Comex Gold (Click to enlarge)

London Gold (Click to enlarge)

"Nobody said it was easy, no one ever said it would be this hard - take me back to the start."

--- Chris Martin: Coldplay "The Scientist"

After a less than stellar 2012 (to say the least) for the precious metals space, it's refreshing to hear such positive (and quite frankly bullish) comments from someone like Alf Feild. Mr.Field is a master of two of John Steuernol's Law's of Influence (Scarcity & Knowledge Supremacy) as his accuracy and timing over the past decade is truly remarkable.

As many of readers know I hold the forecasting ability in the precious metals space of the following gentlemen in very high regard:

• Alf Field
• Ian Gordon
• Richard Russell
• Dr. Michael Berry
• James Turk
• Martin Armstrong
• Ross Norman
• Jim Sinclair

If some of our newer readers are less familiar with Elliott Wave Theory & Kondratieff Long Wave cylces, we have included a brief summary below:

The Elliott Wave Theory

"Ralph Nelson Elliott developed the Elliott Wave Theory in the late 1920s by discovering that stock markets, thought to behave in a somewhat chaotic manner, in fact traded in repetitive cycles. 

Elliott discovered that these market cycles resulted from investors' reactions to outside influences, or predominant psychology of the masses at the time. He found that the upward and downward swings of the mass psychology always showed up in the same repetitive patterns, which were then divided further into patterns he termed "waves".

Elliott's theory is somewhat based on the Dow theory in that stock prices move in waves. Because of the "fractal" nature of markets, however, Elliott was able to break down and analyze them in much greater detail. Fractals are mathematical structures, which on an ever-smaller scale infinitely repeat themselves. Elliott discovered stock-trading patterns were structured in the same way.

Market Predictions Based on Wave Patterns

Elliott made detailed stock market predictions based on unique characteristics he discovered in the wave patterns. An impulsive wave, which goes with the main trend, always shows five waves in its pattern. On a smaller scale, within each of the impulsive waves, five waves can again be found. In this smaller pattern, the same pattern repeats itself ad infinitum. These ever-smaller patterns are labeled as different wave degrees in the Elliott Wave Principle. Only much later were fractals recognized by scientists.

Elliott Wave Theory Intro (Click play button)

Series of Wave Categories

The Elliott Wave Theory assigns a series of categories to the waves from largest to smallest. They are:

• Grand Supercycle
• Supercycle
• Cycle
• Primary
• Intermediate
• Minor
• Minute
• Minuette
• Sub-Minuette

To use the theory in everyday trading, the trader determines the main wave, or supercycle, goes long and then sells or shorts the position as the pattern runs out of steam and a reversal is imminent."

--- Investopedia: Elliott Wave Theory

It is the opinion of this publication that Alf Field is the world foremost expert in Elliott Wave analysis applied to precious metals forecasting.

5 year gold chart with Fibonacci technical points (Click to enlarge)

The Longwave Principle is based on the belief that the Kondratieff Cycle repeats itself over time. While the Kondratieff Cycle applies to past events, the Longwave Economic and Financial Cycle looks at multiple factors to determine where we are in the present and projects into the future.

Between 1923-25, Nicolai Kondratieff discovered a long-term economic cycle primarily based on commodity prices, interest rates and trade beginning in 1789. Ian Gordon has improved upon this concept by including multiple factors not previously recognized. Based on his interpretation of the Longwave cycle, Ian has accurately predicted the current economic downturn and credit crisis.

Ian Gordon's Kondratieff Cycle (Click to enlarge)

The Longwave Principle is a predictive model that includes financial, investment markets and psychological components to pinpoint exactly where we are and where we are going in the cycle. Defined by the four seasons of Spring, Summer, Autumn and Winter, the Longwave Economic and Financial Cycle is a naturally occurring process that repeats itself approximately every 60 - 70 years. Analogous to the human lifecycle, it has been consistent, repeating itself four times since 1789. While we can't change the cycle, understanding the Longwave Principle does allow us to prepare an investment strategy which coincides with the changing of the economic seasons. Let us help you with your financial reporting and financial analysis today."

