here you go big girl: take it apart babe. sqeeze it until someone yells for the jaws of life.
From the cybersphere:
No doubt all are thinking carefully about gold at the moment. Here are a few thoughts boiled down for consideration.
For example, here is a list of 19 names. In the first column you will see the old highs before the recent crash took the entire gold complex down with the rest of the equity market. In the second column you will see friday's closing prices on these shares. In the third column you will see the distance remaining between the old highs and the current price.
ASA 92.60 73.33 20.81%
AUY 19.93 10.63 46.66%
BAA 13.80 2.06 85.07%
CGLD 0.95 0.67 29.10%
DROOY 13.52 8.12 39.94%
GDX 56.87 45.02 20.84%
GFI 19.91 13.63 31.54%
GG 48.00 41.55 13.44%
GRS 11.86 7.86 33.73%
GSS 4.33 3.17 26.79%
HMY 14.56 10.68 26.65%
IAG 10.43 13.84 -32.69%
KGC 27.40 21.88 20.15%
MFN 11.50 9.82 14.61%
NGD 8.00 3.74 53.25%
NSU 2.55 2.01 21.18%
NXG 3.35 2.7 19.40%
PAAS 40.00 22.45 43.88%
SSRI 38.00 21.09 44.50%
It has been approximately 1 year since the above names were at those high numbers. At that time gold/oz was trading at considerably lower average levels 700-800/oz USD, costs of production were risiing in dramatic fashion, mainly in energy costs, and once the crash took place, many doubted any of the juniors would be able to continue financing their ongoing in progress mines.
Now what do we have? We have production costs far lower than a year ago; we have discovered all of these names either have, or continue to receive financing, many have cash balances in the bank, and the price of gold has been trading at considerably higher average levels. Now, finally after 8 attempts, gold appears poised once again, to make new highs, and perhaps set a new bottom at 1k/oz USD.
And yet, these shares, except IAG, still sell far below their previous values, let alone their actual NAV's, when looking at their capital and their proven reserves. Some of these names were sold so far down, that even now, as "undervalued" as they may be, some have moved 500% since the crash. NSU being one very fine example. Gold mining companies rarely in history, find themselves trading at anything close to their actual NAV's, but purely in terms of price behavior, we are not even close to fair value, let alone, froth in the sector, and all this in spite of what seemed like manic buying this past week on truely astounding volumes. Even more amazing to me, with the huge supply overhang in many of these names, there was no sense on my part of bag holders dumping their shares in relief at being made whole, or nearly whole in some cases.
For many many months now, we have seen gold trade in sync with the SPX and counter to the USD. Last week we finally saw a a rising USD and a rise in the price of gold. This was not a one day event, but occured throughout the week essentially. This was a divergent signal many had been hoping for, and some have clearly predicated would occur before gold can begin to lead by rising, and eventually, USD falling to new levels, DXY 77 probably being a fine worthy line in the sand to draw, and DXY 68 being the first stop down on the USS Hindenburg. A hearty and well deserved congratulations to Lance Lewis for his incredible work over these seemingly many months, and his quite bold and steady leadership at the thinking table.
We are, one might conclude, in a classic breakout moment. I was in fact, quite astonished, we did not see much, if at all, any give back in the POG or the mining complex on Friday. And all this, while the USD, yet again, was not particularly weak at all, and remaining still quite nicely above DXY 78.
One can only guess what we will see beginning this coming tuesday.
Anyway, there is so much more one can say about all this, the state of markets, the historical record etc etc etc, but that's probably for some other time. |
