Sunday, September 11, 2011

Got Gold Report – Mining Shares ‘Only Thing Working’

HOUSTON (Got Gold Report) – The Swiss apparently got tired of the Franc being a ‘safe haven’ in a world of no such thing, so they hitched their paper currency to a much sicker inmate in the currency leper colony, the Euro, with a 1.20 upper limit.  Then they made really, really sure that traders would believe it, causing a blitzkrieg exodus from the formerly safe paper to other monetary non-safety.  The momentary mayhem resolved itself in a much cheaper (devalued) franc -- and a higher greenback in minutes, which stood in as the suddenly least sick member of the asylum. 

One gets the impression that the wealth that has flown into U.S. dollars did so not because dollars are more desirable than the “CHF” (Swiss Franc), but instead dollars were merely a liquid place to run to in a time of crisis. U.S. dollars are the convenient foxhole in an air raid, with the foxhole occupants looking all around for somewhere better to escape to.  

20110911AirRaid

Dollars may be a earthen depression one can hide in temporarily, but some likely will travel to a better fortified air raid shelter in gold and silver. Trouble is that a great deal of wealth in Europe had migrated to the CHF precisely because it was ‘safe.’  The message of this past week:  “Think again, Mr. Wealth, no ‘paper’ and no bureaucrat or central bank promise is safe anywhere in the world.  It was not in the past, it is not safe now, and certainly will not be safe looking ahead.  In a global printing press currency war there are no saver prisoners taken, but also, eventually, no winners.”    

It may not sink in right away for everyone, but the desperate move by Switzerland to tie its monetary heritage to a possibly dying currency is yet one more nail in the post Bretton Woods floating fiat currency experiment coffin.  Let’s label this particular nail the capricious central banker nail and be glad we trust hard assets, not governments and central bankers. 

It may not manifest immediately or even visibly at first, but Switzerland’s action is very supportive of precious metals, especially of gold.  The propensity of wealth still parked in the former banking powerhouse and all across the continent of Europe to buy gold just got a boost … in size.   

Europe in a Tight Spot     

Speaking of crisis, the news out of Europe has that ‘nervousy,’ out of control sense about it, we all felt here in the U.S. in ‘ought-eight,’ and we have to wonder if the words of Jim Rogers will end up being prophetic.  In case one missed it, in a linked CNBC interview we posted in the VultureInReview section on Friday, the flamboyant, seemingly always irritated Rogers said that it was time that the banks just went bankrupt, so we can start over. (Link to the interview.)   

What a mess … again.  For some reason we are reminded of a scene from the movie “O’ Brother Where Art Thou” where George Clooney’s character says, “Damn, we’re in a tight spot!”  We wonder if the Europeans feel about like Clooney did in the clip just below.  We Americans certainly did in oh-eight.    

Youtube  link:  http://www.youtube.com/watch?v=-­dR45pdEqW4    

Clooney managed to make good his escape thanks to unexpected but timely help from an unexpected source, as seen in the video clip, but there can be no assurance that there will be a rescue forthcoming in Brussels, Paris, Frankfurt or Athens.  Europe does indeed seem to be in a tight spot. O’ Brother indeed, the “Odyssey” continues.   

Mining Shares – Only Thing Working

However, there is at least one burgeoning bright spot - at least so far.  Just recently, with gold gyrating in a volatile high-consolidation between roughly the high $1700s and the low $1900s, we have a brand, spanking new breakout attempt for one of the most popular big-cap mining stock indexes.  Vultures, be sure to see the new HUI chart links on the subscriber pages for that.  It is not just that the HUI is breaking out that is impressive, it is that it is breaking out now, with so much negative energy flying that makes it doubly interesting. 

