INTERNATIONAL. Manipulation and money that's been on the sidelines are driving the market, according to TraderTracks editor Roger Wiegand in this exclusive interview with The Gold Report.
He see the makings of some "pretty exciting" action in precious metals front, forecasting that gold could go beyond US$2,960, and with the next big drop in the stock market, the gold and silver shares could really depart from the rest of the mainstream market, especially with the dollar being so weak. He likes companies that have good projects and strong partners, and cash in the bank.
The Gold Report: Roger, when we last spoke, at the end of August, you expected the stock market to have a pretty good fall after Labor Day. So, the market didn't collapse. . .what's your view on why it keeps appreciating?
Roger Wiegand: Well, part of it has to do with manipulation and part of it has to do with an awful lot of money that has been on the sidelines. A couple of months ago I heard there was around US$8.5 trillion in cash that was not invested. I couldn't believe it.
A lot of the money is starting to come back because investors are persuaded things are going to really pick up. Typically, what happens in the cycles is November 1st is the time to buy, after the September-October event sell-off is over. And, if you buy on November 1st forward, you usually do pretty well.
This year it was delayed a little bit, and some of those charts look a little bit sloppy and choppy, and that's what got everybody confused, including me. As of November 24, 2009, the news is reporting smaller investors are running to the bear funds for security. If the correction is now imminent, it is off-cycle and late by at least three to four weeks.
TGR: Are you saying that you're expecting the markets to go up now that it's late November?
RW: We could go either way. I really believe that. We've got some interesting charts. There's the S&P chart, which has a double top on it right now, indicative of a selling point, obviously.
I don't think there's going to be that much of a selling event. I think it's going to stay propped-up. Last week we saw a gravitational pull from the smaller cap stocks into the larger ones. Usually, when they go into the S&P 100 and they get out of the trading 500, it's because they're looking for security and safety, and they're looking to buy those consumer cyclical stocks, like household goods and toothpaste.
There's a heavy load in that regard right now in the market, but I think they're going to get out—the people in the funds are going to get their bonuses, and they're going to get out of town with some pretty big money. But I don't think there's going to be very much selling right now. I really don't. The selling is coming but it is delayed until the funds exit and close the books for bonuses at year end next week.
A big part of this has to do with inflation, too. I know a lot of people say, "Well, there's no inflation now; it's all deflation." We disagree; we say that the inflation is now 7% and rising more quickly. Unemployment is a lot higher than people are discussing, and others are saying, "Well, this is a jobless recovery."
Well, it may be a jobless situation, but it's certainly no recovery. What's happened here is a lot of corporations have laid-off so many people and run down their inventory so much that their overhead was cut back tremendously and they're showing profits, at least where we are right now. And those profits are going to be a one-off deal,
I think. They're going to last for maybe a few months but come spring again, we're back to the same old problems. We're overloaded on debt. The bond market in Japan is looking absolutely horrifying right now; it's really scary.
The government is selling bonds to pay pensioners and I don't think they've ever been in that position before. The amount of paper that is out there in Japan relative to GDP and the currency is way beyond where it is in the U.S. And I thought ours was bad!
So, in all likelihood, something is going to snap here pretty soon; it's got to. But it's confusing a lot of people because several good reports continue to be reported.
TGR: If you go back a year ago, everyone was looking at the balance sheets of the gold juniors, looking for those who weren't overloaded with debt who could survive the downturn in the capital markets. And so we've had a shake-out, and we're back to having free markets determine and who's going to make it...
RW: Absolutely. I think your example with the gold juniors is perfect. A lot of the ones who shouldn't have been in the business anyway are shaken out and gone because they didn't have capital; they didn't have the proper reserves; they didn't have any good partnerships.
A lot of those projected mines were located in spots where they shouldn't have been politically. So, what have we got now? I don't know how many there were—I heard numbers like there were 5,000 of them (I don't think there were that many), and I hear now that there's something like 1,500. I have watched the charts and trading activity of these juniors that we like and those we dislike.
We've thrown out the dislikes; we've made money on some like Canplats Resources Corp. now because Goldcorp bought them. The stockholders there obviously did very well, but there's more out there like Canplats. Timmins Gold Corp. is another good one; I think Bravo Venture Group is going to be a candidate for a buy-out on part of it.
