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THE GREAT GOLD DEBATE: Different argument, same result!

Where are gold prices going? What's in store for gold? Why invest in gold? Which gold stocks to purchase? Three of the precious metals industries heavyweights battle it out.

Last night we managed to catch 'The Great Gold Debate' via the web on It was good to see Paul van Eeden and John Embry on the same stage. For good measure they also had an Elliot Wave analyst called Steven Hochberg. The only let down was Lou Schizas, who managed to select plonkers from the audience to pose questions, shame!

The point that got us was that for different reasons both Embry and Van Eeden came to a similar conclusion; that gold was going up. Their predictions ranged from the gold price now to $1650 per ounce by Embry and up to £1350 per ounce by Van Eeden.

John Embry is in the GATA camp and produced data confirming central bank manipulation of the gold price and Paul Van Eeden referred to various metrics to suggest that this was not so.

Its well worth a watch if you have the time.

John Embry, chief investment strategist, Sprott Asset Management
Paul van Eeden, president, Cranberry Capital
Steven Hochberg, chief market analyst, Elliot Wave International

21 September 2006

Kinross Gold Corporation: $500 million loan agreed

Kinross Gold Corporation have just announced the agreement of a loan facility to support their gold exploration and development programme, which is great news.

No matter how good the story might appear if you cant raise the cash to finance the scheme then you are dead in the water.

Approximately $200 million of this loan is allocated for the Paracatu mine expansion in Brazil which Thomas Boehlert the chief Financial Officer for Kinross said; “The project will begin delivering significant new production in 2 years”. It will be interesting to see just how significant, in terms of numbers, this will be when more details are revealed. The main providers of this facility are Scotia Capital along with Export Development Canada, Societe Generale, Royal Bank of Canada and some international financial institutions.

Lenders prefer to spread the risk and the rewards with other lenders just as we as investors prefer to spread our investment funds across a number of gold mining stocks. The effect on the stock price may not be felt for some time however it is reassuring to know that Kinross has secured the means to progress a 'pipeline' of gold mining projects.

If you believe that gold prices have bottomed then this is a buy in our humble opinion. This gold stock is currently trading at $11.95 at the time of writing.

Kinross trades as K on the TSX and KGC on the NYSE.

20 September 2006

US GOLD CORP: Take a chance?

We are holders of this gold explorer but the stock price has fallen badly recently along with gold prices. Is it time to dump them or average down?

The fundamental reasons that enticed us into investing in US Gold Corporation are still intact. Investors, however have ran from USGL leaving the share price at a very low level. Rob McEwen is still a top class professional and we believe that he will turn it around.

The chart looks pretty ugly but there are signs of an upturn on the cards.

My 'gut' feel is to buy now, but patience is not my strongest point. So, we will wait and watch a little longer for some clarification with the direction of gold prices and this gold share in particular.

18 September 2006

GOLD: The transfer of real wealth from the West to the East

The Feds and the central banks continue with their programme of selling gold and driving gold prices lower. So who are the real winners?

Gold has made continuous and steady progress over the last four years. The banks have an arrangement to sell a stated amount each year and they religiously stick to their programme of selling despite gold prices going up. Why? Surely one of those bankers is bright enough to say hang on, I think we should be holding for the time being. I don't expect Britain to do so as Gordon Brown has demonstrated just how thick he is by selling 60% of the British gold reserves at the bottom of the market. Is the demand for currency by each individual government so great that they have no choice but to sell gold in order to feed their ill thought through budgets plans? We know that the public sector is expanding as though they believe that they actually produce something, but just how long can this go on?

In any business enterprise your capital most be preserved for future investment. If government spends its reserves on merely supporting itself then we are in bigger trouble than even we at Gold Prices could have imagined. But I guess you all new that. I read Peter Grandich the other day and he is talking about the next recession in America making 1929 look like a walk in the park. I try to be positive at all times but I'm starting to wonder if we are actually getting close to the edge.

