TGR: Why is that?

RM: Silver is called poor man’s gold. Both are monetary metals, silver for even longer than gold. And silver just might outperform gold in the future. The S&P/TSX Venture Composite Index is trading similarly to the early 2000s when silver was below $10/ounce.

TGR: The appetite for silver bullion is voracious.

RM: The monetary climate is dominated by quantitative easing. There has probably never been a bigger need for non-fiat money, yet the most popular safe havens are the U.S. dollar and Treasury bonds. German bunds are popular. It is hard to understand government controlled paper assets being more popular than real hard money.

TGR: Some of the loudest voices in this space have been talking about silver and platinum more than gold, which is interesting.

RM: Given the demand from more cars being on the road around the world and the fact that almost as much jewelry is made from platinum as is used as autocatalysts, as well as the precarious supply source in South Africa, I can see platinum being an extremely timely investment, but nothing will be as good as gold and silver.

TGR: In addition to buying bullion, investors can participate in the equities through the mining companies.

RM: An investor has to be pretty careful with the equities. A lot of people are claiming we are at the bottom. Yes, there are companies with good management teams on sale, but if this is the bottom, what would start the general junior market upward climb?

“Investors should look for companies that can increase cash flow or companies close to cash flow that can raise the money to jump the final hurdles.”

In my opinion, we will need a huge discovery, but with no initial public offerings (IPO) this year and with the financing well bone dry, where will the upside come from? We are approaching the summer doldrums. Traditionally, the juniors shine in late August through March. How can that happen this year? No money means no drill programs. No discoveries means no returning interest in the sector. For most of these companies, 2013 is a write-off.

If you see a company doing a financing, it usually is for less than $500,000, what I call survival financings. Investors need to be very smart and very cautious. A company doing survival financing will use the money to keep the lights on, keep its listing current and pay salaries, but not do much on its properties.

We just had the Prospectors and Developers Association of Canada conference, where everybody tried to get everything arranged: money, financing, deals, But Q1/13 is over; companies must file their quarterly reports. They have to have a year’s worth of General and Administrative (G&A) expenses in the treasury to stay on the TSX or risk becoming insolvent. Hundreds of these mining companies do not. Depending on what the auditors say, that might deliver even more bad news this summer and fall when the TSX may very well be delisting or suspending 20 or 30 companies a week.

If you believe precious metals, particularly silver, are a good investment, you have to become a stock picker. You have to cut through the noise and understand what is important. Right now, that is money in the bank or cash flow from operations.

TGR: With so many companies in dire straits, why would an investor buy any stock in the sector right now?

RM: We can start with the context of silver production in the U.S.The U.S. has several historic primary silver districts. Most of them were shut down in the bear markets of the 1980s and 1990s. Today, most silver production in the U.S. is a byproduct of copper and gold mining, both of which, in the U.S., are in decline.

“The essence of investing in a junior is you are investing in people.”

Primary silver deposits are extremely rare; less than a third of the silver mined globally comes from primary silver mines. The average yield of the top primary silver miners dropped 34% between 2005 and 2011. It was even worse in 2012. Silver grades are actually declining. For proof, just compare the average ore grade for the year of production to the prior year’s reserve average ore grade. Most silver mines today are producing their best stuff, yet over the last seven years, ore grades have dropped more than 40%.

There are real supply issues and people are snapping up silver as if it will run out tomorrow. Take the U.S. Silver Eagle. In Q1/13, its sales equaled 42% of total 2012 sales. And in 2012, U.S. mint silver coin sales surpassed the amount of physical silver mined in the U.S.

TGR: We have not seen a lot of new silver production in the U.S.

RM: Not much production and very few silver discoveries.

As a group, silver stocks have not experienced a sustained breakout to new highs since 2007, yet people are buying physical silver.

If you look at a 40-year correlation chart between silver and global national debt, the arrows point from the bottom left straight to the top right on the chart. I have no doubt debt will continue to climb.

TGR: If an investor owns silver bullion and wants to buy selected equities, what are some companies to look at?

RM: Let’s talk about three companies: a producer and a brownfields developer, both in Mexico, and a junior with a greenfield project that has considerable upside potential.

Great Panther Silver Ltd. (GPR:TSX; GPL:NYSE.MKT) owns two silver mines in Guanajuato, Mexico, and has been increasing production. The company is unhedged—with no underlying royalties. In 2010, Great Panther produced 2.26 Moz silver equivalent (Ag eq). In 2012, production was 2.38 Moz. The 2013 forecast is a bit lower because the company spent a considerable amount of time and money on its mines and on two satellite operations for its main mine at Guanajuato. It put in underground haulage to get Guanajuato ore to the Cata processing plant. When all that is consolidated, I expect this company to start rewarding investors with vastly increased production.

TGR: Its stock had a big drop in March. What happened?

RM: The company was having cost and operational issues and there was a drought at its Topia mine.

TGR: Is the growth at Guanajuato or in the other exploration projects?

RM: San Ignacio has a 650 meter (650m) strike length out of a 4 kilometer (4km) potential on a vein system just 5km west of the Veta Madre structure that hosts the Guanajuato mine complex. Stepout drilling shows excellent silver and gold mineralization, 50–100m below surface. A shaft will not be needed; a ramp will do it. San Ignacio will be in production next year and can be monetized immediately to pay for its development. The ore can easily be trucked to the Guanajuato plant, and the two have similar metallurgy.

In addition, the company discovered higher-grade gold mineralization at Guanajuato last year. That will increase silver equivalent ounces with the serious gold kicker.

El Horcon is another Great Panther project. It is a silver-gold project in a past-producing underground mine with multiple veins. One vein, Diamantillo, is traceable on surface for more than 4km. The mineralization is compatible with the existing mill feed for Guanajuato.

Both San Ignacio and El Horcon show awesome potential for satellite feed deposits. We should see lower production costs and more throughput.

TGR: What is your brownfields name?

RM: It is Kootenay Silver Inc. (KTN:TSX.V). Its Promontorio project in Mexico has an NI-43-101-complaint resource with 69 Moz Ag eq; most of the resource is open pittable.

What most excites me here is the substantial gold component that has never been counted in the resource estimate. The company’s metallurgical tests are showing that the gold might be economically recoverable.

I did some back-of-the-envelope calculations on reported gold assays. If there is 400,000 oz gold, even if it is only 50% recoverable, that is another 10 Moz Ag eq. The company will be sitting on 80 Moz Ag eq.

Kootenay will publish an updated NI 43-101 resource estimate to include the gold component.

TGR: On April 2, the stock was up 6% on three times volume without any kind of announcement.

RM: Kootenay had taken a hit just like a lot of quality companies; somebody is buying at very nice prices.

Kootenay is doing a 30,000m drill program; the company has three drills turning 24/7, and the money in the bank to pay for it. This is a company that will have news all summer long and another resource estimate after the drill program; watch for plus 100 Moz Ag Eq.

If you like the price of the company, you have to start chipping away at it and pick it up a bit at a time. A smart investor averages in over time.

TGR: And Mexico is a great address for silver.

RM: There is no geopolitical risk among my sponsors. There is enough risk in this sector without deliberately adding to it. You need geopolitically safe areas. You need quality management teams with experience. You need cash in the bank, and you need news flow.

TGR: What is the greenfields name?

RM: Terraco Gold Corp. (TEN:TSX.V) has one of my favorite management teams. Its Almaden project in Idaho is a 1 Moz gold heap-leach project. A lot of it is up on a mountain, and there is quite a bit of starter material laying around down below. When you need more you get a caterpillar and just push it down. Terraco is working behind the scenes on water testing and advancing to a production decision.

The company has $1.4M in its treasury.

Terraco’s Moonlight project in Nevada lies at the north end of the Spring Valley joint venture between Barrick Gold Corp. (ABX:TSX; ABX:NYSE) and Midway Gold Corp. (MDW:TSX.V; MDW:NYSE.MKT), which is currently 3.5 Moz gold. The big question is whether that mineralization carries on to Terraco’s Moonlight. It is the same trend, the same cover. That could put Moonlight into play for Terraco.

But I called Terraco a silver play. Andy Wallace and the late John Livermore’s Cordilleran Resources Company (Cordex Exploration) optioned Moonlight to Terraco. John Livermore discovered the Carlin deposit; he discovered and developed the Pinson and Dee mines. Andy Wallace is credited with the major discovery of the Marigold and the Stonehouse/Lone Tree gold deposits and the Secret Pass mine. They are on the record as stating that they should never have sold Moonlight, not because of the gold, but the silver.

Moonlight has never been drilled. It got its name from the old-timers sneaking into the mine and stealing chunks of silver out of it at night. This is a greenfields property and two of the most respected names in Nevada exploration believe there is a silver mine here.

Terraco has a 2.5% royalty on the Barrick-Midway JV, Spring Valley, valued at perhaps $60–80M. Todd Hilditch, Terraco’s CEO, could monetize that royalty. He could put Almaden in production and get that cash flow going. Then he could chase Livermore and Wallace’s silver mine on Moonlight while it is in play from Barrick drilling. It brings a smile to my face to think that Hilditch could be in a position AGAIN to return this kind of value to shareholders.

TGR: The royalty derisks the stock in a sense.

RM: Yes. Who else has a royalty on a Barrick deposit? But Todd does not want Terraco to be a royalty company. He seems to want to monetize the royalty, put Almaden into production and look for a silver mine on the Moonlight property.

TGR: Rick, thank you for helping our readers understand the silver space a little better and giving them some ways to invest selectively in equities. Do you have any parting thoughts?

RM: Investors should look for companies that can increase cash flow or companies close to cash flow that can raise the money to jump the final hurdles.

We are not buying these companies for instant riches. We are listening to experienced management teams laying out their plans, their vision for the future. If you believe what they are saying, if you believe they can carry it off, if you believe the market will reward them for that—buy in.

Then, trust in them. Go live your life. Check in once in a while to monitor progress. As long as things are going according to plan, life is good. That is the essence of investing in a junior—you are investing in people.

TGR: That is also the basic difference between investing and speculating. You are investing in a hard asset that exists and in a group you think can monetize it. That seems a lot easier than just playing the market ups and downs on any given day.

RM: I agree. It is a lot less stressful and more profitable. Invest in the people and their ideas, then let them go to work and get on with your life.

People do not understand that you only need to get paid once off an investment. If it takes two or three years, fine. You can have several of these things going at once, and get paid every year from one or the other.

The markets will hand you setbacks. There is no sense in crying and whining about it. Not everything goes up in a straight line. Not everything works out the way we plan, but with a little bit of patience, things will work out. Just have a little bit of patience and enjoy yourself.

TGR: I like that. Rick, thank you for your time and your insights.

Richard Mills is the owner and host of www.Aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 400 websites.

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

DISCLOSURE:

1) Sally Lowder conducted this interview for The Gold Report and provides services to The Gold Report as an employee. She or her family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Great Panther Silver Ltd. and Terraco Gold Corp. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Rick Mills: I or my family own shares of the following companies mentioned in this interview: None. I personally or my family am paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.
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6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Quantifornication and The American Spring

OzCopper — Sat, 13 Apr 2013 08:41:12 +0000

Richard (Rick) Mills
Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Ironic isn’t it? A record number of people on food stamps yet new highs for stock indices. Below is an interesting question posed by Michael Snyder. The answer is very important to your future.

“If the economy is getting better, then why does poverty in America continue to grow so rapidly? Yes, the stock market has been hitting all-time highs recently, but also the number of Americans living in poverty has now reached a level not seen since the 1960s. Yes, corporate profits are at levels never seen before, but so is the number of Americans on food stamps. Yes, housing prices have started to rebound a little bit (especially in wealthy areas), but there are also more than a million public school students in America that are homeless…should we measure our economic progress by the false stock market bubble that has been inflated by Ben Bernanke’s reckless money printing, or should we measure our economic progress by how the poor and the middle class are doing?” Michael Snyder, infowars.com

Consider:

U.S. labor force participation is now down to where it was in 1979 – 63.3 percent.

Adjusted for inflation household incomes are now back to levels last seen in the 1990s – average per capita wage is around $26,000, household median income is at $50,000.

Adjusted for inflation markets are lower than they were in 2000.

U.S. national debt is $16+ trillion.

The banking system backs $7.4 trillion in insured deposits with $32 billion, that’s just .43 percent – when the U.S. was on the gold standard your dollar was backed 40% with gold. In 1987 there were over 13,000 banks, today there are 6,000. There are 50 banks with assets totaling over $20 billion.

