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29
Jan
2012

Top 10 gold price predictions for 2012

by Fred Marion

The gold market got a powerful jolt last week when the Federal Reserve announced plans to keep interest rates at historic lows through at least 2014. It was a sign, perhaps, that the gold rally has more than a year’s worth of climbing to do (until the Fed gets serious about combating inflation). The news has helped push gold prices up 10 percent in January alone, and that’s got us wondering what’s in store for the metal in 2012. Let’s take a look then at the Top 10 gold price predictions for 2012:

1) An average price of $1,765 an ounce. A Reuters survey of 45 analysts predicted an average spot gold price of $1,765 an ounce in 2012. That’s 14 percent higher than last year’s average spot price for gold.

2) New all-time high for gold. After getting pressed in an interview with the Washington Post, Puru Saxena, chief executive officer of Puru Saxena Wealth Management, didn’t name a price target for gold, but he did say: “My best guess is the price of gold could reach a new high.”

3) $2,300 an ounce. That prediction comes from Peter Schiff, a former U.S. senatorial candidate from Connecticut. He believes 2012 will be the year the dollar finally starts to “fizzle” out (per ETFDailyNews). “We’re a long way from a blow-off top that you would get at the end of a bubble,” Schiff said in the interview. “We might eventually get there, but we’re years away and thousands of dollars an ounce away.”

4) $1,845 an ounce. Global banking giant Morgan Stanley revised their gold price predictions lower on Jan. 17. They believe gold will average $1,845 an ounce in 2012.

5) $1,681 an ounce. Investment bank Goldman Sachs was more bullish than Morgan Stanley. On Jan. 9, they were predicting gold would hit a new record of $1,940 an ounce in 2012 (per Bloomberg). Two weeks later, they were revising that figure down to $1,681 an ounce in 2012.

6) $1,892 an ounce. Barclays Capital believes the yellow metal will surge 21 percent on the year. That said, they also believe the gold price could go even higher by Q3 2012: “Gold is likely to reach a new all-time record high above $2,000 per ounce during the third quarter of 2012.” (per IBT).

7) $1,450-$1,750 an ounce. Jeffrey Wright, senior research analyst at Global Hunter Securities, believes gold will remain range bound for the year between $1,450 and $1,750 an ounce (per NuWireInvestor). He echoes many other analysts, though, in arguing that we will likely see a sprint north of $2,000 an ounce in 2012 at some point during the year.

8) $1,000 an ounce. The bulls are tempered by Jon Nadler, a senior analyst at Kitco.com. Nadler argues gold will hit $1,000 an ounce before it hits $2,000 an ounce. “The question will remain for 2012, to what extent will investment demand be able to remain the principle driver and continue to attract interest from speculators and investors,” Nadler told TheStreet.

9) $3,000 an ounce. John Ing of Maison Placements Canada Inc. expects to see gold at $3,000 an ounce in 2012. “There’s just a lack of compelling investment alternatives,” Ing writes.

10) A Long-Term Prediction: $3,600 an ounce. Frank Holmes, CEO of U.S. Global Investors, believes gold prices could double in the next five years to $3,600 an ounce (per NuWireInvestor). “Does anyone really believe in the long term strength of the U.S. dollar … We’re just going to have to live with this volatility for another 12 months,” Holmes told NuWire.

The biggest beneficiary of high gold prices in 2012 could be gold and silver mining stocks. See which companies we think our poised for success in our BRAND NEW book: the Top 500 gold and silver mining stocks.

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21
Oct
2011

$10,000 gold doesn’t sound that crazy anymore

by Fred Mason

I’ve been listening to The Financial Sense Newshour with Jim Puplava for about two years now. The host is unabashed about his bullishness on gold, but he backs it with logical arguments, and it’s been difficult to argue with his stance that gold is going to keep going up until we see some new form of non-fiat currency.