Anyway lets consider the timing of this recent sell off. Gold has been sold down from $640 to around $577 as we write. In two weeks time the window for the central banks to sell will have come to an end for this year. Over in India the harvest season is reaching its conclusion and the wedding season is about to begin. The worlds biggest consumers are about to load up on gold, and what a wonderful opportunity for them. Gold, thanks to the west is now $100 cheaper than it was only a month or so ago. If we keep doing this then we are transferring real wealth from the west to the east. Are we doing this by accident or have I lost the plot? Good luck to the new owners for they have acquired a good bargain.

What will these bankers say to each other when gold hits $850? or $1000? 'My word, who could have predicted that'?

15 September 2006

Yamana Gold Inc.


This is one of Canada’s intermediate gold producers focusing its gold production in Brazil, where it has four operating gold mines along with various exploration interests.

Yamana also has mines in operation in Honduras together with a number of concessions in Nicaragua.

We looked at this stock sometime ago when it was $4.04 and a new addition to our Watch List. For various reasons we did not get around to making an investment.
Warren Buffet and Bill Gates give a talk at Washington University in 1998, during which, Warren said that one of the barriers to success was that we get in our own way. I guess we got in our own way when analysing Yamana and not buying the stock then.

At the time it was added to the list another favourite of ours was Agnico Eagle, which was $13.65 at the time and got the vote ahead of Yamana. Interestingly, as of yesterday, they have both increased in value by 140% since then. So, may be it is time to revisit this quality gold miner again.

Yamana is ambitiously targeting annual gold production of one million ounces by 2008, not bad for a so-called intermediate gold producer. Geographically, there are a lot worse places than Brazil so we would be happy to be there. Yamana’s gold production is all unhedged, which is a ‘must have’ on our selection criteria. As we believe that gold prices will rise, then this stock should respond accordingly. However, they have hedged 50 million pounds of 2007 copper production and 90 million pounds of 2008 copper production. We would have preferred Yamana not to do this, although a pull back in base metals has been widely forecast by some analysts. We, ever the sceptics remain to be convinced that the global economy is slowing down. If you live in New York and house prices slip you tend to think it’s all over. The world outside of New York is a huge place, China will be the next super power and what happens in the States will have a lesser impact on the markets going forward.

From the chart below we can see that this stock has suffered in the recent pull back, however that is the time to buy a stock, not when all the indicators are banging their heads on the ceiling. It should also be noted that Yamana didn’t get dragged down as far as a lot of other gold mining stocks so this stubbornness could be considered as a sign of strength. Anyway, the volume is still strong, the RSI has just turned up and the MACD is fairly flat. It should also be noted that each low is higher than the last low, which is encouraging.


We conclude that this stock is a buy. However, we don’t have the cash to buy at this point, may be we will have to examine the Cambior situation and decide if the cash is better invested in Iamgold or Yamana. Decisions, decisions!

Yamana is listed on the TSX: YRI; AMX: AUY; LSE (AIM) YAU

14 September 2006

CAMBIOR: Up 18% today

Cambior Inc to merge with Iamgold Corporation in a $3 billion merger making the new Iamgold Corporation the tenth largest gold producer in the world. As a Cambior shareholder is this good for me? Well Cambior has opened 18% up!

Spread betting: A gamble that failed

You just can’t trust the Australians can you? I go to sleep and overnight they let gold fall below my stop loss level!

No, can’t blame them. We got it wrong big time and lost the bet.

My son compounded matters by asking me what the difference was between gambling and investing? Not now Junior I’m still in shock!

Well my poor answer was that gambling is to take a risk or a chance in the hope of a better return and investing (sounds so noble) is to employ money into stocks in the hope of a better return. There, now both of us are confused.

In a way they are both types of investment, however the bet contained a stop loss to limit the damage but that also means that you have lost your stake. On the other hand an investment into stocks generally means that you do not have a stop loss and the stock can keep on falling, however you continue to be the rightful owner of the stock even though it is now trading at a lower price.