Student debt totals over $1 trillion. Medical care is the second fastest inflating sector after first place college tuition. Since 1985, college tuition has soared nearly 600 percent and medical care is fast approaching 400 percent. The overall Consumers Price Index (CPI) is at 200 percent.

The Federal Reserve’s balance sheet is plus $3.2 trillion and the Fed is continuing to purchase assets at a rate of $85 billion a month.

Consumer sentiment is at crisis levels last seen in 2008. In August 2012, in A Pew Research survey of middle-class Americans done in August 2012, reported 42 percent of those surveyed said they were worse off than they were in 2008.

A Rasmussen survey showed that only 39 percent believed the U.S. economy would be stronger in five years – the first time that figure has ever dipped below 40 percent.

The John J. Heldrich Center for Workforce Development at Rutgers University’s survey showed that more than half of those surveyed believe the U.S. economy will not fully recover for another six years, and nearly one-third said the U.S. economy will never fully recover.

Estimates put a return to “normal” employment deep into 2019 – and that’s a best case recovery with no hiccups.

The largest city bankruptcy in US history was just announced for Stockton, California – population 300,000.

People aren’t buying cars because they can afford them – U.S. cars, on average, are almost 11 years old, that’s the oldest the fleets been since record keeping began. When cars get old they breakdown, costly repairs happen all too often. Unfortunately for a consumer driven economy already swirling around the bowl every dollar spent on a car purchase is one not being replaced for purchases elsewhere.

In the final quarter of 2012, the US economy expanded at an annual rate of 0.4 percent. The 0.4 percent growth rate for the gross domestic product (GDP) was the weakest quarterly performance in almost two years.

For all of 2012, the economy grew 2.2 percent, that’s after a 1.8 percent increase in 2011 and a 2.4 percent advance in 2010. Since the recession ended in the summer of 2009 the economy has been expanding at sub-par rates.

The Congressional Budget Office (CBO) has estimated that the combination of tax increases and spending cuts (the much talked about fiscal cliff) could trim economic growth this year by 1.5 percentage points leaving just 1.5 percentage points for growth in 2013.

The just released (April 10th) Presidential budget calls for $580 billion in new taxes, $400 billion in health savings plus an additional $200 billion in savings from farm subsidy reductions and reforms to Federal retirement plans.

SNAP

Food stamp participation increased from about 17.2 million in fiscal year 2000 to 26 million people in July 2006. By August 2008, participation had reached an all-time (non-disaster) high of 29 million people per month.

Today roughly 15 percent (47.3 million) of Americans are on food stamps – the Supplemental Nutrition Assistance Program (SNAP).

Half of current SNAP recipients are children, and half of these ten million children live in extreme poverty, meaning family income is less than half the official poverty level.

In the 1970s, about one out of every 50 Americans was on food stamps. One in six Americans receives food stamps today.

Last year’s average monthly benefit was $133 per person – Republican’s are seeking $16 billion worth of cuts to the SNAP program over 10 years.

Three out of four households receiving SNAP benefits include at least one person who is working.

The ranks of America’s poor have climbed to 50 million.

Dying Broke

Few Americans own any significant amount of financial wealth:

1 out of 3 Americans have no savings.

Median household income has fallen 7.3 percent since the recession officially ended in the summer of 2009. During the same period inflation has been between two and four percent.

From 2007 to 2010, a typical US family lost 39 percent of its wealth, in 2007, the median family net worth was $126,400, in 2010, it was $77,300.

In the U.S. ten million mortgages are underwater. Today’s home prices are lower than they were during the Great Depression and are approaching their all-time lows.

Roughly 10 percent of the private sector has a pension versus 60 percent in 1980.

The Federal Deposit Insurance Corp. (FDIC) reported more than a quarter of American households lacks access to full banking services or have no bank account while nearly 10 million U.S. households have no checking or savings accounts. The survey said 821,000 more U.S. households have no bank accounts since the agency conducted its first survey in 2009.

The White House has announced its budget proposals include a shift to a Chained CPI. This will produce a major cut in Social Security and Veterans benefits. Chained CPI can be expected to grow .25 – .30 percentage points slower than the current CPI measure. Nearly two in three recipients rely on Social Security for at least 50 percent of their income while benefits make up at least 90 percent of the income of 36 percent of seniors. The CBO has estimated that by switching to chained CPI-U the federal deficits would be reduced by $340 billion in the decade from 2014 through 2023. Of that, $127 billion would come from savings on Social Security.

Nearly half of American’s die broke.

businessinsider.com

The class divide

The S&P 500 – an index of 500 large US companies – has finally, after a four year rally, recouped all of its losses from the 2008 global financial crisis.

The S&P 500 became the last major US index to hit a new high. The Dow Jones Industrial average has already climbed past its previous high.

The average net worth of the 400 wealthiest Americans, classified as the super rich, rose to an all-time record of $4.2 billion, up more than 13 percent from a year ago. Collectively, this group’s net worth, currently at $1.7 trillion, is the equivalent of one-eighth of the entire U.S. economy.

The top one percent of the American population controls 42 percent of all financial wealth in the country.

The top 20 percent control roughly 90 percent of all stock ownership and financial wealth.

The bottom 80 percent of Americans control less than 10 percent of all stocks owned.

The bottom 80 percent of Americans hold roughly 5 to 8 percent of all financial wealth (non-housing related).

Income inequality is the highest it’s been since World War II.

“The vast majority of Americans are not the beneficiaries of this “buoyant economy.” Rather, growing numbers of people have been thrown deeper into poverty and social distress. Long-term unemployment has become entrenched. Working families are saddled with growing debt and struggle to pay for housing and other basic necessities, let alone put aside anything for retirement…

The US Federal Reserve is pumping $85 billion a month in virtually free money into the financial system, fueling the stock market boom. This is more money in a month than the $76.6 billion the federal government spent all of last year to provide SNAP benefits to 47.8 million impoverished Americans.” The two sides of the US economic “recovery”, wsws.org

The ranks of the working-age poor are at the 1960s levels that led to the national war on poverty. One in 12 Americans are jobless, and 50 million live below the poverty line. Over 47 million people, many from middle-income families, now depend on social assistance for food. And across America, 1.5 million children are in families that have lost their homes.

It’s obvious the recovery, concentrated as it is on just the stock market, has nothing to do with most Americans reality.

washingtonpost.com

“Since the S&P 500 first reached its current level, in March 2000, the mad money printers at the Federal Reserve have expanded their balance sheet sixfold (to $3.2 trillion from $500 billion). Yet during that stretch, economic output has grown by an average of 1.7 percent a year (the slowest since the Civil War); real business investment has crawled forward at only 0.8 percent per year; and the payroll job count has crept up at a negligible 0.1 percent annually. Real median family income growth has dropped 8 percent, and the number of full-time middle class jobs, 6 percent. The real net worth of the “bottom” 90 percent has dropped by one-fourth. The number of food stamp and disability aid recipients has more than doubled, to 59 million, about one in five Americans.” David Stockman, former director of the Office of Management and Budget under President Ronald Reagan

Stock Market Longevity

“On the earnings front, my concern continues to be that investors don’t seem to recognize that profit margins are more than 70% above their historical norms, nor the extent to which this surplus is the direct result of a historic (and unsustainable) deficit in the sum of government and household savings. As a result, investors seem oblivious to the likelihood of earnings disappointments, not only in coming quarters but in the next several years. We continue to expect this disappointment to amount to a contraction in earnings over the next 4 years at a rate of roughly 12% annually.” John Hussman, manager Hussman Funds, hussmanfunds.com

“Corporate profits are nothing if not mean-reverting. There are several explanations for this phenomenon; but whatever the cause, the current off-the-charts percentage of profits to GDP is highly unlikely to become an enduring feature of the New Normal. Especially not given the recent weakness across the rest of the data spectrum.” John Mauldin, Mauldin Economics, mauldineconomics.com

Conclusion

We should we measuring our economic progress by how the poor and the middle class are doing. After all, besides the benefits being so narrowly focused, it hardly seems likely that the Fed induced stock market bubble, and off the charts corporate profits, are sustainable.

Quantifornication is the term I coined for what the Federal Reserve is selling to the world – the unrealistic, insane fiat dream that the monetary policy currently being employed by the Fed can fix the economy. It can’t, you cannot fix a debt induced problem by adding more debt.

Welfares role’s are going to grow, millions more will be looking for food stamps yet programs are being cut and taxes raised.

Is an American Spring coming? Certainly many of the same pressures that caused riots and civil disobedience across the Arab world are beginning to build in America and for the very same reasons.

The Arab Spring had many causes, socio-economic turmoil – lawlessness, poverty, lack of adequate medical facilities and attention, low to no employment, low wages, disease, no clean drinking water or water for irrigation and shortages of food or unaffordable food can all cause socio-economic pressure to build.

“It seems to me there are very dangerous ambiguities about our democracy in its actual present condition. I wonder to what extent our ideals are now a front for organized selfishness and irresponsibility. If our affluent society ever breaks down and the facade is taken away, what are we going to have left?” Thomas Merton

“When you think about the largest central banks in the world, they have all moved to unlimited printing ideology. Monetary policy happens to be the only game in town. I am perplexed as to why gold is as low as it is. I don’t have a great answer for you other than you should maintain a position.” Kyle Bass, Hayman Capital, in a Bloomberg TV interview

“Gold is money, everything else is just credit.“ J.P. Morgan

Quantitative easing, a global currency race to worthless and a spring storm on the horizon means gold and silver bullion might be the best protection you can own and should be on all our radar screens. Are they on yours?

If not, maybe they should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:

If you’re interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us at www.aheadoftheherd.com

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

Gold Stock Truth Serum

OzCopper — Fri, 12 Apr 2013 00:50:53 +0000

Is gold bullion leading gold stocks higher, or is the current “wet noodle” action of most senior gold stocks suggesting that the recent lows at $1540 will fail?
I don’t think I’ll join the debate about whether the $1540 area is some sort of “ultimate bottom”, but I will suggest that both gold & silver seem to be getting ready for a nice rally.
Please click here now. You are looking at the weekly chart for gold. Generally speaking, I believe in the “three strikes” rule. In baseball, it’s “three strikes and you’re out”.
In the 2011-2012 timeframe, gold touched key HSR (horizontal support and resistance) in the $1577 area, three times.
In 2013, gold has arrived there, for the 4^th time. It’s unknown whether gold rallies strongly from here. It’s also unknown whether gold will fail here, and plunge lower.
I will suggest that time in the congestion pattern “hourglass” is running out quickly, and a trending move, either up or down, will begin very soon.
From a technical standpoint, congestion patterns have roughly a 2/3 chance of consolidating the primary trend (up in this case), and a 1/3 chance of reversing it. This is clearly good news for gold investors.
Also, a poll taken at the recent Dubai gold conference showed that about 63% of the participants believed gold would rise to $3000 in 2014, and about 37% believed it would fall towards $1000.
The poll and technical analysis of gold’s congestion pattern are roughly in “agreement” that gold should move higher.
Please click here now. Right now, my focus in the gold market is this daily chart. Technically, it’s looking better and better.
Gold is trading in a range between $1540 and $1620. A move below $1540 would open the (trap) door to about $1460, while a breakout above $1620 would suggest a rally to $1700.
Note the position of my “stokeillator” (14,7,7 Stochastics series). It’s moved down nicely. In the $1615 area, I suggested that gold needed to rest, due to the nosebleed level of the stokeillator.
Gold has rested, and looks to me now, like it’s a cat that is stretching lazily, after a wonderful nap. If I was a “dollarbug mouse”, I would consider looking for some serious shelter, very soon.
The red lead line of the stokeillator sits near the 30 area, and it’s beginning to turn up. There’s a chance that it could decline towards the oversold area (below 20), if Wednesday’s critical FOMC minutes report contains a bearish surprise.
Regardless, I’m going to predict that Friday’s employment report is where Ben Bernanke’s focus will be now.
Please click here now. This shorter term hourly bars chart also hints that gold should move higher. I think the next minor trend move will be a rally towards $1620, rather than a decline to $1540.
There’s a rough-looking head & shoulders pattern in play. If it fails, gold will probably fall to $1555-$1560, before mounting a more serious rally. I don’t think it will fail. I think the pattern will take gold up, to test the key $1620 HSR area.
Please click here now. You are looking at the daily chart for silver. My stokeillator “traded” down to about 15, and is now hooking up nicely. Overall, silver looks better than gold. Its strong technical position also adds weight to the argument that gold’s rally can continue, even if it gets “whipsawed” by the release of the FOMC report.
Most investors in the gold community own a lot of gold stock, with an emphasis on the junior sector. It’s been tough lately, but since the lows at $1540 occurred, the juniors have been looking better than the seniors.
I believe that it’s critical to keep an eye on trading volume right now. Some technicians say that following volume is like drinking truth serum.
I don’t mind seeing the price of gold stocks decline further from here, but if that happens, I want to see volume decline, too. That’s bullish technical action. If there is a rally, and I think there will be, I want to see volume rise.
Please click here now. You are looking at the GDXJ chart. If you can, check the volume at the end of each trading day. Check it for your favourite gold stocks, too.
Do you see how low the trading volume was yesterday? The price declined, and so did volume. That’s bullish technical action.
If price rises today, and I hope you all want that to happen, then volume should rise too. The bulls are beginning to fight back!

