When Federal Reserve Chairman Ben Bernanke said the Fed “will provide additional policy accommodation” to bolster the US economy on Friday, metals prices sprinted higher in an end-of-the-month surge. Silver rallied more than 4.5 percent to give it as a solid lead as the top-performing metal in August.

Precious Metals Gains, August 2012

The moves propelled gold to a five-month high while silver’s sitting at a four-month high. Still, leading analysts seem to think the best is yet to come for metals as quantitative easing looks to be more imperative.

“We took the amount of debt owned by major countries that is going to have to roll over in the next three years,” Jim Puplava of the Financial Sense Newshour said recently. “Over 50 percent of US debt is rolling over, 50 percent of Japanese debt, German debt, (etc.), and none of these countries – whether it’s the United States or Europe or Japan – can afford a spike in interest rates. So you know sooner later we’re going to get multiple forms of quantitative easing.”

More quantitative easing means higher inflation and higher precious metals prices as the value of global currencies retreat. That really has me taking a closer look at gold and silver stocks. Many of them have been trending up over the past three months, but they’re still trading below where they were a year ago.

Let’s take a look at a small-cap silver mining stock like Great Panther Silver Ltd. (AMEX:GPL). One year ago, shares stood at $3.19. As of Friday’s close, they were trading at $1.97. If prices return to last year’s levels, that would be a gain of nearly 62 percent.

“When the public comes in here in our tiny gold and silver markets, it will be a bubble, and it will dwarf what the Internet did except it will be real for a long period of time,” Bill Murphy founder and chairman of the Gold Anti-Trust Action Committee (GATA) Jim Puplava in that same interview. “And that’s coming. … It’s probably the best risk-reward situation right now as the gold and silver markets have ever seen in terms of the equities.”

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This post is part of series where we’re checking in on the Top 500 junior gold and silver mining stocks profiled in our book Top 500 Gold and Silver Mining Stocks: Metalproofing Your Portfolio from the Coming Inflation Shock.

Performance: First, let’s compare African Gold Group’s performance against the AMEX Gold Bugs Index (HUI) – a basket of industry-leading gold stocks.

African Gold Group’s following the usual trend: as a junior gold mining stock, it’s more volatile than shares in larger mining companies. When times are good, they’re really good for small cap miners. When times are bad, the declines are steeper.

Profile: African Gold Group, Inc., holds rights to five projects: three in Ghana and two in Mali. The Company’s most advanced asset is its Kobada gold project in Mali. The Kobada Trend contains an inferred mineral resource of 740,000 ounces of gold at a 0.3 g/t gold cutoff (recently upgraded to 1.1 million ounces), and the company believes that Kobada could be a multi-million ounce deposit. African Gold’s Ghana property also includes land abutting Keegan Resources’ holdings. http://www.africangoldgroup.ca/

Risks: With an average trading volume of 20,500 shares per day, volume on AGONF is low, but not too low. Just keep in mind that taking a large position in a small-cap stock means you may have to wait a long time to find buyers for all your shares. Volume is slightly higher on the CVE, where an average of 44K shares trade hands daily.

Recent News: The biggest news out of African Gold is the company’s upcoming resource estimate at its Kobada project. Those numbers are expected sometime this month.

“(Our resource estimate) will be upgraded to indicated from inferred and a percentage of that will go into measured,” company founder Nikiforuk told the Northern Miner in April. “We also anticipate a meaningful increase in grade.”

Step-out holes drilled at the site this spring included highlights of 70 metres of 1.83 g/t gold and 84 metres of 1.26 grams gold. If the company’s resource estimate is significantly higher, expect a boost in share price.

Last year’s preliminary economic assessment indicated that “the project could produce gold at US$470.90 per oz. processing 20,000 tonnes per day, for a total of 7 million tonnes a year” (per Northern Miner). The project currently boasts an inferred resource of 1.1 million ounces of gold.

Check out our book Top 500 Gold and Silver Mining Stocks: Metalproofing Your Portfolio from the Coming Inflation Shock (pictured above) to uncover more undiscovered gold and silver mining stocks.

Silver prices rocketed higher on Friday thanks to hints from Federal Reserve Chairman Ben Bernanke that QE3 could be around the corner. Prices for the white metal traded in a narrow range around $30.70 an ounce Wednesday and Thursday in the run-up to Bernanke’s speech.

Early Friday, prices started climbing and they didn’t stop until the markets closed. By the end of the day, silver was up to $31.74 an ounce – a gain of 4.58% in a single day of trading. The actual quote that had traders salivating is (in typical Bernanke fashion) vague:

“Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” he said (per IBD).

