Precious Metals Capped Again - But Miners are Holding Tightly

The Lord has been giving us beautiful weather during this south Texas winter. We are in bad need of rain, but in His time, He will provide. We are told to be still and to rest in the Lord.

However, that requires patience. I am lacking in that. However, I am learning, albeit slowly, to rest in Him. He will provide peace during any challenge. The markets are a challenge these days, but I know Who is in absolute control and am confident that He is working ALL THINGS for the eventual good of His people.

So, I study Scripture to determine, as the Holy Spirit enlightens me, what to expect. Based on God's principles, I make my plans, commit them to the Lord and totally depend upon Him for the results. I attempt to analyze results that do not seem good and prayerfully seek a better plan from God.

I have learned that we often profit more from our perceived failures than from our successes. So it is back to the drawing board for better results. The results are always up to Him.




The activity of the boyz in the precious metals markets is again obvious. They are allowing gold to stay at a higher level, but seem to be capping it sufficiently to drive many out and allowing them to recover there shorts and discourage the longs held by others. Nevertheless, gold is 893.50 and silver 12.19 with both on down ticks. We may be presented with another opportunity to add to our portfolios.

Our trading stocks remain at higher levels in spite of the drop in the price of the metals, themselves. DROOY is 7.22; HMY is 11.65, and VGZ is 2.23. The ETFs and trust -- CEF 10.86; GDX (Miners) 32.88; GLD 87.72, and SLV 12.06. The DJI is up by 27.39 to 7954.7. The general market just can't make up its mind.


Chuck Butler of The Daily Pfennig is right on about the pork barrel stimulus package: "OK, speaking of stimulus... I'm very upset with the "new and Improved" stimulus package. I'm sure you've figured this out already from previous rants. However, now... I'm even more ticked off! Oh, and the TV / Cable media are swallowing the propaganda from the White House, hook, line and sinker! Here's what I'm talking about folks...

The package has a "buy American" portion in the package... This is protectionism folks... And here's what gets my goat the most about protectionism at this stage of the recession... Fed Chairman, Big Ben Bernanke, is supposedly a "U.S. depression guru"... Well, Big Ben, wasn't the protectionism of the 1930's one of the reasons for the Great Depression? And is just so happens that now we've had "the cheater's" confirmation, calling China "currency manipulators", and that was followed up with the "buy American" portion of the package...

Look... There's nothing wrong with the slogan, Buy American... In fact, I think it would be a great thing to go around saying and doing, based on our manufacturing prowess... But, that's not what I'm talking about here... I'm talking about protectionism, at a time when the global economies are hurting and need to export to us... I'm really surprised that the currency traders haven't seen this and taken the dollar to the woodshed... But then, maybe they're getting the wool pulled over their eyes...

The other thing that ticks me off on the "new and improved" stimulus package is the fact that a very small piece of the $816 Billion (before the Senate adds their pork!), stimulus is for the infrastructure projects that have been billed as a "major piece" of this plan! HOGWASH! Now, I'm not going to sit here and pass judgment on all the "items" that are being allocated Billions of dollars, like $1 Billion to deal with the census problems, and $88 Billion to help move the Public Health Service into a new building next year, and $650 million for TV Converter boxes. The list of items like this goes on and on... And all worthy items, I'm sure... But none of these types of spending allocations, and I repeat this so you get the full force of this statement... None of these types of spending allocations are doing anything to create jobs. Oh... And just for those of you keeping score at home... $50 Billion is allocated to bricks and mortar... Infrastructure... Which has had "top billing" on this package... Well, the truth is out... I sure hope someone takes their lawmakers to the woodshed for this!

And... One more thing that's really ticking me off about how we're going about "attempting to stop the correction" , which in my mind should NEVER have been done in the first place, and that is this creation of a "bad bank"... Again... And I really want to stress this point... Why not focus on creating a "good bank"? Because creating a "bad bank" has all kinds of problems attached to it, and IT DOES NOTHING TO CREATE JOBS!" Comment: Of course, we certainly expected that once the candidates were elected and took office, they would honor their pre-election promises. NOT! Remember one can tell when a politician is lying - His mouth is open.

