munKNEE.com Your Key to Making Money
Who shot J.R. or, should I say, Jr. – the junior gold mining sector? Who did it? This article will provide evidence of the suspects and leave you to decide. The good news is that on Dallas, J.R. didn’t actually die from the attack and neither will the Jr. gold mining sector. In fact, a miraculous “Jesus-like” resurrection for gold and its shares is long overdue and may already be in its early stages.
So wrote Craig Brockie (www.thetafund.com) in edited excerpts from his original article* as posted on SeekingAlpha.com entitled Who Shot J.R.? The Junior Gold Mining Murder Mystery.
[This post is presented by Lorimer Wilson, editor of www.munKNEE.com and the FREE Intelligence Report newsletter (see sample here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Brockie goes on to say in further edited excerpts:
First off, let’s agree that the junior mining sector has been shot. In fact, it’s riddled with holes and hemorrhaging profusely. From its December 2010 peak to its low last week, this sector has fallen 80%! Even since its high of just nine months ago, the sector has bled 65% and, just this year to date, junior gold miners are down 40%.
Market Vectors Junior Gold Miners ETF (GDXJ) December 2010 to present (click to enlarge)
The above being said,…gold miners have proven themselves extremely resilient in the past. In the last outright collapse in 2008, the fund GDXJ did not yet exist, however it’s big brother, senior gold mining fund GDX did, so let’s use it as an example. From its October 2008 bottom, GDX rallied 334% over the ensuing 13 months.
If the above sounds outlandish and an isolated case, it’s not. The article, “What Happens When You Buy Assets Down 80%?” shows that the average recovery is 172% in a sector that has dropped 80%. I don’t know about you, but I’m certainly up for participating in a rally of 172% regardless of the short-term pain required to accumulate the position into falling prices. After the outright slaughter that junior gold miners have suffered, I would not be surprised if the recovery is greater than just average.
Market Vectors Gold Miners ETF October 2008 – December 2009 (click to enlarge)
Now, getting back to the topic of this article. Who shot Jr?
- The killing appeared to be kicked off by an extremely overbought gold peak back in September 2011….
- If the 2011 oversold high started the bleeding, who has been responsible for the more recent bullet holes? Gold and its miners were attacked earlier this year when it was reported in February that investment mogul George Soros cut his holding in GLD in half in the fourth quarter of 2012. (It’s important to note that Soros has since turned bullish on gold and has even bought call options on the junior mining fund, GDXJ.)
- The next round of media ammunition in gold’s demise came from our “friends” at Goldman Sachs. In mid April, Goldman recommended that their clients sell gold short. It’s also important to remember that Goldman was caught up in the crude oil bubble of 2008, suggesting that oil could hit $200 per barrel. Of course, just a few months later, oil dropped well below $40 per barrel.
- Just when things looked like they couldn’t get worse, “Helicopter” Ben Bernanke cast terror on the gold market in the past two weeks as he hinted that the privately owned Federal Reserve may begin tapering its unprecedented inflationary efforts.
We’ve identified a few smoking guns now, but really, who did it? Who killed Jr? Well, according to a report published at zerohedge.com, JP Morgan Accounts for 99.3% of the Comex Gold Sales in the Past Three Months. The article displays Comex delivery notices as proof and identifies that:
“J.P. Morgan has fumbled ownership of 1,966,000 Troy ounces of gold since February 1. That’s 74% more gold than the US mint delivered through the US mint’s American Eagle program in all of 2012.”
Why would JP Morgan be selling so much gold now when they could have gotten $1,900 an ounce back in 2011? You can call me a conspiracy theorist if you like, but this activity appears to be blatant market manipulation that is intended to benefit a small group of “friends,” and not you and me.
The damage has already been done. Junior mining companies have already dropped 80%. Rather than wallow in the injustice of the apparent gold market manipulation, I believe it is better to apply the wisdom, “if you can’t beat them, join them.”
- JP Morgan’s friends appear to be loading up on cheap gold, George Soros has been buying junior gold mining call options,
- commercial traders have taken all-time bullish positions, and
- corporate executives have being buying shares in their own gold mining companies at record levels.
What more does an investor need to get or stay involved? Courage.