Bernanke didn’t say the Fed “may” stimulate, he said the Fed “will” stimulate. That was all it took. Shares in gold and silver mining stocks were off to the races. Majors like Silver Wheaton (NYSE:SLW) rose 5.2 percent and Silver Standard (NASDAQ:SSRI) climbed 7.9 percent. Some small-cap miners did even better with Great Panther Silver (NYSEAMEX:GPL) rocketing up more than 11 percent.

“My friend Eric Sprott of Sprott Asset Management is one of the smartest men I’ve ever met in my life and a real detail guy – and he thinks silver is going to go well above $100, and you might even be able to pick a number for silver,” Bill Murphy founder and chairman of the Gold Anti-Trust Action Committee (GATA) said in a recent interview with Financial Sense. “I think … people that are willing to do their homework and be patient and accumulate these cheap gold and silver shares will make fortunes in the years ahead.”

Of course, anytime there’s a run-up in gold and silver prices, it doesn’t happen smoothly. Since precious metals act as a barometer of the wider economy, political changes and economic numbers can cause large price swings. When prices are on the rise, though, it can happen violently. And it looks like we could be in the midst of another big upswing.

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This post is part of series where we’re checking in on the Top 500 junior gold and silver mining stocks profiled in our book Top 500 Gold and Silver Mining Stocks: Metalproofing Your Portfolio from the Coming Inflation Shock.

Performance: First, let’s compare Adventure Gold’s performance against the AMEX Gold Bugs Index (HUI) – a basket of industry-leading gold stocks.

Adventure Gold’s following the usual trend: it’s more volatile than larger equities. When times are good, they’re really good for small cap miners. When times are bad, the declines are steeper. Still, AGONF’s performance over the past three months has been particularly impressive.

Profile: Adventure Gold Inc. holds rights to more than two dozen potential gold properties in the Abitibi Greenstone Belt located in north-western Quebec and north-eastern Ontario. The company plans to spend $14 million on exploration over the next five years. Most recently, Phase 2 drilling has begun on the Lapaska Property in Quebec. Highlights from previous drilling there showed 1.0 g/t gold over 103.4m including 10.3 g/t gold over 3.8m. http://www.adventure-gold.com/

Risks: Volume on AGONF is extremely low. Some days no shares trade hands. That means that even if you want to sell your shares, there might not be a buyer out there. If there is a buyer, they probably want a discount to the current quote. Volume currently averages 2,500 shares per day.

Recent News: Phase III drilling has kicked off on the company’s 100%-owned Pascalis-Colombiere gold property in the Val-d’Or mining camp in Quebec. The most promising hole showed 3.1 g/t Au over 27.0 metres. Click for more drilling results. Pascalis-Colombiere is a proven property. It yielded just over 200,000 ounces of gold for Cambior Inc. (now IAMGOLD) between 1989 and 1993. That’s a plus over more speculative explorers with unproven plots of land.

Adventure Gold had $5 million on hand as of April, and they have partnerships with two major mining companies in Agnico Eagle (Dubuisson in Val d’Or) and Lake Shore Gold and RT Minerals (Meunier-144 in Timmins West). They’re planning $2 million in drilling through next April with additional work commitments of $10 million over the next 5 years. Promising results would be a boon to the company’s shares.

Check out our book Top 500 Gold and Silver Mining Stocks: Metalproofing Your Portfolio from the Coming Inflation Shock (pictured above) to uncover more undiscovered gold and silver mining stocks.

While you might not be familiar with Shutterstock, you’ve probably seen their wares on the internet, book covers or posters hundreds of times. Shutterstock operates a stock photo site which lets subscribers download pictures to print or post online next to news articles, and/or as part of a Web site’s design. All told, Shutterstock has some 19 million photographs and graphics available to license for online and print use.

While the company may not be the most glamorous tech company vying for investor dollars, but I still think buying shares makes sense. Here are three reasons why:

1) The subscription model. Unlike some of its competitors, Shutterstock really pushes its subscription model. That means customers keep ponying up as much as $250 a month to use the service. Not only does a subscription model breed long-term business relationships, it’s a more reliable revenue stream than the advertising dollars that most websites compete for. The proof is in the pudding. For the year ended 2011, Shutterstock earned 21.8 million on a revenue of $120.2 million (per the company’s S1 filing).

2) Powerful growth. Revenue at Shutterstock grew 44.5 percent in 2011 – not just in the U.S. but around the world:

And the company is in an industry that’s experiencing tremendous growth. BCC Research estimated the online image marketplaces would grow 51 percent a year between 2008 and 2013 to a total of $2.0 billion in 2013. With more than 32 percent of U.S. businesses still without a web site (and millions of potential customers in countries like China), Shutterstock should be able to sustain double-digit growth for years to come.