• http://longwavegroup.com/longwave-principle

The Gartman Letter October 18th, 2012
Dennis Gartman: Editor/Publisher

Sama Resources Closes CAN$4,402,000 Private Placement with Minmetals Resources Ltd.
May 23, 2012 Sama Resources Inc. Press Release 

--- Terrance Bell - Metal Profile: Nickel
http://metals.about.com/od/properties/a/Metal-Profile-Nickel.htm

Worlds Top Nickel Producers: 

 

1. "MMC Norilsk Nickel - 286MT

Norilsk Nickel is the world’s largest producer of Nickel and palladium and one of the largest producers of platinum and copper. Norilsk Nickel's key Russian production facilities include the Polar Division and the Kola Mining and Metallurgical Company.
Company Profile: Norilsk Nickel
Company Website: www.nornik.ru 

2. Vale SA - 206MT

Vale is the second biggest mining company in the world and the largest private company in Latin America. Headquartered in Brazil and operating in 38 countries, Vale now employs over 126,000 people, including employees and contractors. We are the global leader in iron ore and the second biggest Nickel producer.
Company Profile: Vale SA
Company Website: www.vale.com 

3. Jinchuan Group Ltd. - 127MT

The Jinchuan Group is China's largest producer of Nickel, cobalt and platinum metals, as well as China's third largest producer of copper. The Gansu-based company has operations in 24 international locations and had gross sales exceeding US$ 14 billion in 2010.
Company Website: www.jnmc.com 

4. Xstrata Plc - 106MT

Xstrata plc (Xstrata) is a major international producer of base and platinum group metals. With gross revenues of over US$ 30.5 billion (2010) and over 70,000 staff, Xstrata is one of the world's largest metals companies.
Company Profile: Xstrata plc
Company Website: www.xstrata.com 

5. BHP Billiton Ltd. - 83MT

BHP Billiton is one of the world's largest mining and resource companies with roughly 100,000 employees in over 25 countries. The company is headquartered in Melbourne, Australia and listed on the Australian Securities Exchange (as BHP Billiton Ltd.), as well as on the London Stock Exchange and the Johannesburg Stock Exchange (as BHP Billiton Plc).
Company Profile: BHP Billiton
Company Website: www.bhpbilliton.com 

--- Worlds Top Nickel Producers
http://metals.about.com/od/suppliersaz/tp/10-Biggest-Nickel-Producers.htm 

Johnston-Sequoia Commentary:

• Nickel
• Copper
• Cobalt
• Iron ore
• Chromium
• Scandium etc. 

• Substantial additional drilling (Phase 2) consisting of 42 RC and core drill holes totaling 5105 m (ref. Northern Vertex News Releases);
• Comprehensive underground channel sampling consisting of 148 five-foot (1.52 m) intervals oriented across and along the strike of the deposit;
• Reliance on post 2004 drill results (161 RC and core holes) and underground sampling to calculate measured and indicated resources.

• Infill drilling to render 'inferred resources' into the 'indicated' category;
• Continued scoping and baseline studies to advance the permitting process;
• Comprehensive metallurgical testing to determine precious metal recoveries;
• Preliminary pit design for open-pit, heap-leach mining and;
• The initiation of environmental impact and feasibility studies in a timely fashion..."
--- September 10th, 2012 Northern Vertex Mining Press Release

 

• Measured ("M"): 232,100 ounces contained in 2,964,000 tonnes at a grade of 2.44 g/t gold
• Indicated ("I"): 544,000 ounces contained in 8,664,000 tonnes at a grade of 1.95 g/t gold
• TOTAL M+I: 776,100 ounces Measured and Indicated at a grade of 2.07 g/t gold
• Inferred: 231,900 ounces contained in 4,024,000 tonnes at a grade of 1.79 g/t gold
• Wide open for expansion

Please click on image to enlarge 3 year chart - TME.V

Ian Gordon

Why I like Temex Resources Corp (TSX.V: TME)

 

 

"Every now and again, one is lucky enough to discover a precious metals company with outstanding assets that has been overlooked by the investment community. Temex Resources is, in my opinion, one such company.

 

The company’s most prospective properties are all situated in Northern Ontario along the prolific Abitibi greenstone belt which has already produced more than 150 million ounces of gold.

 

Juby Lease Property-Gowganda NE Ontario. Temex 100%

 

The Juby Main Zone has an indicated resource of 14.1 Mt grading 1.36 g/t gold (614,000 oz) and an inferred resource of 18.3 Mt grading 1.14 g/t gold (602,000 oz). The total is, therefore, in excess of 1.2 million oz gold. These grades are similar to the grades at Detour Gold’s massive Detour Lake gold deposit (17.7 million ounces gold). The indicated resource exists above 350 metres and feasible to open pit operation.

 

There is an excellent opportunity to grow this resource in newly discovered gold zones along strike and in parallel structures.

 

Juby Joint Venture Property. Temex 60%, Goldeye 40% (Temex is the operator)

 

This joint venture property surrounds the Juby Lease Property and Temex is the operator. The company recently announced that multiple new priority targets have been identified as a result of ongoing and expanded surface work.

