May 2, 2012
We are most pleased to bring you this special report from Executive editor of Money Morning, and Money Morning's Private Briefing, William Patalon III. Here at Gold Avalanche, we firmly believe that commodities in general, and gold and silver in particular, are getting ready for the next phase of a major up-leg. Be also have good reason (as outlined below) to think that the miners are extremely undervalued at present.
Some volatility may come before the next phase of the commodity bull market gets underway, but it is precisely this volatility that will (and currently is) providing some fantastic buying opportunities of quality companies that have huge growth coming down the pipe. It's no secret that sentiment in the mining shares is nearing rock bottom, and has been there for some time now. When sentiment gets this negative for this long, a contrarian investor can start getting their bids ready, and when the time is ripe, over turn the couch cushions as great companies go on sale at steep discount prices.
By William Patalon III, ,
When U.K. subscriber John M. wrote in this week, he got right to the point.
Asked John: "What's happening to gold prices? Why are they dropping?"
For an answer, I speed-dialed Real Asset Returns Editor Peter Krauth - our resident expert on mining and precious metals.
Peter is based in Canada, which keeps him close to the natural-resource companies that proliferate north of the border. He gave me a detailed and insightful answer to John M.'s question.
And he recommended three ways to profit - including an ETF he says is perfect for first-time gold investors.
To explain what's happened with the "yellow metal" - and to project where gold prices will go next - Peter invented a pricing theory that he christened the "Golden Staircase."
"The bottom line, Bill, is that the price of gold has simply entered a consolidation phase - much like it has done numerous times since it entered this secular bull market back in 2001," he told me.
Gold futures were at $1,662.40 an ounce yesterday - well off the yellow metal's high. Here's why.
"If you think back, when gold hit its all-time high of $1,900 last August, we were in the midst of wild speculation that the U.S. government wouldn't resolve its debt-ceiling crisis," Peter explained. "A deal in Congress was reached in time, but Standard & Poor's went on to downgrade the nation's credit rating for the first time in history. Since then, there's been considerable apathy towards gold by the general investing public, pushing its price down about 13%. What's more, government-calculated inflation looks benign, taking away from gold's luster."
And here's where it gets interesting.
The consumer price index (CPI) - the "official" gauge of U.S. inflation, fell to 2.7% in March. But the American Institute for Economic Research (AIER) says everyday prices - the ones that matter most to working Americans - are up a good 8% over the past year.
"Don't be fooled by the "official' numbers," Peter said. "What this means is that the "real' rate of interest (the interest rate you can earn on the safest investment minus inflation) is down around negative 3%. That scenario has typically kept gold in a bull market. That's why I still expect that we'll see $2,000 gold by late this year or early 2013."
To forecast the timing of that rebound, Peter invoked his "Golden Staircase" theory.
"Since the beginning of gold's secular bull, the "Golden Staircase' has demonstrated that it typically takes 12 to 18 months for gold to establish a new price high once it retreats from a strong run-up. Eight months have already passed since gold reached $1,900. The "Golden Staircase' theory tells us that it will take between four and 10 months to see new highs."
Here are three ways to position your portfolio to profit from this rebound:
We are most pleased to bring you this special report from Executive editor of Money Morning, and Money Morning's Private Briefing, William Patalon III. Here at Gold Avalanche, we firmly believe that commodities in general, and gold and silver in particular, are getting ready for the next phase of a major up-leg. Be also have good reason (as outlined below) to think that the miners are extremely undervalued at present.
Some volatility may come before the next phase of the commodity bull market gets underway, but it is precisely this volatility that will (and currently is) providing some fantastic buying opportunities of quality companies that have huge growth coming down the pipe. It's no secret that sentiment in the mining shares is nearing rock bottom, and has been there for some time now. When sentiment gets this negative for this long, a contrarian investor can start getting their bids ready, and when the time is ripe, over turn the couch cushions as great companies go on sale at steep discount prices.
By William Patalon III, ,
When U.K. subscriber John M. wrote in this week, he got right to the point.
Asked John: "What's happening to gold prices? Why are they dropping?"
For an answer, I speed-dialed Real Asset Returns Editor Peter Krauth - our resident expert on mining and precious metals.
Peter is based in Canada, which keeps him close to the natural-resource companies that proliferate north of the border. He gave me a detailed and insightful answer to John M.'s question.
And he recommended three ways to profit - including an ETF he says is perfect for first-time gold investors.
