8:35a ET Friday, July 30, 2010

Dear Friend of GATA and Gold:

Sprott Asset Management's chief investment strategist, John Embry, writes that gold is near a parabolic move up because of worldwide monetary mismanagement and the diminishment of central bank gold reserves with which to suppress the metal's market price. Embry's commentary appears in the latest issue of Investor's Digest of Canada and you can find it at the Sprott Internet site here:

http://tinyurl.com/37g5eef

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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A Canadian gold opportunity ready for growth

Although gold continues to grab most of the attention in the precious metal world, its less glamorous sister, silver, may be more appealing and for good reason.

First off, silver has many more uses than gold does. It is used for numerous industrial purposes and nearly 55% of total silver fabrication is used for industrial purposes. Silver is commonly used in the electronics space and can be found in plasma display panels and printed circuit boards, as well as in the lining of refrigerators, for food storage containers and for water purification. Additionally, the metal can be used as an antimicrobial to fight bacteria and as an antiseptic to treat fungal infections. Silver’s industrial uses even span to the solar energy industry. As economies around the world continue to expand, the industrial demand for silver will likely follow.

With consumer confidence plunging and governments around the world racking up seemingly unpayable bills, many investors have sought refuge outside of fiat currencies in order to help protect some of their assets from the ravages of inflation which is sure to come eventually. Almost by default, investors have piled into gold which has seen its price soar to $1250/oz. before dropping back to the $1160/oz. level it is at currently. This recent pullback has left gold investors will an interesting dilemma; buy more assuming that the economy or the dollar collapse, or sell as the economy picks back up on the back of solid corporate earnings in a variety of sectors. Although gold remains an excellent hedge against failing currencies, it does not offer the same upside in good times that its cousin silver does which is extremely important in these uncertain times. This is because gold has virtually no industrial uses while silver finds its way into a host of critical applications ensuring that the metal will be in demand no matter if a boom or a bust is in our immediate future. This is especially important in today’s economic climate since the economy could seemingly turn in either direction at any time; there is plenty of data to support both sides of the debate. Due to this conflict, we believe that silver could make an interesting choice for investors who are concerned about the world’s fiscal condition but also realize that things are not all bad in the world.

Not only does silver have a variety of uses but demand is currently outstripping supply. In fact, it is estimated that for every 1.5 ounces of silver that are consumed, 1 oz. is produced, suggesting that as time goes on silver only becomes more in demand for its multitude of uses. So while gold receives the bulk of the attention due to its high price and rarity, an excellent case can be made for investing in silver as well. Below, we profile the seven best reasons why demand for this metal is likely to stay high no matter what the economic situation.

I have written extensively about the extremely strong relationship (.pdf) between gold ETF holdings and gold prices. For much of this year, that relationship benefitted gold, as both holdings and prices relentlessly increased. The trend has obviously reversed over the past month, but interestingly, prices led the decline in holdings.

It is important to remember that gold investors are not a homogenous group. There are gold bugs— perennial bulls who most likely hold physical gold rather than shares in ETFs, there are momentum traders who sell on the first sign of weakness, and then there is everyone in-between. One of the most significant differences between these groups is their respective levels of conviction. Gold bugs will never sell. Momentum traders will sell in a heartbeat. Importantly, the liquidity of gold ETFs makes them a very appropriate vehicle for those closer to the momentum trader side of the spectrum of conviction. Without a doubt, many of these traders bought gold ETFs simply because prices were rising. As prices fall, the process works in reverse.

Agnico-Eagle Mines Limited (AEM)

Q2 2010 Earnings Conference Call

July 29, 2010 11:00 AM ET

By Brad Zigler

Real-time Monetary Inflation (last 12 months): -1.6%

After the break in gold prices this month, a fair amount of questions popped up ‘round the water cooler about the money flows into and out of the iShares Silver Trust (SLV). The queries were prompted by the dissonance between the money flows and share prices in the SPDR Gold Shares Trust (GLD) examined in a preceding column (see "Gold's Waning Strength").

There are certain periods of time in history when seemingly obscene prognistications are right. I believe we are in one of those times. It is at times like these that "conspiracy theorists" (whatever that means) become what I like to call "reality theorists."

Economic shocks come from nowhere. One day the global economy is humming along; the next day it collapses. Crashes don't occur because the fundamentals suddenly change; they occur because the public at large recognizes the fundamentals and heads for the exit at the same time. What's crashing next is the public's confidence in governments across the Western world. You can guess how that will affect the price of gold.

Barrick Gold Corporation (ABX)

Q2 2010 Earnings Call

July 29, 2010 9:30 a.m. ET

New Gold (NGD) has been a long term recommendation for my readers since May of 2009 when it was selling at $2.50. I have always been impressed by the quality of assets New Gold owns. New Gold is unique in the mining sector as they are leading the sector in increasing production and reducing cash costs. In two years, this company has gone from being in debt to having a comfortable net cash position.

They have three operating mines in mining friendly jurisdictions and cash costs have significantly decreased. Costs are expected to go down further when New Afton in British Columbia and El Morro in Chile get started. Both mines have huge amounts of copper. The copper byproduct decreases the cash costs of the gold to almost nil. It becomes pure profit. Their major development project, El Morro in Chile is one of the world’s major gold copper mines and New Afton is an exciting mine that has close to a billion pounds of copper reserve and a million ounces of gold.

Newmont Mining (NEM)

Q2 2010 Earnings Call

July 28, 2010 9:30 am ET

Most traders I have been talking with are feeling the same thing. Something big is brewing for the equities market but most do not want to get heavily involved until there is a clear direction. The broad market has been consolidating for almost 3 months and it’s important to remember that the larger the consolidation the bigger the move.