Special Offer For OzCopper Readers: Send me an email to freereports4@gracelandupdates.com and I’ll send you my free SRT report. Silver ratio traders need to be on the alert now. I’ll cover the basic rules of ratio trading for you! Also, while gold has really gone nowhere over the past 6 weeks or so, my long-only GUTrader intraday gold trading service has booked about $165 an ounce in trading profits. All trades are closed out by 5pm each day. If you’re a gambler that likes intraday action, send me an email to stewart@gutrader.com, and I’ll send you the details of this email-based trading service. Thanks.

Thanks!

Cheers

Written between 4am-7am. 5-6 issues per week. Emailed at aprox 9am daily.

Source: http://oilprice.com/Interviews/Is-Tunisia-the-New-Hot-Spot-for-Energy-Investors-Interview-with-John-Nelson.html

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Are You Prepared?

Is Tunisia the New Hot Spot for Energy Investors? Interview with John Nelson

OzCopper — Fri, 12 Apr 2013 00:48:37 +0000

Until recently Tunisia was considered to be a minor league and relatively underexplored venue in Africa’s rapidly expanding oil & gas scene. This situation has quickly changed with new bid rounds and forced relinquishments creating an opportunity for new companies to come in.

Major American E & P companies like Shell have jumped at the opportunity to acquire ground that had been dominated for decades with little to no work conducted, mostly by European State oil & gas companies in this former French protectorate. For the first time major spending has been committed to test Tunisian basins which are arguably equally prolific as those in neighbouring environments with more work performed, such as Libya.

Tunisia is now in focus for investors because exploration is increasing within the producing Pelagian Basin, which leads us to ask the following questions:

Should Tunisia now be on energy investors watch list?

Is Shell just the start of “big oil” making inroads into the country? And which are the plays that people should be watching?

To help us look at the developing situation in the region we managed to speak with oil industry veteran John Nelson.

John Nelson is CEO of Canadian-listed Africa Hydrocarbons Inc. (NFK). A veteran geologist, Nelson spent much of his career in East and Central Africa—much of it for Mobil Oil–studying regional and mapping rift basins at a time when no one else was shopping around in Africa’s interior. Over his 27 years in the industry, Nelson has also had junior E & P experience, recently serving as CEO for Lion Energy Corp., which was bought out by Africa Oil Corp ‘AOI’ in 2011 as a way for AOI to gain access to their impressive Kenyan land package that John had put together.

Africa Hydrocarbons Inc has a 47.5% interest in the Bouhajla Block, located onshore Tun isia and surrounded by major Shell Oil.

In an exclusive interview with Oilprice.com, Nelson discusses:

What makes Tunisia a great game for the juniors
How Tunisia’s geology compares to the East African Rift
What’s hot in Tunisia: conventional or unconventional plays?
Why security isn’t as grave a concern as one would think
What some of the next great exploration areas will be for juniors
Why it’s a lack of capital, not venues that is holding new entrants back
How to mitigate risk in Somalia
Why Ethiopia may be about t o see its first major discovery
Why things are moving—but slowly—in Eritrea
How close we are to commercial viability in Kenya

Interview by. James Stafford of Oilprice.com

James Stafford: Is Tunisia right now a venue for the juniors or majors, and what makes Tunisia a good venue for small companies?

John Nelson: There is a good cross-section of different sized oil companies exploring and operating in Tunisia. Some of the majors are present such as ENI, Total, CNOOC and Shell; however, most of the activity is with the smaller companies.
Junior companies can be very successful on projects that may not meet the economic threshold of the majors, but can propel juniors quickly to mid-tier producers. This makes Tunisia a good place for smaller compan ies to explore.

The basins in Tunisia are well established and understood. Services for seismic and drilling are available. There is a capable work force and French rule of law. Infrastructure in the way of roads and pipelines can be found across the country. Fiscal terms are good and the government is stable and reasonable to deal with. There are a number of smaller Canadian companies already there.

James Stafford: Can you tell us a bit about Tunisia’s potential. What is the biggest field and what are the best exploration prospects?

John Nelson: There is a lot of geological diversity in Tunisia which creates a number of different play types to explore for. The biggest onshore oil field is the Sidi el Kilani field in north central Tunisia. This field has produced over 50 Million barrels of light sweet crude from a small number of wells. In fact it is the similarities in Africa Hydrocarbon’s targets to Sidi el Kilani that got me interested enough in the “home run” size of the first drillable target, to decide to come and run this company.

James Stafford: How does the geology compare to the East Africa and the East Africa Rift System?

John Nelson: The geology of Tunisia is not exactly like that of the great Tertiary rift system of east Africa. There are of course some geological similarities on a smaller scale where extension has caused the formation of horst and graben structures in some areas of Tunisia. In general what we are looking for is actually arguably more straight forward.

James Stafford: What’s the business atmosphere right now in Tunisia?

John Nelson: Business as usual. We have not seen any significant risks or changes in business practices since we have been involved there. In terms of North Africa, Tunisia is probably at the top as a jurisdiction in which to do business, and stability of the politics, etc. The economy seems to be doing well. There is construction going on in many of the cities. The country has not suffered at the same level from debt and poor fiscal mgmt like some of the Eurozone countries on the northern Mediterranean side. The country, like many countries these days, has unemployment issues especially with the younger generation.

James Stafford: So if Big Oil is not looking in Tunisia, how does that help NFK?

John Nelson: It is hard to compete against majors when it comes to acquiring sizeable acreage and making commitments. It allows smaller companies to cost effectively get positioned and undertake exploration initiatives. However, if a significant discovery is made then Big Oil may appear back on the scene to partner with or acquire small companies like NFK. Sh ell Oil surrounds our Block now but we were there first and were able to position ourselves with over 130,000 acres.

James Stafford: Africa Hydrocarbons has a nice piece of contiguous acreage in Tunisia. Can you tell us a bit about the two blocks in question and where you are right now in the exploration process?

John Nelson: We have a 47.5% interest in two adjoining concessions, the Bouhajla and Ktititir blocks, located in north central Tunisia and only 25 kms west of the Sidi el Kilani oil field. The blocks were acquired approximately 3 years ago when the govt made them available for bidding after being off the market for over 25 years. Our local partners were there first, and that is the opportunity.

James Stafford: What are you chasing here? Conventional or unconventional plays? What do you think you’ll hit with drilling?

John Nelson: We have several conventional type prospects and leads on our blocks and that is what we will be targeting initially. Our first well will be testing a fractured carbonate chalk reservoir, which is very similar to what is found producing at Sidi el Kilani. Last year, Shell acquired a large land position around us and have committed to spending over $150MM on their blocks. We have heard that Shell and others have an interest in testing shale (also called “unconventional”) plays within the region. The possibility for an unconventional play type also exists on our acreage but we have chosen what we believe is the “low hanging fruit” to target first.

James Stafford: You’ve mentioned before the ability to “de-risk” exploration and development in Tunisia. Can you take us through the math here and demonstrate the economic feasibility of operating in Tunisia?

Jo hn Nelson: Our situation is somewhat unique compared to many others in Tunisia or exploring in other remote parts of Africa. Only 25 kms from our block is the facility and pipeline for the Sidi el Kilani oil field. The facility was built to handle up to 25,000 bbls/d but now is only handling 1000 bbls/d. So there is much excess capacity in this nearby facility. There is also a pipeline in place from the field all the way to the port facility on the coast that is also under-utilized.

That means it won’t take much time or money to get any future production on stream. As a result, we can still be profitable in the event of a smaller discovery size due to the infrastructure already being in place. It also allows the option to truck oil to the facility to obtain some cash flow while onsite facilities and a short pipeline are built to Sidi el Kilani if we make a discovery.

In other words if we are successful on our first well next month, we should be able to start cash flowing very very quickly.

James Stafford: Do you need a major operator in there like Tullow with Africa Oil in Kenya? What happens if you make a discovery? Can you develop it cost-effectively?

John Nelson: In our situation we do not need the expertise or deep pockets of a large partner. In the event of a discovery we would be able to adequately finance a development project. We anticipate that fewer than five wells would be needed to optimize drainage of our first target area, which is substantially larger than the area of production of 50 million barrels at Sidi el Kilani

James Stafford: How does the cost of drilling wells compare in Tunisia, Kenya, Somalia …?

John Nelson: Our costs to drill a 2500m well is in the area of $7 million. The cost seems excessive compared to drilling costs in North America, but on an interna tional scale it is reasonable. This actually isn’t very deep, and given the size of the target, not very expensive. We also have easy terrain and a network of roads in our area of Tunisia. Access is pretty easy and services are relatively close if needed.

In more remote projects such as in Puntland, Kenya, Ethiopia or other areas far from infrastructure, the drilling cost of a similar well may be well over $50MM.

James Stafford: Outside of Tunisia, where should smaller companies be looking? Can you rank the prospects for us here in terms of junior capabilities and potential?

John Nelson: Juniors provide a valuable service to the industry by often being the first entrants into a new area or applying new technology to older areas. There are niches in most parts of the world. Myanmar is opening up. New opportunities may now come up in Venezuela. The rift basins of Niger, Chad and Sudan are attracting n ew investment. The new discoveries off of Israel are opening up a lot of new exploration initiatives there that look quite attractive. There is not so much a shortage of ideas and opportunities as there is a shortage of capital to pursue them.

James Stafford: We understand that you have experience in Somalia—specifically in Puntland. Can you debunk any myths about working in Somalia and take us through the challenges?

John Nelson: There were a lot of concerns about security issues both onshore Puntland as well as piracy in the offshore. It took a lot of careful planning to mitigate much of the risk. Local communities were engaged, informed and employed. Our security people worked with the govt and contractors to remove any possible threats along transportation routes. The airstrip and drilling camp were well protected. In the end, all the people and equipment were mobilized and the drilling took place wi thout incident.

James Stafford: What about Ethiopia and Eritrea? Eritrea seems open for business now after preferring to focus on its mineral resources for so long–and thanks to the new technology on the scene–and it’s got Red Sea territory that is virtually unexplored.

John Nelson: Eritrea has been slow to open up to oil and gas exploration despite a fairly high level of interest. New laws and policy changes move slowly in many parts of Africa. Eritrea has been explored in the past and there are known oil seeps there. No major discoveries have been made yet.

James Stafford: How do you view prospects in Ethiopia, as a possible extension of finds in Kenya?

John Nelson: Ethiopia has a variety of play types throughout the country that are soon to be drilled. Africa Oil is currently drilling in SW Ethiopia along the Tertiary rift trend that extends north of Kenya. They may make the first significant oil discovery for Ethiopia in that area.

James Stafford: How close are we to commercial viability in Kenya, and what do you think the next year to year and a half will show?

John Nelson: Tullow and Africa Oil are close to determining commerciality. The recent testing suggests the rates and accumulations may be sufficient. Some additional drilling success in some of the other sub-basins on their acreage in blocks 10BA and 10BB as well as in Ethiopia will help initiate further development decisions. There is a lot of drilling and testing to be done over the next couple years. I am pretty sure the results will lead to major infrastructure plans for the area. It will take time–years–due to the remoteness and current lack of infrastructure in the area as well as political involvement of neighbouring countries.

James Stafford: So what can we expect by the end of the year from Africa Hydrocarbons? What do potential investors need to know?

John Nelson: We anticipate drilling our first well in April and should know the results in May. In over 27 years, I haven’t seen many wells with this kind of risk-reward—a $7 million well that is geologically so similar to a proven field only 25 km away where one well produced more than 20 million barrels.

