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The Gold Stock Strategist analyzes leading junior gold producers and major gold mining companies.

Comments are welcomed!

Tuesday, November 11, 2008


Thank you to those who have been emailing and asking me to post my thoughts.

I've been very busy lately and the Gold Stock Strategist has had to take a back seat. Apologies to my readers.

That said, fundamental analysis is pretty worthless in the current macro environment. And until the macro environment improves, my fundamental analysis on the Gold Stock Strategist isn't useful.

I still hold my investment stake in Metanor and Gold-Ore Resources and my portfolio has suffered with the severe stock price compression. They are both still producing gold. Metanor appears to have solid plans for expansion next year. Gold-Ore will likely need a refinancing in the coming months, but they are also producing gold--even increasing production month over month. The fundamentals for these two companies haven't changed with the exception of expectations for the price of gold going forward.

Realistically, the emerging junior gold producers need a sustained price of gold over US$1,000 to move up in share price given the current uncertain macro environment. And I thought that would happen this year given the credit crisis.

What happened was the deleveraging away from equities--including emerging junior gold producers--to US Treasuries (UST) as a safe haven play put a tremendous lift under the US$. Capital moving to UST as a safe haven would in past decades have gone into gold bullion. No gold analyst I am aware of predicted this global capital action into UST rather than gold.

As I have always believed, emerging junior gold producers were speculative plays. The logic in favor of this sector still holds in the near term if capital begins to see gold as more of a safe haven in financial crisis than US Treasuries.

I expect the price of gold will remain range bound between $675 and $825 an ounce. But no one really knows how gold will behave in the future and I could be wrong.

Good luck to all,

The Gold Stock Strategist


MontyHigh said...

Great to hear from you. Hope you can give us some more time soon.

I'm still holding MTO as well. I am looking forward to those $C.55 warrants coming off over the next two months.

Bought a decent sized batch of one of your favorites, CGC.TO.

Also like SMF.TO. I believe its what GSS should have been.

Its really hard to tell what to do at this point. The situation keeps getting more bearish for the economy as a whole with more indications of long-term inflation all the while we see deflation gathering steam short-term.

My plan, at this point, is to keep my leverage low, day-trade the gold futures based on interventionals targeting around $2000 a week, hold jrs that are either producing or near producing with decent mine life, low cost of production (with low byproduct prices) and that need no financing.

At this point, the list is GORO.OB, MTO, FR, SMF, MFL and CGC.

Am I missing any back up the truck names?

I'm also holding a good sized bunch of DLKM because you should never put a zero in yahtzee and have a bunch of NGG because there's still a decent chance they can get their mine working.

Folks my want to drop by my web site, occasionally.


Anonymous said...

Doug, have you looked at Sangold? Thier drill resluts are impressive.

Seems the best play lately is shorting the market.

Anonymous said...

Ditto the difficulty in trying to figure out where gold is going to go. With the current financial crisis I would expect gold to be way up there in the $1000 range too. And with a bunch of governments facing similar financial woes like the US i can't get over the fact that it isn't through the roof. Though it sure looks like now might be a good opportunity to but gold and silver if one can get their hands on it. I still think that it will rise due to inflation in the next 12 to 24 months.

MontyHigh said...

Yes, I've looked at SanGold. The rocks look really good, but they have had a lot of trouble getting their production working and the balance sheet isn't strong enough (if I recall correctly) to be sure they won't need financing.

So, I'm watching, but not buying at this time.


Anonymous said...

Good to see you back with a market update.

Thought you should know that GOZ will actually not require any additional funds to bring Bjorkdal to full commercial production in the coming months.

The cash equivalents on hand plus growing cash flows from the mine itself are more than sufficient to complete all the necessary development work and achieve their objectives.

Any future financings will be reserved exclusively for either aggressive programs on their other projects or strategic aquisitions.
And only at a point in time when the credit markets have recovered some health and the share price has returned to levels that are advantageous for the company to consider.

With production now at 35K ounces per annum and the bulk test mining of the stopes just about complete (with the feasibility study to follow along shortly after), investors might be surprised at how quickly production acclerates to the 70K ounce range upon a commercial production announcement.

Anonymous said...

Bob Hoye a Canadian analyst has had this market nailed all year, he is now bullish gold stocks on the basis that the real cost of gold rises in a credit contarction ie gold will go up relative to other commodities, so nominal highs in gold are not rquired for gold producers to be profitable. he does weekly interview on Howestreet and some longer interviews on commoditywatchradio


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