Monday, December 26, 2016

Gold Trade Is Dead Now

The gold trade is nearly dead. The last COT report discloses that the open interest in gold futures stands at 399 thousand contracts (the circle marked in green). This level is very close to the levels reported during the last bear market in gold:

Simply put, it looks like the gold is not only cheaper than it was in early July but it is also out of investors' favor. We are at or close to the typical contrarian buying opportunity.

Friday, December 16, 2016

Something For Gold Bugs

Today a nice chart for the gold bugs:

source: Simple Digressions

The chart shows that the very long - term trend line (the beginning in 2005), drawn by the gold dollar index, is still holding.

If anybody is not familiar with the gold dollar index - here is a definition:

“The GolDollar Index was invented by Tom McClellan (of McClellan Financial) and is calculated by multiplying the price of gold by the U.S. Dollar Index. Its purpose is to cancel the effects of currency fluctuations on the price of gold. By comparing it with the spot gold index we can determine if there is inherent strength/weakness in the price of gold”
As the chart shows, now we are very close to the trend line...

Monday, December 12, 2016

Top Five Picks Portfolio 2017 Is Available Now

One year ago (on December 16, 2015) I started my medium - term experiment called the Top Five Picks Portfolio. Now it is time to show the performance of my picks:

As the chart shows, my five picks delivered a nice result: 133.8% since December 16, 2016. In that period the broad precious metals market, represented by GDX, delivered a return of 47.1%. As for metals, gold is 8.4% up and silver is 19.8%.
It means that the leverage (defined as the portfolio return divided by the return delivered by gold) delivered by my portfolio is 15.9:1 while the leverage delivered by GDX is 5.6:1.

Well, I am satisfied. Very satisfied.

That is why I want to extend my experiment into another year. 

However, there is a problem. Now gold, silver and the entire precious metals sector is in its short-term downward trend. It means that many investors are wondering whether this bull is still alive. Well, in my opinion, the bull is alive. Look at the chart below:

source: stockcharts

The upper panel shows the price action of GDX (the broad precious metals stock market). Clearly, since August 2016 this instrument has been in its downward trend.

However, the next two charts show two ratios indicating the current sentiment in the precious metals market. The first one, the GDXJ / GDX ratio (junior miners stocks to big gold stocks) holds generally well. Now it is at around the same level it was in August, when the current correction started.
The same pattern is visible at the second chart, the silver / gold ratio. It is slightly below the level printed in August.

What does it mean? In my opinion, it means that not everything is as bad as the gold bears think. I would even say that these two charts are the best confirmations that the bull is still alive. If the bull were dead, the entire picture would be much different with the silver / gold ratio steeply going down and junior miners being much weaker than big gold.

Understand me well - I am not saying that the current correction in gold is over. For example, the American investors are still selling gold, which is best evidenced by GLD reports (the amount of gold at GLD vaults is going down).

On the other hand, silver and the precious metals related stocks are sending mixed signals:

source: stockcharts

Although gold prints lower lows, silver and GDXJ do not. Yes, I know that I am showing an ultra short - term pattern (which can change, for instance, today) but these ultra short - term patterns combined with a longer - term patterns delivered by two popular ratios (silver / gold and GDXJ / GDX) confirm my thesis that not everything is bad with the precious metals market.

If I am correct and we are still in the bull market in gold it is a good time to start a new portfolio of five stock picks. I am sure that the best time to invest in stocks (no matter what stocks) is when nobody wants to buy them. And precious metals stocks are now one of the most hated assets. Well, it should sound familiar to many of my readers. Just one year ago we had a similar situation - nobody was interested in precious metals stocks and the market was full of opinions that gold was heading for $1,000 or $800 per ounce.
Simply put, it was the best moment to invest in precious metals stocks. I did it and won.

Now I am doing it once again...

O.K. As you know, this year my Top Five Picks Portfolio is offered as a paid service. The price, nonrefundable, is $50 (fifty US Dollars). The payment box is in the section Top Five 2017. All details are there as well.

So, if you are interested in my portfolio - please, go to the section Top Five 2017

Monday, December 5, 2016

A Nice Short - Term Buying Opportunity For Gold Bugs

Some people were claiming that the yesterday's Italian referendum could trigger another financial meltdown. Well, the Italian people said NO to Mr. Renzi's government but the markets...ignored it. Today the Euro is going up, the US dollar is going down is going down as well.

