June 2014 Commentary

28th June 10:20am update yesterday and today you can see enough buying pressure and a decrease in selling pressure. This causes a failure of the stocks to reflect the end of this fall in gold short term. At major tops the share prices start falling as gold continues up to extremes, this is normal. At major lows the sellers are exhausted, the savvy big money is in there accumulating – e.g. Van Eck loading up on SLR, RSG etc.

The legendary commodity investor Jim Rogers is a big buyer here and has been buying for the past few weeks in case that was the bottom. He has sold no gold stating bull markets climb a wall of worry. Small holders will not be lining up to sell gold at the real top they will be lined up buying and this has not happened yet. This is a monumental buying opportunity on quality stocks such as those I have bought in the Funds.
26th June 11:07am I just had a conversation with Les Davis CEO of SLR. Importantly they have immediately responded the the situation with various measures – see their April quarterly. Do your DD on this stock they have the flexibility to generate cash using higher grade ore blocks and stockpiles for the next 18 months. This is vital information in my opinion. They are one of the few elite local gold companies.
25th June special note I am about to load unofficial Newsletter 85 which is a Members only expanded version of the article I released on the WWW last night (GATA, Gold Seek etc). I will notify you here when it is up – I am not a seller here.
25th June this is a bear trap if ever I have seen one. Individual stock options expiry is on the 27th and I am now expecting a sharp rally in gold in the next two weeks. This will be a trade opportunity as difficult conditions will continue until China, the ECB and the USA blink and try to stem the crisis.
The XGD just made a new lower RSI level and has to bounce but the final low is now likely to be next month or early August.
20th June 11:38pm update Just read a great writer Adam Hamilton and while he has not timed the low on gold stocks he does know markets and has developed excellent systems including relationships to 200 dma (daily moving average).
He notes how extreme it is for any market to trade 40% below its own 200dma and so I did the calculation on the XGD now down 48.18% below its 200dma!
Of course there is a limited amount of selling that can be done and then there are no more sellers only buyers. This turns and then the short sellers have to purchase – so up it goes. This is like a law of physics as the energy reverses so must price.
Then markets reverse strongly and the greater the distance from the 200dma the stronger the reversal. I just finished buying today and look forward to this as you all do – those currently invested. Those that are waiting for the reversal to get set – I hope you don’t have long to wait long either.
20th June 10:35pm update I am up watching this unfold. Major tops and bottoms happen quickly as they say.
The market is betting that Fed tapering is here already and needs to settle down and it will however the momentum can push us to lower supports here and a painful wait for the GoldOz Funds. Of course the AUD POG low was far below us in April at A$1281.30. As I write this AUD gold is now a much more comfortable $1414.51 for our domestic producers.
This probably will not help gold stocks in the short term because sentiment is toxic. The XGD finished 180 points above the starting point of the rally that began in 2005 – the prime take off point for this index because that was when AUD gold started to rise.
The crisis in China may be spreading faster than the public knows as the 5 year spread on CDS’s (Credit Default Swaps) has suddenly widened on China by 27.85% to 131.78. This market is now increasing the betting that China will default with China now ranked as a higher chance than Thailand and Malaysia. China has widened more than any other sovereign today.
The yield curve is flattening in the US with shorter term rates closing the gap compared to long term rates. If this inverts it will be a very bad sign the authorities must be in panic mode.
12:10pm update completed purchase 16,600 PNA FundB @ 2.07 and 10k OGC @ 1.43 FundB. I am now set and prepared to face paper losses for what I believe will be a short while – maybe? This is what market lows look like after all.
11:14am completed purchase 50k BDR FundA and 50k BDR FundB all at 65.5c. Low cost, Brazil, pushing cost lower, scale, great upside exploration, do your own DD on this one.
10:49am update I just witnessed 1M RRL offers withdrawn at 72c and 72.5c simultaneously – now that influences people to sell at a lower price and I call that manipulation. Not that I care you just have to ignore the shock and awe applied by the big players and it is a good sign THEY WANT TO STEAL shares at this level. The sharks are circling and I want to place the rest of my capital during the chaos they create. Like the wolves running at the herd designed to scare and scatter so they can feed. We must be very close to bottom with large undisclosed bids (0u is the symbol on the depth) and “possible icebergs” etc scooping up the spoils.
20th June Fed speech highly optimistic on inflation and driving in a fog according to Bill Gross of Pimco (US$2T under management) as the problems are structural rather than cyclic. This move was more about Fx (foreign exchange) than gold as the AUD gold price shot up. Any short sell is another opportunity to buy XGD quality stocks I will complete purchases today. The Fed is trying to get markets to unwind slowly by warning them about taper however conditions are not what they seem – see newsletter 83 when I release I had to delay on FOMC speech until today.

