Buy Gold Stocks and Get Rich--Soon! (WAIT! STOP!)

Posted by WDonway 8 years, 8 months ago to Economics
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I chose that title ONLY for EMPHASIS. I RECOMMEND NO INVESTMENTS!

And yet... that is the message of Adam Hamilton, who to my mind is the most perceptive and persuasive analyst of gold and other precious metals, their stocks, and the forces--fundamental, emotional, technical (charts)--that drive them.

Between about 2001 and 2011, he guided subscribers to his two publications "ZEAL Intelligence" and the "ZEAL Speculator" to legendary gains in the gold and silver bull markets. He was boasting, rightly, about average gains of 50 percent on hundreds of closed trades.

And that was right through 2008 and its horrors because from the horrific bottoms hit by gold and the gold-mining stocks, investors, following Hamilton, saw a quadrupling of their investments through 2011.

Then, things changed. A valid correction began from a gold price around $1900 an ounce. Ah, but then the Federal Reserve began an intervention in financial markets that was historically unimaginable: its outright inflation, including three phases of "quantitative easing," beggared belief. ZERO interest rates for six years. UNLIMITED printing of new money. Virtual guarantees of more inflation anytime the stock market faltered.

Investment was SUCKED out of gold, commodities, and everything but the stock market: profits guaranteed by the Fed! And so the market levitated some 300 percent. Commodities and any possible alternative investment tanked. GOLD, the ultimate alternative investment, EXPIRED. For five years, now, but with huge acceleration since 2013, gold prices have fallen; prices of gold and silver mining stocks have done WORSE.

I will let Adam Hamilton explain it all in this Friday's free ZEAL essay (Hamilton has written this brilliant free essay every Friday for years: it is the best value on the Web.)

But just in the past few weeks, the long decline in the price of gold, and the gold- and silver-mining stocks, hit a PANIC CAPITULATION. This is exceedingly rare; and, though "conspiracy" theories abound in this area, the international synchronized HIT on gold clearly was orchestrated by very, very major players. It tore down through stop loss levels of long, long duration. While gold plunged in price, the already despised and hated gold- and silver-mining stocks were murdered.

Now: here is your bottom line. As a result of this gigantic sell off, the gold-mining stocks, whose profits depend upon the gold price, are selling at the average level they did when their only product, gold, sold for $300 an ounce. Today, after the vicious hit, gold sells for $1100 an ounce. Is it sensible that the gold miners should be priced at the same level they were when their product was less than one-third its present price?

Yes, there are a few miners of recent formation whose costs of production are very high--as much as $1000 an ounce. And at present prices, they are in trouble. Yes, sure, any sector has its outliers.

But the premier miners of gold, at this gold price, or even one considerably lower, can make big profits. So they are being sold at absurd prices, given their earnings.

So...after five long years during which those of us holding gold stocks have felt gutted like trout for the pan, and the market has come to loathe gold stocks, WHAT DO WE DO?

Between 2001 and 2011, stocks that make up the HUI gold-stock index gained 1600 percent. During those 10 years, the flagship S&P500 gained 14 percent.

Investors hold gold as the ultimate currency and safe haven, when governments inflate the money supply (like three rounds of open-ended "quantitative easing"), increase their debt levels (today the U.S. federal debt is $18 trillion), and threaten to throw their economies into chaos (e.g., Greece). And when stock markets are SUPER overbought (after three years of Fed driven levitation of the market).

So what do you think? Is gold forever the has-been investment? Only the stock market henceforth? And the U.S. dollar soaring? And the economy thriving? And any hedges against inflation or financial manipulation or economic chaos a thing of the past? Back when government somehow was unable to guarantee permanent prosperity as achieved by the Obama administration?

Or...is Adam Hamilton right, still pushing his analysis, still making the contrarian case that now, when gold-mining stocks are left for dead, the brave investor cal lay up a future fortune?

Here is his essay for this Friday, at the dark heart of the gold capitulation:
SOURCE URL: http://www.zealllc.com/2015/absgslev.htm


