We are monitoring Sell Signal in US Treasuries. Treasury Bubble 2.0 is in action. On the grand scheem of things this Second Top could become a multi year Double Top reversal in Treasuries. We are entering the generational bear market in USTs.
US Dollar makes the same technical picture even with advance warning.
Gold has made another all-time-high and is breaking out to the upside from Cup and handle formation.
Finally, Silver has confirmed Gold move and made a thirty year high breaking out to the upside.
We expect further fireworks in Gold and Silver juniors. Lithium and REE will be next.
We expect further fireworks in Gold and Silver juniors. Lithium and REE will be next.
One of the major catalyst which can trigger redistribution of liquidity is on the chart above. We have a Sell signal in long term Treasuries. Maybe, our Treasuries Bubble is really ready to pop this time. Bear market, upcoming crash and Deflation are so much advertised now that it is time to take a contrarian approach again and take the side of the FED.
Next couple of weeks will be very important for Silver and Gold market: all announcements by Obama about new economic initiatives should confirm Bernanke's "We will use everything what is necessary". It should translate into sell off in treasuries, lower Yen against the US Dollar and lower US Dollar against the other currencies. Silver should break out to the upside above USD 20/Oz confirming Gold upside move.
First Gold will make new all-time high, second will be M&A play: Majors will shop for Juniors with resources in the ground. Here is the double-game - Gold is moving up and Majors' production and Reserve Base is going down. If you like more leverage you are welcome to Silver market. Place to be is in stories will strong management, growing resources and stable political situations. Markets will be volatile by all means and political tensions will be driving this Gold Bull as well."
MarketWatch:
Sept. 17, 2010,
Rise in gold sector M&A raises eyebrows
Big miners build quality reserves as gold prices rise to new heights
By Myra P. Saefong, MarketWatch
TOKYO (MarketWatch) — Deal activity in the gold mining sector has reached a record this year and left investors wondering what else is on the miners’ agenda.
“The increased level of M&A activity [mergers and acquisitions] and high prices being paid for gold mining assets suggest that the industry itself is confident that gold’s rise of recent years is set to either continue or consolidate at higher levels,” said Mark O’Byrne, director at GoldCore.
On Thursday, gold futures (COMMODITIES:GCZ10) settled at a record high of $1,273.80 an ounce in New York. See Thursday’s Metals Stocks column.
Chilean president on miner rescueChilean President Sebastian Pinera discusses the progress of the operation to rescue the 33 miners trapped underground since August 5.
“Recent years have been lean and tough for the gold mining sector even with the gradual increase in prices (some 16.5% per annum),” said O’Byrne. “The healthier-looking outlook and realization that gold prices could remain at these levels and higher for the foreseeable future are leading to a sea change in outlooks — from one of survival to one of growth and expansion.”
And gold miners have indeed been determined to expand.
Gold-related M&A volume is at the highest year-to-date level on record, according to data from Dealogic, whose M&A coverage records began in 1995. Year to date, as of Sept. 15, there have been 507 announced gold-mining-related deals valued at $29.6 billion, compared with 407 valued at $15.0 billion in 2009, Dealogic said.
“The healthier-looking outlook and realization that gold prices could remain at these levels and higher for the foreseeable future are leading to a sea change in outlooks — from one of survival to one of growth and expansion.”
Mark O’Byrne, GoldCore
Among the top three deals announced this year in value, excluding debt: Newcrest Mining Ltd.’s (PINK:NCMGF) (AUSTRALIAN:AU:NCM) acquisition of Lihir Gold Ltd. (AUSTRALIAN:AU:LGL) valued at $9.76 billion; Kinross Gold Corp.’s (NYSE:KGC) (THE:CA:K) pending buy of the outstanding shares it doesn’t already own in Red Back Mining Inc. (THE:CA:RBI) for $7.2 billion; and Goldcorp Inc.’s (NYSE:GG) (THE:CA:G) $3.4 billion pending acquisition of Andean Resources Ltd. (AUSTRALIAN:AU:AND) (PINK:ANDPF) .
“More deals are to come as long as the price of gold spirals higher,” said Sam Subramanian, editor of AlphaProfit Sector Investors’ Newsletter.
Small companies, big targets
In most cases, it’s been, and probably will continue to be, big miners choosing to acquire smaller exploration companies because of the amount of time involved in bringing a mine to production and a lack of quality gold reserves, analysts said.
“The small to mid-tier companies with the higher-grade assets are the ones that will likely be targeted first because the margin for error is less,” said Ralph Aldis, co-manager of the U.S. Global Investors World Precious Minerals Fund (NASDAQ:UNWPX) .