 

According to Ian Campbell, Temex’s President and CEO, "our intent is to discover new gold zones that will add to the gold resources already established on our 100% owned Juby main zone deposit where we are currently drilling." Oct 19th, 2010.

 

The Shining Tree area, where these two properties are situated, is highly prospective as evidenced by increased exploration activity that is currently proceeding throughout the area.

 

Whitney Joint Venture Property, Timmins, Ontario. Temex 60%, Goldcorp 40% (Temex is the operator)

 

This property historically produced 2.3 million gold oz with 1.7 million ounces of that production coming from the Hallnor mine with an average grade of 0.40 oz per ton. This was the highest grade from the 1 million plus oz gold producers in the Timmins camp. These past mines included the Hollinger mine, which produced gold for 59 years, the McIntyre mine with a production life of 77 years, the Dome mine which is in its 100th year of operation and the Pamour mine which produced gold for 64 years. The production life of the Hallnor mine was 32 years. Gold production from the Timmins camp has already produced in excess of 70 million ounces.

 

The lower Hallnor Mine is wide open at depth and the joint venture partners have determined to work aggressively to advance the exploration around and at the depth of the old mine workings.

 

In addition to the Hallnor Mine, there are another two past producing mines on the Whitney property. These are the Broulan Reef and the Bonetal mines and the joint venture partners expect to aggressively conduct exploration in these two locales as well.

 

Gowganda Silver Property, situated between Timmins and the Juby property. Temex 100%

 

This property historically produced 41 million ounces of silver at an average grade of 22 opt and has a pre-NI 43-101 inferred 2.6 million ounces of silver in the tailings. There is excellent exploration potential for additional vein discoveries in several areas of the property; one drill hole completed by Temex intersected 12,541 g/t (403 opt) over 0.3 metres while others reported up to 32,316 g/t (1,039 opt) over 0.30 m.

 

The current market cap of Temex is about $40 million (CAD), which effectively values the gold in the ground on the Juby property at about $33 per ounce and gives no added value for any of the other outstanding properties. We have recently noted a report from a major Canadian brokerage firm that values gold in the ground at $100 per ounce. By that measure alone Temex’s current share price is trading at about one-third of its value and that doesn’t take into consideration any value for the other excellent properties.

 

--- Ian Gordon: Why I like Temex Resources Corp (TSX.V: TME)

 

Temex Resources (TSX.V:TME) Closing price Thursday September 6th. – $0.215. Market cap equals $27 million (CAD).

 

"On Wednesday September 5, 2012 Temex Resources released a NI 43 101 resource for the upper Hallnor deposit on the Timmins, Whitney property, of which it owns 60% and Goldcorp 40%. This is an open- pit deposit and reaches to a depth of 550 meters. In the measured and indicated category the resource totaled 776,100 au ounces grading 2.07 grams and in the inferred category there are an additional 231,900 ounces grading 1.79 grams. Ian Campbell, President and CEO commented, "This is an important milestone for the company since it is the initial resource estimate based on our exploration efforts on this highly prospective property. The high-grade near surface gold resource announced today is just from the upper Hallnor Mine area, the portion of the property acquired in July 2010 and validates our thesis that Temex controls a very attractive asset strategically located in Canada’s most prolific gold mining district. We are particularly pleased with the high grade gold of the resource amenable to open pit mining, which exceeds those that have been recently mined directly along strike to the east at lower gold prices. Furthermore, excellent potential for expansion of the resource has been demonstrated by our drilling along a 1.5 kilometre strike length to the west, including the Upper Broulan Reef Mine where we have intersected gold mineralization with drill results up to 37.90 g/t gold over 8.8 metres." Wow, that’s great, but would you believe it the stock price fell $0.05 following the news announcement. Anyway, with the 600,000 gold ounce which Temex owns on the Whitney property (60% of 1 million ounces) and its 100% owned 1.8 million ounces on the Juby property, Temex has a combined gold inventory of 2.4 million ounces. The market is assessing Temex a value of just $11.25 (U.S.) per ounce in the ground. In other words, the stock price is very cheap. I own shares in Temex Resources."

 

--- Ian Gordon: Ian's Investment Insight's: September 13th, 2012

 

Please click to enlarge 6 month chart - TME.V

Drilling Highlights:

Broulan Reef

• TW08-67: 33.46 g/t gold over 5.40 metres including 204.00 g/t gold over 0.70 metres

Hugh Pam

• TW05-11: 8.41 g/t gold over 27.50 metres including 17.17 g/t gold over 12.00 metres and 141.28 g/t gold over 1.00 metre

Lower Hallnor 19 Vein

• TW08-77: 21.10 g/t gold over 6.55 metres including 270.62 g/t gold over 0.50 metres

Q Zone

• TW09-78: 17.71 g/t gold over 2.90 metres including 90.35 g/t gold over 0.50 metres
• TW10-94: 180.00 g/t gold over 0.50 metres
• TW11-154: 122.85 g/t gold over 0.50 metres

Terraco Gold Corp. (TSX.V: TEN | US: TCEGF) announced "additional assay results from the 2012 drill program completed at its Almaden (Nutmeg Mountain) Project located in Washington County, Idaho. The Company is reporting the remaining 6 holes of the spring 2012 core drilling program.  

