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Indeud, there is no doubt we stand on the edge of a knife. Curious formations abound, and give sign. Take heed…
And then there’s this from today:
And last… the full retrace of the original breakout in the $HUI, Gold Bug Index. Curiouser and Curiouser:
All the daily charts point to a bounce… not so much this final weekly above, but the circumstances of support could hold here as well. We have revisited the lows, as I’d feared we should, in order to better stabilize this rebound. Tomorrow should be interesting. Be well.
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Callin’ it like it is!
PPT called buy zones on many silver stocks.
including one with wicked OS accuracy thus far 😉
Thank you Jake, nice post and charts sir.. Doing my best to stay cement fortified with protective gear in place.
Just be ready to move if there’s more of the same tomorrow.
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Thanks… will do. Hoping for a bit of a reprieve, but not really expecting it.
PM trades are over. Time to move on to another asset. The CME came in and took away all the fun over the last few weeks, and now these commodities will never run wild again
Long run bud. Unless you think the US has the intestinal fortitude to stop defecit spending and pay down their debt, PM will rise through time, whether today or not.
sure, they rise over the long run. But the short run is going to destroy your capital right now. I would stay away from silver and gold right now.
I would stay away from any spelling bees.
lol
Thx 4 update JIG.
Thanks Jake! I’m 100 percent cash and licking my wounds. But you da best! I’m waiting for the A wave and thinking of how to short or do inverse etfs if the occasion arises in the near future.
Best!
I’d wait for a shake, as we are a bit oversold here. Let some of that work off. Cash is best for the near term, I think.
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The dollar is up .10 and this is the result in PM’s? AGQ looks very appealing at this level.
As I said, we are oversold here on the PM’s so you might wade in for a scrape, if you’re nimble.
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Anyone here, more familiar with the shiny metals than I, know of what kind of valuation is being put on 195,000 OZ annual production of Gold? Let’s say with a mine-life of 20 years or something.
Sounds like a relatively easy NPV equation.
What’s your angle?
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Angle is the Mt. Milligan project being developed by Thompson Creek. Preliminarily, they are expected to produce 195k OZ/year in late 2013 or early 2014… I am familiar with TC from a Molybdenum standpoint, but am intrigued by their diversification. Of course, part of their financing for the Mt. Milligan project comes from RGLD. So they will have sold 25% of the gold stream and get paid $400/OZ stepped up to $450/OZ after something like 575k OZ is mined….
A quick NPV using a 10% or 12% discount rate and 30 year mine life yields $1 to $1.2B present value. That is based on $1100 gold and constant production rate — which I know is unrealistic…… Also includes 2012 and 2013 as no revenue. They also are projected to mine 80mm lbs of copper per year, so that’s worth something. AT full tilt (per analysts) they will be 50% Moly and 50% Gold/Copper….
$1.2B CapEx cost (yikes).. Up from $950mm and likely why the stock has seen weakness in the last week or so.
Actually, I left out significant variables for that NPV calc…. That is the NPV if all of the revenue were to hit the bottom line…… Anyways, I will try to work on the spreadsheet at some point when I have more time.
You might also want to reconsider your cost of capital. I’d be closer to 18%, even blended with cheap debt.
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I’ve obviously not done a ton of npv calcs for mining companies. Out of curiosity, how do you determine cost of capital? Its always seemed like guesswork to me. The reason I chose 10-12 is because of my experience with other peoples models. Sorry for the sentence structure herre, typed on my phone.
Jake,
Interested in your debt and equity returns in you 18% cost of capital considering current div yields and govt bond rates. Is this based on them borrowing gold and repaying with future production? Been interested in this stuff ever since Sons of Gwalia blew up.
No, it’s just a higher risk, higher overhead business, so I randomly assigned it a higher equity cost of capital.
Admittedly, in today’s debt markets, 18% might be a tad high. Say 15-16% fully blended on a 50/50 debt equity basis.
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silver looks like the ole dead cat bounce pattern to me right now. It’s probably fgoing to take some time to clear out the hot money and people with massive gains in silver that finally say “okay fine I’ll sell at much lower pricess than the peak because I’m still up”. Eventually they’ll et washed out and things will ppossibly return, but you can’t just look at a knife stabbing in silver and expect the full recovery.
