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The Best Way to Own Gold Today: 50% Upside If Gold Goes Nowhere

7/31/2013

COMMODITIES CORNER

Although we had to eat those puts and hold all that equity on our positions, the dividends have started to roll in along with the increase in the share prices. We anticipated a 30% recovery by the end of the first quarter and it looks like we are on schedule. If the share price increases 15% quarterly combined with the dividends, we should make our 60% yield target by the end of 2014. Beyond that point, any growth in the sector is gravy.

By Dr. Steve Sjuggerud

I LOVE a HATED investment... and today, gold is as hated as it gets. Investors are as bearish as they've been since 2005. Right now, "big money" futures traders have the smallest long bets on gold they've had in the last eight years. And when extremes like this come around, prices almost always bounce higher.

This is a simple concept I've seen play out over and over again in my few decades in the markets. A market can't peak until everyone is in the trade (like housing in 2007). Until that happens, there are always new buyers pushing the bubble to new heights. But when everyone is in – when there is no one left to buy at a higher price – that is when markets peak.

The same is true when markets bottom. The gold market will bottom when everyone who wants to sell already has... when there is no one left to push down prices. I believe we could be at that point right now in gold. And my favorite way to invest might surprise you. You see, the best way to own gold right now isn't shares of a gold fund. It isn't bullion coins. And it isn't gold stocks. Today, the best way to own gold is a little-known investment. With this opportunity, you could easily see a safe 50% return... even if gold prices go nowhere.

I'm talking about the MS65 Saint-Gaudens semi-rare gold coins we currently hold in my True Wealth portfolio. The story here is simple. These MS65 Saint-Gaudens are "semi-rare" coins. They're pre-1933 coins that are less common than your average gold bullion coin but less rare than one-of-a-kind collector's coins. Therefore, they're like a stock – they're easily tradable. As an "in between" coin, MS65 Saint-Gaudens consistently trade for a premium to the price of gold. The chart below shows what I mean.

Over the last 12 years, MS65 Saint-Gaudens coins have traded for an average premium over the price of gold of 142%. That premium has declined consistently since late 2008. But recently, premiums have turned upward coming off an all-time low. Take a look...

Today, the premium on MS65 Saint-Gaudens is around 60%... less than half the 12-year average premium. Said another way, these coins need to rise 50% just for the premiums to reach their long-term average and that assumes the price of gold goes nowhere.

If gold rises, hundreds-of-percent gains are possible. I think the crash in premiums is over and the uptrend is here. These coins are my favorite way to invest in gold right now. You have the upside potential of gold itself AND you have the upside potential (like a gold stock) if the premium expands. Investors hate gold today. That usually leads to a move higher in prices but even if I'm wrong, these MS65 Saint-Gaudens offer big upside.

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Today In Gold & Silver

7/29/2013

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COMMODITIES CORNER

There was a tiny rally in gold during morning trading in the Far East on their Friday, but starting around 2:00 p.m. in Hong Kong, the gold price began to develop its usual negative bias. That ended at the beginning of Comex trading...and the subsequent rally got cut off at the London p.m. gold fix.

Then at 10:45 a.m. EDT, the high-frequency traders showed up...and fifteen minutes later, the gold price was down another fifteen bucks. The low tick [$1,311.70 spot] came at precisely 11:00 a.m. in New York...and from there the gold price rallied quietly until 3:00 p.m. in the electronic market, when the price popped up over ten bucks in short order before trading quietly into the the close from 3:30 p.m. onwards.

The gold price finished the day at $1,333.80 spot...down 30 cents from Thursday's close. Volume, net of roll-overs was very light...around 88,000 contracts. But gross volume was monstrous.

Here's the New York Spot Gold [Bid] chart on its own...and the fifteen minutes downward price 'adjustment' between 10:45 and 11:00 a.m. EDT is more than obvious.

It was very much the same price pattern in silver, except the 10:45 to 11:00 a.m. EDT price adjustment was even more noticeable...and the subsequent rally didn't get silver back to anywhere near it's Thursday closing price.

Silver closed the Friday session at $19.99 spot...down 26 cents on the day. Gross volume was very decent...around 43,000 contracts. Net volume wasn't much below that.

Here's the New York Spot Silver [Bid] chart...complete with the fifteen minute price 'adjustment'.

Platinum and palladium did not escape yesterday's sell-off...although their respective price 'adjustments' came at slightly different times.

The dollar index closed late on Thursday afternoon in New York at 81.77...and when trading resumed in the Far East on their Friday morning, it spent the rest of the day chopping every-so-slightly lower...closing at 81.66...down 11 basis points. Nothing to see here.

It should be obvious to anyone but the willfully blind, that yesterday's price action in all four precious metals had nothing whatsoever to do with the goings-on inside the currency markets.