Highlights Include:

Hole TAL-787C intersected 60.4 m averaging 1.065 gpt gold, including 21.3 m averaging 1.881 gpt gold with 13.7 m of 2.246 gpt gold;

Hole TAL-792C intersected 76.8 m averaging 0.939 gpt gold, including 12.2 m averaging 1.435 gpt gold, 4.6 m of 1.209 gpt gold, 7.6 m of 1.662 gpt gold and 1.5 m averaging 2.270 gpt gold;

Hole TAL-793C intersected 48.8 m averaging 0.944 gpt gold, including 18.3 m averaging 1.373 gpt gold and 3.0 m averaging 1.625 gpt gold;

Hole TAL-794C intersected 24.4 m averaging 1.000 gpt gold, including 10.7 m averaging 1.409 gpt gold, and an additional 13.7 m of 1.794 gpt gold; including 1.5 m of 10.800 gpt gold.

"We're very pleased with the success of the spring 2012 drill program.  Today’s drill results continue to show good gold grade over longer widths within the deposit. In addition, this round of drilling encountered some very interesting higher grade, sulfide rich breccia which could represent a broader network of near vertical discrete feeders along high angle structures.  This interpretation deserves further study and will form part of the ongoing decision-making process for further exploration."

--- Todd Hilditch, President and CEO of Terraco Gold Corp.

http://www.TerracoGold.com/i/projects/05sept2012_dh_map_pr.jpg

The current Nutmeg Mountain National Instrument 43-101 Resource:

Measured resource of 239,000 ounces of gold (10,810,000 tons grading 0.022 opt);

Indicated resource of 625,000 ounces of gold (32,240,000 tons grading 0.019 opt);

Inferred resource of 84,000 ounces of gold (5,270,000 tons grading 0.016 opt); and

Total gold resource of 948,000 ounces (48,320,000 tons grading 0.020 opt)."

September 6th, 2012 Terraco Gold Press Release

Ian Gordon

Ian's Investment Insights - Terraco Gold: TEN.V

"Terraco's Almaden property in Idaho hosts an NI 43-101 Resource of a little less than a million ounces in the measured/indicated and inferred category within 90 metres of surface, which makes it amenable to open pit mining.  Charles Sulfrian, VP Exploration and Dr. Ken Snyder, consulting geologist who was instrumental in the famous Ken Snyder ("Midas") Mine discovery owned by Newmont in Nevada believe that Almaden is a Midas look alike, in other words the higher grade feeder zones lie below the disseminated lower grade surface deposit.  Terraco has a call on a 2.5% NSR on the joint venture (Barrick Gold and Midway Gold) on 75% and 1% on the remainder of the current 4.1 million ounce deposit at the Spring Valley Project.  Conservatively, this give these NSR's a $80 million (CAD) for a $13 million (CAD) expenditure. As the deposit grows these NSR's become even more valuable.  Terraco also owns the Moonlight Property immediately to the north of the joint venture Spring Valley Project and in November Barrick is scheduled to start drilling close to the property boundaries.  I have a high regard for Terraco's management team led by Todd Hilditch.  I own shares in Terraco."

--- Ian Gordon

Ian's Investment Insights - Terraco Gold: TEN.V

Richard (Rick) Mills

Terraco Gold: TSX.V: TEN

"Terraco has just released the final assays from its 30 hole 2012 Almaden drill program.

All but a few were drilled from surface to 100 meters (300ft). The purpose was to get a better representation of grade – 500 of the 887 historical holes drilled at Almaden were Reverse Air Circulation (RAB) and most of the rest were Reverse Circulation (RC) holes. It was thought core drilling would provide a better representation of grade.

It seems the plan was successful, recovery was better over longer widths, 20-40 percent better. With such a substantial improvement in grade the resource should grow.

The two historical knocks - other than a low gold price - against anyone ever putting Almaden into production were grade and recovery. Well plus one gram per tonne gold with today’s gold price of close to $1700 an ounce would seem to be very doable, if historical recovery of 63-65 percent can be improved upon.

