Yesterday was an impulsive looking move and something of a statement in itself. But now technically, the metals and miners need to gather themselves (after a potential pullback on profit taking) and make a real statement.
Yesterday was the booster stage (gap up), and another leg up from here would give the precious metals complex the velocity to do some real damage with respect to upside targets. That is because important resistance zones are now at hand. While a pullback would be normal, gold bugs obviously do not want to see a terminal velocity situation where yesterday’s momentum erodes beyond normal profit taking. Continue reading "Precious Metals Must Make a Stronger Statement Still"
The Gold Report: Mike, the prevailing wisdom in the market favors producers over explorers in the precious metals equities. The thinking seems to be why buy the pasture when entire farms are selling at nearly the same price? What do you think of that strategy?
Mike Kachanovsky: That is a good summary of current affairs. Market values for the entire sector have been trimmed dramatically; even many of the highest rated stocks are down 50% to 60%. From a value perspective, it makes sense to buy higher up the food chain when you have the opportunity, to buy more established companies that offer legitimate earnings and established infrastructure.
TGR: Kenneth Hoffman of Bloomberg Research notes that production from the world's biggest gold mines has dropped 17% since early 2011. He predicts that gold mines, especially high-cost mines in Africa, will start to close as gold hovers around $1,200/ounce ($1,200/oz). Is there a bullish medium-term case to be made for gold given the shrinking supply?
MK: We have been through similar severe price corrections before. At the beginning of this century, gold's market value was below what it cost to produce it. Mines closed and companies went out of business. That scenario evolved into the bull market we have today and the achievement of all-time high metals prices.
TGR: But this is not a bull market. Continue reading "'Mexico Mike' Kachanovsky Believes the Best Cure for Low Prices Is Low Prices"