Auguries — The wolf at the door

Auguries — The wolf at the door


By Kevin Michael Grace for Resources Wire


Gold was up (at press time) $37.60 (+2.2%) for the week to $1,751.40, and silver was up $1.54 (+4.7%) to $34.21. Bloomberg reported that gold reached a five-week high, and silver reached a six-week high “as the [US] dollar’s drop spurred demand for the metals as alternative investments.”


Reuters reported that, according to UBS, gold had faced “a key technical level” at $1,739.10. “Our technical strategist notes that a break above this level, which is the month’s high, would be a crucial bullish development that would open up $1,748.95, the 62% percent retracement of the October-November selloff ahead of $1,794.80, the October high.” Having risen $23.20 Friday, gold has already gained back that 62% and more.

Earlier this week, Bloomberg asserted that “Gold’s 12-year rally, the longest in at least nine decades, is poised to continue in 2013 as central bank stimulus spurs investors from John Paulson to George Soros to accumulate the highest combined bullion holdings ever.” As a general rule, it is never a good idea to bet against the Angel of Death. Perhaps in response, a panel of 16 analysts convened by Bloomberg set a 4Q 2013 gold price target of $1,925.

This would represent a new nominal (but not inflation-adjusted) high. What is most striking about the 12-year bull market is that the price of gold is 6.5 times higher than in 2000 despite the lack of an economic disaster. Yes, there was a knockdown in 2008, but as our betters never cease to tell us, their actions righted the ship and saved the day.

The worldwide debt crisis may be considered a slow-motion disaster which will continue until it ends, one way or another. But what of the potential of the short, sharp shock? Disasterologists have for several years considered an Israeli attack on Iran to be one possible grand calamity.

In January 2012, Philip Giraldi’s essay “What War With Iran Might Look Like” concluded that it might look like World War III. Two videos released this week by Future Money Trends don’t go that far, but such an eventuality is not ruled out, as “The Day The World Ended” Parts 1 and 2 predict only the first-day consequences of an Israeli attack.

Here’s the scenario. Even before the markets open, oil and gold soar in price. President Obama stands with Israel, and Iran blows up the Saudi oilfields. Shortly thereafter, oil hits $305 a barrel and gold hits $2,600. Canada, Mexico and other countries “temporarily” nationalize their oil industries.

After Iran befouls the Strait of Hormuz with oil, the price reaches $450. The Dow opens down 1,100; there is panic buying of goods everywhere; and gas stations exhaust their supplies. Obama addresses the American people that evening appealing for calm. He announces that US oil has been nationalized, as have the Internet and all other broadcasting. The US has been put on the gold standard, and the metal trades at over $5,000 an ounce.

Those that entertain this kind of speculation will find above scenario plausible. Those that don’t will find it risible or infra dig. It cannot be emphasized too strongly, however, that catastrophes tend not to be widely anticipated—at least by the great and good. Who thought that the Estates-General would lead to the Reign of Terror? Or that Kerenskywould yield to Lenin? In our lifetime, the experts were gobsmacked by the sudden and total collapse of the Eastern Bloc and the Soviet Union.

What is most remarkable about our present situation is that, essentially, nothing has changed since 2008. A few thousand people sitting in front of computer screens still control our destiny. Apparently, there is no alternative. Consider the US presidential election. Did either candidate manifest any understanding of the scope of our difficulties? Did either candidate suggest the possession of the faculties necessary to lead their country through a crisis? Should the wolf appear at our door, would he find a house made of straw?

One could surmise that Paulson and Soros have pondered the answers to these questions and acted accordingly. And so the bull market in gold is likely to continue. But what if the broader market, that is to say ordinary investors, reaches the same conclusions as the big boys? Then all bets are off, even without another war in the Middle East.

And now to cases. It is indicative of the state of the market that Canaccord reports November 21 that only six of the 22 companies on their juniors watchlist have a higher share price than a year ago. They are Panoro Minerals V.PML (+67.5%), Pilot GoldT.PLG (+64.7%), Esperanza Resources V.EPZ (+35.1%), Freegold Ventures T.FVL(+25%), Balmoral Resources V.BAR (+22.7%) and Chalice Gold Mines T.CXN (+6.5%). The bottom six are Tigray Resources V.TIG (-86.2%), CuOro Resources V.CUA(-76.1%), Abzu Gold V.ABS (-73.7%), Regulus Resources V.REG (-67.9%), Columbus Gold V.CGT (-66%) and Ethos Gold V.ECC (-65.75).