19th 3:16pm update I think what you are seeing is strong accumulation combined with selective forced selling. The brokers know when a large US Fund is moving a parcel that HAS to be sold so they buy as it falls offering a lower and lower support. There is little liquidity so not many competing for the shares in PRU for instance. This will change it was hitting SAR recently and this has stopped as the chart stabilized. Gold down last night as you know but today the buying is stronger than the selling with RRL. RSG, KCN, BDR and TRY up.
11:00am update bought 35k PRU av 83c FundB
10:17am bought 35k PRU @ 85.5 FundA
19th June pre-open gold has fallen again slightly on speculation the Fed will taper. This is rubbish speculation and the gold stocks will not go to zero – not the viable ones which are selling at a deep discount. As we approach the end of the FY I am completing the buying for both Funds. I don’t think the buying gets much better than this as a whole on the sector. I am working on your next Newsletter with essential news on China and Aussie gold stocks.
2:32pm update bought 20k TRY @ 2.05 FundB. P: E 5.6 and yield 4.65% is attractive.
1:28pm update a beautiful small scale cup and handle has formed on RRL today in the 2 min tick chart. I have been telling you time is fractal. Patterns within patterns work short term on short term charts so break above 3.485 just condirmed a break to upside can happen today – on an intra-day basis. The smaller the time frame the less reliable.
18th June 11:33am FundA bought 10k RRL @ 3.46.
Gold looks ready to rise today in the short term – that is on a trading basis but we see it is now at the apex of a flag. FOMC meeting speech could go either way as they discuss the stimulus taper.
14th June 11am the XGD just registered its first rise on open after 6 losing sessions in a row. I am looking to balance the portfolios more now and scouring for new additions however they must have scale, stable or growing production a good balance sheet & low cost or high hedge price to sell their gold.
1:45pm update buy completed 30k RSG @ 0.675 FundB
1:21pm completed purchase 10k RRL @ 3.58 in FundA and 20k RRL average 3.59 in Fund B. Prices are absurd Fund boys trying to break everybody and I just want to buy when they do this!
FundA now holding $98,695 (9.8% cash) and FundB now $142,529 (14.25% cash).
Yield of some gold stocks higher than banks and P: E of RSG is now under 3. Will be revised down but not that bad in my opinion. Perhaps they need to write down NMG for tax benefit?
13th June 1pm the XGD just found the bottom line of a falling wedge. You must all be wondering where the low is – my view is it has to be close. We are now just above the lows of 04 & 05 and not far above the top of 2002 for this index now.
Bought for each Fund 30k OGC @ 1.60, 50k SLR @ 86c, 25k BDR (A) @ 66c and 30k BDR (B) @ 66c
4:22pm update this is a book build process I now have cash: $242,154 in A and $325,330 in B looking to buy SLR, AQG and BDR + more EVN in B to balance for a rally to come. May look at a few less loved producers PNA, more OGC etc just depends on how cheap they present.
12th Jun 4pm A huge amount of old supports in this area of the chart – basement buying so more bids in:
bought 45k RSG FundA @ 71c and 55k RSG (B) @ 71c before 4pm.
4:10pm close of auction update selective purchased to layer back in; bought 30k SLR @ 83.5 FundA and FundB. Note: approx 27% of funds still available FundB and 36% in FundB. I am targeting the lower cost producers.
3:58pm update bought 20k OGC @ 1.75 av FundA & 20k OGC @ 1.745 FundB
10:48am the XGD just hit 2614 pushed below the 2008 low, if this is not blood in the streets I don’t know what is. Gold looks ready to rise on the 30 min chart. COT at extremes now so any short covering could cause a rapid rise in our stocks. Low AUD assists the earnings of Aust based ASX gold producers even more. This looks horrible it must be time to buy as small traders have given up. Working on the worksheet and Educational Portfilio update next day or two as it is finally time.
11th Jun market open – Double and triple bottoms are very important. The Fund boys may push this lower to try to break holders in various stocks – this is how they behave, they are predators and this is not a level playing field. We have to look beyond that at times.
1:08pm update completed bought 50k EVN @ 84.75 FundA and FundB
12:43pm bought 20k PRU @ 1.05 FundB
12:14pm update bought 28k RSG @ 75.5c FundA and 30k RSG @ 75.5c FundB
11:37 report bought 32k RSG @ 75.5c & 20k PRU @ 1.045 FundA
7th Jun 11:25am update the XGD has now hit the low of 2008. Funds are buying this modestly now with stink bids, have to go out for about two hours (blast) will report purchases later.
7th Jun 10:25am update shock to gold sector with unprecedented fall on NCM miles below lower Bollinger Band has already recovered over $1. This sapped confidence of investors initially which may reverse with NCM today. I have stink bids in the market and will day trade this as gold broke that upper resistance out of the pennant. Signals are still short term.
7th Jun 8:30am the call made yesterday was correct on gold, AUD, Euro and USD so I am glad I stayed partly long overnight. This could signal a double buy divergence in the XGD so watch this carefully for strength.
10:50am update the dogs have been running at the pack to scatter and create a minor panic. This is probably a good sign but still high risk on these gold stocks. Remember the pro’s close and the amateurs open the market. RRL, RSG, SLR and PRU all recovered a little could support this theory.
6th June 9am gold is tightly wedged in the pennant formation and could go either way. No hint from the technicals I use. So I looked at the AUD: USD chart and I see the daily could easily head up as we have held a strong support area. The intra-day work I do also shows potential upside for the AUD here which implies USD down and gold upside break. The probability therefore favors a break up out of this pennant based on my technicals.
Against the USD: the Yen looks ready to fall and the Euro may have made a short term upside break so this is very hard to call – mixed signals and hence the pennant.
4th June 7:50am gold behqaving as expected and the stocks showed great signs yesterday. I took profits in trading only to see them continue to run despite the softening of the gold price. I am writing all this up in the next Newsletter as I see buy divergences across many stocks and they are starting to lift. Remaining cautious however left some positions open overnight and the price of gold looks like it will stay firm for todays trade. The momentum is finally with us today.
We shall see how the late afternoon plays out as the pro’s look at the futures for tonight and I will try to update you at the end of the day as I don’t expect to have the letter ready until tomorrow.