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  • Posted by BrettRocketSci 8 years, 8 months ago
    Hi Walter! Great to see you active here. I'm a distant and long time fan, you wouldn't know me I expect.
    Anyway, taking the long view of history and economics, plus remembering that there is a real objective value (use) of gold, doesn't it become clear that we are in the middle of a huge artificial manipulation of the market? That's my conclusion, based on what I see, hear, and know. We are in a massive reality distortion field (created by society and many influential powers), but when the reality of metals and economics ultimately prevail (which they have to do eventually), the owners of gold will be very fortunate.
    Thoughts and reactions?
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  • Posted by $ jbrenner 8 years, 8 months ago
    A well-timed piece, WDonway. The price of Au currently is going through a major decline. There was a post about a week ago by ObjectiveAnalyst regarding how a couple of banks held an exorbitant amount of derivatives on Au and Ag. There is a market manipulation going on that most do not understand.
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    • Posted by BrettRocketSci 8 years, 8 months ago
      Ditto, Jim. Strange, I didn't see your comment on the webpage before I wrote mine.
      There is a lot of "interesting" business going on in China and Russia regarding gold. And larger patterns in Asia. We read 1984 and say, "Of course 2+2=5 is false! I would never agree with that!" Yet the irrational math is all around us...
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  • Posted by $ CBJ 8 years, 8 months ago
    Compared to 100 years ago, gold is less attractive as a monetary instrument. As a unit of account, gold’s purchasing power today is much less stable than that of the major currencies. As a medium of exchange, any major currency is superior in terms of ease of use for transactions, as long as such a currency is not undergoing hyperinflation. As a store of value, gold is subject to as much risk as any other commodity, as we have discovered since 2011. Gold price manipulation may very well have been going on for decades, but the very fact that it can be so easily manipulated makes gold more suitable for speculation than for wealth protection.
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    • Posted by BrettRocketSci 8 years, 8 months ago
      Thanks, a compelling argument. Perhaps it's a longer term asset than most of us expect.
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      • Posted by plusaf 8 years, 8 months ago
        Research the 'investment value' of gold (or other commodities) at MarketMinder.com or any of Ken Fisher's writings on the subject.

        Long-term gains... mediocre. High prices make more mines viable; more production gluts the market, crashing prices and closing mines. Lack of production creates cyclical shortage, raising prices (and incenting mines to reopen.)

        If you like see-saws and merry-go-rounds, Go For The Gold!
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  • Posted by $ allosaur 8 years, 8 months ago
    I've been suspicious of all the "buy gold" and "buy silver" ads I've been bombarded with for over a decade.
    At this point I'm glad I did not buy anything.
    Also at this point I still don't feel enthused to buy either.
    And this time I actually have some money to spare.
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    • Posted by blackswan 8 years, 8 months ago
      All the economics point to gold and silver heading to the stars = eventually. Just wait until they bottom out, and then buy (and sit on them until they do head for the stars).
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  • Posted by DrZarkov99 8 years, 8 months ago
    Personally, I've invested in lead. Maybe I'm a pessimist, but if things do seriously collapse, gold isn't worth much. It's only a safe haven if a financial bottom occurs, while the structure of organized civilization exists to conduct trade. Worse than that, and stocks of food, medicine, and ammunition become far more valuable items of barter.
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  • Posted by Flootus5 8 years, 8 months ago
    Although I have been in the gold/silver mining business for decades, the financial side shenanigans can get pretty mystifying and frustrating. I know the technical mining side in and out and do have some thoughts on the financial side.

    Although we are living in an era of fiat money on a phenomenal scale, it is not without precedent. Fiat monies fail. Period. Without exception. Ignore history and it will repeat. The difference is this very scale.

    With this modern fiat experiment now at a global scale, the machinations to keep this house of cards/sand castle/ponzi scheme alive are raising the stakes to these unprecedented scales.

    The following quick interview is with GATA's Chris Powell on the latest (last sunday eve) and ever increasingly blatant manipulation of the Au and Ag markets in all their various forms:

    https://www.moneymetals.com/podcasts/...

    GATA is of course the Gold Anti Trust Action Committee. They have been around awhile and have been active in investigating the players in this game. Including one of my former gold mining employers.

    In short, the manipulation is getting ever more brazen and is a sign of desperation at holding this global fiat scheme alive.

    It is highly recommended to have some physical Au and Ag on hand. The best is just simple minted .999 pure gold or silver Eagles, Maple Leafs, Philharmonics, Krugerrands, etc. Good to have a range of silver dollars, 1/10 oz, 1/4, 1/2, 1 oz pieces to be able to function when heading to barter town. Certified mint rounds and bars are good as well.

    Historic gold coins are an entirely different type of market. Acquisition prices are currently driven by collector values which with many can exceed the melt value.
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  • Posted by RonJohnson 8 years, 8 months ago
    I have two guideposts when trying to decipher the future:
    1.) That which can't go on forever won't.
    2.) The time to buy is when there is blood in the streets.
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  • Posted by fivedollargold 8 years, 8 months ago
    Fivedollargold thinks of gold partly as an investment and partly as a form of insurance against catastrophy. He reduced his gold hoard, though, when its price started to decline thanks in part to Fed actions. Happy to see the author include gold mining stocks. They are often overlooked. One advantage of this form of owning gold is that they frequently pay dividends which you can't get from physical possession of the metal. Unfortunately, these dividends tend to be erratic and sometimes suspended. Production costs are considerable and variable as well, especially when you get a labor strike, mine explosion or flood. $5Au views these stocks as highly speculative and limited to a very small part of one's portfolio. If interested in these stocks, perhaps the safest play is with an exchange traded fund that holds a basket of these stocks. If you really want to speculate on the wildside, there is an ETF that holds only small gold mining company stocks.
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