We have worked up the target with 2-D and 3-D seismic that are remarkably clear, and that give us what we call in the business a “play chance” that is much much higher than your typical International exploration well. Usually with a target this size you are looking at a 10%-15% chance of success – we have heard our chances rated by third parties between 28% and into the low 30% chance of success. This is actually a geometric difference in probabilities – really an order of magnitude.

With success on our first well, w e would look to start production from Bouhajla North, and follow in that area by preparing to penetrate the reservoir again with new wells. We would also establish a reserve and resource calculation to highlight the size of the produceable reservoir in that area.

Concurrently we would develop an inventory of prospects all over our acreage which we would develop with additional seismic programs.

Real success just on our first well would turn us from an explorer into an intermediate producer immediately.

James Stafford: What happens if you hit—what kind of NPV do we get compared to current market cap.

John Nelson: Well James, if we don’t hit we are backstopped by cash in the treasury as well as our land position and additional targets which we would then set our sights on.

But with a discovery similar to a Sidi el Kilani well, our NPV10 based on our 47.5% working interest would be close to $100MM, which is about 10 times the current market capitalization of the company of $9 million – we will know within 8 weeks. .

James Stafford: Thanks for taking the time to speak with us John.

The Long and Winding Gold- (Bull Cycle about to Begin)

OzCopper — Sat, 06 Apr 2013 00:38:18 +0000

David Banister – www.TheMarketTrendForecast.com

The dramatic 2-3 day take down in Gold Spot pricing action smells and looks like capitulation to us at The Market Trend Forecast. We have been calling this entire 19-20 month consolidation period as a Primary wave 4 correction pattern, though complicated for sure. It has had multiple false rallies and buy and sell signals the entire time. With that said, the pattern is set up for final 5^th wave decline which we are seeing now at the beginning of April.

Traditionally, Gold tends to meander or be weak in April anyways on a seasonal basis. This sets Gold up to rally in May into July with another soft patch, followed by a fall rally. However, our technical analysis is predicated on our Elliott Wave analysis, which says this entire 20 month correction is a “Double Three” correction pattern. Essentially its two ABC patterns with an “X” Wave rally in the middle to really confuse everyone.

The X wave took Gold to 1800 last fall before dumping all the Bulls off and eventually working its way down to the 1540’s levels we see today. This last leg down is a 5 wave decline and you know you’re at the bottom of wave 5 when everyone throws in the towel, the Gold stocks trade at multi year lows and relative valuation extremes. We also have insiders buying 7 to 1 over sellers according to Ink Research in the Gold stock sector. Stocks are valued at $923 per ounce equivalent even though Gold is trading north of $1,500 per ounce still.

We say bring it on and are actively accumulating selected Gold stocks with production profiles and growth metrics that are attractive.

See the Gold Elliott Wave analysis chart we sent to our paying subscribers a few days ago to forewarn of one more leg down. The next rally should be a doozy and have very few people on board. We would simply caution that a drop below $1523 spot pricing could lead to a blast down to the 1440-1460 areas, but its unlikely in our current views.

Join us for regular updates at www.TheMarketTrendForecast.com

Buying Dead Flowers

OzCopper — Fri, 05 Apr 2013 23:42:07 +0000

Richard (Rick) Mills
Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Institutional investors tend to prefer investments that are thought to contain the potential for growth, growth = sprouts. An investment has to produce a growing revenue stream – if it doesn’t grow it doesn’t compound.

Silver and gold are rejected as investments because they don’t produce sprouts, meaning the steady income and systematic growth so sought after by institutional investors just isn’t there.

John Exter was an American economist and a member of the Board of Governors of the United States Federal Reserve System. Exter is known for creating Exter’s Pyramid – useful for visualizing the organization of asset classes in terms of risk and size.

When the credit system is expanding most money flows to the top of the pyramid – the increasingly speculative and illiquid investments. When the credit system comes under pressure and debt cannot be repaid, the items at the top of the pyramid get sold and money flows towards the bottom.

“In order to make use of it though, we must first make the distinction between real wealth and claims on wealth. Real wealth is represented by actual items that people want or need. This can be food, land, natural resources, buildings, factories etc. Financial assets, shown as layers in the pyramid, represent claims on real wealth. In a fully developed financial system, in good perceived standing, there is a high ratio of claims on wealth to actual underlying real wealth. In this environment the average buying power of the financial assets is lower. This can best be observed by looking at the purchasing power at the bottom of the pyramid. Gold is at a minimum here. It is competing with all of the other claims on wealth for a relatively constant amount of underlying real assets.

According to Exter’s theory of money, when economies get into trouble through the accumulation of too much debt, the levels of the pyramid disappear in order from highest to lowest. As the pyramid contracts downward, the remaining layers represent a proportionally higher claim on the real underlying wealth. In other words their value increases. Using gold as our reference point, it’s relative purchasing power increases as the pyramid contracts. Gold finds itself in a secular bull market.

In the extreme hypothetical case where all other asset classes are destroyed, including the currency itself, only gold remains. In this case the holders of gold compete with no other financial assets for claims on the underlying wealth. This scenario represents the ultimate clearing of the economy. All currency denominated debts have been wiped clean.

If a market economy remains in place then the pyramid begins to expand and grow again. The wealth claims represented in gold will be deployed as investments and a new currency will emerge that garners the faith of those who use it. As this new economy grows and expands, the previous instruments of credit and financing will appear again. Layer upon layer are added back to the pyramid. From the perspective of gold, its relative purchasing power decreases as it competes with these new financial assets for claims on the underlying real wealth. Gold is in a secular bear market as the newest levels of the pyramid are in their growth phase. This model provides a useful intuitive understanding of the alternating secular bull and bear markets of commodities vs. equities.” Trace Mayer, The Paper Empire

In the first part of 2013, the world’s most popular safe havens are the dollar, US treasuries, stocks and Government bonds – yet all are fiat assets.

In today’s current economic and political climate central banks control much of the money supply by their use of quantitative easing (QE).

According to the Organization for Economic Co-operation and Development, the combined government debt held by the world’s advanced economies is at its highest point since the Second World War. In 1945, the debt topped out at 116 percent of GDP; at the end of 2012 it hit 114.4 percent. The OECD says we’ll hit a new high in 2013.

There are currently four options for governments to manage debt:

Default
Inflate the debt away
Sustain faster real economic growth
Keep interest rates unusually low for many years

“Policy actions speak louder than words. Governments engaging in large-scale quantitative easing, such as the U.S., U.K., Switzerland and Japan have at least cracked open the window to a scintilla of extra inflation. Central bank mandates are beginning to shift. The U.S. Federal Reserve now seems more interested in unemployment and has articulated a greater tolerance for inflation. The Bank of Japan has just increased its inflation target. The Bank of England continues to conduct policy in a manner that seems willing to accept the trade-off of higher inflation in exchange for additional growth. Consciously or not, central banks are starting to take their eyes off the inflation ball. Meanwhile, the current competition to devalue currencies provides a further window into the soul of policymakers, revealing where their priorities lie on the inflation file.” What To Do About Public Debt, RBC Global Asset Management

With continuing QE, low interest rates, budget deficits, increasing inflation and the specter of default ever present its likely confidence in government-controlled paper assets will continue to be undermined.

So where should my money go? Well, stock markets are hitting records every day. Silver and gold have backed off highs and seem range bound to weak. Are investors buying silver and gold right - the holders of gold compete with no other financial assets for claims on the underlying wealth – or are investors buying into the stock markets right, whose really buying dead flowers?

To answer that question we need to find out if there is a real economic recovery underway.

The Federal Reserve’s monetary experiments in the U.S. have not worked, yes Gross Domestic Product (GDP) is up but:

Medium household income has declined
Inflation is climbing much higher and faster than officially reported statistics
Few Americans own any significant amount of financial wealth
Housing has not recovered
U.S. Employment rate is not recovering

As for global economic indicators:

World GDP shows no global recovery underway
Global trade has slowed

mybudget360

While medium household income has declined consumers struggle with a Consumers Price Index (CPI) over 200 percent.

Few Americans own any significant amount of financial wealth. Consider:

The top one percent of the American population controls 42 percent of all financial wealth in the country
The top 20 percent control roughly 90 percent of all stock ownership and financial wealth
The bottom 80 percent of Americans control less than 10 percent of all stocks owned
The bottom 80 percent of Americans hold roughly 5 to 8 percent of all financial wealth (non-housing related)

Most Americans have their wealth in home equity.

mybudget360

As we can see in the World GDP chart below there is no global recovery underway.

“The five members of the BRICS (Brazil, Russia, India, China and South Africa) met in Durban this week to discuss their increasingly common interests. The now ubiquitous acronym was coined in 2001 by a strategist at Goldman Sachs. The group has since become a formal club of nations with South Africa, which wasn’t included in Goldman’s original collection, joining in 2010. Thanks largely to these big emerging economies, world GDP rose by 2.5% during the final quarter of 2012. The BRICS alone have been responsible for 55% of global growth since the end of 2009. Dragged down by debt and austerity, the 23 countries that make up the developed world contributed just 20% to that growth.” The Economist, World GDP

Morgan Stanley doesn’t see a lot of growth outside China, India, Brazil and Russia for 2013 and 2014.

The World in 2013: the list of the world’s ten fastest-growing economies. Except for China none of these countries can contribute real growth to the world’s stock indices.

The global economy is not recovering and neither is the U.S. economy.

“Well into the fifth year of the global breakdown, the financial system is being sustained only by the activities of the world’s major central banks, which are providing hundreds of billions of dollars to the major banks and finance houses through various forms of “quantitative easing”—a euphemism for printing money.” Nick Beams,The World Economy 2013: Illusions and Reality

mybudget360

Conclusion

Silver (silver has an even longer history of being used as money than gold does) and gold perform two jobs that fiat currencies, or any other financial innovation, cannot do; they act as a safe haven in times of turmoil – to escape Nazi Germany, or buy food and water in a crisis. Perhaps even more important, silver and gold, for the last couple of thousand years have acted to preserve your purchasing power. In 1913 (the year the US Federal Reserve was born) the US dollar was well a dollar, silver was 58 cents an ounce and gold was US$20 an ounce. Today, at the 100 year anniversary of the Fed, the dollar has lost 95 percent of its purchasing power, silver is $27 an ounce gold is $1600 an ounce.

The twin policies of zero interest rates and the continual creation of money and credit being enacted today, by all governments and central banks, means that the purchase of precious metals is the only way to protect the value of your assets.

“In the extreme hypothetical case where all other asset classes are destroyed, including the currency itself, only gold remains. In this case the holders of gold compete with no other financial assets for claims on the underlying wealth. This scenario represents the ultimate clearing of the economy. All currency denominated debts have been wiped clean.

If a market economy remains in place then the pyramid begins to expand and grow again. The wealth claims represented in gold will be deployed as investments and a new currency will emerge that garners the faith of those who use it.”

That’s gold and silver, sprout-less yes, but irreplaceable in their functions.

“On Friday we closed out the Quarter with both the DOW and the S&P hitting new all time highs. During this week we saw consumer confidence fall, we saw PMI’s fall, we saw housing sales fall, we saw no less than 6 economic reports miss expectations. Yet we hit all new highs. Even the man on the street, the guy who doesn’t even follow the markets; feels that something odd is happening. Well that would be the understatement of the decade. Odd does not describe the madness we’re witness to. They are pushing the market up because it is the ONLY thing they can control. They can’t make a real housing recovery, they can’t create jobs, they can’t spur economic growth, all they can do is push the market higher.” Bob Chapman’s International Forecaster

There is no recovery, market highs are an illusion David Copperfield would be proud of. Not buying dead flowers, and instead looking at precious metals, should be on all our radar screens. Are preserving your purchasing power and the fact that gold and silver act as safe havens during times of turmoil on your radar screen?

If not, maybe they should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

Source: http://oilprice.com/Alternative-Energy/Nuclear-Power/Gas-Starts-Flowing-from-Israels-Levant-Basin-What-Now.html

Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:

OzCopper, WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Londonthenews, Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTReport, Vantagewire, Indiatimes, ninemsn, ibtimes and the Association of Mining Analysts.

If you’re interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us at www.aheadoftheherd.com

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

Gas Starts Flowing from Israel’s Levant Basin, What Now?