Miranda Gold Corp. is in the same position. They've been slowly and carefully building it up and shepherding their capital, and as a result, they've got some cash, they've got good projects, and they've got strong partners. And the deeper we get into the gold rally, which is going to last a long time, with companies like that, bits and pieces if not all of the company are going to get bought out. And, the people who hold the shares going to be very happy.
The experience we've been through is going to helps us with what's coming next. The thing that's really interesting is that a lot of these stock buyers who focus on the juniors are not really educated in the industry—they don't understand, especially in America; as they do in Canada—how much further we've got to go on this thing.
I just wrote in my letter this morning that some of the people that are involved in silver are thinking that because we are up to $22 and fell back to $9 that that's the end of the game. I think if you look at where we are in gold and silver right now we're basically on page two of a ten-page story. I believe that's how much longer we've got to go.
TGR: You've previously mentioned all currencies are devaluing almost simultaneously. Other than currency devaluation, what's driving the price of gold and silver?
RW: Well, a lot of it is fear; gold is now basically considered to be money in many of the foreign countries, partially in the U.S., more overseas. I think a perfect example is Vietnam. It looked like they were going to have some things that would work out in their economy, and unfortunately for them, a lot of it's coming apart. And they know from experience that if they can get into gold and hang on, they're going to be a lot better off.
And, China is the number-two gold producer now, we've been told. They're not selling any and not only that, they're buying it. Further, they're encouraging gold sales to consumers. And Japan has been doing the same thing.
The supply of gold is not going to be able to meet what people are after here, and that's the reason for this breakout we're looking at right now. We felt gold shares would separate from the regular stock market. I saw early glimmers of that this fall, a little bit of that in late summer.
And now I am more convinced than ever that with the next big drop in the stock market, the gold and silver shares could really depart from the rest of the mainstream market, especially with the dollar being so weak.
TGR: You've said that you see a lot of money moving from the smaller cap stocks to the larger cap stocks. Is the smart money moving to the seniors in the gold equity plays?
RW: Well, two things happen when you get into a market where the gold really starts to take off. Before we were in a long, slow climb from US$200 up to US$850—that was one marker. And then we got up to a US$1,000 and hung around there for quite awhile, and it looked like it was going to sell-off, and did, and then came right back.
But we are now in the next price range, which is beyond US$1,000, and Mark Faber of The Gloom and Doom Report, said this morning, "If gold will say above US$1,000, it's never going under US$1,000 again." And I agree with him; I really don't think it's going to. Next, as of November 24, December gold futures are trading at US$1,165 and have enough cycle room to reach US$1,200.
Again, getting back to the senior versus junior, keep in mind when these markets get so crazy and convoluted like they are there's so much money looking for a place to go, that when a sector like gold takes off, where does the money go? It's going to go to NYSE gold companies, and who are those? Goldcorp, Newmont Mining Corp., Barrick Gold Corp., and Hecla Mining Company, and you've got some foreign ones; you've got Newcrest Mining Ltd.from Australia; and there's some in Africa. I don't like anything in Africa except the gold royalty companies.
TGR: So, as an investor, are you through shifting your funds to the seniors or are you still investing in the juniors?
RW: I don't trade shares personally; I trade the futures because they're faster and that's the business I started in. That's my preference—futures and commodity trading. I can't buy a stock and then go promote it. That's not fair. So, it's easier for me if I don't buy the stocks for me, but there's a lot of people who read our newsletter and that's all they do. They prefer shares, and they've made a lot of money on it.
TGR: Can you talk about some of the stocks in your newsletter?
RW: Sure. Clifton Star Resources Inc. is one we've been talking about; it got some new financing with a partner. It looks like they've got US$70 million in financing over a period of time from the new partner.
And, it's an old gold mine in Quebec. I just love Quebec because they treat the miners fairly; they bend over backwards; they've got railroads; they're got grids; they've got water; they've got labor force. They've got old proven mines. With Clifton Star they started up on a property where they had an old mine.
They had waste rock, and there was un-reclaimed gold in that waste rock. But with advanced geology the way it is right now and the technical ability and the sophistication they've got they can pull it out. They've got some bonanza grades in part of it. It's looking to be shaping-up to be a really good opportunity.
TGR: Anything else you are recommending?
RW: Hecla Mining Company (NYSE:HL). In early 2008 Hecla bought the Greens Creek mine in Alaska from Rio Tinto (RTP) and paid them US$750 million, which is a lot of money for half a mine, but considering that they've been there as 50-50 partners for 20 years, they know what they've got. That's one of the things that emptied the treasury at Hecla, but these people have things squared away now, and Hecla is back on its feet, and moving nicely. I look for Hecla stock to rise from US$5 to US$8.
