Rick weighs in on gold and energy.
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🙂
I can’t find the icon for “hairy leg”.
+1
This is significant:
#18 “Most bank economists predicted that key (g)old ETF holdings could decline in 2015. Instead, they have been rising, even on price declines! The type of investor that is buying gold ETFs in 2015 appears to be much more solid than the wildly leveraged hedge funds that bought during the “QE to Infinity Cowboys” era. That’s more good news for Western investors, and for the entire world gold community.”
http://www.321gold.com/editorials/thomson_s/thomson_s_021015.html
It seems to me that when everyone abandons an asset and don’t see any driver for for that asset class, that this is precisely when there can be an unique upside surprise, especially when technicals indicate a strong likelihood of something happening. This usually accelerates the pop up on the very front end due to a short squeeze as Rick so often correctly points out. During a short squeeze the news and fundamentals aren’t as big of a driver as the need to unwind positions before their neighbor does, so the squeeze itself becomes the driver.
There have been a ton of times over the last few years where there were huge fundamental drivers that should have moved Gold up and nothing happened, or gold actually fell, and many sat around scratching their heads in confusion. As has been mentioned on this show by most of the commentators, the fundamentals don’t seem to be affecting gold. So, this is inversely true that sometimes an asset or security will take off and there doesn’t seem to be a good fundamental reason why. Sure, people and news anchors go sifting over news looking for a scapegoat that nobody saw coming as their alibi, but the Global Marketplace doesn’t care with Goldman or JPMorgan or CNBC thinks should happen.
Case in point. A month ago in early-mid January, when people were getting a little bearish due to the dip in Gold , there were a few people (including me) that technically felt gold should break the 1280 level, but there was no real reason for it other than technical analysis, and the sentiment wasn’t that hot. Then from out of nowhere, the Swiss announced they were going to unpeg their currency from the Euro, and Canada and Australia announced surprise rate cuts. Everyone that was short ducked for cover, there was a short squeeze, and most of the people that track gold missed the trade. Then a week later when everyone got bullish, Gold topped and a number of technical traders called for a correction even in the face of all the Europe nonsense. People didn’t see gold falling much, but when it fell on the very day of the news that most thought would be bullish for the metals, and has come all the way down to a precise target on Friday and today, “nobody saw that move down coming” and they got confused.
In effect, this market has been ignoring the fundamentals in the general stock market indexes (DOW, NASDAQ, and S&P) for years , and that is also true for many commodities. This puts the game in the hands of technical analysis and sentiment indicators. Technically gold is due to bottom very soon and then bounce up, and with sentiment slipping again and becoming bearish, it is the perfect time to put in the low and then pop “surprising” people once again.
At this point there is not a fundamental driver for the bounce up, but it is, nonetheless, uncanny how these new events seem to come from out of nowhere, that don’t always even add up, but they become the justification for the technical move that was expected. So, I don’t think we will see the driver until it is too late and the move has been made.
The jury is still out on whether we bottomed on Friday (today Tues had gold trading right back down to the exact same range as Friday again, but then bounced again for the second time from around the 1232 level). Tomorrow (Wed) could be a contender if we haven’t already seen it. The bottom rarely comes out and rings a bell to let you know it just happened, but it seems like we are in the neighborhood.
I do agree with Chris’s comments that when the main stream media and retail investors flock back to Gold, that it will be a “safer” time to enter the space and “limit losses”, but it will also limit gains. 15-30% of the move up will have happened by that point, and the remainder will be fighting to get orders filled at higher and higher prices once it is self evident.
I don’t think buying gold/silver or select mining companies around these levels is “Being the Hero” and, while I normally agree with the majority of what Chris T. has to talk about, I disagree that people risk losing 80-90% of their money, like they would have in the fall from 1900 gold and inflated valuations on the miners with terrible cost controls in 2011. Today, the miners have already had the huge 80-90% haircut, have reduced capital expenditures, worked for over 3 years on containing cost, and Gold has fallen quite a bit from its high.
We are at an inflection point where gold could reverse the 3 1/2 year Bear market soon if the leg up can take out 1347 and specifically 1382. I am starting to have my doubts as days keep on ticking by, and it seems the move up will still happen very soon, but it will likely be more muted after 1250-1240 failed to hold.