Agreud,
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Oh yeah, and then there’s the whole “the crowd is always wrong” factor and the volume of the SLV was up massively right before the massive drop on massive volume. The dumb money always gets in right at the peak!
you managed to drop the word massive three times into one sentence – that’s a massive amount dude
jpm and hsbc dodge the bullet again
oops I wrote in the wrong reply. MASSIVE mistake
Hey Mr Gint,
I appreciate your posts. Here’s my take on this beautiful moment in the markets. Money flow will be continuing shortly and hugely for those willing to wait for and pounce at the following setup…
Its becoming more apparent that there is an imminent and significant trend change underway. The reversal of this trend will change the direction of virtually every asset class, and will provide a multi-month opportunity for profit for those who are able to enter near the pivot. Over the past two years, a majority of asset classes have been influenced by a weakening US dollar. Currently, the dollar is trying to put in a bottom. Sentiment has reached negative extremes that mark multi-year bottoms, and the commodity complex and stocks are showing signs of topping with sentiment having become extremely positive and price volatility increasing. When the dollar puts in a bottom, the unwinding of the weak dollar trade will take several months, lasting until sentiment reaches the opposite extreme of overwhelming favoritism toward the dollar, which will likely be the point at which the dollar begins to once again roll over.
With this trend reversal, assets that have risen for the past two years will fall..
-Commodities (oil, precious metals, and agriculture)
-Stock sectors (energy, real estate, financials, tech, retail)
-The Euro
Here is a low risk tactic for getting in on this trend early. The dollar has recently bounced at 72.69. That currently marks a potential bottom. When the dollar has its next correction, if it manages to stay above the 72.69 pivot, and reverses upward through its peak prior to correcting, positions should be bought that favor a strong dollar.
Short commodities (oil, precious metals, and agriculture), stocks sectors (energy, real estate, financials, tech, retail) and the Euro.
To manage risk, position size should be determined by setting a stop 1% below the 72.69 level on the dollar (71.97), and calculating how large a position can be taken such that one’s loss if the trade goes against them is within one’s risk tolerance.
For example: With a total hypothetical account size of 100k, I might be willing to risk 2% of my account to open this trade. Thus, if I buy DUG at 32.00 (appx where it will be if the dollar breaks through its peak pivot), and set a stop at 25.00, (appx where DUG would be with the dollar at 71.95), I could open an initial position of 300 shares. 300 x 7.00 would give me a loss of 2100 or 2.1 percent of my account if the stop is hit. If the strong dollar trend continues, positions will be added when the dollar has corrections, and when it reverses higher after becoming oversold. New stops will be set below bottoming points. The reward to risk ratio is highly favorable if one waits for this setup.
An even more compelling oppty awaits when Silver and Gold reach their bottoming points, which is why I’m only willing to risk a small percentage of my portfolio. I want to preserve capital for that time, but I believe getting into a strong dollar trend offer the potential for substanttial gains in the meantime.
fubsy
Very nice Fubs, and very likely.
Be nimble, however, as its not clear as to when the dollar will take that fatal step.
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Hmmmmmm Its been awefully got-damn quiet around here Mr. Goldfinger. What say you man??
http://www.youtube.com/watch?v=HtPGIzLuBVQ
Here’s what I say and it is pretty elementary because I haven’t gone back to look at longer term charts to see where support is for the $HUI and $XAU. However, both have broken through their 200 day simple MAs on the 1-year daily and $HUI has broken through its 50 day sma on the 1-year weekly. Meanwhile, the dollar is flirting with breaking through that $76 line that Jake posted two days ago. It doesn’t look good and I like Fly’s idea of having a hedge against his silver positions as well. I bought very small in the precious metals this week – my plan is to stay small and see what the dollar does as I don’t see the need to rush into anything.
Nice summation. Thank you.
Prudent.
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Jake – You still a fan of AAU at these levels? PPT gives it Oversold every other day. You’ve said it could be the next EXK.
If you put 10% of your portfolio into a precious metal play.. would it be an ETF? Or a single PM stock?
I would put 0% of my money into precious metals plays right now.
Risk is very, very high across the board.
And I say that as a 10-year veteran PM bull.
Sit in cash for the next two months.