Improved metallurgy – recovery – was the second intent of this year’s overall program at Almaden. In past recovery tests material was combined into one column for leach testing and wasn’t left for the full 90 days. The oxide, the sulphide and the mixed oxide/sulphide material were all lumped together and test results were less than satisfactory. TEN believes that by separating the three materials, and testing separately, (in a production scenario, all three would be treated separately), recovery would improve. We’re waiting for results.

Two positive notes are the four larger holes (4”) drilled for metallurgical testing had the best grades drilled this year. Also many are describing Almaden as an open pit model, well not quite, it sits on the side of Nutmeg Mountain, you would push material down to end up on a leach pad, there’s no stripping ratio to speak of and there’s already landslide material at the bottom - the inferred resource of 84,000 ozs of gold.

Over in Nevada at TEN’s Moonlight Project things have gotten very very interesting. I’ve already explained what Terraco’s royalty on the Spring Valley project of Barrick and Midway is so I won’t get too far into that except to say they currently have a production royalty on 3.45m ozs of gold. That’s $80m dollars or net of $67m.

It’s this authors opinion that Spring Valley is going to grow in size. Barrick applied for a permit to drill in the northern gap between its deposit and TEN’s southern border, in geological speak it’s a very short distance from some of Barrick’s best holes and Moonlights southern border.

What’s the possibility of Moonlight being in play? It certainly would be if Barrick starts releasing nice assays from their November 2012 northern drill program, combine that with a royalty worth $900-$1200 an oz to a company like a Silver Wheaton and a million ounce plus gold mine at Almaden. All that with what is obviously a very competent management team with loads of skin in the game, and you can see why I’m so high on Terraco.

Terraco Gold TSX.V – TEN is definitely one to have on your radar screen. Is it on yours?

If not maybe it should be."

---Richard (Rick) Mills

Terraco Gold: TSX.V: TEN

rick@aheadoftheherd.com

www.aheadoftheherd.com

Click to view: Terraco Gold Corporate Video 

Johnston-Sequoia Commentary:

"All things are difficult before they are easy"

--- Thomas Fuller 

As many of our readers know I am a big supporter of Terraco Gold Corp.  I am an even bigger advocate for its management team led by President & CEO Todd Hilditch.  

Todd started Terraco Gold when he was just 27 years old after he was finished playing pro hockey.  In the late 90's and early 2000's Todd had built a successful (modest scale) oil production company out of Terraco & still felt so strongly about the potential of the gold market that he switched his "first born" (in Todd's word's) to gold exploration in 2004.  Todd was able to execute an agreement with Newmont at which time he came across Dr. Ken Snyder's (discovered Newmont's lowest cost producing mine - the Ken Snyder "Midas" Mine) name in the process.  Todd was able to bring Dr. Snyder to Terraco in a consulting geologist role & Dr. Snyder was kind enough to bring in Charles Sulfrian (former Chief Chemist & Chief Geologist at Barrick's Goldstrike Mine) now Terraco's VP Exploration.  

I began assisting Terraco in June of 2008 (I was 28 years old), just coming from an independent advisory role with RBC Dominion Securities - I had not spent a great deal of time researching the junior exploration market or its major contributors.  I simply knew that I liked Todd, I trusted him & I believed in his vision for Terraco.  At that time Terraco's lead project was the Moonlight Project (which remains TEN's wild card & still arguably my favorite property in the project portfolio).  At that time Spring Valley was "only" 993,000 ounces and Barrick Gold was financing Spring Valley in equity private placements.  

Then came the October 2008 financial crisis - the financial world was in complete shock and no one was certain on how deep the correction may be.  Terraco was very fortunate that on October 20, 2008 the world's largest gold company Barrick Gold moved into the neighborhood joint venturing Spring Valley (60% ownership for $30,000,000.00).  

Todd made an incredibly smart (and difficult) decision putting a huge portion of his life's work on hold - made the choice to conserve capital, watch what Barrick was doing next door and live to fight another day.  

While Terraco was on hold Todd was asked to come in a the new President & CEO of a micro cap company with lithium & potash assets in Chile called Salares Lithium Inc. in November of 2009.  By July 15th, 2010 Salares Lithium had advanced to a size where Talison Lithium Ltd. (now the world's largest producer of lithium) agreed to merge with Salares Lithium to create the world's largest producing lithium company in a $350,000,000.00 merger.  This merger created an enormous amount of wealth for its shareholders moving from $0.23 in December 2009 to $7.75 in December 2010.  In addition, it gave the Investment Banking community (in particular here in Candada) a tremendous amount of confidence in Todd's abilities.

Recently Talison Lithium announced a $724,000,000.00 all cash bid for the company by Rockwood Holdings (NYSE: ROC) to gain 100% control of TLH.  