3) Consolidation, anyone? While Getty Images dominates the stock photo industry thanks to its strong ties to newspapers, Shutterstock could give the company a run for its money by acquiring some of its competitors. Indeed, that could be exactly what Shutterstock execs have in mind.

“We may use all or a portion of the net (IPO) proceeds to acquire or invest in complementary companies, products or technologies, although we currently do not have any acquisitions or investments planned,” Shutterstock writes in its S1 filing. If it can acquire one or two key competitors, the company will be able to quickly ramp up profits – and look to establish itself as a long-term player in the stock photo business. I’d be nervous if I were Getty.

Now that Yahoo Inc.’s (NASDAQ:YHOO) freeing up 20 percent of Alibaba’s shares, the Chinese tech giant Alibaba can begin preparing for its IPO. Expect a lot of fireworks as Alibaba’s one of the most exciting tech companies behind the Great Firewall. Here are three reasons to consider investing in the Alibaba IPO:

1) Fingers in a lot of pots. Summing up Alibaba’s internet operations is a bit like trying to describe Microsoft’s software offerings. They both do a hell of a lot. Alibaba’s most promising properties, though, are Alibaba.com (a business-to-business commerce site), Taobao.com (an eBay-like auction and Buy It Now site), eTao.com (a shopping search engine similar to Google Products), a cloud computing division, and Alipay (a PayPal-like payment processor for online transactions in China).

2) Rapid growth. One of the easiest ways to see how fast Alibaba’s growing is to look at Yahoo’s returns. In 2005, Yahoo invested $1 billion for a 40 percent stake in Alibaba. Now, they’re selling half that stake for $7.1 billion. Their full stake is worth some $14 billion, and that means they’ve made 14 times their money in seven short years.

3) The fat part of the curve. For most Westerners, buying and selling products online is second nature. That’s not the case in China. The country’s still in the fat part of the growth curve for e-commerce. Indeed, China’s online shopping industry is expected to grow by 42 percent this year (per Bloomberg). Contrast that with the U.S. where Q1 2012 e-commerce growth stood at 17 percent (per comScore). As China’s largest e-commerce provider, Alibaba stands to rake in a big part of that 42 percent growth.

Already, Alibaba’s pulling in substantial profits. The company generated $2.3 billion in the year ended Sept. 30 ($1 billion more than the previous year) and posted a profit of $268 million.

While we don’t know Alibaba’s IPO date yet, it is expected to come by the end of 2015 at the latest.

“The gold miners are cheaper today versus the price of gold than at any time in this 12-year bull market,” Fred Hickey of the Barron’s Roundtable said recently (per IBT). Indeed, gold stocks are hovering near two-years low, and the mining sector is looking ripe for consolidation. Here are three tips for identifying potential gold mining takeover targets:

1) Follow the pros. One of my favorite tactics for identifying strong junior mining companies is by looking at the companies professionals are investing in. A great starting place is the Market Vectors Junior Gold Miners ETF (NYSE:GDXJ). This ETF invests in a basket of junior gold mining stocks, and the fund regularly updates its holdings. As of right now, GDXJ holds shares in 82 companies (download the excel file here), and it reads like a who’s who in the industry – particularly when you’re looking at the miners towards the top of the list.

Right now, GDXJ likes Perseus Mining (TSE:PRU), Silvercorp Metal (NYSE:SVM), Medusa Mining (ASX:MML), Rubicon Minerals (AMEX:RBY), Endeavour Silver (NYSE:EXK), Evolution Mining (ASX:CAH) and Aurizon Mines (AMEX:AZK) among others.

2) Look at past acquisitions. Perhaps the best way to see which gold mining stocks are worthy of acquiring is by looking at past acquisitions for clues. In March, for example, Pan American Silver Corp. (NASDAQ:PAAS) completed its acquisition of gold and silver mining company Minefinders Corp. Ltd. Let’s take a look at what made Minefinders a tantalizing takeover target:

• A producing gold and silver mine at the multi-million ounce Dolores project in Northern Mexico.
• 2.34 million ounces of proven and probable gold (as of 2010) as well as 119 million ounces of proven and probable silver.
• Low cash costs of $450-$500 per gold ounce equivalent.
• A small debt load and more than $200 million in cash before the acquisition

Find a company with similar prospects and you’ve probably identified a takeover target.

