CITI Goes Bullish On Miners For The First Time In Three Years GDX, TNR.v, MUX, ILC.v

 Now CITI joins our small crowd with its bullish call on miners - it is very important development as now these news will go mainstream with the new money being allocated to the sector. Gold is particularly interesting now with the record high Leverage at COMEX of 112 owners for each ounce of Gold and record low level of Registered Stocks. Copper will be gaining attention as well with Chinese biding for huge Las Bambas Copper in Peru making the headlines again.

Rick Rule: Money Are coming Into Gold And Silver Now GLD, TNR.v, MUX, GDX

 "Rick Rules discusses the recent bear market in Gold and what is going to happen in the beginning of the new bull phase. Money are coming into the resource sector again. It is the very big money, which are circling this sector now. Who are the investors? You can guess - they are mostly from Asia - China and Korea, new type of long term investors. There are a lot of opportunities in the market now - we have learned from our previous experience and the valuations are very appealing now for the right plays."

McEwen Mining And TNR Gold: Report - Argentina Is In The Mood For Change On Investment Policy TNR.v, MUX, LCC.v, SSRI, PAA

  "Argentina mining landscape is changing for the better according to the report by BN Americas. Lumina Copper is trading above CAD 6.00, McEwen Mining is breaking out to the upside and TNR Gold has found some bids as well recently."

MarketWatch:

Citi goes bullish on miners for the first time in three years

“We would rather be too early than too late in making this call.”

And with that, analysts at Citi moved their 12-month view on the mining sector to bullish for the first time in three years.

Sure, they’re concerned about the potential for long-term structural demand for commodities in China, and yes they’re aware there could be a seasonal slowdown in the first quarter of this year (as they pointed out in December), but analysts are seeing better bottom-up fundamentals, notably from big diversified miners. Citi’s top picks are BHP BillitonBHP +0.84% UK:BLT +1.34%, Rio Tinto RIO +1.46% UK:RIO +1.68% and Glencore-Xstrata UK:GLEN +3.19%.

“Investor sentiment has hit rock bottom. The mining sector has moved through five stages of grief, namely Denial, Anger, Bargaining, Depression, and now we think we are in Acceptance that the sector has moved into a new norm,” said lead analyst Heath Jansen, in a note out Thursday.

Amid a clutter of metals-price calls, Jansen foresees a flat commodity-price environment ahead and a reduction in volatility. An improvement in U.S. and European growth will help boost commodities, while weakening commodity currencies — the currencies of major exporters like Australia, New Zealand and South Africa — are boosting miners, he said. On top of all this, miners are cutting costs, improving balance sheets and aligning with shareholders’ interests. Because of this, earnings momentum has become positive.

But Citi’s advice to stay underweight on gold and base-metal stocks diverged from the opinions of other big investors. DoubleLine Capital founder Jeffrey Gundlach said earlier this week that not only is gold looking good technically — calling for $1,350 an ounce on gold “sooner rather than later” –  but he likes those miners as well. Most major gold companies lost at least half their value last year on the gold price plunge.

“Sentiment is as black as night on gold, so I’m actually long on some gold miners,” said Gundlach.

His gold call is more bullish than the average investment bank so far this year. Recent forecasts from six big banks (not including Citi) see the metal sinking to $1,209 an ounce this year, an average drop of 14.5% from the 2013 average. The gold-mining sector has a fan in hedge-fund manager John Paulson, who wasreportedly telling clients last year that he won’t add more to his hard-hit gold fund, but still likes the miners.

For its part, Citi said its least-favored big-cap miner is Anglo American UK:AAL +1.43%. The investment bank parted company with UBS, whose analysts lifted the stock to buy from neutral, saying valuations are looking attractive after a recent underperformance (by more than 18% over the past three months compared to buy-rated Rio Tinto and BHP Billiton).

Writing for Benzinga on Wednesday, William Briat said now isn’t a bad time to go hunting gold mining stocks, which are nearing lows not seen since the fall of 2008. He advises looking for stocks that “are able to produce at an all-in sustaining cost that is below the current price of gold bullion, which means they remain profitable.”