And after that, once we get past US$8 or US$9 where there's a resistance number, you're looking at US$12 or $13, and once we are past $13, we're going to be in new territory ahead and we're looking at us$15 or US$20. Hecla remains one of my better recommendations too; one that I really like.
I want to go back and make some comments on two companies I mentioned earlier. Timmins has a really interesting project in Mexico.
Timmins was put together by a man who was an SEC mining attorney, Bruce Bragagnolo, with 20 years' experience, a very bright man.
He's done a tremendous job. He's done everything right that you need to do with a junior mining company from the standpoint of finding the property, furthering the geology and taking the time to get proper financing.
They're pouring gold this year for the first time, and that company, unlike many of the exploration juniors, is going to be a real producer. The stock on Timmins, not that long ago, was 40 cents and now it's over a dollar. We see US$3 to US$5 here rather quickly. It's a really classy company from the standpoint of all the things they have done to build the company, put it together, and make it run.
They have a top-notch Mexican manager on site there in Mexico. They've got a great geologist. They've bought all this new equipment and rebuilt everything; they've been running and testing it.
They've got plenty of capital; they've had the patience to put this company together properly. I just think that if I were going to buy three stocks and that was all that I could buy, I would buy Timmins as one of the three selections.
As far as Bravo, I am not as versed as I should be on all their projects because they've done a lot of shifting and changing around. But those guys are smart and aggressive, and they've been in this business for a long time. Here's the key point. Because I like trading and I'm a technical analyst, we've been able to recommend that stock in and out—I can't remember how many times—I would guess five or six times in the last two years—every time they've climbed 20% to 40%; maybe I got stopped out once and either broke even or lost a little bit once, but for some reason or other, Bravo stock is a good trading stock. If you want the shares to move and make money, that's one of the places I would go. And here once again, this is just from experience watching it since roughly 2006. I can assure you in the next quarter of next year they should be one of the best ones we have selected.
NioGold Mining Corporation is another one we like. We had it in our letter as Miner of the Week. It's a smaller mining company that's gotten some good results from geology. They've got money; they've got the patience; they're in a good location.
With this crazy market, I worry about telling our readers to go ahead and buy 10 or 20 positions, because if I make a mistake and I'm wrong, a pile of invested cash is going to out the door, and they're going to lose it. So, I took the tack of let's take two or three—Clifton Star, Hecla, and then the other one, an ETF for silver, AGQ. We've done really well on that, too. We put our toe in the water and we'll see what's going to happen.
TGR: Roger, can we wrap up with your thoughts on where you think the price of gold is headed? Or investing in precious metals?
RW: I forecast that gold is going to go beyond US$2,960, which is my highest number right now. You're getting to the point in the gold market where some of the really strong, big players—by that, I'm saying commodity funds with hundreds of millions of dollars—are saying gold is should easily be rising to US$2,000.
And as far as investing, I think people are going to have to take more of a trading stance, rather than buy and hold. After what happened at Lehman; and what happened this year with prices mushing around, I suspect people understand they're going to have goals; they're going to have to trade a minimum of two times a year with these shares, and use other available trading vehicles, too. Volatility is increasing and is demanding more trade management than ever before. Opportunities are wider and larger than ever.
TGR: Thanks, Roger. Enlightening as always.
Note: Roger Wiegand produces the popular Trader Tracks online newsletter, offering investors short-term buy-and-sell recommendations and insights into political and economic factors that drive markets.
He has devoted intensive research time to the precious metals, currency, energy and financial markets for more than 17 years. His varied background—a blend of graphics and commercial printing, writing and editing, sales and marketing, consulting and real estate development (from sand and gravel mines to landfills to residential/commercial projects)…and trading—also shapes the views he shares.
"TraderRog" also digests various domestic and international publications for economic, political, monetary and market news and commentary that inform his opinions and analyses. Roger is a regular essay contributor to popular websites addressing the commodities markets and is frequently interviewed on radio in the United States and Canada. Wiegand is also a regular speaker at major precious metals and resource conventions in North America.
Streetwise - The Gold Report is Copyright © 2009 by Streetwise Inc. All rights are reserved.
For more information about The Gold Report, please visit www.theaureport.com