3) Positive cashflow. It seems obvious, but a lot of beginning gold and silver investors like the idea of getting in on a junior mining stock before they hit the mother lode during exploratory drilling. In my mind, that’s a lot like gambling, and I encourage investors to look instead at junior gold miners that are already pulling ore out of the ground.

The majors want to acquire companies that have made it through the often arduous permitting process, have proven reserves and are already generating cashflow. At that point, the major just needs to bring in its deep pockets and mining expertise to join in the reaping of rewards.

So, while it’s definitely tempting to try to guess which junior mining company is going to uncover the next Brucejack project, you’re a lot safer buying shares in a miner that’s already making money. It’s not as glamorous, but trust me – it’s probably more profitable.

Since topping out around $35.50 an ounce late in February, the price of silver has done little except fall. Sentiment in the precious metals market seems to be hovering at multi-year lows with investors shunning the metal for riskier assets. That is until late last week.

The pop in silver prices on Thursday felt different to me, and I went long silver for the first time in months (buying shares in ProShares Ultra Silver ETF – NYSE:AGQ). Why? Here are four reasons why I think silver prices could be due for a sharp upturn:

1) QE3. We thought Operation Twist buried our chance to see further monetary easing out of the Federal Reserve. Don’t give up hope just yet. The metals bounced hard on Thursday after meeting minutes from the latest Federal Open Market Committee gathering held hints that further quantitative easing is still a potential option if the U.S. economy remains sluggish. Another round of QE would likely ignite a surge in commodities across the board.

2) Too far, too fast. Silver prices have crumbled more than 11 percent in the past three weeks. The drop last Wednesday was extreme with the metal shedding $1 an ounce in a single day of trading. A plunge that large feels like concession selling. And we all know when we see concession selling: right before the start of a recovery.

3) The bull market in precious metals is still intact. While we don’t always like to admit it, silver prices generally follow gold’s lead. Sometimes, it can feel like it’s the other way around since the silver market is so much smaller than the gold market, but we’d be kidding ourselves to say that silver prices aren’t extremely dependent on what the price of gold is doing.

And gold’s been flirting with important psychological levels lately. For one thing: last week’s lows (hit on Wednesday) coincided with a 20 percent drop from last year’s highs (per Forbes). That key technical level seemed to awaken a lot of the sleeping bulls who promptly piled back into the metal. After all, a 20 percent drop is considered the cut-off for the transition from a bull market to a bear market. Had gold continued dropping (and particularly if it would have fallen below $1,500 an ounce), you could have taken it as a sign to sell your metals and head for the hills. Until we get that confirmation, though, I’m leaning to the bullish side for gold (and therefore silver, too).

4) The Grecian plot thickens. The primary reason I think last week’s low in silver prices was a turning point is this: fears that Greece would leave or get booted from the Eurozone were still at a fever pitch. For the past month or so, problems in Greece have been amplifying, and I think that’s a big reason the price of precious metals have fallen.

Investors didn’t want a “safe haven”, they wanted cold, hard, highly-liquid cash. Indeed, some €700 billion reportedly left Greek banks in a single day last week. Last Thursday and Friday marked the first two days gold and silver prices have climbed in the face of the fears of a default in Greece. That could be a sign investors are betting the EU will announce new stimulus or that they’ve accepted the fact that a collapse in Greece is unavoidable. Either way, the rise in precious metals – despite the bad news out of Greece – was enough to turn me bullish on precious metals (at least for now).

While they’re both silver ETFs, the iShares Silver Trust ETF (NYSE:SLV) and the Sprott Physical Silver Trust ETV (NYSE:PSLV) operate very differently. Here’s how they work:

The iShares Silver Trust ETF: The fund buys and sells silver in an attempt to have it’s share price match the value of its bullion holdings. If the value of the fund’s shares rise, iShares buys more silver. In theory, the fund’s market cap should equate to the fund’s silver holdings (less fees and liabilities).

Sprott Physical Silver Trust ETV: The Sprott trust operates much like the iShares ETF with one major exception, shareholders have the ability to exchange their Sprott shares for physical silver bullion on a monthly basis.

Although they operate similarly, the two ETFs have been on divergent paths year-to-date with the PSLV down 10 percent and the SLV up 4.8 percent. During the same time, the price of spot silver is up 2.54 percent on the year. It’s clear then that while the ETFs are designed to track an underlying commodity, they definitely come with margins of error.

And that’s actually making PSLV look quite attractive. In the past, the fund has traded at a premium of up to 35 percent above the price of spot silver (apparently investors like the fact that their holdings could be exchanged for physical silver). Today, PSLV’s trading at a premium of just 4.95 percent to the silver spot price.