While Citi’s note is focused on Europe’s mining stocks, Briat outpointed NYSE-listed Primero Mining  PPP +0.49% . “If a company still has strong assets, a solid balance sheet, and is able to create positive cash flow, this type of firm is of interest to me, especially when market sentiment is so negative,” he said.

Marc Faber extolled the virtues of mining stocks at the close of 2013. The author of the Gloom, Boom and Doom report said that given the extremely bearish views out there on gold, silver, platinum and palladium, mining companies are at “relatively good values.” Not a new call here for Faber, he’s been touting miners for a while.

– Barbara Kollmeyer covers markets for MarketWatch. Follow her @bkollmeyer. Follow The Tell @thetell."

Citi Asks "How High Can Gold Ultimately Go?" GDL, GDX, GDXJ, MUX, TNR.v

  

  Zero Hedge reports that Citi joins our A Team calling for the Bull Gold Market and much higher prices.

Gold Breakout: Jim Sinclair - The three entities that called the $1900 in gold are back long. GLD, SLV, GDX, MUX, TNR.v

"Now we have the full A Team calling for the New Bull Leg in Gold. Summer doll drums time out is officially over. Gold was over 1400 intraday and Silver is over 24 now. Junior miners are exploding to the upside with McEwen Mining pushing 3 dollar mark. Survived Juniors will show this Fall what is called the ten baggers again."

McEwen Mining Up 11.7% On 7 Mil Shares, Trading Above 200MA $MUX, $TNR.v

"McEwen Mining is strongly Up today - more than 11% on 7 mil shares. With Gold and Silver markets down after recent breakout we can anticipate some news from the company.  Rob McEwen was taking about upcoming Los Azules Copper PEA in September and M&A ideas to combine with another Gold Mining company to reach his goal of being included in S&P 500."

ZeroHedge:

Citi Asks "How High Can Gold Ultimately Go?"

Via Citi FX Technicals,

Gold looks to have found a base...

Following the multi-year surge in Gold the recent fall took us 14% below the 55 month moving average. That is exactly what happened in 1976 during Gold’s correction after a multi-year move higher.

Once that moving average was regained on a monthly close basis the uptrend re-established itself and Gold rallied for the next 3 years. (included in that period was the “supply shock” driven move higher in crude)

The rally in the Equity market after the 1973-1974 “crash” peaked 4 weeks after that corrective low was placed in Gold.

SO FAR the trend peak in the stock market (DJIA and S&P) has taken place 5 weeks after the corrective low was posted in Gold.

After that peak in late 1976 the Equity market entered into an 18 month long 27% correction.

Gold weekly chart- Prior support now good resistance

The pivotal breakdown level on Gold was at $1,522-1,527 and should now be pivotal resistance in this rally.

Gold broke below this level during the week of 08 April 2013. It is unlikely that it is a coincidence that that precipitous fall took place in the same week that the S&P 500 regained its 2007 highs.

So, do not be surprised that IF , as we expect Gold heads higher to re-test this $1,522-1,527 area in the weeks/months ahead that the S&P is re-testing the break out point of 1,576 again...

........

We still retain a view that we can see a “low to high” percentage move in this bull market similar to what we saw in the bull market of 1970-1980.

If we extract the final leg of that move in December 1979-Jan 1980 which was totally driven by the USSR invasion of Afghanistan almost doubling the price of Gold over 5 weeks then we end up with a target of around $3,500 over the next 3 years or so.

The charts below are compelling in that respect, but before we look at them we will indulge in some pontification.

We are at a point of change of leadership at the Fed with two primary candidates being mentioned. (Janet Yellen and Larry Summers). We are NOTgoing to opine on who it should be but rather make observations about why we think it is going to be one rather than the other.