This means that is becoming more likely that we pop up briefly for 1-2 weeks (for no reason other than just technical) and then we grind down into the late spring/early summer and put in the final bottom along with the rest of the commodity sector.
Arthur Schopenhauer, the German philosopher pointed out that when any great idea comes to fruition it goes through 3 stages:
1) The idea is ridiculed or scoffed at
2) Next the idea is strongly opposed, and sometimes violently opposed
3) The idea suddenly becomes self-evident
This is how most of the technically forecast models are received by people that feel their opinions or fundamentals are challenged by the analysis. If they feel the world is in tension and gold should go up, but the technicals point to downside pressure. They laugh, they scoff, the get angry, they pound on the table, and then when the move down happens they are so “confused” or there must be manipulation. Then when they don’t see any hope for gold and get bearish or jaded, but things appear technically like they should go up, they laugh at this, they scoff at the “gold bug” that was a “gold bear” in the prior downward call, they get angry at the message (or more often the messenger and they miss the message), and then when gold goes up they are “confused” but there is never manipulation on the way up : – ) ….just some news event that people grasp for to look for the meaning of the move.
They miss the point the whole way along, and when they do enter the marketplace, it is much later in the cycle and while definitely safer, it is less lucrative. It does really depend on someone’s time horizons and particular criteria for investing. Buying when there is doubt or blood in the streets, when nobody cares about the investment is called buying low. When mainstreet retail investors flock into an asset class, that is called sell into the strength or “selling high”. If you wait for everyone and their cab driver to get positive on gold again (you’re a little late to the party at that point). That’s called buying $45-$49 silver in 2011. Woops!
This week should end on a more frisky note than the last 2 days of doldrums
P.S. – Picked up a small position back in JNUG today. I had bought JNUG on Friday when gold got down in the 1232 zone we had been discussing as support level from Dec 9th, just in case that was bottom of Wave 4, and the beginning of the Wave 5 uptrend. Yes, it very briefly went down to the 1228-29 zone, but quickly snapped right back and then hovered +/- 1232 (1230-1234) zone in a channel for the rest of Friday, so there was no doubt that a key area of support had held into the close.
I do find it interesting that we were discussing that bottom was still not in at the 1254 intra-day low on Thur the 29th, which then rebounded to 1283 by the close on the 30th. During that whole week before the most recent fall with gold in the 1270s & 1260s many were uber bullish, but the technicians were calling for 1240. We (Matthew & Glen & I) had a new focus on the 3rd, 4th, and 6th and discussed 1232, based on the Dec 9th peak. Now it has come down and tagged that area twice and rebounded. Coincidence or is it technical analysis?
For the record, it is support and not a bullet-proof shield so oscillating back and forth around that area and holding all day shows there is support and congestion of buying and selling in that zone.
This was a pretty accurate target that we put on the table when analyzing technical numbers, and we were saying emphatically that we expected it to happen soon. Then when that is exactly what happened, most people acted like they were surprised. I was surprised that 1240 fell so quickly, but not that the 1232 zone was support, and we had laid out the case for this target in a number of difference discussions. A short term correction was discussed over an over by Doc & Gary and tons of people on the blog all through the end of January and beginning of February, but I guess the people surprised by the $33 drop in Gold weren’t really listening.
On this Monday, personally I didn’t like the odd channeling and lack of conviction, so I sold my Friday JNUG position at a nice little profit. My plan was to wait until Wed/Thursday to buy the low, but when I saw the waterfall decline from overnight trading into the Tues session and Gold returned right back down to 1231-1232 level of support right on the dot; then this got my attention. One reason is that Gold still did not violate the Wave 1 leg up to 1232 from Dec 9th. (no overlap Glen : – )
So, when that happened and there was a second bounce out of this zone, then I got back in JNUG with my first tier (33% of what I want to allocate). That gives me two more tiers that I can average down with if we fall out of bed down to 1220-1218 this week. However, when something cascades down that fast 2 times, in less than a week, and bounces off the same exact zone, then that shows there is definitely some strength there. Will it be tested again, or was that the bottom? I dunno, but I took a small position just in case.
Looks like today is going to be the low we’ve been waiting on and the 1220-1218 support needs to hold. Today may be a good time to take a position for the bounce.