It wasn’t until this week, though, that I heard Mr. Puplava actually give a price target on the metal:

“We aren’t even close to where I see the price of gold and silver going. We’re probably in the second phase of this bull market. Wait until we get to the third phase of this bull market where I think you’re going to see prices closer to $10,000. I know people probably think I’m nuts saying that, but I can make all kinds of fundamental reasons why we think that’s where we’re eventually going to end up.”

Mr. Puplava attributes the rise in gold to one thing: money-printing at, not just the Federal Reserve, but by central banks and governments around the world.

“The debt issue, as Reinhart and Rogoff have told us in This Time Is Different, it takes about 10 years to work those things off.

“We’re only four years into a 10-year debt cycle work-off. So we have another six years to go, and does anyone believe that governments are going to stop printing money? I mean just take a look at what they’re talking about bailing out, back-stopping, quantitative easing, they have all kinds of fancy names for it, but we all know what happens when they do this kind of thing.”

It turns out Jim Puplava’s not the only one who thinks we could see gold at $10,000 an ounce. Nick Barisheff (the CEO of Bullion Management Group Inc.) is actually working on a book titled “$10,000 Gold – Why it will get there sooner than you may expect.”

“Unless current monetary policy is drastically changed, it will almost certainly rise to $10,000 an ounce and beyond,” Barisheff writes (per ResourceInvestor).

He believes three facts are contributing to gold’s ongoing march toward five digits:

  • The loss of purchasing power of global currencies
  • The inflationary effects of money creation
  • Irreversible trends (an aging population, peak oil and outsourcing) will continue to cause gold to rise

Barisheff goes onto point out what I think most outsiders fail to miss when they’re thinking about gold: it doesn’t rise in value. It’s only going up in price because the value of our dollars, euros and yen are falling.

And, if you fall in their camp, you’ll probably come to the same conclusion they have: the fiat currency system that President Nixon implemented in 1971 is on the verge of collapse. And until we get a new currency, gold, silver and other hard assets will be the only vehicles we’ll have to protect the assets we’ve a worked a lifetime to accumulate.

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08
Oct
2011

Four signs gold prices are being suppressed

by Fred Mason

Recently, I blogged about why the U.S. government has a vested interest in keeping gold prices low (see my post What is gold price suppression? for more). Today, I offer up four signs that gold price suppression is actually happening:

1) Swiss miss? One of the strangest impacts of the news that Switzerland was pegging its currency to the Euro was the downward pressure it put on the price of gold. Before the news, the Swiss franc was generally regarded as one of the last strong currencies in the world, and the fact that it would no longer serve as a safe haven should have pushed gold up according to Hinde Capital CEO Ben Davies.

“Why was (gold) selling off just ahead of a really bullish announcement?” Hinde asked in an interview with King World News. “You have to believe that there was some coordinated action. When I say that, the central banks will all have been in on knowing ahead of time that the Swiss were going to announce this. So there was central bank selling because they really didn’t want the price of gold to skyrocket on what is incredibly bullish news for gold.”

Even Goldman Sachs’ head gold trader Zak Dhabalia was perplexed. “The immediate aftermath was in complete contradiction to prior recent episodes of intervention and what anyone would have expected,” he said (per Fool.com). “Instead of spurring a further gold price rally on the basis that it was one of the few remaining safe haven ‘currencies’ we saw a USD$50 collapse in minutes.”

2) Collusion among central banks. GATA.org is one of the most forceful advocates for transparency in the gold markets. And they’ve been trying for years to draw attention to comments by William S. White, former head of the monetary and economic department at the Bank for International Settlements. At a convention of central bankers in Basel, Switzerland, in 2005, White declared that a major purpose for cooperation between central banks is “the provision of international credits and joint efforts to influence asset prices – especially gold and foreign exchange.” GATA’s went as far as taking out a $264,000 full-page ad in the Wall Street Journal re-printing White’s comments (along with a few others).

3) Gold margin requirements. I constantly go back and forth on whether or not the COMEX is attempting to manipulate commodity prices by raising and lowering gold and silver margin requirements. On the one hand, the COMEX exists to make money for its parent company, the CME Group. When prices get too volatile the CME Group tries to shake out weak hands (and protect itself from losses) by raising margin requirements.

