A Mine is a Terrible Thing to Waste Bob Moriarty

A Mine is a Terrible Thing to Waste

Bob Moriarty

I was on the way to the field last week when the news came out about the surprise Swiss move to sever the tie with the price of the Euro. I suspect that move will be identified as the beginning of the end. In a matter of minutes, the value of the Swiss Franc rocketed higher by 30%. Other than perhaps Zimbabwe, I don’t think I have ever heard of any currency changing value by 30% in minutes. The Swiss Franc settled up some 15% for the day.
Many years ago I wrote a short piece when Enron collapsed I called “The End of the World. . . as we know it.” In it I bemoaned the danger inherent in having the incredible sum of $100 trillion in derivatives. Boy did I get it wrong. Derivatives made it as high as $710 trillion and now stand at a still incredible $691.492 trillion dollars. When that firecracker goes bang, it will rattle the windows in the houses on Orion’s Belt. We have a world economy of under $70 trillion, derivatives are a ticking time bomb and one went off last week.
According to the BIS, the derivatives on the Swiss Franc totaled $3.95 trillion in the last reporting period. A 30% loss would cost some poor sods $1.185 trillion, 15% loss would be a still hefty near $600 billion. Hedge funds are starting to pop like an overheated bag of popcorn. This could be the end.
It came to me that perhaps an investment  in silver and gold might not be amiss according to Exter’s Triangle. I recognized as early as 2002 that governments would attempt to fiddle with the economy when derivatives blew up. I also understood they are powerless.
The project I was going to see used to be the 2nd largest silver mine in Arizona. From discovery in 1892 until WW II caused the mine to shutter in 1942, the Commonwealth Silver mine produced about 16 million ounces of silver and 138,000 ounces of gold. The silver mines around Tombstone produced more silver however; we will have a drill rig on the ground of the White House before anyone allows mining in Tombstone.
Management of the privately held Commonwealth Silver and Gold optioned the Commonwealth Mine in late 2010 from another private company. They completed the purchase in 2011 right as silver topped. Actually their timing couldn’t have been any better, they were able to raise $9.5 million at the top and have watched as their brethren silver companies cratered as silver dropped over 70%. They came close to going public several times but the market wasn’t right. Meanwhile they did put the money raised into the ground.
The company filed an updated 43-101 and PEA study in April of 2014. It shows 389,000 ounce of gold and 32 million ounces of silver in M&I and an additional 67,900 ounces of gold and 4 million ounces of silver in the inferred category with about 1.05 million ounces of gold equivalent in total. At $1350 gold and $25 silver the project showed a blistering 58% IRR at a 5% discount rate and NPV of over $101 million. Capex would require about $27 million to production.
The numbers in the PEA are a bit optimistic for today’s prices but given the crash in energy prices, actually the NPV and IRR would be a lot higher today.
A mine is a terrible thing to waste and this mine will be back in production. It’s gone through several owners since closing in 1942 and come close to production several times. With current management in place, it will go public with more favorable prices. The management team has expanded the footprint of the project and believes the mine has district potential. Since the existing mine is on patented ground, permitting could be done in as little as two years. With more time and more drilling, the resource could be expanded and more ground permitted for mining on the surrounding BLM ground.

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Gold's New Friend: The Swiss Franc Stewart Thomson

Gold's New Friend: The Swiss Franc!

1. While I predicted a huge rally in gold would usher in the new year of 2015 in a spectacular way, the top bank economists have failed again.
   
   
2. Most of them predicted, “No rally for gold!” Their dire predictions in 2014 all failed to materialize, and this year they are off to an even worse start.
   
   
3. The bank economists, quite frankly, look ridiculous. They clearly need to reset their thinking about the powerful demand coming from billions of Chinese and Indian citizens, or they risk turning themselves into clownish figurines.
   
   
4. The daily chart for gold looks spectacular. Please . Note all the buy-side support lines that I’ve highlighted on this chart.
   
   
5. For another look at that daily chart, please . Note the green trend line. The breakout above that line will attract a large number of technicians and momentum-oriented hedge funds.
   
   
6. The commercial traders are shorting gold into this strength, but I suspect they may end up booking heavy losses on this trade. They don’t lose often, but they appear to be in some serious trouble here.
   
   
7. Please. Chinese hedge funds have emerged as a new potential threat, to the Western bank dominance of the world’s metals markets.
   