Not surprisingly, the gold stocks spent most of the day in negative territory...but popped into winning territory on the back of the surprise gold price rally late in the electronic trading session. The HUI finished up 1.29%.

The silver stocks weren't as fortunate...and Nick Laird's Intraday Silver Sentiment Index closed down 0.53%.

The CME's Daily Delivery Report showed that 45 gold and 30 silver contracts were posted for delivery on Tuesday. In gold it was Barclays as the only short/issuer...and the Bank of Nova Scotia as the only long stopper. In silver, it was the same story as it has been all month...the short/issuer was JPMorgan out of its client account, with 24 contracts....and JPMorgan was the big long/stopper with 22 contracts out of its in-house [proprietary] trading account.

For a change, nothing happened in the GLD ETF yesterday...and an authorized participant withdrew a smallish 289,388 troy ounces out of SLV.

For the fourth day in a row, there was no sales report from the U.S. Mint.

Over at the Comex-approved depositories in silver on Thursday...nothing was reported received, but 298,624 troy ounces were shipped out the door.

In gold, they reported receiving 32,137 troy ounces...and only shipped out a tiny 230 troy ounces.

The Commitment of Traders Report was a bit of a surprise in silver, as the Commercial net short position in that metal actually declined by 6.04 million ounces....and now sits at 60.7 million ounces in total. Based on the price action during the reporting week, an increase appeared certain. Ted Butler says that although this headline number looks great...under the hood, it wasn't quite as rosy.

In gold, the Commercial net short position increased by a healthy 1.0 million troy ounces...and the total Commercial net short position now stands at 3.47 million ounces. Once again Ted mentioned that digger deeper into the numbers showed that the deterioration was a bit worse than even this number indicates.

So far, this rally off the lows in both metals has been very orderly. I was hoping for disorderly, but up to this point, it hasn't happened.

There was a very interesting Reuters story out yesterday that really caught my eye...and here, in part, is what had to say..."Russia, Ukraine. and Azerbaijan are among eight countries that increased their gold holdings in June, data from the International Monetary Fund shows, reflecting strong interest on the part of emerging economies to own gold as part of their reserves....Data showed Russia's gold reserves climbed 0.3 tonnes to a total of 996.4 tonnes in June for its ninth consecutive monthly increase."

It was such a small increase that it didn't even show up as a rounding error in their June data when they updated their website on July 19th. Both May and June data showed their official reserves as 32.0 million ounces.

Since this is my Saturday column, I always use this occasion to empty out my in-box...and today is no exception.

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A NEW UPTREND IN GOLD

7/26/2013

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COMMODITIES CORNER

There's still opportunity left in precious metals; specifically gold. You just have to know when and what to buy and of course how to buy it.

Jeff Clark

On Monday, the gold sector did something it hasn't done since last November: It traded above its 50-day moving average (DMA) line. Most technical analysts view the 50-DMA as the line in the sand separating intermediate-term uptrends from intermediate-term downtrends. Stocks trading above the 50-DMA are in bull mode, while stocks trading below the line are in bear mode. So Monday's action is a BIG deal. And the rally should have folks looking to buy.

Last month, I explained how the failure of the sector to rally above its 50-DMA – when it was set up almost perfectly to do so – created a firestorm of selling pressure. I also told you that I believed the disappointing action in the gold sector could be setting up for an even more violent rally in the coming months. Here's what I wrote; This is the type of oversold condition you only see once or twice in a generation. Other than the liquidation event of 2008, we haven't seen anything similar to today's conditions since 1976.

Gold stocks, as measured by the Barron's Gold Miners Index (the "BGMI") – the most popular gold index in the 1970s – declined 67% from their 1974 highs to their 1976 lows. The index bottomed 44% below its 200-DMA. Using 1976 as a guide, there's still room for gold stocks to move slightly lower here. But by that same guide, gold stocks rallied more than 600% in the years following the 1976 bottom. So the sector could explode violently higher once the bottom is in.

Of course, it won't be a one-way move higher. The sector will have plenty of selloffs and back-and-forth action as it starts its new uptrend. Traders should look at any declines as buying opportunities – especially any declines that come back down and retest the 50-DMA – like the one we got Wednesday...

You can see how the Market Vectors Gold Miners Fund (GDX) broke above its 50-DMA (the blue line) on Monday. It extended that rally on Tuesday. Then Wednesday, it came back down and is now testing the 50-DMA as support.

That support should hold. I don't expect GDX to decline much more than a couple percentage points below its 50-DMA. If that turns out to be the case, Monday's action will prove to be the start of a new intermediate-term uptrend for the mining sector. And GDX should work higher toward its 200-DMA (the red line) over the next several months.