On the week of Sept. 19, though, news leaked out that the COMEX would be raising margin requirements on gold at the close of trading on Sept. 23. This information got out even after gold prices were already falling rapidly (and the rumors likely accelerated those losses dramatically). Having followed the gold and silver markets closely for four years, this is the first time I’ve heard of the COMEX “leaking” news about margin requirements. Granted, it could have been an accidental leak by a rogue insider, but the whole thing feels fishy – particularly since it helped contribute to one of the biggest sell-offs in gold since 1987.

4) The Chinese have figured us out. It’s interesting that gold price suppression gets sneers in the U.S., but the U.S. embassy in Beijing was alarmed enough by a newspaper editorial in China to forward it to the U.S. State Department. That happened in 2009 (according to a cable leaked by Wikileaks). The Embassy forwarded on the following snippets from the editorial that ran in a State-sponsored newspaper in China:

“The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold’s function as an international reserve currency. They don’t want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar’s role as the international reserve currency.”

It’s important to remember why central banks want gold prices suppressed: they need investors to maintain their faith in fiat currencies. Without that faith, an economy collapses, and few things erode faith in fiat currencies like a rapidly rising gold price.

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07
Oct
2011

Short-term gold and silver price targets

by Fred Mason

Despite a two-day rally in stocks and precious metals, I’m still bearish in the near-term (see my post 8 signs we’re headed for a bear market in stocks for more). One of the biggest indicators that we’re in for a rough patch is the rapid climb in the volatility index (the so-called “fear gauge” for the stock market). The VIX spiked early in August and it’s yet to taper off:

(Click to enlarge)

Typically, gold and silver act like hedges against market uncertainty, but the recent turmoil in stocks has me feeling like this isn’t typical market uncertainty. It feels like it could be something worse.

And when things really go south in the markets, there is no true hedge outside of cash. We learned that in 2008 when gold slumped 30 percent from $1,010 to $700 an ounce and silver shed nearly 60 percent from $21 to $9 an ounce.

Of course, history might not repeat itself (despite warnings of a recession from the ECRI). And there are quite a few investors who are still bullish in the near-term for gold and silver prices.

MF Global’s Tom Pawlicki is calling for gold to advance to $1,700 and silver to move toward $33 an ounce in the short-term (per Barron’s). Technical traders argue gold’s still in a four-week-old downtrend (per Kitco). If gold closes both $1,535, expect more selling. If it closes above $1,705, it could be time to get bullish.

For silver, bulls are looking for a close above $33.58 and bears are looking for a close below $26.15 (again per Kitco).

Today’s non-farm payroll report could determine the direction for gold and silver prices for the rest of the month. “Many think (the jobs number) could dash recession expectations or rekindle widespread macro economic uncertainty,” the CME Group said in a statement yesterday (per IBTimes).

It’s clear we seem to be at a turning point in the markets. And that’s evidenced by lower silver price predictions from leading analysts. TD Securities expects silver to average $36.11 per ounce this year and $39 an ounce in 2012 (per ResourceInvestingNews). That’s roughly in line with predictions from Credit Suisse. They expect silver to rise to $33.70 in 2012 and taper off to $30.60 an ounce in 2013. Credit Suisse also points out that another silver price sprint to $50 an ounce appears to be “increasingly unlikely.”

Natixis Commodity Markets sees silver averaging a ho-hum $27.50 an ounce in 2012 on decreased industrial demand, and gold at $1,450 an ounce.

The only thing that has me feeling like we might be near a bottom in silver prices is the fact that no one’s making bold predictions of $100 silver or $250 silver like they were this spring. That only happens when prices are in a strong uptrend, and the lack of bold predictions and media coverage could be the perfect buying opportunity as the precious metals consolidate.

“It would be quite conceivable to see silver test the strong support area at $20, but that gift would really be too much,” writes Warren Bevan at Goldseek. “Already, with this nice decline refiners are struggling or simply can’t keep up with demand.”

