August usually presents the best time of year for "buys" in precious metals. To a large extent, I am preaching to the choir on that point. At this time, despite all the bearish press and declining share values, gold is in a generational type bull market. There can be no debate about that and even though some published bears think a correction looms ( they always think a correction is looming,( remember Andy Smith, Bob Prechter?) The momentum based on gold becoming a currency of choice and prefferred storehouse of value in all parts of the world is not subject per se to regular type markets. When currencies lose confidence, capital flows move markets in huge way. In any case...for a good read in captial flows, Martin Armstrong, the previous head of Princeton Economics is probaby one of the best authors on that subject. You can google and find some of his writings and his story.
On to the precious metals shares........
This is the time of year in which the hedge funds, start to lift their shorts ( they play the metals for seasonal trade mostly) You can watch the tape and see some of the short cover occur in senior names. Although I wouldn't reccommend you become a "screen jockey". The senior names listed here have strong underlying assets and opportunity to increase those assets. Also some decent looking charts as a precursor to a move in shares going into the end of the year. It has not been a great 36 months for juniors, as the interest and volume just doesn't exist. Part of this of course if that the ETFs have soaked up millions in cash from funds and pensions who normally would be buyers of the pm shares. So there is quite a lag between physical and pm shares. It is my opinion that anomoly will correct itself, as the securities laws in US are changing and requiring all funds and ETFs to make clear the amount and type of derivatives they hold. ( that would let the cat out of the bag for gold ETFs) BAsically those vehicles are paper with not enough physical to back up all claims. But that is a long story and maybe for another blog.
Lets start with Semafo.......Its neighbour ( Red Back) just received a take out offer from Kinross. Semafo has a great deal of potential to expand resources and while I owned Red Back a while ago, I sold before payday. Not in Semafo's case. I am a long term holder and expect this dynamic Quebec based miner to take out the $9 high and move onward to $12 near year end.
Silvercorp is a Canadian silver producer which does most of it's work in China. Do I need to say more? Just this week, the Chinese are quoted as wanting to expand the gold and precious metals markets in their country and with their population and resources, it will happen. What other government encourages its people to own gold? Besides all that, the deposits Silvercorp has been mining in China are a rich grade and they fund their drilling mostly through cash flow. Excellent silver play. Silver may outperform gold in percentage terms by 2011, so this is a keeper. You'll notice that it just broke the downtrending ling which runs from May and crossed over the 200 and 50dma's. Looking promising.
It would be too long of a blog to cover each pm share listed on header, but I have to inlude a junior.......
Orko Silver is the real deal. During the early 2001- 2006 run up of juniors, anything and everything went up.while those days are gone, the juniors still in my opinion offer an outstanding proxy for gold and silver in this bull market. The seniors will be running out of deposits and production, so it is the juniors with assets in ground that will be sought after. And Orko already has Pan American as a partner, so in the silver world, this is as good as it gets. Not only is PAA way ahead of schedule, they are also doing some exploratory drilling on other sites owned by Orko which could be an intersting bonus.The take out is for certain and when it is done, it will be done as a Producer, not as an Exploration company, as PAA only earns it's share when the mine is complete. And that mine looks to be some 7 million ounces per year or production. That would make it one of the top silver mines in world. But now the funds, and general public is not aware of juniors or gold for that matter, so shares of Orko can be bought at incrediblely reasonable prices...ie. $1.40 I would hate to put a target price on this, but by January 2011 I think $3 is likely if silver moves as it's charts suggest it might.
Currently, it needs to break that downsloping trend line from May peak which crosses at aprox $1.50 and should silver break $19 ...then the stars align for another good rally into the 2011 year. BTW, it is worth mentioning that most well respected prognosticators in gold suggest that new highs are coming in 2011. There are several good pieces by John Embry, Eric Sprott, Jim Sinclair. Even Martin Armstrong is looking for gold at $2000 in 2011, so looks like a good trending move is apon us.