On November 20, Canaccord lowered the price target of MAG Silver T.MAG from $20.75 to $19.75 (currently $10.36), noting “uncertainty around [its Mexico] Cinco de Mayo project” but adding that the recent “selloff represents a buying opportunity” and initiated coverage of Copper Mountain Mining T.CUM with a price target of $5 (currently $3.69), noting “Copper Mountain remains open at depth, and we anticipate the current drilling program to materially increase the size of the deposit.”

On November 16, Canaccord increased the target price of Endeavour Mining T.EDVfrom $4.70 to $4.80 (currently $2.27), noting “forecast growth to 431,000 ounces of gold in 2014 at a cash cost of US$796 per ounce.”

Reuters reported November 21 that CIBC has cut the price target of Banro T.BAA from $6 to $4.75 (currently $3.14), citing “concerns given instability in the South Kivu region where the company has its Twangiza mine” and that RBC has cut Osisko T.OSK from $13 to $12 (currently $8.60), citing “the company’s dilutive acquisition of Queenston T.QMI” and November 16 that BMO has cut Copper Mountain Mining T.CUM from $4.50 to $4 (again, currently $3.69), citing “weaker-than-expected third-quarter results due to higher stripping and repair costs.”

In an November 21 Gold Report interview, Michael Berry, cofounder of Discovery Investing, declares, “I do think the TSX Venture Index has put in pretty close to a bottom, but it could be a long time, a year or two, before we see the emerging world start to build out again.” In the interim, he likes Revett Minerals T.RVM (“I know the management team, which has turned Revett around. It was a $0.07 share stock two or three years ago…and I [still] think it’s cheap”) (currently $3.20), Quaterra ResourcesV.QTA (“a company with some tremendous discoveries… nobody cares”), Grande Portage V.GPG (“could be taken out by somebody bigger for much less than it’s worth, in the ground anyway”), Alexco Resource T.AXR (“mining very high-grade silver in the Yukon, and it could be a consolidator, looking for other companies”), Endeavour SilverT.EDR (“It has done a great job… has three producing mines in Mexico”), Geologix Explorations T.GIX “good deposits and has done a good job of raising money”) and Terraco Gold V.TEN (“It has a good management team. It has about 1 million ounces gold indicated and inferred in Idaho as well. It’ll be open-pittable”).

At Happy Capitalism November 21, Lou Schizas examines Semafo T.SMF, which traded as high as $13.84 as recently as December 2010 (currently $3.46). He concludes, “The three-year chart tells the tale of a long and grinding decline after a wonderful advance…. The trend is your friend until it ends, and right now the trend is down.” (Resources Wire’s interview of Semafo President/CEO Benoit Desormeaux will appear next week.)

At the Financial Post November 19, Peter Koven reports that Stephen Walker of RBC believes that Agnico-Eagle T.AEM has been oversold and has set a price target of $69 (currently $55.64).

From the same source November 20, Barry Critchley examines the sad story of Great Basin Gold T.GBG: a billion-dollar market cap two years ago, insolvent and suspended today. At Seeking Alpha November 15, Alberto Savrieno argues that GBG’s “$715 million in hard assets and [a] mining property that they can’t develop for lack of cash” make it a tempting takeover target.

And also at Seeking Alpha, Robert Tepper is also keen on Endeavour Silver T.EDR. He writes November 19, “Investors should feel encouraged that Endeavour and their capable team can now begin enhancing the[ir El Cubo silver-gold project in Mexico] into a thriving, revenue-generating, reliable mine for many years to come.”

Finally, despite his lurch to the left after winning the Republican nomination, Mitt Romney’s loss continues to be attributed to him being “too extreme.” Talk about controlling the discourse. If a “right-wing” party ran a castrated puppy for office, its loss would still be blamed on being too extreme. The Ontario Conservatives actually tried that last year. The dog was called Tim Hudak.


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