Since the financial crisis of October 2008 Todd has acquired 948,000 ounces of gold within 90 metres of surface in Idaho, consolidated the Moonlight District (now 35 sq km & 100% controlled), brought in a 2.5% NSR royalty on a 4,1000,000 ounce Barrick led project in Nevada and an additional 1% NSR royalty on the area that connects the known deposit to Moonlight - for Terraco Shareholders along with a non dilutive $5,000,000.00 cash infusion.

In the past 11 trading days - Terraco has traded 6,160,000 shares and climbed a staggering 71.43%. Unless there is some other serendipity that I'm not aware of, perhaps some have chosen to believe in Mr. Hilditch's abilities as a CEO once again? 

I am an advisor of Terraco Gold & own shares in the company.  As always - please do your own due diligence.

“Republicans to Push Gold Standard Back Into Center of Political Debate.”  I think this is just a feeler, I doubt whether the US is ready to go back to the gold standard.  That will happen out of desperation when there's nowhere else to go.

Of course, the Fed will fight any suggestion of going back to the gold standard.  The Fed wants to have the sole right to create money, and the gold standard means discipline, the last thing the Fed wants.  But it's interesting that the subject of gold has come up at this time.

Lets start with some basic fundamentals.  With the entrance of Asia, China and the emerging nations into the world economic system, more products were made than the world could digest.  This was the beginning of world deflation.  The planet was choking on competitively-priced goods.  And it produced deflation.

The US and Europe would not tolerate deflation and the high unemployment that went with it.  There was only one proven method of attacking deflation, and that was to print more currency or to devalue the currency.  A second huge problem emerged -- the problem was that the new trend of deflation came at a bad time -- the deflation came at a time when the world was drowning in debt. 

Again the formula to handle debt was to print more currency -- to devalue the various currencies.  Actually, the world's debts were so huge that it required a huge devaluation in order to service the debts.  In the face of these problems, the Fed and the various central banks went on a currency-printing binge.  This is the difficult background that we now face.

Europe is in recession, China's economy is shrinking quarter after quarter, the US is in semi-recession (to be polite), and the Fed and the central bank of Europe are dealing with the problem of when to print.  The next printing operation cannot be a small one -- to have any effect it will have to be massive.

Those who are depending on China to brighten the global economy should examine the chart below.  This is a chart of the Shanghai Composite.  It's hardly encouraging. 

I present all the above as the basic background, which suggests more and increased central bank printing.  It's also the long-term background for the accumulation of diamonds, commodities, classic cars, objects of art, any thing of tangible value, collectibles -- and gold.

Next, what to do?  Let's begin with the super-laggers.  And, of course, I'm referring to the gold-miners.  I'm posting two ETFs.  The first, GDX, includes the better or higher-grade gold-mines.  The second chart, GDXJ, includes the smaller or junior, more speculative gold mines.  These smaller mines are often bought or merged with the larger mines during periods when gold is ‘hot.’  The junior mines are often bought for their gold reserves.

Below we see GDX surging above its 50-day moving average.  RSI is near the overbought zone, and MACD is bullish.

Below is GDXJ, which includes the smaller, speculative, junior mines.  Here we see GDXJ surging above its 50-day MA.  RSI is again signaling overbought.  Both of these ETFs are showing bullish accumulation, and both may now be due for a rest.  However, I think speculative positions in either or both are worthwhile.

Meanwhile, with the Fed and the European Central Bank poised to create more currency, gold is in a potential position to move higher.

Below you can see GLD, which features a run-away gap, which has taken it above both moving averages.  This could be the very beginning of a major move in gold, and it may be a move that turns out to be one that is well worth being in.

As I said, gold is overbought and probably needs a rest or consolidation.

Late Notes:  Just another day and the Dow going nowhere fast.  Cigar today goes to Gold which happily again is above 1600.”

--- Richard Russell - Dow Theory Letters

King World News Interview

To subscribe to Richard Russell’s Dow Theory Letters CLICK HERE.

What Happened To Gold? - Part 2

Alf Field

"There are no certainties in the investment universe. Investors are forced to weigh up the various risks and assess the probabilities involved before committing themselves to a course of action. Current Elliott Wave and technical studies suggest that the probabilities now favor a strong rise in the gold price.

It may be helpful to consider my personal assessment of the various probabilities at different points in the recent gold market correction. On 23 August 2011 when gold pushed above $1910 my guess was that there was a 90% probability of a severe correction. The target for the decline, as given in my keynote speech at the Sydney Gold Symposium in November, was circa $1480, the point at which the explosive extension in the gold price had started.