When President Obama spoke on the Charlie Rose show about Chairman Bernanke’s tenure it was obvious that it was coming to an end. The question to ask was why? If we (He) was happy with the path being followed, why not just ask Ben to stay on. (We also firmly believed that if asked Ben would have stayed). It is therefore not a stretch to believe that the President was less than convinced about the “efficacy” of QE. Reasons for this could well have been (supposition on our part):

• Sub-par economic growth of 1.7-2.0% and very low nominal growth given the low level of inflation
• A falling unemployment rate... yes (7.6% at the time)... but not of the magnitude and quality that we associate with an economic recovery(Lowest participation rate since 1979 flattering the rate;underemployment at the time (U6) at 14.3%; the majority of jobs being created are part time jobs with the 55-69 year old age group the primary demographic beneficiary)
• Housing recovering but very gradually compared to previous cycles and a view in a lot of circles that a significant chunk of demand was private equity buying distressed assets
• An Equity market rallying about 140%+ (The rich get richer, the gap gets wider)
• Banks et all benefiting from never ending cheap money and being encouraged to misallocate capital in financial assets that are being made almost risk free by the Bernanke, ever expanding, “QE to infinity” put
• Provides a benefit to the marginal borrower while “crucifying” the whole savings base
• Continued QE created a back stop to allow congress to push harder on budget cut and debt limit negotiations (Play hardball)

Let us say that some or all of that was true. Would the President really want to appoint somebody who to a very large extent would be likely to follow the same “prescription” (Yellen)? Why? If you wanted to continue that policy then would you not do that with the “guy” who engineered it and took us through the crisis (Bernanke)? Or do you feel that your financial “Churchill”…the man to fight the war is no longer the direction you want to go. We firmly believe that “change is afoot” and that change goes by the name of Larry Summers.

Why is that important?

Nothing suggests that Summers is a “hawk”. However, there are suggestions that he questions the “mix” of policy. It looks like he would be much more likely to try and “draw a line” under this unorthodox monetary policy experiment by bringing QE to a conclusion. This will not be a “shock and awe” change but rather a gradual wind down of purchases and eventually the Fed balance sheet through the maturity schedule.(We believe this could happen irrespective of the economic backdrop)

What would this mean?

If, as we believe, we have some potentially significant headwinds coming in markets and the economy then this is going to “throw the ball” right back into the “arms of Congress”. (Is Larry Summers the 21st century’s Paul Volcker?) If the independent Fed is no longer prepared to expand monetary policy “ad infinitum” to support the economy and the economy is slowing what will Congress have no choice but to do???? Stimulate again through fiscal policy.This will mean deficits once again widening and the debt limit rising. It will be a shift back not to tight but to “less loose” monetary policy and looser fiscal policy (This will also likely benefit the USD)

That is why the chart below remains one of our favourites.

Gold and the US Debt Limit

It is no coincidence in our mind that these two have expanded together over the last 10-12 years

As we continue to spend more than we earn and shift that liability to the next generation Gold has shown itself to be a very effective hedge against that policy. The recent “squeeze in Gold” has sent it significant below this “stairway to hell” chart (Debt limit) which has continued higher. As we said earlier, we do not believe that this fall in Gold will be sustainable and expect new highs in the trend eventually. As we also said above , we have retained a long term target of about $3500 for some time on this Gold price based on a comparison of this period and that seen in the 1970’s

As we headed towards the last Presidential election there was a considered view in the markets that by the end of President Obama’s 2nd term the debt limit could be as high as $22 trillion. Then we got the sequester, a more rosy economic outlook, tapering talk and all this has been forgotten. For how long?

The market dynamics above combined with the change of leadership at the Fed may well be “resurrecting that thought”. If so our 2nd favourite Gold chart comes into play.

Gold and the US debt limit (Again): So what would a debt limit of $22 trillion over the next 2-3 years suggest for the Gold price?

How about $3,500

We firmly believe that the Gold correction has “run its course” and that much higher levels will be seen in the years ahead."

  

  New Bull Legs are born when the last Bull is throwing into the towel. Chinese liquidity squeeze has ignited the latest round of selling in Paper Gold - Banks are selling what is the most liquid there now. COMEX has got another chance to survive and replenish its inventories on the cheap now. Never Fight The FED!? We should just wait for the revelations of Gold market Manipulation after LIBOR and FOREX manipulations has been exposed. MF Global case could be the first sign of things to come now.

ZeroHedge:

Citi: Are Gold And Silver Finding A Bottom?

Gold and Silver appear to be in the process of finding a bottom; however, the price action could continue to be choppy in the coming weeks. Ultimately Citi's FX Technicals group, as the following charts suggest, expect both precious metals to move much higher in the long term with the potential for Silver to be the outperformer, as was the case from 2008 to 2011.