Gambling and investments and volatile so be careful and don’t go too mad even when it looks like a dead certainty.

Well I guess that it’s back to the drawing board.

13 September 2006

GOLD: A rough ride

GOLD: A rough ride

The last few days has seen the gold price drop down and penetrate gold’s 2oo DMA. So, where does gold go from here?

This sell off has surprised us a little as it looks like one or more of the central banks are doing the selling. We had thought that the banks would tend to be holders of gold rather than sellers when you take into consideration gold’s progress in the last few years. Britain sold at very bottom having announced to the entire world that it would hold a series of auctions to get rid of the family silverware. Something that my Grandmother would never do despite the many hard times she had to live through.

We understand that there is approximately 140 tonnes of gold that can still be sold before the 23rd September deadline from this years allowance. Will they? Won’t they?

We know that the German government wants to sell gold and use the funds for all sorts of schemes and the German treasury wants to hold to gold as an investment. Who will win this tug of war? Will we find out in the next couple of weeks! The French too are in a similar position.

It could be a rough time for gold. Our strategy is to sit it out. We still believe that gold is headed much, much higher and to sell our portfolio now would be like giving someone else an early Christmas present. It takes strength, courage and patients to sit on your hands during these periods especially when September is usually a good month for gold.

However, once we get September out of the way we reckon it will be onward and upward for gold.

We are NOT selling any gold mining stock and may even acquire a little more if and when we conclude that the selling is over done.

Relax and go and do what you do. Hit a few tennis balls, play with the kids, talk to your wife, talk to your pals wife, but generally chill; the smart investors are not selling at the moment.

12 September 2006

Kinross Gold Corp: Up 39.58%


We bought this gold stock on 23 June at $10.08; it is now at $14.07 despite the current shakeout. Hold for now and accumulate on dips that is our investment strategy for Kinross Gold Corp.

On the news front Verena Minerals Corporation has announced that it has entered into an agreement with Kinross Gold Corporation whereby Kinross will purchase 7,000,000 common shares at $0.30 per share for a cost of $2,100,000 to obtain 8.7% of Verena's common shares. Verena is a gold exploration company developing prospective projects in Brazil. Active in mineral exploration in Brazil for 10 years, Verena, through a number of its wholly owned Brazilian subsidiaries, controls properties covering 100,000 hectares of exploration concessions at Rio Grande do Norte, Tapajos and Tocantins states.

There is also a 6 minute piece on ROBtv on Wednesday 6th September 2006 at 8.50 am ET on The Street Power Breakfast programme with Tye Burt who is the president and CEO of Kinross Gold. We draw your attention to this because we think he is one of the best managers around and this interview does showcase his skills. Well worth catching on the web if you have not seen it.

Part of our investment criteria is to find well-managed companies and in our opinion we feel that we are in safe hands as this manager is top draw.

Verena Minerals Corp is listed as VML on the TSX-V exchange

Kinross trades as KGC on the NYSE

8th September 2006.

Asset Management: Funds

Unfortunately we do not manage funds or assets for other people. We only invest our own funds and those of family and friends.

We are not financial advisors, asset managers or fund managers just individuals who invest money and write about it on our websites.

However we can discuss a few possibilities with you on the strict understanding that we are not recommending any of the companies below and have no financial connections with them.

For instance, we have mentioned John Emery of Sprott asset management in previous articles as someone that we have the utmost respect for, but that is only our opinion.

If however you are interested in options trading then you could try Fidelity, they also handle other types of trading, retirement funds, etc, although we have never done business with them.

If your need is for EFTs, bonds and mutual funds then there are people like Scottrade or Schwab. There are such financial instruments as Exchange Traded Notes managed by Ipath, but we don’t do any of these types of investments.

You can search the web or better still ask a few of your colleagues and see what they have to say, they might even have a personal experience or two to share which would be invaluable. Do try and look beyond the label and pick up the phone and talk to people, the response is usually very positive.

Good hunting.

07 September 2006