Got Gold Report - Keep Focused on Gold, Silver This Summer

One writer's opinion about the current gold market, liquidity, and juniors. Because liquidity was the major crisis for most juniors over the last 12-18 months, what are we to make of the evidence presented that PK has secured bridge financing, and is negotiating long term debt with Fortis?

The full link below has the entire story with charts.

Got Gold Report - Keep Focused on Gold, Silver This Summer

By Gene Arensberg
08 Jun 2008 at 05:55 PM GMT-04:00


ATLANTA (ResourceInvestor.com) -- This week crude oil spiked 8% higher Friday into the high $130s; Senator Barack Obama cinches the Dem-Nom; an Israeli official says that bombing Iran’s nuclear facilities looks inevitable; the U.S. unemployment rate pops half a full percentage point to 5.5%; the buck gets thumped despite Bearded Ben’s early-week fireside chat (where he uncharacteristically mentioned the U.S. dollar) and then the U.S. Big Markets received a royal 400-point pasting late week.

Suffice it to say that this week was not conducive or supportive of general investor confidence on Wall Street. The news was, however, supportive for the two most popular precious metals, both of which tested technical support levels and support won the contest.

With Barack Obama now the apparent democratic nominee for president, fear of much higher income and capital gains taxes to come in 2009 showed up in earnest. Tax avoidance selling may escalate and remains one of the headwinds stock markets in the U.S. must deal with between now and at least November.

Long-term profits from capital gains are currently subject to a 15% rake by Uncle Sam. As mentioned before in this report, the fear on the street is that income and capital gains tax rates are going up big if the Dem-Nom actually becomes POTUS (president of the United States). Investment counsellors, fund and portfolio managers and individual investors probably don’t fear the tax increase itself as much as they fear the FEAR that kind of thing causes in financial markets.

The markets won’t be selling off so much because of the perception that income taxes will be going higher in 2009. That’s bad news, but not what money managers fear. They will be selling off because of the perception that other people will be selling because of that. Because of the fear that the markets will go much lower because of it. That fear is the kind that feeds on itself. As it does it could perversely play right into the camp of the future, socialist-leaning tax raisers.

Got Gold Report on Hiatus

Scheduling note: The principal author of the Got Gold Report will be traveling extensively over the next six to eight weeks. It’s time to take a short hiatus from writing in order to concentrate on that journey. Look for the Got Gold Report to return sometime in August or early September. Hopefully we’ll see you then.

Keep Focused on the Prize

Meanwhile, keep focused on the big picture and the prize during this best, most powerful secular bull market for precious metals in a generation.

Resource investors have been given one of the best opportunities of our own generation over the past nine months as so many of the promising small resource development and exploration companies have been decimated price wise because of the vacuum of liquidity which has occurred for nearly all speculative issues during the carnage spawned by the sub-prime credit crunch.

Ironically, just when these small, speculative issues should have been buoyed by strongly rising metals prices, the global, credit-market-inspired fears which helped to support the metals themselves took quite a toll on the little guys. That fear sucked enormous amounts of liquidity out of all speculative stocks, but very likely peaked (troughed?) sometime between January and April.

This report continues to believe that some of the now badly beaten up, but nevertheless still promising issues offer tremendous, multi-bagger opportunity for those who have the patience, intestinal fortitude and long-term minded determination to stick with them until liquidity returns to the tiny, very speculative and very thinly traded junior miners and explorers. Although no one can say for sure when liquidity and investor confidence will return to them, it is almost a certainty that it will. It may already be returning now.

The time to add them is when most everyone that needed to sell already has and their stock prices have been driven to ridiculously low levels. Like now for so many of the companies this report tracks daily on charts.

When confidence does return it can do so quite suddenly in particular issues, often without apparent warning and many times too fast for some investors to take advantage of it well. Consequently, it pays to add them in incremental bites or units AHEAD of when they “make the turn.”

In response to reader feedback, five such companies this report tracks were mentioned in “trade comments” in the technical charts for gold and the HUI on May 25. Links to those charts can be found below and one here. Judging by the action lately, when gold and silver had sold off and were challenging their respective technical support levels, these inexpensive miners and explorers held their ground (some even advanced modestly). There might not be all that much downside left in them this cycle, in other words.

Not that much more downside and probably quite a bit of upside is what we all should be on the lookout for, isn’t it? We’ll see if that strategy proves right soon enough.

Without getting into the argument of whether or not these small, liquidity-dependent stocks are being sold naked short, some of them are one good news surprise from a short squeeze rocket launch. That can happen anytime, even when a company drilling for one resource accidentally and unexpectedly drills through a couple of wide seams of coal, for example.

Bottom Line

Repeating from the last Got Gold Report two weeks ago: “When real interest rates remain negative, real inflation is escalating and the very inflationary effects of much higher oil prices have yet to really be felt; when gold production for the major producers is falling (that’s right, falling), central bankers are selling less than they are allowed to under the Washington Agreement II; when investors world-wide are trying to preserve their purchasing power in an era of continued reckless, competitive government fiat currency debasement; when investment demand for both gold and silver are strongly on the rise, it is a time for buying gold and silver, not for selling it. This is a gold and silver bull market and it won’t end abruptly anytime soon in this report’s opinion.

As of today nothing trumps gold and silver for places to store wealth (especially silver during its usual harsh corrections). This report continues to recommend buying/adding on significant to strong dips if possible, but add a reasonable percentage of gold and silver soon to one’s investment portfolio if you haven’t already done so (preferably into significant to strong pullbacks).”

Please see a little more about silver in the Silver Market Commentary section below.

On to some of the indicators.

http://www.resourceinvestor.com/pebble.asp?relid=43437