   
8. It’s impossible to know if these giant Chinese funds are running long gold/short copper trades of size. If they are, the Western banks may decide to fold on their short gold positions, rather than risk even bigger losses.

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Gold Market Update Clive Maund

Gold Market Update

originally published 
 
Nothing has been done to address the structural inadequecies and distortions that lead to the 2008 financial crisis – instead our leaders have resorted to the procrastination made possible by turning to drugs, specifically Quantitative Easing, which has enabled them to clamp interest rates at 0 to prevent the already unserviceable debt load from compounding out of sight. Spearheaded by the US, this money printing policy has now become standard practice around the world, with Europe and Japan following suit in a big way. The notion put about that all this newly printed money can somehow be contained within banks is nonsense as demonstrated by the soaring prices of stockmarkets in developing markets until recently and in various asset bubbles like the boiling London and New York Real Estate markets.
This global procrastination worked until recently, but now this reckless and economically suicidal policy is visibly coming apart at the seams – it didn’t work for Robert Mugabe’s Zimbabwe and it won’t for anyone else either because it is a flawed scheme to avoid facing up to the consequences and fallout from one’s actions. The only reason that the ship hasn’t sunk so far is complex financial engineering that has enabled the rot at the heart of the system to be obfuscated for as long as possible, but now the markets have gotten control of the ball and things look set to get ugly fast.
Of course, no-one really wants them to grasp the nettle and seriously attempt to rectify the mistakes of the past, because they have left it so late to do this that it would lead to an earth shaking deflationary implosion that would economically lay waste most of the planet. This being so they have no choice but to continue with more of the same, and any attempt by the Fed to resist the inevitable QE4 will lead to the markets getting it in an arm lock and forcing it to comply and cough up. This process has already started as deflationary forces have been gaining ascendency. A symptom of these gathering deflationary forces is the crash in  and the failure of key support in copper about a week ago, which threatens to crash too unless something is done. The big question is when will they (the Fed) capitulate and reverse course – will they do so immediately to keep the game in play, or will they let the US stockmarkets crash first, so that they can use it as a justification for their actions? Europe, which is already being ravaged by deflation, has already surrendered and is preparing to do massive QE, which is why the euro is so weak.
Last week we had the bombshell development of the Swiss abandoning their Franc peg to the euro. This was a development with grave implications. They know that this move will severely damage their exports and tourism industries, but they have done it because they realize that it is better to take to the lifeboats now than go down with the Titanic (the euro). This was a major vote of no confidence in the euro that has kicked out an important prop from under it – and it's nice to see the Swiss going back to their independent mountain ways – now all they have to do is kick out the international snoopers spying on bank accounts to restore the confidence of the global tax dodging community.

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Dollar’s Major Breakout and Gold’s Simultaneous Rally Przemyslaw Radomski

Gold & Silver Trading Alert
Dollar’s Major Breakout and Gold’s Simultaneous Rally

Przemyslaw Radomski

Briefly: In our opinion no speculative positions are currently justified from the risk/reward perspective. Being on the long side of the precious metals market with half of the long-term investment capital seems justified from the risk/reward perspective.
Gold soared on Friday once again and so did the USD Index. It was yet another day of the two rallying together, which is a very bullish development. What’s next?
We generally don’t post alerts when the markets are closed, but we decided to update you this time anyway, as quite a lot happened last week and we thought that posting a comment today would be useful to you.
The medium-term outlook has improved greatly, but not based on what most market participants (individual investors, mutual- and gold hedge funds, etc.) think. The most recent move higher is not what improved it – we have already seen significant – yet counter-trend – rallies in the past years, which didn’t change the medium-term trend, so why should this one be any different? The real difference comes from the situation in the gold-USD link and the gold link to the bond market. Let’s start today’s alert with the USD Index (charts courtesy of http://stockcharts.com).

The USD Index moved and – more importantly – closed the week above the resistance level. We have just seen a breakout.
The USD Index had been trading below the resistance for some time and it paused at the cyclical turning point. Perhaps the pause was the effect that the turning point had – the trend might have been too strong for this signal to generate a decline.
The breakout has not yet been verified, but a weekly close above the resistance (quite visibly above it) is quite meaningful. The situation is not very bullish yet, but it’s more bullish than not at this time. The next resistance is slightly above the 96 level, so there’s quite significant upside potential.
The above has bearish implications for the gold market, however, given gold’s recent ability to rally along with the USD, we could expect the bearish implications to be delayed. Let’s check the signal from the bond market.