UNWPX 21.09, +0.31, +1.49%
22201816JJAS
The precious-metals fund Aldis focuses on small- to mid-tier mining companies. “Those are the ones that are seeing the flurry of deals,” he said.
“They generally have the specialty and expertise to scour the earth looking for reserves and many have already put in the hard work,” he said, adding that he also looks for management who have done this before because “experience really matters.”
Brien Lundin, editor of Gold Newsletter, said some of the likely acquisition targets may include Keegan Resources Inc. (THE:CA:KGN) (CONSOLIDATED:KGN) , with its Essase gold property in Ghana; International Tower Hill Mines Ltd. (CONSOLIDATED:THM) (THE:CA:ITH) , with its Livengood gold deposit in Alaska; and Kaminak Gold Corp. (PINK:KMKGF) (TSX:CA:KAM) , with its Coffee project in Canada. Lundin owns positions in Keegan and Kaminak.
“The major companies have always relied upon the more nimble and aggressive junior exploration companies to make discoveries,” he said. “Once a small company has outlined a significant new deposit, the big boys swoop in and take over the smaller operation.”
“The majority of the M&A activity we’ll see in the months ahead will center around big producers buying up exploration outfits that have large deposits to their credit,” said Lundin. “There are just too many large-scale, undeveloped deposits out there waiting to be bought by someone.”
Supply constraints
The rise in M&A activity may also be a sign of the mining sector’s struggle against falling output.
“At the moment, the gold industry is struggling to keep annual gold production around the 2,500 tons level,” said Julian Phillips, an editor at GoldForecaster.com. “There are many exploration and royalty companies out there who are constantly looking for new deposits all over the world.”
“Companies like Randgold Resources Ltd. (NASDAQ:GOLD) do their own exploration and keep adding to reserves and developing new reserves, but others like Kinross buy small shareholdings in companies that look as though they might have found good deposits,” he said.
M&A activity helps to “replace spent gold deposits, and bear in mind that it takes around 5 years to bring a mine from discovery to production,” said Phillips. “Now there is a serious shortage of good potential deposits.”
“It’s doubtful you’re going to see any major supply increases because the depletion rate of many of the senior producers is faster than the rate they can purchase new assets.”
Ralph Aldis, U.S. Global Investors
Data from the U.S. Geological Survey show that world gold production peaked at 2,600 tons in 2001, falling to 2,350 tons in 2009.
“This happened despite 10 consecutive years of higher prices and this is leading some analysts to believe that we may have reached ‘peak gold’,” said O’Byrne, referring to speculation that global gold production has reached its maximum level and is poised to see a gradual decline.
But the consolidation in the gold mining sector won’t necessarily lead to rising production and efficiencies.
“It’s doubtful you’re going to see any major supply increases because the depletion rate of many of the senior producers is faster than the rate they can purchase new assets,” said U.S. Global Investors’ Aldis. “Their hope is to really keep production flat, not necessarily see an increase.”
Good for the gander, not for the goose
Despite their best efforts, however, gold miners have seen their shares underperform gold’s price gains in recent years and most analysts aren’t surprised.
“Why would an investor who is seeking leveraged exposure to gold also expose their portfolio to the risk of labor strikes, sub-par drill results, increasing fuel costs, infrastructure problems, unstable governments, uncertain foreign-taxation schemes, poor management and the myriad of other risks associated with mining/exploring for precious metals,” said Sam Kirtley, chief executive officer of SK Options Trading.
“The simple answer is a rational investor wouldn’t, and for the large part investors aren’t,” and that’s why gold stocks have been underperforming, he said.
So “although this M&A activity may be in the best interest of the mining company, in terms of maintaining a profitable and sustainable business, gold speculators are not looking for strong earnings or consistent dividends, they are looking for rapid capital gains in relation to the gold price,” Kirtley said. “Most are not here to profit from the next takeover deal, but from the next $100 move up in gold.”
Eventually, gold stocks may embark on a large rally, he said. In the meantime, there is a “bull market in gold that investors do not want to miss out on.”
Trading options on exchange-traded funds, such as the i-Shares Silver Trust (CONSOLIDATED:SLV) and SPDR Gold Trust (CONSOLIDATED:GLD) , can offer “more leverage to gold and silver prices,” said Kirtley. “This is why we are using options as our primary method of trading this bull market and gaining leverage to rising precious-metals prices.”
“If an investor does not wish to have this leverage, then simply buying SLV [ETF], GLD [ETF] or physical bullion should work just fine,” he said."
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