Indeed, the only place we’ve really seen increased demand for precious metals is in the physical coin and bar market. Those are investors who are in for the long-haul, though, and that doesn’t necessarily bode well for the short-run.

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06
Oct
2011

What is gold price suppression?

by Fred Mason

A few weeks ago, I might have argued that gold price suppression is a myth. The more I learn about it, though, the scarier I find the concept.

Gold price suppression refers to coordinated efforts to lower the price of gold. On the face of it, that sounds like a meaningless goal. Dig deeper, though, and you’ll see there’s a whole lot at stake; namely, the future of the U.S. economy.

If governments, institutions and individuals lose faith in the dollar as a reserve currency, the Greenback’s value will plummet. It will be much harder for the U.S. to borrow money, and government services will have to be slashed. With 48.5% of the U.S. living in a household that receives some form of government benefits (per the Wall Street Journal), slashing benefits could collapse the U.S. economy.

Here’s what really changed my mind about gold price suppression: a single diplomatic cable released by WikiLeaks (click here to see the gold price suppression cable from Wikileaks). In it, the U.S. Embassy in Beijing wrote to the U.S. State Department, warning that the Chinese government was proactively dumping dollars in favor of gold reserves in an attempt to undermine the dollar and raise the clout of the Chinese Yuan.

The cable highlighted an article titled “China increases its gold reserves in order to kill two birds with one stone” from a State-sponsored newspaper in China. It was apparently alarming enough for the U.S. Embassy to send it straight to the State Department. Here’s an excerpt from the story:

“The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold’s function as an international reserve currency. They don’t want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar’s role as the international reserve currency.

China’s increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB.“

Of course, right now, the yuan is tightly controlled by the Chinese government. It’s difficult for retail investors to even invest in the yuan (see our post How to buy Chinese Yuan for more), but China’s showing signs of loosening that control.

It’s not in their interest to de-couple the yuan and dollar yet, since tying it to the Greenback keeps Chinese exports cheap. It is interesting, though, that China’s could be building up enormous leverage over the U.S.

“When they [China] want the dollar to fall, they will let it,” Mark Weisbrot, the co-director of Washington’s Centre for Economic and Policy Research, told Al Jazeera recently.

In the meantime, China’s accumulating gold, even while they realize that the U.S. could be working to suppress gold prices. Should the U.S. economy continue to stagnate, suppressing gold prices looks like a losing battle.

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04
Oct
2011

Silver coin shortage reeks of price manipulation?

by Fred Mason

By now, most silver investors have heard about the lawsuit against JPMorgan Chase & Co. (NYSE:JPM). A class action suit’s been pending against the bank since 2010, when a large group of investors accused JPM of taking out enormous short positions in the silver futures market. The move was allegedly a bid to manipulate silver prices (see our post Silver price manipulation case narrows in on JPMorgan; drops HSBC for more).

Interestingly, there are rumors floating around the Web that some silver coin sellers could be doing their own form of silver price manipulation: namely, refusing to sell coins in the face of lower silver prices.

“I visited three very reputable distributors today – AMPEX, Gainesville and Northwest Territorial Mint – and all three of these dealers were mysteriously out of stock on one-ounce silver coins,” writes George Maniere at Market Oracle. “I can only conclude that they are willing to sit on them until the price of silver goes back up.”

Even the U.S. Mint got in the action, halting orders for sets of un-circulated American Silver Eagles (see our post Expect volatility on the path to higher silver prices in 2012 for more) because they can’t stock the necessary blanks to make the coins.

Everything’s in flux right now. We’re going through what the Financial Times calls “the biggest swings in precious metals since the collapse of Lehman.” According to the same article, though, gold and silver coin sales hit all-time sales records on Thursday (Oct. 22), Friday (Oct. 23) and Monday (Oct. 26).