OzCopper — Fri, 05 Apr 2013 02:44:57 +0000

The first gas has started flowing from Israel’s supergiant Tamar gasfield in the Levant Basin. Where it will go will redraw the Mediterranean energy map and the geopolitics that goes along with it.

The Tamar field stakeholders announced on 30 March that the gas had started flowing, raising the value of Texas-based Noble Energy Inc. (NYSE: NBL), which holds a 36% stake, and Israel’s two Delek Group subsidiaries, which each hold a 15.6% stake.

Fo r now, the gas is being pumped to mainland Israel, where it will feed the domestic market, but exports should begin in 2-3 years. What Israel has in mind is the European market, via a hoped-for undersea Mediterranean pipeline to Turkey, which has the infrastructure to get it to Europe.

The competition for this prized market is stiff. In total, the Mediterranean’s Levant Basin has an estimated total of 122 trillion cubic feet of gas and 1.7 billion barrels of oil. Lebanon and Cyprus are eyeing the same market for their own Levant Basin gas resources. Cyprus has found gas in its section of the basin, and Lebanon has announced a tender for exploration off its shoreline.

The Greek Cypriot government believes it is sitting on an amazing 60 trillion cubic feet of gas, but these are early days—these aren’t proven reserves and commercial viability could be years away. In the best-case scenario, production could feasibly begin in five years. Exports are even f urther afield, with some analysts suggesting 2020 as a start date.

Israel has the upper hand right now in terms of development and production, but it lacks the infrastructure without Turkey.

Israel was originally hoping to lay a pipeline that would traverse both Cyprus and Turkey, but there are too many political pitfalls to this plan (whichwould essentially mean a final resolution to the Turkey-Cyprus spat). The ideal would have been a pipeline that connects all the Levant Basin resources—including Lebanon, Israel, Cyprus and Turkey—but this is the stuff of geopolitical dreams.

In the end, it is shaping up that an Israel-Turkey pipeline is not only possible, but coming to fruition. Earlier this month an official apology from the Israeli prime minister to his Turkish counterpart for some high-level grievances was engineered by US Preside nt Barack Obama. It was an unprecedented move by Israel and one that illustrates how important this pipeline is for Israel. An apology was really the only thing keeping Turkey from green-lighting this pipeline project without a backlash at home.

This Israel-Turkey pipeline makes Lebanon and Cyprus nervous. It essentially cuts them out of the equation. Politics for now will keep Lebanon from connecting up to any Israeli pipeline, and Turkey won’t have a connector to Cyprus.

Russia’s Gazprom, of course, is not keen to lose its stranglehold on the European market. To that end, it’s jumped in on Tamar itself, obtaining exclusive rights from Israel to develop the field’s liquefied natural gas (LNG). Here’s the plan: Russia is hoping to divert Israeli gas exports to Europe by banking on these resources being turned into LNG for Russian export to Asian markets instead. Russia is willing to invest heavily in a $5 billion floating LNG facility to thi s end. In return it gets exclusive rights to purchase and export Tamar LNG. (Gazprom has signed the deal but it still awaits final approval from Israel).

For Israel, this is a windfall. There is an estimated 425 billion cubic meters (16 trillion cubic feet of gas in its Leviathan field, plus the 250 billion cubic meters in the Tamar field, which is now officially pumping. All this gas is worth about $240 billion on the European market, and Tamar gas alone could boost Israel’s GDP by 1% annually. For now, the Tamar gas will result in a decline in the price of electricity for Israelis by way of reducing the production costs for the state utility.

For Europe, it will mean newfound power to deal with Russia differently like it did with the recent Cypriot bailout package that came along with a harsh lesson for Russian oligarchs who are seeing their Cypriot banks holdings sequestered.

By. Jen Alic of Oilprice.com

Silver’s Coming of Age

OzCopper — Sun, 31 Mar 2013 09:01:44 +0000

Richard (Rick) Mills
Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Silver is winning market share from gold buyers.

2008 – In March 2008, sales increased nine times over the month before – 200,000 to 1,855,000.

In April 2008, the United States Mint had to start an allocation program, effectively rationing Silver Eagle bullion coins to authorized dealers on a weekly basis due to “unprecedented demand.”

On June 6, 2008, the Mint announced that all incoming silver planchets were being used to produce only bullion issues of the Silver Eagle and not proof or uncirculated collectible issues.

The 2008 Proof Silver Eagle became unavailable for purchase from the United States Mint in August 2008. The US Mint suspended sales of the silver bullion coins to its network of authorized purchasers twice during the year.

20,583,000 Bullion American Silver Eagles were sold in 2008. Silver averaged $14.99 an ounce and almost 80 percent more American Silver Eagles were sold then in any previous year.

“During 2008 there was a record inflow of over 93.1 million ounces (Moz) into the three main silver ETFs.Coins and medals fabrication jumped by an astonishing 63% to a record of 64.9 Moz. The main reason for this was a surge in investment-related purchases of bullion coins, both in the United States and Europe. Notably, fabrication of the U.S. Silver Eagle bullion coin achieved a record 19.6 Moz, approximately double the 2007 figure, and would have been higher if the U.S. Mint had sufficient blanks to produce coins to meet demand.” silverinstitute.org

2009 – 30,459,000 Bullion American Silver Eagles were sold.

On March 5, 2009, the United States Mint announced that the proof and uncirculated versions of the Silver Eagle coin for that year were temporarily suspended due to continuing high demand for the bullion version.

On October 6, 2009, the Mint announced that the collectible versions of the Silver Eagle coin would not be produced for 2009.

The sale of 2009 Silver Eagle bullion coins was suspended from November 24 to December 6 and the allocation program was re-instituted on December 7.

Total ETF holdings rose by 132.5 Moz and ended the year at 397.8 Moz. Coins and medals fabrication rose 21 percent to post a new record of 78.7 Moz.

Silver Eagle bullion coins sold out on January 12, 2010.

The average cost of an ounce of silver in 2009 was $14.67

2010 - No proof Silver Eagles were released through the first ten months of the year, and there was a complete cancellation of the uncirculated Silver Eagles.

Production of the 2010 Silver Eagle bullion coins began in January instead of December as usual. The coins were distributed to authorized dealers under an allocation program until September 3.

Silver posted an average price of $20.19 in 2010. World investment rose by an 40 percent in 2010 to 279.3 million troy ounces (Moz).

“Exchange traded funds (ETFs) registered another sterling performance in 2010, with global ETF holdings reaching an impressive 582.6 Moz, representing an increase of 114.9 Moz over the total in 2009. A significant boost in retail silver investment demand paved the way for higher investment in both physical bullion bars and in coins and medals in 2010. Physical bullion bars accounted for 55.6 Moz of the world investment in 2010. Coins and medals fabrication rose by 28% to post a new record of 101.3 Moz. In the United States, over 34.6 million U.S. Silver Eagle coins were minted, smashing the previous record set in 2009 at almost 29 million.” silverinstitute.org

2011 – Silver posted an annual average price of $35.12 in 2011, more than double the $14.67 average price for 2009.

Global investment in silver bars and coins & medals produced yet another historic high of 282.2 million ounces – the equivalent of $10 billion, itself a record high.

Physical silver bar investment grew by 67 percent in 2011 to 95.7 million ounces, global coins & medals fabrication rose by roughly 19 percent to an all-time high of 118.2 million ounces.

The US imported 6,600,000 oz of silver for consumption in 2011 – up from 2007’s imports of 4,830,000 oz.

In 2011 the US Mint sold 40,020,000 Bullion American Silver Eagle Coins.

2012 – United States Mint Authorized Purchasers (AP’s) ordered 3,197,000 Bullion American Silver Eagle Coins on January 3rd, the first day they went on sale. That opening day total catapulted January Bullion Eagle sales higher than half of the monthly totals in 2011.

As of January 25th 2012, 5,547,000 Bullion American Silver Eagle Coins had been sold.

From February to September monthly sales were weaker then the corresponding months in 2011.

In October demand started to pick up. In November, bullion sales took off with sales of American Silver Eagles more than doubling the figures from November and December 2011.

On December 17th the Mint said all remaining inventories of 2012 dated Silver Eagle bullion coins had sold out – no additional coins would be struck.

Since the 2013 dated coins would not be available to order until January 7, 2013 that left a three week void where no one was buying silver Eagles – yet Decembers sales were the third highest on record!

In 2012, the US Mint’s silver coin sales surpassed the amount of physical silver produced via US domestic mine production.

2013 – On January 7th the new 2013 one ounce Silver Eagle bullion coins went on sale and a new record of nearly 4 million were sold that day.

According to David Baker over at the Sprott Group:

The US Mint’s silver coin sales reached an all-time high of 13.2 million ounces in the first three months of 2013. If annualized, the Mint would sell 52.8 million ounces of silver in 2013 – a new record.
The SPDR Gold Trust (GLD) has dumped 141 tonnes of gold year-to-date (March 22nd) while at the same time silver ETF’s added more than 20 million ounces of silver.
Finally from David comes the fact investors are buying 56 times more silver ounces than gold ounces – ask yourself if silver is 56 times more available then gold?

silverdoctors.com

“The major monetary metal in history is silver, not gold.” Milton Friedman, Nobel Laureate

Investors are currently risk adverse and mining stocks are not well understood by the general investing public, but at least one thing is going to become very apparent to most – the best way to hedge yourself against inflation could be owning silver and the shares of a silver and gold producer.

Junior resource companies offer the greatest leverage to increasing demand and rising prices for silver. Junior resource companies are soon going to have their turn under the investment spotlight and should be on every investors radar screen.

If this is Silver’s Second Age we need to get ourselves some silver, both bullion and the leverage of shares.

Here’s a way to buy both bullion from, and the shares of, a primary silver producer…..

Great Panther Silver TSX-GPR

Great Panther Silver (TSX-GPL) is a profitable primary (66%Ag, 28%Au, 6% Pb-Zn) silver producing (silver and gold production un-hedged, no royalties) company operating two mines in Mexico, the Guanajuato and the Topia Mine:

2010 – metal production was 2.26M ounces Ag. Eq.
2011 - production was 2.2M ounces
2012 - metal production was 2.38M ounces
2013 – the company forecasts a metal production target of 2.4M – 2.5M ounces

GPR also controls a number of exploration properties in Mexico, including a project which is likely to become Great Panther’s next mine, the very promising 100 percent owned San Ignacio project:

Current resource covers only 650m strike length out of a 4km potential on the La Luz vein system just five kilometers west of the principal Veta Madre structure that hosts Great Panther Silver’s Guanajuato Mine Complex
Step-out drilling continues to show excellent silver-gold mineralization
Mineralization starts 50-100m below surface for easy ramp access, no need for a shaft
Ore will be trucked 20km to the Cata processing plant at Guanajuato plant
Ability to monetize project immediately to help pay for its development

The 100 percent owned El Horcon silver – gold project (7,908 hectares in 17 contiguous mining concessions) is a past producing underground mine with multiple veins in old workings – El Horcon hosts nine known veins, with the Diamantillo vein traceable on surface for more than four kilometres. Mapping and sampling is currently underway and an initial mineral resource is targeted for 2013. El Horcon lies within trucking distance, just 60km, from GPR’s Cata processing plant in Guanajuato – preliminary metallurgical testing at the Company’s facilities in Guanajuato shows the El Horcon mineralization to be compatible with the existing mill feed.

Both San Ignacio and El Horcon show excellent potential to be satellite mines for GPR’s Guanajuato Operations.

Great Panther has spent a considerable amount of money improving operations & exploration/development at both mines over the last two years:

Increased plant capacity to process ore from San Ignacio
Completed an access drift for the underground transportation of ore from Guanajuatito. Ore from Guanajuatito can now be transported underground to the Cata shaft, thereby eliminating the need for truck hauling to surface and then on surface to the Cata mill. Underground haulage is faster, cheaper and reduces truck traffic through populated parts of the City of Guanajuato.
Increased exploration at Guanajuato contributed to the discovery of new high grade mineralization. The drilling at Valenciana included an intercept of 2,900g/t silver and 26.00g/t gold over 1.30 meters, while the two new discoveries at Guanajuatito are highlighted by intersections of 1,010g/t silver and 6.67g/t gold over 1.10 meters and 1,460g/t silver and 4.79/t gold over 1.15 meters.

All of this investment should provide future benefits such as decreased costs and increased production.

