Stewart Thomson's latest examines why gold stocks are sitting at such low valuations, and what will happen to them (should have already happened) when institutions finally panic out of the US dollar.
Add in cartel/ hedge fund ratio trades and shorts which will one day be covered, and the coming explosion will be one for the ages.
From Stewart Thomson of Graceland Updates:
1. Sometimes mountains seem to be created from molehills. When investors focus on these mirages, tremendous excitement or disappointment occurs. After all the smoke clears, all that matters is that no wealth has been built.
2. The current “in vogue” molehill is the gold versus gold stocks performance issue. You are living in what may be the greatest crisis in the history of the world, and trying to get richer from that crisis.
3. A very difficult job indeed. Your competitor, Elmer Fudd Public Investor, looks like financial charcoal. He’s been reduced from an egotistical price-chaser praying to a debt devil, to a pathetic child-like entity, cowering in front of Ben “Dr. Pinocchio” Bernanke’s photocopier machine, praying for a solution from Daddy, so he can resume buying houses on a credit card. Ben tells us the solution to the crisis is to buy more houses on more credit cards. That’s not happening.
4. This is not the end of the crisis. Rather, it is the endgame. The crisis is accelerating. How will it end? The end, and the only solution to the crisis, is millions of people, or even billions, on 1930s-style breadlines. In a massive crisis, almost all predicted events take far longer than anyone predicts. Prices move to fundamentally “impossible” levels, and many black swans show their face in the market pond.
5. Embrace the impossible becoming the norm as part of the nature of this crisis.
6. Since the lows at Dow 6500, the Dow has risen, but on relatively light volume. Click here now to view the Dow reality check chart. That light volume doesn’t mean the Dow is about to fall or should have fallen already, as team shorty pants thought would happen. The light volume reflects the impoverishment of the average investor.
7. Likewise, gold stocks are not “undervalued” in the strictest definition of that word. Gold stocks are trading at prices that reflect the impoverishment of most investors during this crisis.
8. Click here now to view the GDX volume chart. As with the Dow, the falling volume reflects the destruction of the wealth of your failed competitors, not a bearish technical situation. Fundamentals make charts.
9. While gold has risen from $1300 to $1500, the public has actually become less interested in gold and gold stocks, again, because this is a crisis and greed will play a diminishing role, while fear plays an exponentially increasing role.
10. The public’s disinterest in gold is a huge positive for the long term price and stability of the gold sector, but not an immediate catalyst for powerful liquidity flows into gold stocks.
11. Forget about gold stock ratios and individual gold stock analysis for now. Until the US dollar goes into a fall that causes institutional panic, focus your energies on patience and endurance.
12. The money being made now with individual gold stock picking is good, but it is difficult to do consistently, and more importantly, it is crumbs money in the bigger picture.
13. As the dollar goes lower, an institutional money panic will occur, causing massive liquidity flows out of the dollar and into the general equity market.
14. Gold stocks as a group, including even some scams, should go vertical for a substantial period of time as that institutional panic occurs. It should have happened already. It could have happened already. It would have happened already. It did not happen already.
15. It will happen. Take the pain. Endure. Gold bullion is rising now against the dollar because of central bank buy programs. Remember that central banks are not interested in buying your favourite junior gold stocks. In this crisis, if it takes more time than you thought physically possible, to build monster wealth with gold stocks, well… Welcome to the market!
16. My cash is where my mouth is, as every writer’s cash must be, so I stepped up to the buy plate yesterday and was filled on a hundred GDX buy fills, at a myriad of price points. GDX “impossibly” tanked yesterday, while bullion soared.
17. As I will keep repeating, the impossible becomes the norm in a crisis! The current gold stock price levels are not a problem. They are a gift, from the ratio-obsessed hedge funds, to you!
18. My “thank-you” to these funds will be laughing in their face, after the banksters cut off their financing. The destruction of the long bullion/short gold stocks ratio trade likely begins as price surges over $64 on the GDX. Click here now to view the gold stocks launchpad chart!
19. Forget about the fact that GDX is trading below its Oct 2010 levels when bullion was $1387. Forget about the fact that GDX is $60 now while bullion is $100 higher at $1497. Instead, remember that I labelled that day in October, as it happened, the “loss of sanity” day, for the price-chasers in the gold community.
20. Forget about the fact that gold stocks might be trading at levels associated with the gold price of 2001. Forget about what is “wrong” with the gold stocks and focus on what is correct with them.
21. The gold stocks are correctly factoring in two things. First, gold stock prices reflect the impoverishment of the public. Second, gold stocks reflect a crazed add to positions by leveraged ratio trading funds.
22. The rewards in gold stocks are going to be distributed to a very small number of investors; those who endure.
23. While $64 represents the point of the beginning of the end for the GDX ratio trade-a-holics, the reality is that GDX already broke out upside from a massive bull continuation pattern. The target is $100. I think we will go to $200. Declining volume means nothing except that more of the final profits are for you!
24. Click here now to view the massive GDX bull continuation pattern chart. Focus on that chart, not the ratios from 2002. GDX is on the road to $200 now, and the only question is, are you jumping off the gold stocks train to chase the USD photocopier that the gold punisher just threw off the train? Or are you manning the golden engines with buy orders into this price gift to you!