That left the shelves at silver coin dealers empty. Demand for industrial precious metals may be falling, but it’s actually rising in the physical markets on bargain-hunting. That means a whole lot of investors see the recent drop in gold and silver prices for what it is: a rough patch in a decade-long bull market for precious metals.

“Buying in the retail market … it’s just huge right now,” Jim Puplava, the host of Financial Sense Newshour, said on Saturday. “They drive the price down, and it’s like Nordstrom is having a 20-30 percent off sale.”

While it may seem strange that coin dealers run out silver as soon as prices dip, it’s probably not manipulation and refusal to sell silver coins, but rather that a tidal wave of buyers have moved in to capitalize on lower prices. Even the popular Sprott Physical Silver Trust ETV (NYSE:PSLV) announced a week ago that it’d run out of silver and needed to replenish its supply.

“I think investors are really smart,” Kathy Derbes of KDerbes Precious Metals LLC told Mr. Puplava. “They know what’s going on. They understand that these price breaks – particularly this time around – are not telling us anything about the fundamentals of gold and silver. In fact, I think the reasons for owning it have gotten a lot stronger.”

Derbes adds that current orders for her clients have a two to three week delay before they’re shipped, and she doesn’t expect that to change. If anything, the delay could increase.

“We’re probably in the beginning stages of what could be shortages,” she said. “We have to remember that it’s a market that can’t be printed into existence like all the paper currencies. We have to wait for the mints to catch up.”

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03
Oct
2011

Silver price analysis leaves investors paralyzed

by Fred Mason

The only thing that’s certain in the silver market now is uncertainty. Even after a 40 percent plunge two weeks ago, silver prices have struggled to recover, and the upcoming week doesn’t exactly have investors feeling bullish.

Many analysts are actually calling for further weakness in silver prices on decreased industrial demand. CommodityOnline warns prices could fall as low as $23 an ounce in the near-term.

It’s difficult to downplay the severity and threat Greece’s financial crisis poses for the rest of the world. Consider this: Greece’s debt now stands at 150 percent of the country’s GDP. Investors are so negative on the government’s ability to pay back that debt that the interest rate on three-year bonds there recently climbed above 100 percent (per CommodityOnline).

If the problem were isolated to Greece alone, it might not be such a big deal, but many of the holders of Greek debt are intimately tied to economies in bordering countries. BNP Paribus, Societie General and Commerzbank hold some $14.5 billion in Greek debt. The IMF, EU Loans and European Central Bank hold an additional $150 billion in Greek debt (again per CommodityOnline).

Rest assured that should the Greek government default on that debt, reverberations will take down other countries or financial institutions. That’s left investors fleeing the Euro not for gold or silver (as we’d like to see), but rather for the dollar.

Couple the strengthening Greenback with fears of a global slowdown, and the silver bears are starting to make a very compelling argument indeed. If we are on the cusp of another recession, silver and copper will be the metals that are hit the hardest (owing to significant price influence from the industrial sector).

We only have to look back to 2008 to find evidence that when investors start raising cash, precious metals don’t automatically shoot higher. Between March 2008 and the end of the year, the silver price fell nearly 50 percent from $21 an ounce to $10.50 an ounce. During roughly the same period, the S&P 500 lost more than 10 percent in one of the most brutal sell-offs in decades.

Still, you hear precious metals referred to as a safe haven investment. That’s true to some extent, but when there’s blood in the streets, don’t count on metals to rise. They’re going to fall alongside of every other major asset class. Metals only become a safe haven when inflation is rising. And you can’t get inflation if everyone’s raising cash because they’re nervous about what’s going on in Europe (and China).

“If the economy continues to weaken silver could fall as far as $21.00 an ounce,” writes George Maniere at MarketOracle.

Bearish predictions like this have me re-thinking my decision last week to go long the ProShares Ultra Silver ETF (NYSE:AGQ). AGQ is a leveraged bet that the price of silver will go up. I’m starting to consider betting against the S&P instead by buying shares in ProShares UltraPro Short S&P 500 ETF (NYSE:SPXU).