Significantly higher production was reported for Q4 2012 compared to the fourth quarter 2011:

Processed ore for Q4 was 67,659 tonnes, an increase of 30%
Metal production for Q4 2012 was 672,690 Ag eq oz, a quarterly record and an increase of 23% over Q4 2011
Silver production for Q4 was 453,934 ounces, an increase of 28%
Gold production for Q4 was 2,826 ounces, an increase of 24%

“We are pleased to report a strong fourth quarter with several quarterly and annual production records. We have made and continue to make improvements and changes at both mines that will have a positive impact going forward.” CEO Robert Archer

Great Panther completed a $24 million bought deal financing in 2011 for an acquisition that later fell through. They still have this money and are continuing to look for the right ‘fit.’ Geographically they continue to focus on Mexico and Peru, the two largest silver-producing countries in the world.

Conclusion

Great Panther hit a rough patch in 2012, as net income for the year totaled $5.5 million, compared to $11.5 million for 2011. The decrease is attributable to a $7.7 million decrease in gross profit, a $1.5 million increase in general and administrative (G&A) expenses, a $1.5 million increase in exploration and evaluation expenses, and an increase in tax expense of $2.2 million.

“Gross profit was significantly impacted by lower silver prices and an increase in depreciation charges due to the substantial investments made in our mines, plant and equipment over the last year.” Great Panther CEO Robert Archer

Great Panther would seem to have a lot going for it as we move forward into 2013:

A very strong cash position and no long term debt
Impressive high grade silver and gold discoveries at Guanajuato
The substantial investments made in mines, plant and equipment
The excellent potential of San Ignacio and El Horcon to be satellite mines for GPR’s Guanajuato Operations
Cost control measures have been implemented and the one-time costs occurred in 2012 will not occur again
A potential acquisition

Producing 66 percent silver with a 28 percent gold kicker GPR, with its strong profit margins of between 30 and 53% seems to be an excellent play on firstly silver and secondly combined precious metals.

If you can’t get your hands on any American Silver Eagles, Great Panther’s silver store can be accessed here.

With their 2013 focus squarely on improving the profitability of operations, and commencing the development of the San Ignacio Project in preparation for anticipated production in 2014 Great Panther Silver and its un-hedged royalty free silver and gold production in mining friendly Mexico should be on everyone’s radar screen.

Is it on yours? If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:

OzCopper, WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Londonthenews, Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTReport, Vantagewire, Indiatimes, ninemsn, ibtimes and the Association of Mining Analysts.

If you’re interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us at www.aheadoftheherd.com

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

Richard does not own shares in Great Panther Silver TSX-GPR

Great Panther is a sponsor of Richard’s website aheadoftheherd.com

Gold Stock Insiders & Patience

OzCopper — Sun, 31 Mar 2013 08:57:41 +0000

Please click here now. That’s a link to a nice article published by Canada’s Globe & Mail newspaper. It shows that gold company insiders are aggressive buyers of their own stock, at current price levels.
In the big picture, that’s great news for gold stock investors!
Unfortunately, while long term market fundamental & technical indicators suggest that gold offers tremendous value to investors, the daily charts of gold and related assets… seem to be presenting quite a different picture.
Please click here now. You are looking at the daily T-bond chart. Quantitative easing is a big factor in this crisis. Generally speaking, as long as QE is in play, when bond prices rise, gold prices rise.
So, unless the T-bond can rise above HSR at about 145, gold will likely have a very hard time making upside progress.
Please click here now. That’s the daily gold chart, and I’d like you to make careful note of the position of my “stokeillator” (Stochastics 14,7,7 series).
Technically, gold is beginning to become overbought, in the short term. If you make the assumption that the T-bond can make it to the 145 level, it’s reasonable to project a little higher gold price, too.
That would make gold even more technically overbought than it is now, and quite vulnerable to a more substantial sell-off.
A week ago, as the gold price arrived in the $1615 zone, I suggested that it had broken out upside, from a symmetrical triangle. I said that it was due to pull back, immediately, to about $1585.
Gold’s rise did stop there, in that $1615 area. Yesterday it fell to $1590, and then blasted higher, to about $1608.
My concern now is not that it pulled back to $1590, but how it did so. Please click here now. That’s the hourly bars gold chart, and you can see that a head & shoulders top pattern formed.
The neckline has broken. To abort the pattern, and put the bulls back in control, gold needs to rise over the right shoulder high, which sits at about $1615.
That hasn’t happened. Instead, gold has started a fresh decline this morning, and is doing so against the background of that overbought “stokeillator”, on the daily chart.
Gold needs an immediate-term fundamental catalyst of size, to “blast” it over daily chart HSR at $1617, and $1627-$1640.
There are quite a few key economic reports scheduled for release today; hopefully one of them is just what the gold doctor has ordered.
Silver is also having a tough time right now, and a lot of market timers are becoming increasingly frustrated. It seems to be almost incapable of mounting a significant rally.
Please click here now. Silver is trading within the boundary lines of a near-perfect symmetrical triangle.
18. Aggressive traders should watch for a move beyond those lines, as a breakout signal.
The triangle suggests that silver should either fall to the $27 area, or rise to about $31.
Technically, the odds are about 67% that the break comes to the downside, but there is another technical event that needs to be considered, before you get too glum!
Please click here now. That’s another look at the daily silver chart. Note the bullish wedge pattern that is forming. It’s defined by the converging blue trend lines.
This wedge indicates that regardless of how the triangle pattern is resolved, a trending move to the upside is becoming much more likely.
Please click here now. That’s the weekly GDXJ chart. It’s very possible that after breaking out from a huge bull wedge, junior gold stocks (and silver stocks) have simply pulled back to the supply line (in green here) of that huge wedge, and done so in a narrow drifting parallel channel. Watch the upper blue supply line for a breakout. It may hold more significance that it appears!
I’m more net long gold & silver stocks that ever, and company insiders clearly are taking a similar approach, at this point in market price and time! Be aware that insider buying doesn’t necessarily translate into an immediate parabolic move to the upside. Patience continues to be the gold stock investor’s very best friend!

Special Offer For OzCopper Readers: Please send me an Email to freereports4@gracelandupdates.com and I’ll send you my free “Trap Door!” report. In October of 2008, the Dow almost went right off the trading board. Since then, it’s risen on a wave of liquidity, created by Ben Bernanke’s electronic printing press. I’ll show you some key technical “trap doors” that I’m following, which could produce put option profits!

Thanks!

Cheers

Written between 4am-7am. 5-6 issues per week. Emailed at aprox 9am daily.

Source: http://oilprice.com/Energy/Natural-Gas/Cypriot-Bailout-Linked-to-Gas-Potential.html

Rate Sheet (us funds):

Lifetime: $799

2yr: $269 (over 500 issues)

1yr: $169 (over 250 issues)

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To pay by cheque, make cheque payable to “Stewart Thomson”

Mail to:

Stewart Thomson / 1276 Lakeview Drive / Oakville, Ontario L6H 2M8 Canada

Are You Prepared?

As Cyprus Collapses, It’s a Race to the Mediterranean Gas Finish Line

OzCopper — Sat, 23 Mar 2013 04:11:32 +0000

Cyprus is preparing for total financial collapse as the European Central Bank turns its back on the island after its parliament rejected a scheme to make Cypriot citizens pay a levy on savings deposits in return for a share in potential gas futures to fund a bailout.

On Wednesday, the Greek-Cypriot government voted against asking its citizens to bank on the future of gas exports by paying a 3-15% levy on bank deposits in return for a stake in potential gas sales. The scheme would have partly funded a $13 billion EU bailout.

It would have been a major gamble that had Cypriots asking how much gas the island actually has and whether it will prove commercially viable any time soon.

In the end, not even the parliament was willing to take the gamble, forcing Cypriots to look elsewhere for cash, hitting up Russia in desperate talks this week, but to no avail.

The bank deposit levy would not have gone down well in Russia, whose citizens use Cypriot banks to store their “offshore” cash. Some of the largest accounts belong to Russians and other foreigners, and the levy scheme would have targeted accounts with over 20,000 euros. So it made sense that Cyprus would then turn to Russia for help, but so far Moscow hasn’t put any concrete offers on the table.

Plan A (the levy scheme) has been rejected. Plan B (Russia) has been ineffective. Plan C has yet to reveal itself. And without a Plan C, the banks can’t reopen. The minute they open their doors there will be a withdrawal rush that will force their collapse.

In the meantime, cashing in on the island’s major gas potential is more urgent than ever—but these are still very early days.

In the end, it’s all about gas and the race to the finish line to develop massive Mediterranean discoveries. Cyprus has found itself right in the middle of this geopolitical game in which its gas potential is a tool in a showdown between Russia and the European Union.

The EU favored the Cypriot bank deposit levy but it would have hit at the massive accounts of Russian oligarchs. Without the promise of Levant Basin gas, the EU wouldn’t have had the bravado for such a move because Russia holds too much power over Europe’s gas supply.

Cypriot Gas Potential

Exports are even further afield, with some analysts suggesting 2020 as a start date.

In 2011, the first (and only) gas was discovered offshore Cyprus, in Block 12, which is licensed to Houston-based Noble Energy Inc. (NBL). The block holds an estimated 8 trillion cubic feet of gas.

To date, the Greek Cypriots have awarded licenses for six offshore exploration blocks that could contain up to 40 trillion cubic feet of gas. Aside from Noble, these licenses have gone to Total SA of France and a joint venture between Eni SpA (ENI) of Italy and Korea Gas Corp.

But the process of exploring, developing, extracting, processing and getting gas to market is a long one. Getting the gas extracted offshore and then pumped onshore could take at least five years and some very expensive infrastructure that does not presently exist. The gas would have to be liquefied so it could be transported by seaborne tankers.

The potential is there: Cyprus’ gas discoveries adjoin Israeli territorial waters where the discovery of the massive Leviathan gasfield (425 billion cubic meters or 16 trillion cubic feet) and smaller Tamar gasfield (250 billion cubic meters or 9 trillion cubic feet) have foreign companies in a rush to cash in on this.

There are myriad problems to extracting Cypriot gas—not the least of which is the fact that some of this offshore exploration territory is disputed by Turkey, which has controlled part of the island since 1974.

Gas exploration has taken this dispute to a new level, with Turkey sending in warships to halt drilling in 2011, and threatening to bar foreign companies exploring in Cyprus from any license opportunities in Turkey. The situation is likely to intensify as Noble prepares to begin exploratory drilling later this year in Block 12.

In the meantime, there is no shortage of competition on this arena. Cyprus will have to vie with Israel, Lebanon and Syria—all of which have made offshore gas discoveries of late in the Mediterranean’s Levant Basin, which has an estimated total of 122 trillion cubic feet of gas and 1.7 billion barrels of oil.

Blackmailing Cyprus?

While Greek Cypriot citizens are not willing to gamble away their savings on gas futures, Russia and the European Union are certainly less hesitant.

This is both a negotiating point for Cyprus and a convenient tool of blackmail for Russia and the EU. Essentially, the bailout is the prop on a stage that will determine who gets control of these assets.

Theoretically, Cyprus could guarantee Russia exploration rights in return for assistance. As much as this is possible, the EU could ease its bailout negotiations if it becomes clear that a Russian bailout of sorts is imminent.

Gas finds in the Mediterranean and particularly across the Levant Basin—home to Israel’s Leviathan and Tamar fields—could be the answer to Russian gas hegemony in Europe. The question is: How much does Cyprus count in this equation? A lot.

Though only half of the estimated resources in the Levant Basin, Cyprus’ potential 60 trillion cubic feet of gas could equal 40% of the EU’s gas supplies and be worth a whopping $400 billion if commercial viability is proven.

Russia is keen to keep Cyprus and Israel from cooperating too much toward the goal of loosening Russia’s grip on Europe before Moscow manages to gain a greater share of the Asian market.

Russia is also not keen on Israel’s plan to lay an undersea natural gas pipeline to Turkey’s south coast to sell its gas from the Leviathan field to Europe. Turkey hasn’t agreed to this deal yet, but it is certainly considering it. This is fraught with all kinds of political problems at home, so for now Ankara is keeping it as low profile as possible.

With all of this in mind, Russia is doing its best to get in on the Levant largesse itself. While it’s also courting Lebanon and Syria, dating Israel is already in full force. Gazprom has signed a deal with Israel that would give it control of Tamar’s gas and access to the Asian market for its liquefied natural gas (LNG). Tamar will probably begin producing already in April at a 1 billion cubic feet/day capacity.