There are benefits to both the ETFs approaches, though. First, the arguments for PSLV:

1) Redemption. Obviously, investors can choose to exchange their shares for physical silver – something that could come in handy if we do experience a currency crisis in the West.

2) Tax perks. If you plan to hold your silver ETF shares for more than a year, you can claim any appreciation as a long-term capital gain. That’s good for a 15 percent tax rate. Profits from SLV will set you back 28 percent under the current tax code.

3) Safety. The Royal Canadian Mint stores bullion for the Sprott trust. As Sprott writes on its web site, “The Mint is a Canadian Crown corporation, which acts as an agent of the Canadian Government, and its obligations generally constitute unconditional obligations of the Canadian Government.” SLV’s bullion is stored and managed by a private company (JP Morgan Chase: NYSE:JPM) with no government backing (unless, of course, you count the tacit promise of a bailout when times get tough).

Now the arguments for the SLV:

1) Low or no premiums. Since SLV doesn’t have to manage the costs associated with fulfilling delivery, the fund’s holdings trade at a much smaller premium to the price of silver. That’s important as premiums are subject to the whims of potential investors. As I wrote above, PSLV has traded with a premium as high as 35 percent above the price of silver in the past. You may as well go buy and store your own bullion at those prices.

2) Higher volume. A lot of silver ETF investors have no intention (or at least they don’t foresee the desire) to redeem their stock holdings for physical silver. For them, buying and selling shares is simply a vehicle to make money. SLV wins out if that’s your goal as the fund is much more liquid than PSLV. On an average day, more than 1.7 million shares of SLV trade hands compared with less than 100,000 shares of PSLV. This makes going both long or short the SLV much easier.

SLV Vs. PSLV: Which one’s better?

Both funds accomplish the same goal: exposure to the spot price of silver without actually buying silver. In the end, then, it comes down to two factors: security and taxes. If you know you’re going to hold your shares for more than a year (which entitles you to tax benefits) and you value the security of knowing your ETF shares can be redeemed for actual silver, buy PSLV. For all other traders, the SLV is perfect.

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Despite accusations that it’s a worthless chunk of metal, gold prices have risen for the past 12 years. That’s more than a decade of net buying, and those buyers must have a good reason to keep pushing up gold’s price.

In general, I break gold buyers into two camps: defensive buyers and offensive buyers. Defensive buyers are temporarily trying to protect their wealth from effects of inflation. Offensive buyers are the so-called “gold bugs” – the investors who believe that we’re in the midst of a financial crisis that can only be resolved in one way: a string of sovereign defaults. Those offensive buyers don’t plan on selling until we have some new, multi-national gold-backed monetary system.

If we look at gold from the perspective of an offensive buyer, their predictions of $6,000 gold start to make some sense. Here are three reasons why $6,000 gold just might come about:

1) A solid track record. $6,000 sounds like an awful lot of money, but that’s actually just 4 times higher than gold’s current price around $1,590 an ounce. During the 1970s, gold went up 24 times. If we look at gold’s starting point 12 years ago around $250 an ounce and multiply that by 24, we end up at $6,000 an ounce. Gold went up that radically in the past, so it can surely happen in the future.

2) The Dow/gold ratio. Historically, the Dow/gold ratio tends to revert to 2:1. At the time of this writing, the Dow Jones Industrial Average stands at 12,835 and gold’s selling for $1,591. That’s a Dow/gold ratio north of 8. If the Dow were to stay at its current levels (floundering sideways in the years to come), and the Dow/gold ratio were to return to historical means, we’d be looking at gold at $6,000 an ounce.

3) Sovereign defaults seem imminent. It’s hard to believe there are countries with debt that rivals our own, but Greece is under the magnifying glass. The Eurozone “is on a path that leads to eventual dismantling,” Peter Tchir of TF Market Advisors wrote in a note to clients on Monday (per IB Times), and Greece looks like it’s poised to be the first domino that falls. Sunday’s election in the country is still yet to yield a coalition government. That’s prompted warnings from the EU “that Greece would get no more payments from the $170 billion deal approved in March if it did not enact roughly $15 billion in cuts by June” (per USAToday).

If Greece stops getting bailout cash, the country would slide into default within weeks. That might not happen in June, but it seems imminent, and it would certainly raise doubts about the future of the Euro.

If people start doubting the future of a currency, gold will get a shot of adrenaline that’ll push it up rapidly. Throw a few currency defaults into the mix and there are few places besides gold to stash your cash. Viewed in that light, $6,000 gold seems more and more likely.

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