I don’t say all this because I’m bearish on silver prices in the long run. I’m absolutely not. Instead, I’m afraid we could be in for a genuine market rout that’s akin to 2008′s Great Recession. I lost more money than I care to admit then by sticking to the “buy-and-hold” mantra. I don’t plan to repeat the mistake, and the recent surge in the value of the dollar is evidence that other investors feel the same.

I’ll leave you with just this warning: don’t blindly buy silver on recent weakness. Sit in cash and wait until precious metals decide which way they’re heading. Silver will have it’s day in the sun again, just don’t expect it until we know for sure we’re not on the brink of the dreaded double-dip.

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30
Sep
2011

Expect volatility on the path to higher silver prices in 2012

by Fred Mason

You know things are going bad in the silver market when the U.S. Mint suspends sales of silver coins. The Mint announced on Monday that it was halting incoming orders for uncirculated American Silver Eagles sets so it can re-price the collector coins (per MineWeb). The move came on the heels of a 30 percent plunge in silver prices last week.

It was a perfect storm for precious metals last week. The CME Group announced new margin requirements for gold and silver on Friday, fears of a Greek debt default and a rally in the dollar all converged to push silver down from $40 to $28 an ounce in the span of five days.

It’s safe to say investors panicked, and – in their panic – showed yet again a preference for sitting on the sidelines in cash. That’s telling, as much of the investment demand for silver has been driven by fears of inflation and a debased dollar.

But what happens when every currency in the world is getting debased and commodities are falling, too? Investors don’t have much of a choice but to sell and wait for sunnier days. And some think it could be a while before we see sunnier days.

Even Eric Sprott – a billionaire hedge fund manager and founder of the Sprott Physical Silver Trust (NYSE:PSLV) and the Sprott Physical Gold Trust (NYSE:PHYS) – sounds nervous. In a recent interview with the Financial Post, he cited the fact that consumers just don’t have any cash to spend.

His evidence? Comments from Wal-Mart’s CEO Mike Duke who claims Wal-Mart shoppers are “running out of money” faster than they were a year ago. Duke cites Wal-Mart sales numbers that show customers are shopping at the first of the month (right when they get paid). After the first, sales drop precipitously.

“People’s incomes haven’t been going up, but their costs have,” Sprott told the Post. “It’s palpable what’s happening, and it’s not good.”

That’s not to say that Sprott’s advocating investors turn away from silver.

“Gold was the investment of the [past] decade, and I think silver will be the investment of this decade, so we’re trying to position ourselves to take advantage of that,” Sprott said in an interview with the Globe and Mail on Sept. 13.

He also argues that a Greek debt default would ultimately be a boon for gold and silver prices as it would lead to yet more currency debasement in Europe.

Where does that leave us in the short-term then? One of the few analysts who has went on record in recent days with an actual short-term price target for silver is Chris Thompson from Haywood Securities.

Thompson expects the gold-to-silver ratio to tighten this year, and he believes that will push silver prices up to $38 per ounce by the end of the year.

“Nonetheless, we caution that more sharp declines in silver prices, similar to that recently experienced, should not be ruled out, considering the volatile nature of silver prices and the relative ease with which ETF investors can exit the market,” Thompson says (per MineWeb).

As I said earlier in the week (see my post Silver prices setting up for “trade of a lifetime”?), I went long on the ProShares Ultra Silver ETF (NYSE:AGQ) on Monday. The paper-based silver ETF seeks to produce 200 percent of the daily returns for the price of silver.

Yes, there could be extreme volatility in the months to come, but the ultimate driver for the price of silver (currency debasement) hasn’t changed. And that means my outlook for silver prices hasn’t either.

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29
Sep
2011

Revising gold price targets for 2012 after the plunge

by Fred Mason

It’s difficult to downplay the severity of the sell-off in gold. Just a week ago, the yellow metal closed at $1,805 an ounce. Since then, it’s fallen as low as $1,540 – a loss of 14 percent. Silver prices have performed even more dismally dropping 35 percent from a peak of $40 an ounce.