The prior level of support has given way to lower lows, so it is looking more like the rally out of November was an A-B-C counter-trend rally, so we are going to need to put in lower lows in the Spring/summer and bottom with the whole commodity complex.
Dan Norcini in a kitco article agree with you Rick, sell all rallys he says.
Personaly, I think we have a deflation in commodities happening, could get serious actually.
Maybe your right about these Tech? companies Al tlt etc
That’s what I say too – “SELL EVERYTHING GOLDIE”.
’cause I wants to buy more.
Norcini is a joke. He was bullish at 1900. Why bearish now? it is a lot lower now? He is toxic.
He’s been bearish for quite some time now. Hell, he’s been bearish on precious metals since I started following him two years ago.
Yes, lower the gold goes lower he will be more bearish and recommend shorting. So you end up buy high and sell low. I found that out when gold was high so I stopped listen to him at KWN. But what you need is someone who makes you buy at 1100 and sell at 1900. Otherwise you will lose money to The banks. He has to go against the general public. Just my two cents.
Charles Nenner
Everyboidy was bullish at 1900.
Definitely not me. I can give you the link I posted on Chinese Investor site if you know Chinese.
In the follow post I stated gold was peaked and stock was safe. I recommended oil and fertilizer for futher investment. Date was August 10, 2011.
Here is my bearish call for silver on April 24th, 2011. Luckily it is in English. I also said gold was safer at that time. I stated gold silver ratio will reach 10 in a long term. That day has not come yet. For me long term is 10-20 years.
in first post, by stock I meant DOW.
I hate it when Big Al says “I don’t see a major drop in the gold market”.
It’s like the kiss of death 🙂
Peter
I found the ultimate indicator.
Do the opposite of what Big Al recommends 🙂
Peter
Actually when you got over the top bullish two weeks ago it was the perfect contrary indicator that a correction was about to begin.
As for the Uranium comments, I am not in agreement with Rick. There is plenty of demand that will be hitting the markets in 2015 and 2016 when many of the existing producers long-term contracts expire (where they are currently selling their production in these contracts way over spot price). Germany is not a play in nuclear and pale in comparison to the USA, Russia, France, what China has and is building, Japan, Indian, and many emerging markets in S. America & Asia.
I am just going to repost this thread from the 5th because I’m not retyping all that:-)
On February 5, 2015 at 6:41 pm,
Shad says:
Here is a nice summary from the CEO of Paladin Energy in their Jan 19th, 2015 Quarterly Activities report. They’ve had some major financial drama in the downturn but they’ve been in the game for a while and are still major players, so I think they’ve got a better handle on the Uranium scene than most. Enjoy!
URANIUM MARKET COMMENTS
During the December quarter, the uranium spot price continued to demonstrate significant volatility, having risen from US$28.10/lb in mid-CY2014, reaching US$44.00/lb by the middle of November. During the latter half of the quarter, the spot price declined to US$35.50/lb, as near-term demand decreased and a limited number of suppliers reduced offer prices to complete end-of-year sales.
The term contracting market showed a substantially greater volume for CY2014, exceeding 80Mlb as compared to around 20Mlb during CY2013. As has been the case in the recent past, the majority of the long-term agreements involved non-US utilities, which were predominately located in the Asia/Pacific region. US utilities tended to execute smaller volume agreements with deliveries confined to the mid-term market period (2015-2018), providing for limited deliveries post-2019/2021.
TradeTech’s long-term U(3) O(8) price, which declined to US$44/lb-US$45/lb through most of CY2014, increased during the December quarter to US$50/lb at the end of November and held at that level to year-end.
The Japanese reactor restart program continued to make progress during the December quarter. In mid-November, the governor of Kagoshima Prefecture granted his approval for the restart of the Sendai 1&2 reactors (Kyushu electric Power Company), which are undergoing final documentation reviews and plant inspections by the Nuclear Regulatory Authority (NRA). Actual operations are now anticipated to commence during the first quarter of CY2015.
Furthermore, the NRA released its draft report, which states that the Takahama 3 & 4 reactors (Kansai Electric Power Company) meet safety standards introduced subsequent to the Fukushima accident. The Takahama reactors will now move into the local government approval phase.