I guess gold bugs may feel disappointed. As usually, no matter what is going on the gold is going down. However, in my opinion, today gold and the US dollar are drawing a nice picture for the risk-averse investors. Simply put, it looks like an interesting short -term buying opportunity is in the making. Look at these two charts:

1. The first chart shows the current price action of the US dollar:

The US dollar is breaking down from a short-term consolidation.

2. Now the second chart. This time it is a well-known silver / gold ratio:

Since late November the ratio has been in its upward trend. 

I think that the charts above create an explosive short - term pattern for higher gold prices.

Friday, December 2, 2016

Another Divergence Between Gold And The Silver / Gold Ratio

My readers know that I am tracking the relationship between silver and gold. A few times the divergences between these two metals delivered nice short - term buying signals. But the last signal was a fake. Although the silver / gold ratio was going up, the entire precious metals market crashed - look at the charts below and the area marked in orange (the upper panel shows gold and the lower panel shows the silver / gold ratio):

Now both metals are drawing another divergence. Gold is going down (green arrow) but the ratio is going up (red arrow). Who will win?

Thursday, December 1, 2016

Top Five Portfolio 2017 - Update

One of my readers has made a comment that it is much better to offer the entire portfolio than  just one pick today, then another pick in a week etc.

I agree  so let me make one change. The entire portfolio (all five picks) will be available within two weeks. My readers will be notified on that blog (section "Top Five 2017". The price is $50 per portfolio (fifty US dollars).

New Portfolio Top Five 2017

The end of 2016 is very close so it is the right time to start a new portfolio of precious metals stocks. To remind my readers, this year the Top Five Portfolio consisted of five picks:
  1. Fresnillo plc
  2. Claude Resources (in the mid year this company was replaced with B2 Gold)
  3. Newmarket Gold (now Kirkland Lake)
  4. Fortuna Silver
  5. Richmont Mines
The chart below shows the results delivered by my portfolio (for comparison, I have plotted the returns delivered by GDX and S&P500):

As the chart shows, between December 16, 2015 and November 30, 2016 the portfolio delivered a return of 130% (GDX: 48% and S&P 500: 6%). Well, despite a strong correction in the precious metals sector the Top Five Portfolio is still performing very well (much better than the broad precious metals market).

That is why I want to repeat this experiment and construct a new portfolio for 2017. This time it is going to be a little bit different. Let me explain.

A new portfolio will consist of five picks. I think a few picks may be the same as in 2016 but a few new companies will surely be added.

Next, contrary to this year, I am going to be more active. It means that some rebalancing is possible. If I find a new and, in my opinion, a better company I am going to replace an old pick with this new one.

Now, what criteria do I use to decide whether a pick qualifies to my portfolio? Here they are:

  1. Only producers - My picks do not include any exploring company. Simply put, explorers are riskier than producers, and I want to limit risks as much as possible. What is more, these producers must hold at least two operating mines.
  2. Debt free - Debt is also risky, so my top companies hold either very small debt or even no debt at all.
  3. Low costs of production - My picks are low-cost producers. If I am wrong claiming that this bull cycle in gold is intact, low-cost producers should perform relatively better than other PM-related stocks. It means that losses incurred by investors should be relatively low.
  4. Catalysts - Looking for the best stocks, I am trying to find companies with some near-term catalysts defined as a big chance for a relevant increase in production, a possible acquisition or management change etc.
Now, an important message. The 2017 Top Five Portfolio is a paid service. It will cost $50 (fifty US dollars).

Within the next two weeks I will notify you on this blog that the portfolio is ready to be dispatched.

What will you get for this price? Let me list:
  • five stock picks
  • portfolio rebalancing (if I decide to replace an old pick with a new one you will get this new pick for free)
  • regular updates (at least one per quarter) - the updates should include my comments on financial results, operating results etc.
  • alerts - you will be notified if there is any important issue related to the stock pick
All these picks, comments, alerts etc. will be delivered through email (PDF file) to the subscribers

Simply put - you pay $50 and I am doing the job for you.

That's it. Quite simple I guess.

All details, pay buton and notifications will be available in the  section "Top Five 2017". 

Last but not least. Because it is a paid service I will not comment on the new portfolio on this blog, Seeking Alpha etc. The picks or comments on them will be available only for paid subscribers.