After the sell-off, gold is still up 15 percent on the year while silver’s just about flat. The scary part is (as Eric Fry at Daily Reckoning points out), U.S. Treasuries have actually out-performed precious metals! The 20+ Year Treasury Bond ETF (NYSE:TLT), for instance, is up nearly 25 percent since Jan. 1.

“That’s right,” Fry writes, “the debt securities of the now-AA-rated and heavily indebted US government remain the safest safe haven around.”

That’s a sign that investors are losing faith that the recovery we’ve been promised – despite the near-zero interest rates and the $2.3 trillion the U.S. government has pumped into the economy since 2008 – isn’t coming.

Fears of a 2008-style global financial meltdown feel almost palpable. In the words of Nouriel Roubini, we’re facing “unending stagnation, depression, currency and trade wars, capital controls, financial crisis, sovereign insolvencies, and massive social and political instability.”

It’s hard to stand by your investments when you hear economists telling you to stock up on food and make sure you have access to an isolated safe house. The moves in gold prices have even hardened gold bugs wondering whether or not they should stick with the metal.

And no one seems to know for sure where prices are going to go in the near-term. Daily Reckoning’s founder Bill Bonner sees the potential for gold to tumble as low as $1,000. Momentum traders see gold prices touching $1,517 an ounce and silver hitting $22.45.

“Following this rebound (in gold prices), which I expect to get underway this week, there will be a longer slowdown,” GloomBoomDoom analyst Marc Faber told CNBC Tuesday. He says the metal could fall as low as $1,100 an ounce.

Famed commodities trader Jim Rogers seems to concur. “I have no idea what is going to happen this year. I doubt if it will go to $2000 an ounce in 2011, it is more likely to have a correction which will last for several weeks, several months,” he told India’s Economic Times.

Despite their dire warnings about gold prices in the near-term, though, all of the traders mentioned above are unanimous in arguing that this is just a temporary set-back for precious metals.

“Silver has been one of your favourites, but that is down 24% in the past week,” the Economic Times asked Rogers. “Are you still buying?”

“Not yet,” Rogers replied, “but if silver continues to go down as we have discussed before, I will buy more silver too. Do not sell your silver, do not sell your gold unless you are a short-term trader, but anybody who is in this for a long term, silver and gold will both go much higher over the next few years.”

While the pros haven’t started down-grading their gold price targets for 2012 yet, they’re certainly not saying we’re going to hit $2,500 an ounce anytime soon. One ominous research fact points that it could be a long time before we even see gold at $1,800 an ounce again: The gold market has only dropped 20 percent peak-to-trough twice in the past 10 years (per the Financial Times). It happened once in 2006 and once in 2008. In both instances, it took about 18 months for prices to re-touch their highs.

We’ll eventually see gold at $2,000 an ounce (reference my post 10 reasons why we’ll see gold over $2,000 an ounce). These dips are painful, but they’re definitely buying opportunities for patient and disciplined investors.

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23
Sep
2011

Up 180%? 10 best gold and silver stocks returns year-to-date

by Fred Mason

Picking winning gold and silver stocks is notoriously difficult. Not only are mining stocks influenced by volatile precious metals prices, they’re also subject to natural disasters, political risk, worker strikes, misinformation and poor assay results. If you can find the right companies with the right management (see my post How to pick gold stocks that outperform the market), the gains can be extraordinary.