Global uranium production totalled 155Mlb during CY2013. However, due to operational cut-backs at facilities such as Rossing (Namibia) as well as placing Paladin’s Kayelekera Mine (Malawi) and Uranium One’s Honeymoon ISR Mine (South Australia) on care-and-maintenance, CY2014 worldwide uranium output is expected to be reported at less than 150Mlb and perhaps close to 145Mlb.
Written by: John Borshoff
Managing Director/CEO
On February 5, 2015 at 8:05 pm,
On February 5, 2015 at 9:28 pm,
Birdman says:
Uranium suffers from politics of every stripe and persuasion. The public fears it, the media misrepresents it and some environmentalists would like to see it outlawed for use altogether. It is probably not the best example to use to make the point but there is no question it is a resource and a commodity. I would like to take it more seriously but like a lot of others have already experienced your investment can go up in smoke on the news of a single incident like Fukushima, Three Mile Island or Chernobyl. So nobody likes that element of unpredictability when they take stock in a good mine no matter how good the outlook is for price.
On February 6, 2015 at 6:21 am,
Shad says:
Birdman – All the more reason to be a contrarian investor in the space while the sentiment is so low, (if you have the nerves and vision for it). Nuclear energy is abut 20-25% of the overall base power load for the world, there are around 400 reactors in place, about 60 being built world-wide, and another 80-100 planned. That is not up for debate and is a fact whether people agree philosophically or not, and will not be changing any time soon, no matter how much whining about it there is.
Japan will be forced to put their reactors back on line this year, and have been a mess ever since they turned them all off in fear. Many companies have only been working 2-3 days a week and there are strict power curfews in effect because out of a knee-jerk reaction to 3 reactors, they shut down their whole fleet of 40 reactors which was an over-reaction and has cost them dearly. They’ve had to import oil and coal just to make it the last 4 years and that has put them further into debt = not very smart.
As a result of the silly low pricing, many of the suppliers have been taking projects off line for the last year, or putting development projects on hold, so there is a large supply deficit projected form 2016-2019, and prices only have one way to go —- Up.
Most hard rock producers need a Uranium price in the mid $50s to $60s to be profitable and that is a fact. There are insitu miners like URZ, URG, and Uranium One that can produce in the mid $20′s but they only make up a small percentage of the market and cannot supply the world.
The pricing must come back up or they’ll be no meaningful supplies. The arrangement where Russia traded in old nuclear warheads for nuclear supply ended in 2013 but the effects carried into 2014. That is clearly over now with all the tension, and the supply is working its way through the system, and energy companies will be coming back to the table this year and next to set up new pricing terms.
Most of the long term contracts were set around $54-$60 in prior years and that is the only way companies have survived the 2011-2014 bloodbath, because they have not been selling their supplies at the spot price. However, many contracts expire this year or next, so the pricing will have to rise to meet the cost of production.
The supply demand fundamentals are there, the infrastructure is already in place (unlike Nat Gas, Solar, Wind, Geothermal) and Coal is the real relic and polluter, but will still take time to phase out. The publics fear of nuclear is valid but largely misplaced. 3 accidents in the last 50 years, doesn’t change the fact that 100′s of millions of people depend on nuclear for their power everyday. Also, Oil/Gas/Coal are not going to win over the environmentalist agenda, where Nuclear gives off water vapor and no greenhouse warming gases. I believe this will be highlighted more and more as the Agenda 21 madness is pushed by the UN.
On February 5, 2015 at 11:50 am,
Lawrence says:
Bird, you are really off base on this one. Uranium price is mostly have nothing to do with other commodities. When it peaked in 2007, other commodities went up another year and half. When other commodities languished in 2008, Uranium was rising!!! till march 2011 and crashed after nuclear accident. Got a reason to crash since Germany, Japan even China halted nuclear reactors and Germany and
Japan sold their uranium stock pile for cash. Uranium is very unique in it movement. It is not in the commodity crowd. Also contract price is a lot higher, which is 90% of the sales.
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On February 5, 2015 at 12:43 pm,
Dan, calgary says:
Good points Lawrence and Bird. Nothing is cut and dry in the uranium field as far as I am concerned.
