Edition 2 - January 26 2005
First, we would like to welcome the newcomers who recently signed up for the StockTracker gold report. We will look to put out something every couple weeks, or as necessary.
Most people are not very aware of the gold markets or how gold stocks trade in comparison to say, the Dow Jones. I will give you a couple of lines that should always stay in the back of your mind, and remember news services like Reuters and Bloomberg will not give you the insight required to trade gold stocks. These news agencies have relations to Wall Street who want you buying tech, biotech, oil stocks etc because this is where they can make most of their commissions. The gold market is too small and they would go bankrupt if everyone wanted to buy gold stocks. This tiny market will work in your favour in a big way, explained below.
The market capitalization of all gold stocks in existence is less that 1 company listed on the Dow Jones and there are some 10,000 to 15,000 companies listed around the world. This is real small!! Excellent, this means that it will not take much $$ to move the shares higher when they come into demand, as it is starting now. The large cap mining stocks like Newmont have been in a steady uptrend for over a year. The small caps (also known as junior or exploration stocks) lag, but some exploration stocks have made 25 to over 100% over the past month. This is just the beginning...
Listen to this: it is estimated that all the gold available for sale from central banks is only about US$58 billion. Well, Governments from around the world over the past year have printed in the neighborhood of $5 to 7 trillion!! It would not take much of this money to buy the remaining gold. But it gets even better: central banks from around the world that own this gold are under a strict sale restriction. Combined they can only sell around 500 tons per year. The central banks say they have about 30,000 tons, but with the use of sophisticated leasing programs, swaps and over-the-counter derivatives it is believed they have let go of 15 to 18,000 tons, so this only leaves about 12,000 remaining. This is a conspiracy that many gold advocates are looking to reveal to the investing public. (You can order a CD at www.goldrush21.com for further information.) The gold has been loaned, and when something is loaned, it usually has to be returned, with interest. Okay, now this even gets better: there is a huge short position in the gold futures and over the counter market. The price of gold has been going higher and higher, and many believe there has been a major turning point where the firms and people short gold and now being squeezed - forced to buy-in their short positions that will lead gold much higher and fast. By the way, Warren Buffet views over the counter derivatives as "junk" or "weapons of mass financial destruction". This is because they operate in an unregulated market.
Here we are now, in the midst of a short squeeze in gold. Reuters, Bloomberg and commentators on TV are saying this is the top. Most people are selling their gold stocks or are out of the gold market, except the big players that are in the know. When will the average investor start to really buy gold stocks? Most likely when the price of gold accelerates to the $700 per ounce level. The gold stocks will be soaring and investors will be chasing them. CNBC will be interviewing all the fund managers that "told you so".
This is why we believe you still have time to step into some high quality gold stocks, preferably junior mining shares with promising exploration plans. Companies such as Linux Gold that trades in the USA under symbol LNXGF with their Granite Mountain property near very successful exploration companies such as NovaGold, Teck Cominco and Northern Dynasty in Alaska. The stock has been rising on large volume and we believe it still has a long way to go. The website is www.linuxgoldcorp.com. Granite Mountain could hold the promise of another large porphyry deposit - gold, silver, copper, lead, zinc, tin, molybdenum and uranium. The small cap mining stocks have much more volatility than the large caps, so you must have diligence to trade accordingly: if you buy into a junior mining stock and the price comes down by 15-20% don't fret, buy more. This is the way many professional traders in the commodity pits in Chicago make their living or in some cases fortunes. I would add 2 times maximum and then hold. Do not use capital that you cannot afford to lose, this is the stock market and investing is not always 100% safe. The small cap (junior) gold stocks can have more volatility than large cap stocks such as Newmont (NEM) and Goldcorp (GG), so don't let your nerves get the best of you if there happens to be a downswing. Step up and buy.
Another company that may hold a lot of promise is Teryl Resources symbol TRC.V that trades in Canada. Their website is www.terylresources.com. This company is partnered with the 7th largest gold producer in the world called Kinross Gold. They also have a few properties in Alaska. I like Teryl because it is rumored that Kinross is running out of ore that will very soon need to be replaced. They spent US$600 million on a first class processing facility, and are sure they do not want to close it down. I believe that Teryl could have a very interesting exploration year. If they ever hit something significant such as another Fort Knox type deposit (4 million ounces gold) could see real fireworks in the stock. In the meantime they have around 500,000 ounces of gold reserve with 4 large properties to explore. Investment into junior mining companies should greatly increase over the next 3 years.
You may wish to enter your email at www.linuxgoldcorp.com and www.terylresources.com to receive their press releases. This would be a wise decision.
If you need to find a brokerage firm that trades small cap mining stocks, take a look at www.penntrade.com.
|