Here’s a list I put together of the top 10 biggest gainers in the gold and silver market year to date. I pulled only from the 100 largest gold and silver stocks by market cap:

Stock YTD Gain
NEWSTRIKE CAPITAL INC. (PINK:NWSKF) 181.24%
Midway Gold Corp. (AMEX:MDW) 177.48%
NGEX RESOURCES INC. (PINK:NGQRF) 144.63%
Richmont Mines Inc. (AMEX:RIC) 129.55%
WILDCAT SILVER CORP (PINK:WLDVF) 114.23%
SCORPIO MINING CORP (PINK:SMNPF) 97.62%
PRETIUM RESOURCES INC ORD (PINK:PXZRF) 63.02%
Samex Mining Corp. (OTC:SMXMF) 51.39%
Vista Gold Corp. (AMEX:VGZ) 48.54%
Minefinders Corp. Ltd. (AMEX:MFN) 44.75%

The year-to-date gains listed above are particularly impressive considering the steep losses gold and silver stocks suffered yesterday. Several of the stocks on the list lost nearly 20 percent in a brutal day of trading. Here are my guesses as to why these stocks have out-performed their peers this year:

NEWSTRIKE CAPITAL INC. (PINK:NWSKF): Newstrike’s Ana Paula project in Mexico continues to show impressive drill results. Most recently, the company announced 119.60-meter interval grading 3.76 g/t gold. That’s after results of 230.95-meter interval grading 7.5 g/t gold in April. The Ana Paula project has good pedigree. It was purchased from Goldcorp Inc. (NYSE:GG) last year. Goldcorp still has a robust mine there in Los Filos, and Torex Gold Resources Inc.’s (TSX:TXG) Morelos project is nearby. All three are part of the Guerrero Gold Belt.

Midway Gold Corp. (AMEX:MDW): Company insiders have been big buyers over the past six months snagging 100,000 net shares (per DailyFinance). Analysts have a price target of $3.71 on the stock as drill results from Nevada roll in. Midway’s gained a lot of investor interest thanks to a joint venture with Barrick Gold Corporation (NYSE:ABX).

NGEX RESOURCES INC. (PINK:NGQRF): The company’s Josemaria copper-gold deposit in Argentina has 460 million tonnes of gold (0.30 g/t gold) in the ground. NGEx’s also drilling for potash in Eritrea with results expected next month.

Richmont Mines Inc. (AMEX:RIC): Richmont’s Wasamac gold deposit just seems to keep mushrooming. Most recently, the company intercepted 7.28 g/t gold over 31.40m. The company has interests in 14 projects in Ontario and Quebec.

WILDCAT SILVER CORP (PINK:WLDVF): One of a handful of precious metals stocks that’s focused exclusively on silver, Wildcat Silver Corp. has an 80 percent interest in the Hermosa silver project in Santa Cruz, Arizona. The project has an indicated resource of 36 million ounces of silver and an inferred resource of 85 million ounces. Recent drilling results showed an impressive 230.9 g/t silver.

SCORPIO MINING CORP (PINK:SMNPF): Headquartered in Canada, Scorpio’s mines in Mexico are already in production. Fifty-five percent of the company’s revenue comes from silver – with the rest a mix of zinc, copper and lead. In addition to their operational Nuestra Señora mine, Scorpio has its eyes on more than 40 other exploration targets.

PRETIUM RESOURCES INC ORD (PINK:PXZRF): Much of the excitement around Pretium surrounds the company’s Snowfield deposit. Pretium could join up with mining major Seabridge Gold, Inc. (AMEX:SA) to further explore the project. On top of Snowfield, there’s the “Bonanza-grade” results the company recently announced at its Brucejack Project (5,740 g/t gold and 2,750 g/t silver).

Samex Mining Corp. (OTC:SMXMF): Samex is an early-stage exploration company that’s drilling in the Los Zorros District in Chile. Four out of 46 holes drilled at the Milagro project yielded 4.26 to 5.56 g/t gold.

Vista Gold Corp. (AMEX:VGZ): Impressive results from the company’s Mt.Todd Gold project pushed shares up nearly 20 percent in a day last week. Measured mineral resources were bumped up 23 percent to 353,000 ounces of gold. Indicated resources climbed 14 percent to 506,000 ounces of gold.

Minefinders Corp. Ltd. (AMEX:MFN): Minefinders’ massive Dolores gold and silver mine in northern Mexico is in production and has proven reserves of 1.2+ million ounces of gold and 68+ million ounces of silver. The company’s also evaluating the viability of a mine at its La Bolsa property.

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