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On February 5, 2015 at 7:13 pm,
Shad says:
Agreed Lawrence & Dan. Uranium is a unique marketplace, it has bottomed, and will start the slow grind up from here. I took larger positions in the two new US insitu uranium miners – URG – Ur-Energy, and URZ -Uranerz (getting acquired by UUUU – which will make the new Energy Fuels the biggest US producer). Cameco and Areva as the biggest majors in the space, and while very undervalued, they won’t have the multiples of the mid-tiers and juniors as this space comes back alive.
The mid-tiers are Uranium One (now privately owned by the Russian conglomerate ARMZ), Paladin (PALAF), Denison (DNN), Uranium Resources (URRE), Uranium Energy Corp (UEC), and UEX Corp (UEX).
There are some other exciting explorers in the space with great projects like Fission (FCUUF) or Laramide (LMRXF) that are worth watching as well.
2015 will be the beginning a huge 3-5 year Uranium Bull. China is not on hold any more and is building reactors like crazy, and the MiddleEast is building nuclear reactors, and the US & Russia have made deals with many South Amercian and Asian countries to assist them with new reactors. Japan will be restarting a few of its reactors in the next few months. Germany was not a major player in Uranium anyways. France is a big player in this space, but the US, Russia, China and eventually India will the biggest players.
Lastly, all the environmentalists are finally starting to realize that Nuclear energy gives off water vapor aka steam as it’s by project, not soot, smog, and poisonous fumes like coal, oil, and gasoline, and it doesn’t destroy ecosystems like dams. Solar and Wind are great but only 1-2% of the power grid at this time, and many environmentalists even block people from building them, so you can’t win. The fact is that Nuclear makes up about a fifth of the power grid, and is the answer for many emerging countries to meet their base power requirements. Coal is starting to be phased out, and Nat Gas is starting to be phased in, but those will be gradual changes that take decades. Uranium’s time to shine is the next 3-5 years.
For the haters – yes Fukushima was absolutely a rare and horrible disaster. Many are upset, and a little warry, and rightfully so – it was mess, and old plant, a horrible design with the back up generators in the basement below sea level, and spent fuel rods in the attic), and a terrible cleanup operation. What a cluster*&%$. But most of the new plants would not have fared so badly, most electric companies do a better job of designing backup plans, and there are many new ideas coming into the space to use Thorium (less radioactive waste) and even a company IBC Alloys (IAALF) working with MIT and Texas A&M to use Beryllium coated Uranium pellets to burn at a much lower temperature and be more stable as a Nuclear fuel preventing meltdowns.
I think the time to get into select uranium producers & good explorers that meet all the normal criteria for quality juniors. Just my 2 cents on the subject.
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On February 5, 2015 at 7:35 pm,
Shad says:
I love investing in something like this when it is at its bottom in the stocks, the commodity prices are half of what they need to be for 80% of the miners and producers to be successful, and there is sentiment that has been absolutely terrible….just terrible. Anybody noticing that 2011-2014 were the blood in the streets years in this sector, and barely anyone has been willing to touch it with a 10 ft pole. yet every day millions of people get the power for their electric cars, smartphones, and refrigerators from Nuclear power safely and clean powered. Anyone feeling a bit contrarian?
On February 5, 2015 at 7:48 pm,
Lawrence says:
Thanks Shad, great summary. You know more in this field. Good information. This is a sector with some of my dead money. 🙂
Only thing is that I feel UEX is a smaller play. Even it has good resource, it is not producing actively. I also has two uranium plays, one is Pinetree capital and the other Jet Energy, these were both Grandich’s recommendation. I lost quite a lot in PNP but not much in JET (former CXX). I could not see how feasible they are but I am holding them.
Good luck to all of us.
On February 5, 2015 at 7:50 pm,
Lawrence says:
I do own Cameco, Paladin and Denison as my major holdings.
On February 5, 2015 at 8:06 pm,
Shad says:
Wise on the Cameco, Palladin, and Denison. I would recommend UUUU (currently via the shares of URZ at a discount to UUUU due to the planned transfer ratio of .255 in June merger).