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
*http://seekingalpha.com/article/1531502-who-shot-j-r-the-junior-gold-mining-murder-mystery (© 2013 Seeking Alpha)
Related Articles:
1. Gold Producer Stocks Dramatically Undervalued: Don’t Miss This Blood-in-the-Streets Opportunity
While the waterfall decline in gold stocks is painful for those of us already invested, the reality is that this is a setup we get a shot at only a few times in our investing life. It’s a cruel irony that those who are fully invested are now faced with the buying opportunity of a lifetime; however, it would be a shame for anyone to miss this blood-in-the-streets opportunity. Read More »
2. Huge Rebound in Gold & Silver Stocks Coming Soon – Here’s Why
It’s been a tough road for precious metals but the path ahead has strong potential of being significantly profitable and in a short period of time. The buying opportunity that we’ve spoken of for months could be days away. When precious metals equities rebound, they rebound violently. Read More »
The precious metals complex is arguably at its most bearish sentiment since the start of the bull market 12 years ago. Either the bull market is over or this will prove to be a tremendous buying opportunity. It’s clear that anyone who doesn’t believe in Gold for the long-term has sold and judging from the sentiment indicators, Gold is now in much stronger hands than when it was trading at these prices at the 2012 and 2011 lows. Despite all of the bearish sentiment, the panic and bad-mouthing, Gold (and Silver) has maintained its consolidation. Thus, if Gold is able to hold this support and turn higher, it should approach $1750 to $1800 faster than one would think. This year will go down in history as one of the best buying opportunities for both the metals and the stocks. Words: 675; Charts: 3
4. Gold Miners Have Hit Rock Bottom! Now’s the Ultimate Buying Opportunity
Looking at the recent Gold Miners price action and crash-like conditions, I cannot hide my excitement. As we judge the recent cyclical bear market within the longer term secular uptrend, we can see that Gold Miners are becoming very attractive. Whether it is the technically oversold levels that only occur a handful of times over a generation, the rock bottom valuations on nominal or relative basis, or the extreme sentiment that the overall sector is going through, all of these indicators point to one conclusion: we are fast approaching a major buying opportunity. [I support that contention below with the use of 8 charts and a full explanation of each.] Words: 1133; Charts: 8
The timing of this article may seem incongruous given the current weak performance of gold and gold stocks but that was the identical situation in each of the past manias – both the metal and the equities didn’t excel until the frenzy kicked in. The following documentation (exact returns from specific companies during this era are identified) is actually a fresh reminder of why we think you should hold on to your positions – or start accumulating them, if you haven’t already. (Words: 1987; Tables: 7)
6. Goodbye $1,200 Gold: Hello $2,340 Gold – Here’s Why & How
Gold may be set to nearly double from current levels, but it didn’t drop in a straight line and it won’t return to (and surpass) its previous highs in a straight line, either. For now let’s watch and wait to see if it overshoots. If you own gold, you can stay put but if you’re looking to add to or initiate a position here, my suggestion is to do nothing and to get ready to buy when the time is right… Read More »
7. The Bottom Is In for Gold and Silver – Here Are the Reasons Why
No one has a crystal ball and I certainly don’t claim to have one. [Nevertheless,] I strongly believe that the prices we see today in gold and silver will be looked back upon in the next few years as a great buying opportunity. The data I read and understand tells me the case for gold and silver is now a strong one…If you are conservative dollar cost average into a position for a long time now [otherwise] I am OK with a full allocation into gold and silver at this point in time… Read More »
8. Goldrunner: Gold Complex So Underpriced Reward Is VERY High & Risk Is VERY Low
A more aggressive devaluation of paper currencies is on the horizon thus the whole PM Complex is completely underpriced. Averaging in from this point on seems warranted. Below is a full explanation as to why that is the case. Read More »
9. Gold Advice: Look for Onramps, Not Exits
The historical record shows that those who get washed out during big corrections miss the greatest buying opportunities of a bull market. With that as context, what can we expect from gold moving forward? Let’s start with the short term. Read More »
10. Gold & Gold Stocks: A Look At the Current Weakness & Future Expectations
Nearly all markets except the dollar reacted rather badly to Ben Bernanke’s news conference – even though it actually contained no news – Treasury yields soared, stocks were whacked, and so was gold. While the charts certainly don’t look good in the short term, though, it should be pointed out though that investors with a longer time horizon probably won’t make a big mistake by buying on weakness. That being said, however, in the short term all the tentative evidence that a bottoming process may be under way has by now been eradicated. Below are a number of charts illustrating the situation. Read More »
11. Increasing Evidence Indicates a Reversal in Gold & Silver Trend Is Near
We can find nothing – nothing – that has happened over the past two years that invalidates the principal reasons we’ve laid out for owning precious metals. [This article] looks at the key reasons why we originally recommended gold and silver plus, sadly, several new drivers that have developed recently all of which confirm that the bruised precious metal investors out there should still sleep well at night, secure that the foundational rationale for holding gold and silver remains intact. Read More »
12. The Gold Story Is NOT Over. Far From It. Here’s Why
Is it time to admit defeat, sell our positions, slink into a cave, and lick our wounds? Absolutely not. The only thing that changed over the past 60 days was the price of gold, and perhaps the mainstream’s perception of our industry. The realities of the fiscal and monetary state of the world, however, did not. Amid the ongoing rollercoaster ride of gold prices, clearheaded thinking reveals reasons to be optimistic. Read More »
This is a Great Article!
It reinforces what I’ve been thinking about how Gold has been getting manipulated (using naked shorting) by the Central Banks which are using their freshly printed paper money to drive Gold prices downward, which is shifting Golds ownership to the same Central banks who are now able to buy Gold at bargain prices, instead of all the small and medium investors which have been scared into selling their “worthless” holdings “ploy”.
This “trick” also serves to take peoples minds away from using Gold as a monetary standard, something that the same Central Banks do not want to do unless/until they control almost all of the Gold!
Each day allows all these Central Banks to further increase their store of Gold using just paper, something that nobody else can do; which tells me that when the US$ stops becoming the World Standard, PM (Precious Metals) prices will zoom upward!