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Resource Stocks Are Below "End of the World" Prices

7/17/2013

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COMMODITIES CORNER

We recently closed out some positions and are preparing for the rally after Labor Day. Some past performers like Silver Wheaton Corp. are just too cheap to ignore. We have actually increased our equity positions on proven performers and dividend payers. Hold tight for the indicators and hedge with an option chain.

Month by month, commodity stocks are getting more hated by the market... getting to be greater values... and getting set up for at least 100% gains. In fact, for some companies, we're seeing 2009 levels of cheapness.

That sentence should make any trader take notice. Those levels preceded spectacular gains in commodity stocks. Regular Growth Stock Wire readers know that commodity stocks have plummeted this year. The big gold stock fund, GDX, is down 64% from its 2011 high. The S&P/TSX Venture Index, which we nickname "the Dow Industrials of small resource stocks," is 63% off its 2011 high. These large declines have created extremely bearish sentiment toward the sector. Bearish sentiments create great values. And great values create great trade setups.

One way to see where these setups are cropping up is to compare today's valuations to where these stocks were at the "end of the world" in 2009. In the table below, you'll find 10 major commodity producers that are selling at a lower price-to-earnings ratio now than they were in 2009.

To create the table, I used each company's actual 2009 earnings (before interest, tax, depreciation, and amortization – called EBITDA) and March 2009 share prices. That was near the bottom about as cheap as these things got. So any stock that's actually cheaper now is becoming a GREAT value.

But we aren't ready to buy yet. To borrow a wise market saying, a bear market in resource stocks can continue longer than traders can stay solvent. We don't want to speculate in this sector until we see an uptrend. With many resource stocks as cheap as they are right now, a new uptrend could send them hundreds of percent higher.

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YESTERDAY IN GOLD & SILVER TRADING

7/4/2013

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COMMODITIES CORNER

The gold price didn't do much in Far East trading, but tried to rally around noon in London...and then again once the London p.m. gold fix was in at 10:00 a.m. EDT...but both rallies met with the same fate...a seller of last report. After the second rally got capped, the gold price didn't do much for the remainder of the trading day in New York. Gold's high price tick of $1,261.00 spot came shortly after 10:00 a.m. EDT.

The gold price closed the Wednesday session at $1,252.50 spot...up $10.10 on the day. Not surprisingly, with everyone in New York heading out early, the net volume was a smallish 117,000 contracts.

The silver price followed a similar path...and the blast off after the noon London silver fix probably made it past the $20 spot price mark for a moment...and a not-for-profit seller had a throw a fair amount of paper silver at it before the rally collapsed. The rally at the 3 p.m. BST gold fix met the same fate...and after that, the price traded flat for the remainder of the New York session. Kitco recorded the New York high tick as $19.97 spot.

Silver finished the day at $19.72 spot...up 34 cents from Tuesday. Not surprisingly, with both rallies getting hit hard, net volume was pretty hefty...around 38,000 contracts.

Platinum got sold down a bit yesterday...and palladium traded sideways. Here are the charts...

The dollar index closed late Tuesday afternoon in New York at 83.54. Once trading began in the Far East on their Wednesday, the dollar rallied a hair...up to 83.68...by 9:00 a.m. BST in London. It was all down hill from there, with the spike low of 83.12 coming a few minutes after 11:00 a.m. in New York. The index recovered a handful of basis points from there...and closed at 83.24...down 30 basis points on the day.

The gold stocks chopped around in positive territory yesterday on Wednesday...and even though the gold price gained back every dollar it lost during the Tuesday trading session, the HUI was only up 1.68 percent by the early 1:00 p.m. EDT close.

It was the same story with the silver stocks. Even though the silver price gained back more than it lost on Tuesday, Nick Laird's Intraday Silver Sentiment Index gained back only 2.60%. It was down 5.01% on Tuesday, in case you'd forgotten.

The CME's Daily Delivery Report showed that Wednesday was another JPMorgan/Bank of Nova Scotia duet in both metals. There were 10 gold and 221 silver contracts posted for delivery within the Comex-approved depositories next Tuesday. In silver, Canada's Bank of Nova Scotia was the short/issuer on 202 contracts and JPMorgan Chase was the only long/stopper of note, with 192 contracts in its proprietary trading account and 22 contracts for its client account. There were no reported changes in either GLD or SLV yesterday...and no sales report from the U.S. Mint, either.

Over at the Comex-approved depositories on Tuesday, they didn't report receiving any silver...but they did ship 428,838 troy ounces out the door for parts unknown. They didn't report receiving any gold but Canada's Bank of Nova Scotia reported shipping out a couple of kilo bars (64.30 troy ounces).

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