Cameco is biggest and will outlast any downturn and is the 800 lb. gorilla, but doesn’t have as much percentage upside. Denison is solid, has been a player for decades, and buys and sells assets regularly to keep it fresh. Denison also helps with mine reclamation and environment clearance to decommission mines, which will always be in need. Denison is how Energy Fuels (UUUU) – my ultimate favorite pick at todays pricing, got the white mesa mill – the only – I repeat only…. conventional Uranium mill in the USA (that’s called a monopoly) and there are 2 more in N. America.
Paladin has been through the ringer, and many have given up on them, but I think they’ll survive. They just gave away part of the company ownership to the Chinese, but that was wise to survive and live to fight another day. They are a little better financial footing, have their Kayelekera Mine is on care and maintenance due to the pricing environment, but they just stated in January that they are going to release as PEA to get the mine up and running again when the pricing gets up north of $50-$60. They’ve been in the space a while and are a big supplier, but had bad rain storms that messed them up post Fukushima, some fatalities, missed guidance, and hit rock bottom. However, I think they are now a turn-around story and have their ducks in a row to make a gradual comeback.
Here is the post from the 4th as well, so all this Uranium info is in one place:
On February 4, 2015 at 9:56 am,
Dan, calgary says:
BTW, Uranium is sneaking up again.
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On February 4, 2015 at 3:57 pm,
Shad says:
Yes it is. I increased my positions in URZ (for the takeover by UUUU), and URG. I like the in-situ recovery plants because they are easier to get permitted (especially in Wyoming). UUUU will be the largest US miner/processor of Uranium after this merger with URZ in June. I expect with prices continuing to rise that Energy Fuels will be re-rated up. It has made 3 other acquisitions in the last 2 years and on the Denison deal they have one of the only operating Uranium mills in the country. Their hard rock mining needs higher prices north of $60 but the insitu margins allow for pricing in the low $20s, so this will help both companies be a stronger united company in the new UUUU. It has been smacked down because both sides feel the other side gave away the farm, but most analysts feel the deal is fair and will pass the necessary votes this summer. Unlike Oil, I feel very comfortable bottom fishing in Uranium at present because it has bottomed since 2011, there is a supply deficit, Japan will be turning on their reactors this year, and the starting in the 2nd quarter I expect a noticeable increase in the Uranium miners.
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On February 4, 2015 at 4:04 pm,
Shad says:
Obviously Cameco, and Areva are still the global leaders in the Uranium space, but they won’t have as much upside as Uranerz (soon to be merged with Energy Fuels), or Ur-Energy. As for Uranium One it got taken private under the Russian company ARMZ, so it is out of the equation. Paladin is a wildcard because it has great assets and mines, and fair amount of experience, but its financials and debt are terrible, the dilution is horrible with 1.67 Billion shares outstanding. I believe if the go bankrupt or (more likely) do a big reverse stock split, that after the dust settles that the new entity will go much higher, but I am waiting to see how that plays out.
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On February 4, 2015 at 4:42 pm,
Lawrence says:
Also add in Denison mines and UEX.
On February 4, 2015 at 7:01 pm,
Shad says:
Yes both are great companies with good management.
Rick, who gives a flip about German and Swiss nuclear power plants. Its the Japanese that shut down 52, count em, 52 nuclear power plants. (Coal can be an energy of the future, if we can get it to burn cleanly and not put out greenhouse gases.) China is going to keep building nuclear power plants no matter what the price of oil is. Just so they can breathe clean air.
Agreed Stephan on your thoughts on the reactors being built in China, and that Germany made headlines for saying they were phasing out nuclear, but they are small potatoes in the energy game and have very few reactors. It is the USA, France, Russia, Japan, China, India, S. Korea, the middle east, and emerging markets in Eastern Europe and Asia that matter.
Cory, you have asked Rick & Gary about Uranium but neither one of them follows it very closely. CHRIS TEMPLE on the other hand, covered nuclear power in his 2015 handbook, and would probably have more substance to put towards the matter.
There are also experts you could interview like Mickey Fulp, David Sadowski (w/ Raymond James), or David Talbot (w/ Dundee Capital) that could offer real commentary on the subject.
This would be an interesting subject for the weekly show sometime by getting Chris Temple, Mickey Fulp, David Sadowski, or David Talbot on the show. Just an idea.
impulse leg…………..is no different than a dog shaking it’s leg while having nightmares, while dreaming about the fire hydrant it passed during the day.