Extensions have a good record of retracing to the approximate point from which the extension began, in this case $1480. Market action during the decline is used to fine tune a more accurate end of the correction. Gold never got down to target of $1480, stopping not very far away at $1523 in late December 2011. At $1523 all the minor subdivisions suggested that there was a 75% probability that this was the low and that the market would move into a strong upward move, probably the most vigorous of the bull market. A lesser alternative considered was that $1523 might only be the A wave of a larger A-B-C  correction.

Subsequent events proved that the lesser alternative - that $1523 was only the low point of the A wave - proved to be the correct diagnosis. The A-B-C correction is shown in the above chart.

The upward move from $1523 through January and February 2012 to $1792, a gain of $270 in just 2 months, looked exactly like the vigorous upward move that had been anticipated. From $1792 a correction in the 6%-8% range was expected. That meant a maximum retracement to $1650 could be tolerated. A decline below $1650 would indicate that something was wrong with the analysis and would necessitate examining alternative possibilities.

Gold did drop below $1650, throwing a spanner in the works of the expectation that the market was in the early stages of the massive third of a third wave with a target of $4500. Once the 61.8% retracement level at $1626 was also broken, the strongest probability was that the rise to $1792 was the B wave and that the market was declining in the C wave. At this stage it began to look as if gold might still achieve the original downside objective of $1480.

The decline halted at $1528 and then started rising in a desultory fashion. The above chart was produced at that time showing that the A wave decline had lasted 88 trading days while the C wave decline had lasted 55 days. In addition the C wave decline of $264 was 66.5% of the A wave decline of $397, as depicted on the chart. The 2/3 relationship between the A and C wave declines plus the ratio of 88 days to 55 days absorbed by the respective waves, a neat 8:5 Fibonacci ratio, improved the odds that $1528 was the end of wave C. It would thus also mark the final end of the correction that had lasted since late August 2011.

The above positive assessment was not published at the time. Additional confirmation from further market action was required to be sure of the call. The required evidence of a rapid and large upward surge in the gold price plus the break of the prominent downtrend did not emerge. Gold simply churned within a relatively narrow range below the declining trend line.

A number of readers have urged me to pay more attention to time. In the past I had found that the magnitude of the waves was a much more important factor than the time involved. I had never been able to make an accurate call using only time elements and cycles. Every time I made a forecast based on time, I got it wrong. Nevertheless, I resolved to examine the time elapsed by the different moves more closely.

That gave rise to recognizing that the 88 and 55 days absorbed by the A and C wave declines respectively was the interesting Fibonacci ratio of 8:5. With the gold market churning and going nowhere, I developed an alternative theory that $1528 was not the final low point of wave C but only the low point of wave a of an a-b-c move making up the C wave.

That would explain the desultory sideways trading in the gold price and implied that the final low was still somewhere in the future. An extension of this theory was that the decline in the smaller and final wave c to the low would last 33 trading days. This would extend the previous 88:55 ratio to 88:55:33, and would mean that the time absorbed by the two small c wave declines would total 88 days (55 +33), identical to the 88 days absorbed by the wave A decline.

This was pure hypothesis. There was no real basis for this theory, but it seemed worth testing it. If it was possible to predict the day of the final low ahead of time, that would be a significant achievement. Gold had rallied to $1640 on 6 June 2012 and then started churning sideways with a downward trend.

Projecting ahead 33 trading days from 6 June 2012 produced a date for the forthcoming low of 23 July 2012. I didn’t have any idea of what the low price would be. The chart below depicts what happened on 23 July 2012.

The low gold price on 23 July 2012 was $1564, certainly not a new low. Yet the gold price started rising almost immediately. Within a couple of days the gold price had broken upwards through the downtrend line that had been in place since the end of February 2012. This is a very positive development which will be greatly enhanced if the gold price continues to move strongly upwards over the coming days and weeks.

The bottom line is that we now have a really strong probability that the correction which started at $1913 on 23 August 2011 has been completed both in terms of Elliott waves and also in terms of time elapsed. If this is correct, the gold price should soon be expressing itself in violent upside action as it moves into the third of third wave which is still targeted to reach $4500."

--- Alf Field

31 July 2012 

Comment to: alffield7@gmail.com

Gold: The Ultimate Store of Value During the Kondratieff Winter

Ian Gordon: The Longwave Group

"There are several reasons why gold performs so well during the Kondratieff Winter and why investment risk in gold is at its lowest during this time.

1. During winter there is a high probability of severe financial and economic dislocation. The massive debt bubble disintegrates, causing bankruptcies and banking problems. The largest debtors and the largest creditors are always vulnerable during the winter debt cleansing process.

Other likely occurrences include the following:

Derivatives debacle.