Also the biggest and best moves come from failed patterns. So is the big head & shoulders pattern on the S&P 500 which everyone is yelling about (the sky is falling) really going to happen or is this the BIG FAKE OUT? Only time will tell, either way no matter which way it goes I will be sure to catch some of it.

At the end of May I reviewed a very simple ETF rotation system using the free tools available at ETF Replay involving GLD, SPY, and SHY (low duration Bond ETF, used as a proxy for cash). Using the average of the 3 month return (weighted 40%), 20 day return (weighted 30%), and 20 day volatility (30%), SHY is currently ranked highest among the three. If we lengthen the time frame to average the 6 month return (weighted 40%), 3 month return (weighted 30%), and 3 month volatility (weighted 30%), GLD is surprisingly still ranked highest.

Given that SPY has been caught in a range of late, I thought it would be helpful to test a similar system using DBC (PowerShares Commodity ETF), SPY, EFA (MSCI EAFE), SHY, and TLT (long-term Treasuries). The shorter term system (3-20-20) ranks the fives ETFs as SHY, TLT, EFA, SPY, DBC. The longer term system (6-3-3) ranks long term Treasuries (TLT) as the top ranked, SHY second, and PowerShares Commodity ETF the lowest.

Sherritt Intl Corp Restr Vtg (SHERF.PK)

Q2 2010 Earnings Call Transcript

Mining giant Newmont Mining Corporation’s (NEM) second quarter 2010 earnings (excluding extraordinary charges) of $377 million or 77 cents per share fell short of the Zacks Consensus Estimate of 87 cents. However, earnings jumped 79% from $211 million or 43 cents in the year-ago period.

Including one-time charges, the company earned $382 million or 78 cents per share. Robust earnings were helped by higher gold prices, which reached a two-month high in June this year. Newmont realized gold prices of $1,200 per ounce, while copper prices were $2.33 per pound.

Over the last decade, investors seeking protection from inflation have been accumulating gold and silver mining shares. Gold and silver have appreciated by more than 300 percent from their lows, so it would be logical to assume that mining shares have performed even better given their inherent leverage in earnings potential. Ironically, some of these investments have already suffered from their own hyperinflation in the form of share dilution. Just as governments have mismanaged their budgets and printed too much money; some mining companies have done the same to the detriment of their shareholders.

Coeur d' Alene (CDE), an American silver miner, is one such company. It has diluted its shares so much that on May 27, 2009 it had a reverse 10 for 1 stock split. This article will use post split adjusted figures. Governments often do the same thing with their failed fiat currencies. In the wake of Germany's Weimar Republic hyperinflation, a new Rentenmark was created that was equal to 1,000,000,000,000 of the old German Marks. While not as bad, CDE's shares outstanding have risen from 2.4 million in 1999 to over 80 million in 2009 - a factor of more than 33.

Hecla Mining Company (HL)

Q2 2010 Earnings Call

July 28, 2010 1:30 p.m. ET

Wednesday morning's email from gold general Jim Sinclair - under siege yet again from the troops in the "community" - prompts today's post.

Mr. Sinclair often writes with a war mentality, pitting the gold community against the evil bullion banks - and a good chunk of the rest of the financial world. Don't get me wrong, I think there is plenty of evil out there (it seems that on Mondays, following a meeting or conspiracy of the assembled dignitaries in the G20, my investment accounts take the hit). But apparently a good chunk of the "community" gets its panties all in a bunch every time gold takes the hard hit.

Every now and then Team Macro Man has the satisfaction of making money, and making money for the reasons they expect. In macro, that can often be more rare than one may think. To wit, we have only "told you so" to say to the gold bugs and other trolls that have occasionally frequented this blog.

Gold has been looking pretty weak for a few weeks now to TMM and not because of politics, religious affiliation or the recently cancelled Indian wedding we heard about from a friend of a friend. Quite simply, the flows into ETFs (much of it composed of retail) seems to have gone a bit flaccid as of late. Orange is spot gold, white is total ounces in all the major ETFs - principally GLD US and GBS LN.

As gold prices have scaled new heights in recent years, acquisition activity has begun to heat up in the gold mining space. In this article, we will conduct a case study of recent major transactions in the gold mining space to identify characteristics of attractive takeover candidates. We will then apply these lessons to spot likely takeover targets within our coverage universe.

Profile of the Perfect Target

Gold is now reaching long term trend support after falling the last few weeks as investors returned to bid up the euro and equities. The bounce in equities, especially financial, retail and real estate may be short lived as volume indicates that there is not much conviction from major investors on the upside. Gold has recently been the safe haven as investors sought shelter away from the euro when it was having the sovereign debt issues. Now that those issues have been quelled, gold has had some selling and it has now reached an oversold condition and a long term trendline which is acting as major support.

Stock prices move in trends. In a bull market, it is quite often easy to identify the ascending bottoms. Being familiar with trendlines allows the investor to enter long term bull markets when they are oversold and at key support. An investor must always be aware of a stock’s underlying long term trend. This can be counter-intuitive and awkward, as most times when it comes down to support you have to think against the market herd and buy when others are selling. It’s like buying a winter coat in the heat of summer. Gold is on sale, and presenting a low risk, high reward trade, but it requires non conformity with the crowd which is not an easy task for anyone. Many of us like to be in what’s hot now situations, rather than seeing the bigger picture and entering into a trade when it is uncomfortable.