Let’s be clear – the above chart doesn’t have meaningful short-term implications. It covers many years to filter-out the short-term price sings and focus on the main trends. The relationships between major economic indicators, such as gold and bond prices, don’t have to work in the short term – they are not technical tools. The way the two markets react to each other can tell us something about the major trends, though.
We divided the entire period into 4 sub-periods. Before mid-2011 both gold and the ratio of 20-year to 1-year bond yields rallied. Then they both declined for about a year. After that the ratio moved higher, while gold declined. The early divergence was a bearish sign indicating a major decline.
In the final weeks of 2014 we saw something different. The gold market finally reacted to the moves in the bond market. The huge decline in the ratio wasn’t able to push gold price lower but gold reacted visibly to a move up in the ratio. They are both rallying together this year. This suggests that the next big change in the precious metals market “is here” and that it was a very good decision to get partly back on the long side of the market with the long-term investments a few tens of dollars ago in the case of gold.
On the above chart, we’ve marked the only situation that was similar to the current one – the 2012 bottom. Both the ratio and gold bottomed after a visible decline and then started to rally together. Back then it meant that a rather significant rally would follow in gold. However, there was some back and forth trading before gold moved much higher.
Will gold decline or rally shortly?

Gold moved visibly higher above the declining resistance line and ended the session close to the 38.2% Fibonacci retracement level based on the 2001 – 2011 rally, which was a significant support at the time and now could provide resistance. The next significant resistance is at about $1,300, which is not only a psychologically important number (being a round one) – it’s also where the rising very long-term resistance line is currently located.
Please note that the long-term cyclical turning point is very close. The previous turning point was due in mid-2013 and the major bottom materialized several weeks after that point. Perhaps it will be the case once again, which means that we could see a bottom after April or so. It’s not a very strong bearish factor, but we’d say it’s something worth keeping in mind – especially given the breaking-out USD Index.

Gold broke above the medium-term resistance line and several other resistance levels, but this move has not been verified, and if the USD Index keeps rallying, it might not be verified. On the other hand, the self-similar pattern that we marked on the above chart in green and red remains in place, which has bullish implications as back in Feb. 2014 gold rallied even higher before stopping.
The RSI indicator just moved above 70, which means that the rally could pause or stop shortly. In June 2013 gold kept rallying for a few more weeks, but it didn’t move much higher. We could be in this type of situation once again.

In our previous alert, we wrote the following:
Because of the rising red support line, the Dow to gold ratio chart tells us that this ratio could move lower, but it’s not likely to move much lower before stopping or pausing. This means that gold could move higher but not likely much higher before stopping or pausing.
Gold has indeed moved higher and the ratio has moved lower, reaching the support line. The implications are bullish for the ratio and bearish for gold.

Silver moved back slightly above the very long-term, rising resistance line, which seems bullish, but let’s keep in mind that silver tends to “fake out” instead of “breaking out”. Breakouts are often signs of a looming decline, which makes us skeptical toward this “traditionally bullish” development.

Gold stocks corrected about half of their recent decline, but the strongest resistance was not reached. The 3 important resistance levels intersect close to the 210 level: the 61.8% Fibonacci retracement, the 50-week moving average, and – most importantly – the declining long-term resistance line. If gold stocks manage to break and confirm the breakout above this level, it might serve as a confirmation that another major upswing is underway. For now, the current rally looks similar to the corrections that saw in July 2013, in late-2013 to early-2014, and in June 2014.
Summing up, while there are some signs that this rally might be the beginning of another major upleg in the precious metals market, it’s still more likely than not that it’s just a correction. Gold seems to be once again responding very positively to the signs from the bond market, but if the USD Index keeps rallying, the yellow metal might give up its recent gains and decline once again. Whether it declines significantly or not, it could be the case that we’re just one decline away from the final bottom before the next major rally.
That’s the clearest thing that we can say based on the current situation in many markets. Things are not as clear regarding the very short-term outlook. Gold could decline based on the USD’s strength or simply because the short-term breakouts have not been confirmed yet. It could move higher based on the self-similar pattern that has been working very well in the recent weeks. It seems that “when in doubt, stay out” is a justified approach at this time. Things might become clearer in the coming days or weeks. We’ll keep you – our subscribers – informed.

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