To explain what's happened with the "yellow metal" - and to project where gold prices will go next - Peter invented a pricing theory that he christened the "Golden Staircase."
"The bottom line, Bill, is that the price of gold has simply entered a consolidation phase - much like it has done numerous times since it entered this secular bull market back in 2001," he told me.
Gold futures were at $1,662.40 an ounce yesterday - well off the yellow metal's high. Here's why.
"If you think back, when gold hit its all-time high of $1,900 last August, we were in the midst of wild speculation that the U.S. government wouldn't resolve its debt-ceiling crisis," Peter explained. "A deal in Congress was reached in time, but Standard & Poor's went on to downgrade the nation's credit rating for the first time in history. Since then, there's been considerable apathy towards gold by the general investing public, pushing its price down about 13%. What's more, government-calculated inflation looks benign, taking away from gold's luster."
And here's where it gets interesting.
Gold Prices, Inflation and the "Golden Staircase'
You see, as we've detailed to you a number of times, inflation is much, much worse than Washington would have us believe.The consumer price index (CPI) - the "official" gauge of U.S. inflation, fell to 2.7% in March. But the American Institute for Economic Research (AIER) says everyday prices - the ones that matter most to working Americans - are up a good 8% over the past year.
"Don't be fooled by the "official' numbers," Peter said. "What this means is that the "real' rate of interest (the interest rate you can earn on the safest investment minus inflation) is down around negative 3%. That scenario has typically kept gold in a bull market. That's why I still expect that we'll see $2,000 gold by late this year or early 2013."
To forecast the timing of that rebound, Peter invoked his "Golden Staircase" theory.
"Since the beginning of gold's secular bull, the "Golden Staircase' has demonstrated that it typically takes 12 to 18 months for gold to establish a new price high once it retreats from a strong run-up. Eight months have already passed since gold reached $1,900. The "Golden Staircase' theory tells us that it will take between four and 10 months to see new highs."
Here are three ways to position your portfolio to profit from this rebound:
- If you're a newcomer to the gold market - or you are somewhat risk-averse - Peter suggests the physically backed Sprott Physical Gold Trust ETV (NYSE: PHYS).
- Gold Avalanche Recommendation: Buy at market, then buy tranches on weakness until you reach your desired weight. For Canadian investors, try MUTF_CA:SPR216 or TSE:PHYS.U
- If you're game for somewhat more leverage, Peter likes Newmont Mining Corp. (NYSE: NEM). It's currently yielding 3%, is stable and well-diversified, and its dividend is linked to the price of gold, Peter said.
- Gold Avalanche Recommendation: Buy 1 tranche on weakness, and another tranche or two if Newmont trades down to $40. Buy a third tranche if Newmont trades down to $30. Avoid trying to 'pick the bottom', unless you truly don't care if you get filled or not. If you want to just place a 'stink bid' and wait to see what happens, try a bid at around $30.
- If maximum profits are your goal, Peter's favorite play - and his personal pick for the Private Briefing report "The Five Stocks You Have to Own in 2012" - is Sandstorm Gold Ltd. (TSXV: SSL). This streaming-gold company is the riskiest of the three. But it's up 39% since Peter recommended it, and forecasts call for years of rapid growth.
- Gold Avalanche Recommendation: Buy one tranche if SSL trades down to $1.50. Buy another tranche if SSL trades down to $1.25. Turn over the mattresses if there is serious capitulation and we are lucky enough to see 1$ again.
[Editor's Note: Since its launch, Private Briefing has delivered as many as 45 winners. Two dozen of them have been double- or triple-digit gainers--all in just eight months.
With his 24/7 access to stock market gurus like Martin Hutchinson, Keith Fitz-Gerald, Shah Gilani and Dr. Kent Moors, Bill is able to provide Private Briefing subscribers with an inside look at some of their key recommendations.
To learn more about Private Briefing, click here.]
Source: http://moneymorning.com/2012/05/02/gold-prices-how-to-climb-the-golden-staircase/
With his 24/7 access to stock market gurus like Martin Hutchinson, Keith Fitz-Gerald, Shah Gilani and Dr. Kent Moors, Bill is able to provide Private Briefing subscribers with an inside look at some of their key recommendations.
To learn more about Private Briefing, click here.]
Source: http://moneymorning.com/2012/05/02/gold-prices-how-to-climb-the-golden-staircase/