Via Citi FX Technicals,

Are Gold and Silver finding a bottom?

Gold and Silver appear to be in the process of finding a bottom; however, the price action could continue to be choppy in the coming weeks. Ultimately we expect both precious metals to move much higher in the long term with the potential for Silver to be the outperformer, as was the case from 2008 to 2011.

Our original target for this Gold correction was $1,260, which was the target of the double top. This would also have resulted in the same high to low move on a percentage basis as seen in March – October 2008.

Gold has overshot that target, though only slightly (the 2008 high to low correction was 34% while this one has been 36%). The bottoming process in 2008 can still serve as a template for what might still come for Gold:

• After rallying through September-October 2008, Gold made one final push down to a low 7.4% lower than the previous one
• After rallying through April, Gold has made a push lower and similar move to the last one in 2008 would suggest a bottom would be put in at $1,224. The low so far has been $1,221 and consolidation seems to be taking place.

Daily momentum is also at the most stretched level seen since the Gold correction in 2008

One important thing to note is that after posting the low of the correction on October 24, 2008, Gold did not immediately shoot up in a V-shaped bottom. Rather, it consolidated over the next 2-3 weeks and did not begin the next move higher until after turning off of the 76.4% retracement of the bounce off the lows and then breaking through the pivot. This suggests that if $1,221 is the low, we may still see some choppiness in the price action over the next few weeks.

Our only concern at this point is that the correction in Gold may be more like that seen from 1974-1976

The high to low correction during that time was 44% and a similar correction this time would suggest a Gold price closer to the $1,050 area. The timing would be closer in similarity as well as the correction in the 1970s took place over 1 year and 8 months whereas this one has already taken place over 1 year and 10 months (meanwhile the 2008 correction lasted only 7 months).

The most important thing to note is that whether we are seeing a pattern more like 2008 or the 1970s, we do not see this as just the beginning of a bear market in Gold; rather, this should simply be another correction in the upward trend. This would be similar to what we saw in both of those time periods (a deep correction setting up for the next move higher which would take Gold higher by multiples). We still remain of the bias that Gold will find a bottom soon and that in doing so it will form the base for a new leg higher which can take Gold to our target of $3,400 - $3,500 by 2016. Before we get there, though, we may need to see more stresses to riskier asset markets. As we have previously seen, moves higher in Gold are accelerated by either:

• Global stresses - Europe and China come to mind as potential catalysts, with the possibility of another Euro crisis becoming more real as highlighted in Chart of the Week. The potential for tapering by the Fed has shown just how sensitive asset markets are and how easily panic selling can take place.
• Increasing balance sheets of Central Banks / debt levels of governments - “taper talk” is still just talk and even when/should it begin, there is no plan to actually reduce the size of the Fed’s balance sheet; meanwhile, other major Central Banks are still in the process of accommodating or increasing their balance sheets. On the debt side, there is no indication that any major economy is actually reducing the size of outstanding debt any time soon. This might actually suggest that when Gold begins to rally again, the price change in other currencies may be greater than that in USD (a topic we will likely revisit in the future).

These dynamics continue to suggest to us that the long term trend of higher Gold prices is very much intact.

Silver should also follow suit as it attempts to find a bottom. Once it recovers, it may actually be the outperformer of the two…

As with Gold, we think the correction in Silver should end up being similar in magnitude to that seen in 2008. The 60% correction would suggest Silver bottoming around $19.75, though it has already overshot that level. However, as with Gold, our bias is that Silver is in the process of bottoming before a more aggressive move higher, such as that seen after the correction in 2008. That suggests a move in Silver to over $100 by 2016.

The Gold/Silver ratio shows that in the correction of 2008, Silver severely underperformed Gold (correcting 60% versus 34%). Then as both moved higher, Silver outperformed, rallying 488% versus 181% for Gold.

This correction again has seen Gold do better (less badly?) and the ratio is approaching resistance around 67, the 76.4% retracement of the 2009-2011 move lower. If Gold and Silver are bottoming, as we expect, than it would not be surprising for the ratio to begin to turn around the resistance area as well. This would mean Silver could once again be the outperformer over the next few years."