We began the last full report, the one we penned just before leaving on our attempted ‘hiatus,’ with:  “If it seems like things have gone from bad to worse, they have since our last full GGR three weeks ago. Unstable, uncertain markets are never fun, mostly because people have a nasty habit of hitting the sell button on so many things when fear and panic is in the air.  At the same time buyers understandably lock up and wait or lower their buy targets because by doing so they are rewarded with even lower, sometimes even irrationally lower prices for doing so. – Bargain hunting paradise has arrived thanks to Team Obama, the U.S. Congress and the European Union.”     

With the woefully undervalued Big Miners attempting a breakout, in a crisis, they could get the coveted moniker of “the only thing working,” where portfolio managers end up flocking to them because their brethren and colleagues who already own them are doing well while everything else turns to excrement.  If so, we have to believe that will ultimately be supportive of the smaller, less liquid and more speculative miners and explorers we love to game here at Got Gold Report – if the world manages to pull a Clooney this time, or perhaps later, once the new global Charlie Foxtrot has peaked.  More in a moment, but first here is this week’s closing table:

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20110909table

Table comments:   Gold down for the week in greenbacks but up in Euros.  More buying pressure than selling pressure for gold and silver ETFs. Highest ever close for gold on a COT date.  COMEX commercials add to net short positions into then higher metals prices.  Big Miners actually outperform, a little, but smaller miners and explorers tread water. USD explodes higher as the CHF manipulated with a new Euro peg at 1.20 (good luck there Switzerland).  ICE commercial traders flip to net short the US dollar. Higher GSR, not such a good sign short term.  Ted spread higher and looking more worrisome. Higher highs and lows for gold and silver, but it didn’t feel like it. COMEX open interest falls by Thursday, hinting at a bit less opposition (than in the COT report, although up slightly from the previous Thursday).

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The smaller miners might get trounced again, ala 2008, but we sincerely doubt they will stay that way … again.  We believe a good deal of “bad” has already been priced into many of them, the result of people with memories of three years ago still fresh enough to matter. 

Still a Vulture Bargain target-rich paradise, in other words … for now. 

Before we move into the “meat” of this report, we wish to acknowledge and remember our fallen Comrades and fellow Americans on this tenth anniversary of the attack we all know as “9-11.”  Everyone except the religious zealots who live for chaos has probably figured it out, but the one clear message that should be ringing clear to America’s enemies is that you really don’t want to kick a big, very powerful sleeping dog.  Because if you do there will be harsh, painful and certain consequences – no matter how long it takes.        

Much more below for our valued Vultures 

Got Gold Report       

First things first, the Got Gold Report – the full report – is published biweekly at least 24 times per year.  Between reports we communicate more regularly on the GGR web log, which is always free and open to the public, or in our COT Flash reports and Vulture Bargain Hunter reports reserved exclusively for subscribers.  COT Flash reports appear on off weeks for the Got Gold Report when there are what we consider important changes in the commitments of traders reports which cannot wait until the next full report.  Vulture Bargain offerings appear ad hoc as there are developments we feel merit comment for and in the resource company issues we track closely. 

Our aim is to briefly summarize our positioning for the gold and silver markets, and also to highlight a few of the dozens of indicators, ratios and graphs we keep in constant touch with.  Vultures, after logging in, please see the commentary in our numerous technical charts located in their own section of the password-protected subscriber pages. We update most of the Got Gold Report linked charts each week, sometimes even the weekends when we don’t publish the full report. Changes to the linked charts are almost always completed by 6:00 pm ET on Sunday evening (except when Monday is a holiday) and occasionally during the week as events unfold. 


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The Original
Vulture Speculator

Trading gold, silver and mining shares since 1980 with a focus on taking advantage of volatility extremes, Gene Arensberg analyses the markets through a basket of technical and fundamental indicators and shares his findings from time to time here at Got Gold Report. Mr. Arensberg has been quoted in the Wall Street Journal, Dow Jones MarketWatch, USA Today and dozens of other news organizations.

"I've been a huge fan of Gene and his amazing work for years..."

Brien Lundin, CEO, Jefferson Financial, Host of the annual New Orleans Investment Conference and Publisher of Gold Newsletter


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