In accordance with this deal, which Israel has yet to approve, Gazprom will provide financial support for the development of the Tamar Floating LNG Project. In return, Gazprom will get exclusive rights to purchase and export Tamar LNG. It is also significant because Tamar is a US-Israeli joint venture—so essentially the plan is to help Russia diversify from the European market.

What does this mean for Cyprus? The chess pieces are still being put on the board, and both fortunately and unfortunately, Cyprus’ gas potential will be intricately linked to its bailout potential.

By. Jen Alic of Oilprice.com

Regarding Our Current Commodity Super Cycle

OzCopper — Sat, 23 Mar 2013 04:10:09 +0000

Richard (Rick) Mills
Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Commodity super-cycles are defined as decades long price movements in a wide range of commodities. Super-cycles differ from shorter term fluctuations in three ways:

Super-cycles are demand driven because they follow world GDP
Super-cycles span a much longer period of time with upswings of 10-35 years, taking 20-70 years to generate complete cycles
Super-cycles are observed over a broad range of commodities, mostly inputs for industrial production and urban development of an emerging economy

According to DESA Working Paper No. 110 ‘Super-cycles of commodity prices since the mid-nineteenth century’ published February 2012 by Bilge Erten and José Antonio Ocampo there have been 3.5 non-fuel commodity super-cycles from 1894 to 2009:

(1) from 1894 to 1932, peaking in 1917. The first long cycle begins in late 1890s, peaks around World War I, and ends around 1930s, and shows strong upward and downward phases.

(2) from 1932 to 1971, peaking in 1951. The second takes off in 1930s, peaks during the post-war reconstruction of Europe, and fades away in mid 1960s. It shows a strong upward phase but a weak downward one.

(3) from 1971 to 1999. The early 1970s marks the beginning of the third cycle, which peaks around early 1970s and turns downward during mid 1970s and ends in late 1990s. This cycle shows a weak upward phase and a strong downward one.

(4) 2001 still ongoing. The post-2000 episode is the beginning of the latest cycle, which has shown a strong upward phase which does not seem to have been exhausted so far.

The most recent boom (from 2001) in global economic growth or GDP, is unprecedented.

“Global growth performance has been attributed as the single most important driver of commodity markets, being most pronounced for metals.

The basic premise is that commodity prices and world GDP have a long-term relationship over time because the robust growth episodes in the world economy are accompanied by a rapid pace of industrialization and urbanization, which in turn require an increasing supply of primary commodities as inputs of production. However, there is often a lag between the investment in further commodity production and the actual results, which leads to price hikes in periods of strong world economic growth. As growth slows down and investment generates with a lag an increase in commodity supplies, the pressure on commodity prices eases. This hypothesis implies that the super-cycles in world output fluctuations generate corresponding super-cycles in real commodity prices.” DESA Working Paper No. 110

The real prices of energy and metals more than doubled from the lows of 1999 and late 2001/2002 to the high in 2008.

After suffering a severe correction in late 2008 (because of a global economic slowdown) and bottoming in early 2009 commodity prices started to recover – from the low in early 2009 commodity prices have been putting in higher highs and higher lows.

By comparing the charts above it’s obvious metals and agricultural have a long running integrated relationship with global GDP.

The phases and durations of previous super-cycles lead us to expect an upswing phase of between ten and thirty years. Being that we’re twelve years into this super-cycle is there more to come, or has supply caught up to a cooling global economy?

First let’s recap, commodity prices are dependent on:

Demand side factors – the rapid pace of industrial development and urbanization in China, India, and other emerging economies
Supply side factors – increasing costs due to resource depletion, resource nationalization, geo-political risk or lack of investment in capacity enhancement

To help us answer whether or not commodity price strength will continue we first turn to global growth predictions:

Conference Board

No one it seems is predicting a global no growth scenario. In fact, the prediction seems to be a call for average future global GDP to be at four percent with developing countries clocking in at a six percent average.

That’s a lot of continuing forward demand for commodities. Global demand seems to be well supported – economic growth in emerging economies will continue because of:

Industrialization
Urbanization
Population growth
Higher reserve price

“There is also the issue of the so-called reserve price (the highest price a buyer is willing to pay for a good or service). The reserve price places a cap on how high commodity prices will go, as it is the price at which demand destruction occurs (consumers are no longer willing or able to purchase the good or service).

For many commodities, such as oil, the reserve price is higher in emerging countries than in developed economies. One explanation for the difference is accelerating wage growth across developing regions, which is raising commodity demand, whereas stagnating wages in developed markets are causing the reserve price to decline. By implication, if nothing else, global energy, food, and mineral prices will continue to be buoyed by seemingly insatiable emerging-market demand, which commands much higher reserve prices.

Ultimately, emerging economies’ absolute size and rate of growth both matter in charting commodity demand and the future trajectory of global commodity prices, with per capita income clearly linked to consumers’ wealth. If people feel rich and enjoy growing wages and appreciating assets, they are less inclined to cannibalize other spending when commodity consumption becomes more expensive. They just pay more and carry on.” Dambisa Moyo, Commodities on the Rise

The facts are:

Global economic growth is going to continue
As long as developing countries commodity demand grows at a higher rate than global supply, prices will rise
There will be no demand destruction in developing economies as prices rise

“Although it is perhaps difficult to believe at present, the third great economic super-cycle is underway. Since 2000, emerging market countries have been unlocking their growth potential and facilitating the catch up process. This will last until 2030 and will be commodity intensive throughout.” Neil Gregson, fund manager, JPM Natural Resources Fund

Supply-side challenges

There is a concern on the supply side, from the DESA Working Paper referenced above comes this cautionary note…

“As growth slows down and investment generates with a lag an increase in commodity supplies, the pressure on commodity prices eases.”

Now we get to the nut-crunching, the ‘rub’ as they say. Will the investments into ramping up commodity supply over the last ten or so years fill the gap, has supply caught up to demand?

As we’ve seen both demand and prices dropped temporarily but both demand and prices are quickly rebounding. That’s because, in addition to a continuing growing demand there are real deep seated structural issues on the supply side.

There are many serious concerns in regards to global metals extraction that we need to consider:

Resource nationalism/Country risk, political instability of supplier
A looming skills shortage
Competition with Chinese mining investment, smaller areas open for exploration
Low hanging fruit – the high quality large deposits have already been found, lower economic attractiveness of new projects, cost inflation
Supply bottlenecks for much needed and scarce equipment
The manipulation of supplies ie speculation and concentrated ownership of LME stocks
Rising capex/opex, lack of financing options, capital project execution
Lack of innovation and technological advancements
Declining open pit production, ongoing operational issues, declining grades at older mines, more complicated metallurgy
Lack of recognition for population growth, growing middle class w/disposable incomes and urbanization as on-going demand growth factors
Environmental group and labor risks, mining unrest – lack of a social license to operate, incredibly difficult and lengthy permitting processes
Climate change, accidents and natural disasters
Lack of infrastructure or poor infrastructure access, attacks on supply infrastructure
Price and currency volatility
Fraud and corruption

A Few Rising cost and Resource Nationalism Examples

Brazilian mining giant Vale SA is likely to cancel a $5.9 billion potash project, has put mining projects around the world on review and took a $5.66 billion write down on assets.

Chile’s Copper Commission (COCHILCO) stated that the country will be delaying 11 out of 45 copper and gold mining projects or US$38.9 billion out of the total US$104.3 billion worth of projects.

Chile is the world’s top copper producer but the country as a whole is woefully short of power. The country’s power generation capacity currently stands at 17,000 megawatts. It is estimated that the country will need at least 30,000 megawatts of power by 2020 to keep up with the demand, the increased demand coming primarily from mining projects. Unfortunately the government only plans to add 8,000 megawatts between now and 2020 and there is serious opposition to these plans from environmental groups who have, so far, been wildly successful by suspending several key projects and more than $22 billion worth of power investment. The Chilean Supreme Court recently struck down the planned 2,100-megawatt, $5 billion Castilla thermoelectric power plant project, citing environmental concerns.

Codelco, the Chilean state owned copper company, and the world’s largest copper miner with 20% of global copper reserves, said that their 2012 first half copper production fell 6.4% because of lower grades mined. Codelco’s direct cash costs increased 27% year-on-year mostly because of paying higher prices for electricity from the drought stricken SIC grid.

“On the demand side, new reactor construction continues in China and there are strong indications that additional plants will be coming back on line in Japan. On the supply side, about 24 million pounds of annual uranium supply will be removed from the market after 2013 with the end of the Russian highly enriched uranium agreement. We are also seeing new mine projects delayed or cancelled due to the prevailing uncertainty in our markets.” Tim Gitzel, Cameco president and CEO

Antofagasta announced in that it was dropping its Antucoya project because of a 20 percent jump in costs, primarily due to higher energy costs. Antucoya was to come online in 2014.

Resource nationalism is increasing – Xstrata Plc’s plans to create a $5.9 billion copper-gold project in the Philippines has been halted because of a mining reform bill. The almost $6 billion Tampakan mining project has had its start of operations delayed until 2019 because of the political cost of doing business in the Philippines.

Antofagasta’s Esperanza Sur project capex went from under US$3 billion to US$3.5 billion

Inmet’s Cobre Panama project capex climbed to US$6.2 billion from US$4.8 billion, that’s a capital intensity north of $15,000/t

Teck’s Quebrada Blanca’s capex is US$5.6 billion. The amount of money required to build Teck’s new, and very large copper mine in a difficult environment, corresponds to a US$28,000/t capital intensity.

Peru is the world’s second biggest producer of copper and silver. At least 135 projects worth $7.5 billion have been delayed because of social unrest, mining investment in the country is expected to fall 33 percent in 2013 because of the unrest.

Barrick Gold, the world’s biggest gold miner, says its capital costs to develop a giant gold mine high in the Andes could reach $8 billion dollars and has delayed production. Barrick has lowered its copper production outlook for 2013 due to permitting delays at its Jabal Sayid project in Saudi Arabia.

Labor costs jumped 54 percent on a per hour basis in Argentina in 2012.

“In 2014, substantially all the mine production growth will come from new greenfield projects and these are subject to higher risk of production shortfall. New production from Africa, where infrastructure is less developed, also faces higher risk of shortfall particularly from power disruption.” FitchRatings, Base Metals Update

Vale’s New Caledonia (Goro) is many years behind schedule. The Goro nickel project in New Caledonia has become the bad boy poster child for the assortment of problems associated with HPAL technology. Minority partners Sumitomo and Mitsui have reduced their participation in the project.

Zambia is Africa’s largest copper producer (and wants to directly market its copper), in second place is the DRC, the world’s largest cobalt producer. The copper-belt which straddles Zambia’s and the Democratic Republic of the Congo’s borders is being tied up for internal development by the two countries. The DRC and Zambia are amending their mining codes to enable the government to raise taxes and implement a 35-percent minimum ownership threshold for state shareholding in projects.

“The spectre of resource insecurity has come back with a vengeance. The world is undergoing a period of intensified resource stress, driven in part by the scale and speed of demand growth from emerging economies and a decade of tight commodity markets. Poorly designed and short-sighted policies are also making things worse, not better. Whether or not resources are actually running out, the outlook is one of supply disruptions, volatile prices, accelerated environmental degradation and rising political tensions over resource access.” Chatham House, Resources Futures

Conclusion

There’s good news and bad news. First the bad news, consumers are going to be paying more for their very basics of survival because of a continuing price rise, across the board, in commodities.

The good news is you are being presented with an opportunity to get into commodity investing ahead of the herd. There are compelling reasons, and likely profitable ones, for an investment into commodities via junior resource companies at their current lows.

The two facts you need to have on your radar screen to be ahead of the herd are one, the world’s developing economies still have a lot of commodity intensive growth ahead and two, the best leverage to rising commodity prices has historically been investments into quality junior resource companies.

Are these two facts on your radar screen? If not, maybe they should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:

OzCopper, WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Londonthenews, Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTReport, Vantagewire, Indiatimes, ninemsn, ibtimes and the Association of Mining Analysts.