From Emirates Business 24/7:

Gold prices could hit $1,500, fears Merrill Lynch CIO

By

Shashank Shekhar on Tuesday, February 03, 2009

Gold prices may hit $1,500 (Dh5,509) an ounce in the next 12 to 15 months, Gary Dugan, the Chief Investment Officer (CIO) of Merrill Lynch, said yesterday.

Dugan termed his apprehensions of gold striking such a high as a "fear" that may come true. He reasoned that such a price would mean the other commodities and streams of investments have been shunned by investors.

With confidence in currencies shaken to the core, the yellow metal is increasingly assuming the role of "the most trusted currency", Dugan said. "We have never seen such a rush to buy gold. It's bringing in security and it's still affordable." Read it HERE. Comment: The fear is well founded, because gold could go that high in the near future and gold at that level would indicate a great deal of price inflation in virtually all other commodities and consumables which we use. Thus, such an reasonable increase in the price of gold has a negative implication for all of us. Remember, we use the precious metals, not as an investment, but a means of retaining purchasing power in place of paper currencies.

From The Times, January 31, 2009:

Dawn of new age of industrial unrest as wildcat strikes spread across UK

Strikes at 19 sites over ‘British jobs for British workers’

Francis Elliott, Sam Coates and Fran Yeoman

Web encouraged every skilled man to strike | Comment: British Jobs and British Workers | ‘We’re used and abused by greedy employers’ | Q&A: British industrial strikes | Phrase that has come back to haunt Brown | A whole new European world of work

Gordon Brown’s pledge to create “British jobs for British workers” came back to haunt him yesterday when a dispute over foreign labourers sparked a wave of industrial unrest.

Wildcat strikes flared at more than 19 sites across the country in response to claims that British tradesmen were being barred from construction jobs by contractors using cheaper foreign workers.

Mr Brown, in Davos for the World Economic Forum, was caught by surprise when a ten-day-old strike at an oil refinery in Lincolnshire sparked copy-cat action at other energy plants. Unions claim that British workers are being barred from jobs because of a European Union directive which allows companies to bring in foreign labour for less than they would have to pay to Britons. Read it HERE.Comment: This could result in a move toward protectionism which would add much woe to the world wide economic crisis. American workers, too, have been plagued by both outsourcing of tasks and by the illegals being welcomed in by the droves. Think about world trade being shut down completely by national protectionism spreading across the globe. That would be the end of whatever international free market trade still existing.

Gary North (Read his report HERE)reported on the doubling of the monetary base using U. S. Financial Data from The Federal Reserve Bank of St. Louis, MO. While the figures at the bottom are not easily read, the graph at the top is clearly shown.
As Gary reports, the only thing keeping this massive inflation from being reflected in gross price inflation is the fact that the banks kept most of the funds in reserve. Comment: I fully agree. At some time these funds and subsequent bail out packages will begin to filter down into the markets and generate a new series of bubbles. Of course, we recognize that the current bubble forming is in U. S. Treasuries. Were it to burst, it would cause one of the loudest bangs in history.

From WELLINGTON CAPITAL MARKETS ANALYSIS:

Declining costs to catapult gold miners and developers in 2009

Wellington Capital Markets says a window of more favorable precious metals costs has opened, and will especially benefit large open-pit gold mines and gold projects.

Author: Dorothy Kosich
Posted: Tuesday , 03 Feb 2009

RENO, NV -

An analysis of precious metals costs by Wellington Capital Markets claims, "The perfect storm that precipitated higher capital costs has passed, leaving in its wake a favorable development window" for precious metals project.

An "unprecedented rate of cost deflation" will boost the economics of gold mines and gold projects, a mining sector report by analysts Steve Parsons, Paolo Lostritto, Ryan Walker and John Miniotis suggests.

The costs of key mine inputs, such as steel and diesel, strongly influence mining construction and operating costs, and have plunged lower, according to Wellington. Explosives, mill reagents, and contract labor costs also all trended lower last year. Read it HERE. Comment: The cost of mining is always a factor for consideration by the miners. As the price of precious metals moves upward, there is more of a profit margin, and the same is true when the costs of production decrease. This gives the mining stocks leverage over the precious metals as the Gold Rush appears, as it will. Thus, the mining stocks are real investments as opposed to precious metals.

Continue to trust the Lord in all aspects of life and He will provide every need.

Best to each, Doug