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Here are the links from this past week...
Gold Stocks Reverse at Resistance Targets.
Penned Friday afternoon. Gold Stocks hit our resistance targets and reversed course. History and the reversal at resistance argues for a correction. But did Monday's strength change that?
Video: Gold & Gold Stocks Breakout
Published on Thursday.
Video: Negative Real Rates, Investment Demand & GLD
We discuss how these drivers of Gold are connected and the huge inflows into GLD.
Interview with CrushTheStreet
This was on Tuesday. The link includes a list of topics discussed at precise times.
Podcast: Dan Norcini Analyzes Gold Market
We interviewed Dan on Friday to discuss all things Gold. Find him at traderdan.com.
Weekly Market Summary
Update from Fat-Pitch Blog. Focuses on stocks.
Gold & Confidence
Post from Steve Saville.
Premium Snippets
Chart 1...
Here is the daily chart of our Top 15 index.
The top 15 index has strong resistance at 170-180 dating back several years. The index tested 170 last week and closed lower. It touched 182 on Friday but closed below 171. The two support areas are 154-157 and 135-140. A retest of 140 would be a retest of that key breakout.
Chart 2....
Historical valuations for junior gold producers.
The chart plots enterprise value to cash flow from an index of 10 juniors. The low during the bear years was 4x-5x cash flow. During the bull years the valuation spent most of its time from 7x to 12x cash flow. Currently its about 5.5x cash flow. That means the recent rise can be mostly attributed to the Gold price and not from a valuation increase.
In TDG #455, a 34 page update we noted correction targets for the Top 15 index, the ETFs as well as our favorite individual stocks. Like the index, many stocks have two potential areas of support. We'll see if the stocks correct 10% or 15-20%.
As we noted last week the top 15 index has major resistance at 180 but the long-term prognosis has turned bullish. Whenever the index breaks above 180 (assuming later and not immediately) it figures to be an explosive move. Hence, it will be important to put cash to work during this period of weakness. One should be a bit patient also because maybe the sector takes a few months to consolidate the gains.
Last we mentioned optionality plays. In TDG #455 we included a report on a company that we own that is an optionality play. The stock corrected 20% so we took advantage of it. The stock is a speculation but it has an extremely low market cap and based on the economics of its project, the move above $1300 (and resistance at $1325) and then $1400 would be very significant. We projected if the stock trades at 0.25 NAV at $1750 (and we reduced the project's NPV by another 33%) the
market cap of the stock could rise nearly 10-fold. That will take time though. With optionality plays one has to be very patient and hold the position.
We reiterate what we said last week:
The good news is we think there will be another chance to buy these cheap in the months ahead. We own a few in the portfolio already, although only one is a true optionality play. If the sector has a correction or multi-month consolidation that will be the time to buy these because they could explode and keep going higher into 2017 and beyond. We will be covering these companies more in the weeks ahead.
Its a bull market and its best to buy and hold. Don't let the perfect be the enemy of the good. Don't wait for 30% weakness if you can buy something down 20%.
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