If you’re interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us at www.aheadoftheherd.com

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

Gold & The Retail Investor

OzCopper — Wed, 20 Mar 2013 00:41:35 +0000

Hedge funds have been exiting the gold market, and shorting it. Most of the bearish analysis is based on forecasts of crashing investor demand.
Many analysts are claiming the gold bull market is over, and you should sell all your holdings.
3. I disagree. So does Merrill Lynch. “Our data shows that to sustain gold prices at $2,000/oz by 2016, investors need to purchase an amount of gold similar to that purchased in 2008, when prices hovered around $872/oz.” -Merrill Lynch, quoted by Investing.Com, March 17, 2013.
4. Gold never declined after President Roosevelt revalued it in the 1930s. The average retail investor couldn’t even buy an ounce of gold, yet the price remained high. Asian central banks are engaged in what I view as market-based gold revaluation. Merrill is forecasting that while investor demand for gold will plummet over the next 3 years, the price will go higher.
5. My long-held view is that at the end of this gold bull market, American retail investors will not be lining up in the street to buy, like they did in the 1970s.
6. Instead, they will more likely be lining up in real breadlines, like they did in the 1930s. Central bank buying will push the gold price higher and higher, and their balance sheets will probably look vastly worse than they already do.
Please click here now. That is Merrill’s forecast for investor demand. You can see that they are forecasting what could rightfully be called a total wipeout of investor demand.
8. Every 2 weeks, the Federal Reserve releases statistics about their balance sheet. The next release comes later this week.

Please click here now. You are looking at the chart of the Fed’s balance sheet. Since the sell-off in bonds and gold began in the fall, the balance sheet has grown quite substantially.

9. Vice Chair of the Fed, Janet Yellen, has recently been making extremely dovish statements. Chairman Bernanke himself has clearly stated that the unemployment rate is totally unacceptable.
10. Please click here now. This chart gives you a closer look at the Fed’s balance sheet growth. There is a clear uptrend in play.
11. Merrill’s report could be an institutional “game changer”. Until now, most of the bearish analysis has been predicated on the view that retail and hedge fund liquidity flows are needed, to make the price of gold rise in a meaningful way. Many pension funds will pay close attention to this important report from Merrill, and direct their liquidity flows accordingly.
12. Sadly, most of the current emails that I get from gold market investors are about how much lower they think gold is going. There is a lot of talk about the need to wait for a “breakout”, before applying capital into the metals market.
13. Unfortunately, this type of thinking can destroy wealth, rather than build it. Fundamentals make charts. The fundamentals of the Fed’s balance sheet are likely to make gold and gold stock charts look very good, but only for investors who buy at lower price levels, when it is uncomfortable to buy.
14. Japan’s central bank balance sheet may be set to grow, tremendously. Also, Mark Carney appears to be committed to growing the BOE balance sheet.
15. If Merrill’s report turns out to be the institutional game changer that I think it is, the current “disconnect” between the gold price charts and the Fed balance sheet chart may be about to be resolved.
16. Either the Fed’s balance sheet must shrink, or the gold price must begin to rise. The current conundrum could continue for a bit longer, but I wouldn’t bet too much money on that idea!
17. With both the Fed Chairman and the Vice Chair calling the current unemployment situation totally unacceptable, and Merrill Lynch stating that the retail investor can be almost entirely jettisoned from the gold market, without harming the price, the bears appear to be treading on ice that is thinner than a dollar bill.
18. How low could gold go, before embarking on a rise that mimics the Fed balance sheet chart? Please click here now.
19. That’s the monthly gold chart, and I’ve highlighted massive support that sits in the $1432 area. A decline to that level would make the disconnect between the Fed’s balance sheet chart and the gold price chart “bizarre and surreal”.
20. As unlikely as such a decline is, investors need to be prepared for anything, in all markets. The new head of Japan’s central bank, Haruhiko Kuroda, probably won’t ramp up their balance sheet for a few more months. That gives the gold bears a tiny window of opportunity, to make their play.
21. Regardless, I expect to see Chairman Bernanke become much more aggressive, in coming FOMC meetings. I think this meeting will be the last time you see him discuss the “costs” of QE very much, and rather than reducing the monthly purchases, he’ll ultimately move towards accelerating them.
22. To view my short term outlook for gold, please click here now. Gold has likely broken out, upside, from a small symmetrical triangle. The Fed meeting this week could cause enough volatility to push gold down to the supply line of that triangle, in the $1580 area.
23. If Chairman Bernanke says something wildly bearish, gold could begin a decline down to $1432, but I think that is highly unlikely. I also think the some gold investors may be over-focused on the events in Cyprus, and under-focused on the Japanese parliament approval of Haruhiko Kuroda. Aggressive traders should wait for this week’s FOMC statement before buying more long positions.
24. I think most of the ingredients needed to begin a bullish trending move in gold, are now in place. Please click here now. That’s the GDX daily chart, and I’ve highlighted a “peppy” ascending triangle pattern, targeting the $40 area, which is not exactly a parabolic move, but it’s a start!

Special Offer For OzCopper Readers: Send me an Email to freereports4@gracelandupdates.com and I’ll send you my “Super Top Gone Wrong?” report. I’ll discuss the head & shoulders top patterns in place on many silver stocks, and why those patterns may be about to “abort”. Understand why silver stocks may become the gold bull’s best friend, very soon!

Thanks!

Cheers

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Are You Prepared?

Picking a Junior Gold Company in a Bad Market

OzCopper — Tue, 19 Mar 2013 06:09:06 +0000

Richard (Rick) Mills
Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

The current investment market for junior gold companies is arguably one of the worst since the United States went off the Gold Standard in 1971.

Despite the current high price of gold (and many other commodities), investors have almost abandoned the junior gold mining sector to invest in physical bullion, ETF’s, and producing companies. The value of the TSX-Venture Composite Index, shown below, is similar to what it was in the early 2000’s when the price of gold was below US$300 per ounce.

In 2013 I expect to see the equity market in the junior gold sector begin to correct itself and investors should currently be taking advantage of the investment opportunities resulting from the severely beat up junior sector. There presently exists a great opportunity for those investors who are “ahead of the herd” and want to invest in the market at or near the bottom.

TSX-V Composite Index 10 Year Chart

The Venture exchange is down over 50 percent from its March 2011 high.

The questions become – How does an investor take advantage of the dislocation in the junior markets? What might be a good junior to have on our radar screens?

Investing in junior gold miners is a speculative business at best, with risk on the downside but the potential for significant reward on the upside.

Two ways to mitigate risk for investors is to buy at market bottoms and have a long-term view of their investments to take advantage of a company’s increasing value as its projects move through exploration and development while markets recover. Ideally, the pay off comes when a project is brought into production, gets joint ventured, or is sold by the junior.

So in this environment, companies should have the following key attributes:

Established track record
Experienced and competent management teams
Established mineral resources
Projects in safe and stable jurisdictions of the world
Strategically located properties – existing infrastructure
Significant upside potential

One junior to consider when looking at the many juniors available to investors is Emgold Mining Corporation (TSX-V: EMR). Emgold has been in existence since 1989 and has survived numerous equity and mining cycles. It has an experienced management team with background in all facets of the mining industry, including exploration, permitting, project development, and mine operation.

The Company has a solid resource base in its Idaho-Maryland Project in California. And this resource has grade – something operating companies are looking for as mining costs continue to rise (higher grades typically equate to lower cost per ounce production). Emgold’s Idaho-Maryland Deposit was listed as the 9th top undeveloped deposit by grade in the Global Gold Mines and Deposits 2012 Ranking, for deposits over one million ounces of gold, by Natural Resource Holdings.

“Another data point we found fascinating was that out of 439 mines or deposits, 189 are in fact producing mines owned by companies with an average market capitalization of $1.8 Billion. This leaves us with a universe of undeveloped deposits over 1 million ounces of just 250. Of course some of these 250 deposits are owned by miners (84) while just 166 are owned by independent junior companies, private companies, or government sponsored enterprises. Investors seeking leverage to gold should focus on these companies as they provide the best exposure to a rising gold price environment…In the United States we found only 33 deposits owned by 26 companies (23 Independents).” Global Gold Mines and Deposits 2012 Ranking

In emerging markets, political strife and resource nationalism have triggered increased taxation, social unrest and changing regulations which is hindering resource development and scaring away investment. Emgold works solely in North America with its transparent and structured regulatory regime. Its properties are located in California, British Columbia, and Nevada, some of the most attractive mining regions in the world being internationally known as safe and stable mining jurisdictions.

The Idaho-Maryland Project is in the historic Grass Valley District which produced over 17 million ounces of gold historically. The Stewart and Rozan Properties are in the historic Nelson Mining District of British Columbia, which hosted many small gold and silver mines. The Company also has the Buckskin Rawhide East, Buckskin Rawhide West, and Koegel Rawhide Properties all located in the historic Rawhide District in Nevada.

What is strategic about these locations? Obviously the Idaho-Maryland deposit in California represents grade. The mine historically produced 2.4 million ounces of gold at a recovered grade of 0.43 ounce per ton gold and holds a measured and indicated resource of 472,000 ounces gold (1.7 million tons at 0.28 opt gold) and an inferred resource totaling 1,002,000 ounces gold (2.6 million tons at 0.39 opt gold). The potential exists to delineate a 3-5 million ounce resource at Idaho-Maryland, subject to additional exploration.

In California, we are seeing a resurgence of mining activity with New Gold Inc.(NYSE:NGD, TSX:NGD) operating the Mesquite Mine, ATNA Resources Ltd. (TSX:ATN) operating the Briggs Mine, and Sutter Gold Mining Inc. (TSX-V:SGM) reopening the Lincoln Mine. Emgold is arguably undervalued because their main property is in California. While the state is sometimes viewed negatively by the mining investment community for its stringent environmental standards (not a bad thing), regulations for mine development and operation are clear and straightforward. A misunderstanding of California’s regulatory environment presents a significant opportunity for investors to capitalize on mispriced equities.

While historically there has been a lot of focus Emgold’s substantial Idaho-Maryland Project, many investors have failed to realize that the Companies other projects provide considerable opportunity as well. For example, the Rozan Property (Nelson Mining District, South West British Columbia, Canada) is adjacent to Altair Gold Inc.’s (TXV-V:AVX) Kena Property.

The Kena Property has a measured and indicated resource of 549,000 ounces of gold and an inferred resource of 513,000 of gold. Altair is well on its way to potentially delineating a plus one million ounce bulk disseminated resource which is sure to attract the attention of the majors. The Stewart Property is adjacent to the historic Yankee Dundee Mine that is owned by Duncastle Gold Corp.(TSX-V:DUN). Duncastle has just signed a production agreement with a private company called Armex Mining Corp. who appear to be looking to advance the property into production.

Emgold’s Nevada properties also represent substantial unrecognized potential. Over the past several years, Emgold quietly acquired a number of properties adjacent to or near the historic Denton Rawhide Mine in Nevada’s share of the prolific Walker Lane Gold Belt.

The Walker Lane shear zone straddles the border between Nevada and California and has a long history of exploration and mining, dating back to the discovery of the world famous Comstock Lode in the 1850s. The Walker Lane is notable for its numerous occurrences of volcanic-hosted epithermal gold and silver deposits.

The majority of gold deposits occur in the Walker Lane shear zone, which is a 100-km wide, NW-trending structural corridor extending southeast from Reno towards Las Vegas. The Walker Lane gold belt has historically produced over 50 million ounces of gold and 400 million ounces of silver.

The Denton-Rawhide Mine was owned and operated by Kennecott Minerals Company from 1988 to 2010. From 1990 through 2010, the Denton-Rawhide Mine produced 1.5 million ounces of gold and 12.7 million ounces of silver, according to Muntean (in Nevada Bureau of Mines and Geology Special Publication MI-2010, 2011). In 2010, the Denton Rawhide Mine was acquired by Rawhide Mining Company LLC (“RMC”) a private company, who continued to produce gold from historic heap leach pads. In late 2012, Rawhide Mining Company re-commenced production from the mine.

In late 2012, Emgold announced a deal whereby RMC is doing a CDN$1 million private placement into Emgold. Emgold will use part of the proceeds to buy out the underlying property interests in the Buckskin Rawhide East Property, which it will subsequently lease to RMC. RMC is now acquiring a second property, the Regent Property, from Pilot Gold Corporation (TSX: PLG), as per Pilot’s January 15, 2013 press release. Emgold’s Buckskin Rawhide East Property is surrounded by Denton Rawhide Mine on the east and south, and by the Regent Property on the west and north. Emgold’s Buckskin Rawhide West Property is adjacent and to the west of Regent and its Koegel Rawhide Property is just three miles south of Denton Rawhide Mine.

Conclusion

If you are looking for a junior gold company to put on your radar screen, one with an existing substantial resource and many paths to significant potential upside, Emgold definitely qualifies to be there. Is Emgold on your screen?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com