Gabriela:
<<juniors which have some cash resources>> Why would a junior with cash necessarily thrive if good times return? Is there enough cash to survive that long? Will any specific junior have a property with an ore body? Does each junior have 1) good geologists, 2) astute financial management, 3) top managers who understand how to promote, 4) major brokers behind them, 5) a stockholder base that won't simply sell into any rebound? Sorry, but your assumption that juniors with cash will "really thrive" is simplistic.
<<All hostile conditions will reverse themselves in time with a healthy POG>> That is known as a straw man case. Why and when would POG increase? This aspiration fails to recognize the change in monetary system. Gold transaction costs and inefficiencies of transfer prevent gold from serving as basis of transactions for world trade.
<<The return of inflation will help sentiment greatly...>> Do you understand that majority of gold production is now not labour intensive and, therefore, tendency for inflation to elevate gold mining costs is not operative today. POG protects us from inflation only if the cost of producing gold climbs if inflation translates into rising gold mininig wages not offset by gains in productivity. If higher unit operating costs are not met by rising POG then, ultimately, mines close and gold supply diminishes. However, decline in gold supply must be sufficient to cause actual reduction in marginal supply sufficient to cause users to subscribe to higher prices.
Central banks have virtually unlimited gold supply. They short gold against 1) actual holdings, and, 2) their ability to print fiat money to cover gold bear raid costs. They can, I can attest personally, intimidate ring traders by the massive scale of central bank selling, to cause traders to liquidate their own holdings, thereby 1) dropping POG and, 2) intimidating traders sufficiently to cause sharp drop in demand for gold.
Gold is no longer money. Central banks have long desired to make fiat currencies "as good as gold" and to do so they must cause POG volatility to diminish to near zero to preclude profit opportunities in POG. That they have succeeded in every way in achieving goals spelled out by Mr. Greenspan as long ago as the late 1970s is evident in the sharply diminished gold price volatility, and resultant down-rating of gold and gold shares by investors.
Old Wall Street Adage - don't fight the tape. Gold is dead. The real trick is to figure out what industries benefit from todays' Central Bank policy and goals and to find the beneficiaries to invest in.
Gold has been in a ten+ year bear market. Few investors managed to stick profits in the bank from speculating solely on the POG. Those who prospered did so by gaining intimate acquaintance with genuine company builders, of which there were scant few (Barrick, Corona, TVX), and figuring out which were blessed by an orebody but didn't have management smarts to last.
If you don't have time, inclination and skills to become personally acquainted with juniors, their properties and their management you have better odds at the Blackjack table. Chances are at least 50-to-1 against a junior finding, from grassroots exploration, an economically viable property. To make money on juniors otherwise means selling on the first hint of a good drill intersection and that is plain crapshooting. Blackjack odds are only about 3.2% against a skillful player.
RH |