Real estate bust.

Private Pension plan failures.

2. The world monetary system is collapsing just as it did in the previous Kondratieff Winter. At that time, after Britain abandoned the gold standard in 1931, all other countries followed suit and the world monetary system disintegrated. This Winter, the world is abandoning the US dollar. This portends monetary chaos.

Reserve monetary leadership always goes to the world's largest creditor nation. The US is the world's largest debtor nation.

3. American leadership in the financial, economic and political arenas is waning. This leadership too, passes to the leading creditor nation.

4. Under British stewardship throughout the 19th Century, gold was money. For the first time in more than 5000 years, following US refusal to back the dollar with gold in 1971, the entire world has been subjected to a fiat money system based on the dollar. Governments, particularly the US government, want to convince you that their paper (debt) is as good as gold. You be the judge.

Fiat /Paper money systems have never survived. History is filled with examples like the Assignant and the Confederate dollar.

5. Gold and gold equities are scarce. Annual gold production amounts to a measly 2500 tonnes, which is approximately 75,000,000 ounces. The total market capitalization of all the publicly traded gold stocks is only $200,000 billion versus $17 trillion US equity market cap. Imagine what happens to the price when real demand comes into both the physical metal and gold equities!" 

--- Ian Gordon: The Longwave Group 

Johnston-Sequoia Commentary:

"Be loyal, under promise and over deliver and surround yourself with people smarter than you".

--- David Zinczenko (Editor-in-Chief Men's Health Magazine)   

The three gentlemen quoted above (one of whom your editor has been fortunate enough to know very well personally over the years) are some of the most accomplished and knowledgeable investors in gold anywhere on the planet.  To add (humbly) to the analysis above included below are the:

$HUI - (The AMEX Gold BUGS - Basket of Unhedged Gold Stocks Index represents a portfolio of 15 major gold mining companies)

$GOLD - (Spot Gold (EOD) - CME)

$CDNX - (S&P - TSX Venture Exchange)  

Shortly after market close on May 16th, 2012 - I had just finished a presentation at the Las Vegas Money Show when I learned from a very reliable source that $Gold , $HUI, $GDX & $GDXJ had all formed a Key Reversal - Confirmation Pattern . 

Following the the May 16th Key Reversal $GDX surged 23.33% to close at $47.73 on June 17th, 2012.  It subsequently gave back 14.73% to close at $40.70 on July 22nd, 2012.  Since that time $GDX has risen17.94% to close at $47.94 on Friday.  Next weeks action will be most interesting with RSI (Relative Strength Index) at 65.92 - teetering on overbought territory.

Following the May 16th Key reversal (with the $HUI  closing at $375.77 on May 15th) the $HUI surged 21.33% to close at $455.81 on June 17th.  The AMEX Gold Bugs Index then gave back 14.94% to close at $387.81 on July 23rd.  Since the 23rd of July the $HUI  has gained 18.21% to close at $458.42 on Friday.  The $HUI  also appears overheated with the RSI at 65.56.

Click on image to enlarge: $Gold 2012-09-03 (10 min tic) 5:09 PM EST - High of $1,694.20

• A 53% premium to Talison’s last closing price on August 22, 2012 of C$4.24; 
• A 52% premium to Talison’s 10 day volume weighted average price (“VWAP”) of C$4.28; and 
• A 59% premium to Talison’s 30 day VWAP of C$4.08.

• Approval under the Australian Foreign Acquisitions and Takeovers Act 1975 (Cth); 
• Regulatory approvals from the Australian Securities and Investments Commission and the Australian Court; 
• Approval of the requisite majority of Talison Shareholders at a meeting of Shareholders; 
• No Material Adverse Change (as defined in the SIA) occurring to Talison; and 
• No Prescribed Occurrence (as defined in the SIA) occurring in relation to Talison.

The big new thing in gold - capital adequacy ratios

 

Now, when we cross reference the Longwave Principle with some basic Technical Analysis, Value & Discovery Investing philosophy as it pertains to gold - we come come up with some intriguing discoveries:

 

Note the change in RSI (Relative Strength Index), MACD (Moving Average Convergence & Divergence) & our favorite early indicator ROC ("Momentum") on May 22nd, 2012.   

We include a quote from one of our absolute favorite analysts (and editors) & discovery investing pioneer Dr. Michael Berry:

Micro Cap: Terraco Gold Corp. TSX.V:  TEN | US: TCEGF

So, with all of the above considered - dust off your rifle's, it may be time to shoot some bears...

Remember:
"All things are difficult before they're easy".

--- Thomas Fuller


As always please do your own due diligence & hope all of you have a fantastic weekend!