Keep Your Head When Investing In Precious Metals

My readers are well aware that the role of the media is to confuse and misdirect the average investor. Be careful of the media’s job which is to sell the popular news of that day for the masses.  Many times the cover stories are a reflection of the majority view, which is usually wrong.  Behind the scenes the world is in the midst of competitive currency devaluations.  The Japanese Yen is in free fall and the West must compete which could put downward pressure on the U.S. dollar and Euro.
However, the news fails to discuss what the implications of trade wars and the impact on currencies can have to investments. Instead they like to publicize pundits who are speaking about if the Canadian Venture exchange can be saved or discussing  a complete collapse.  In my opinion, this is characteristic bear market talk, capitalism and metals exploration are not ready to run for the hills especially as we have a lack of available supplies in uranium, rare earths and precious metals.
Usually these pessimistic doom and gloom comments signal a contrarian bargain buying opportunity.  In fact, I have spoken with many mining executives who have been in this business for 4+ decades and they have commented that they have never seen pessimism in the sector like now.  There are several mining companies whose market cap is just a fraction of their Net Present Values from third party independently verified economic assessments.  Never have they seen this disconnect.
Just like we had irrational exuberance on the upside with tech and real estate this past decade, we are witnessing illogical fear in the junior mining sector.  In due time, investors will look back at this time and be amazed at some of the values.
We feel that it is only a matter of time before the precious metal, rare earth and uranium miners themselves participate in reflecting this bull market in other areas such as banking and real estate which are being manipulated higher by Central Banks.   Capital will eventually flow to quality.
Many miners are reporting earning surprises beating analyst estimates and breaking into new highs.  The large gold mining companies have taken write downs.  The majors are desperate for resource growth at a time when new discoveries are at an all time low.  While the large gold miners are testing lows, some of the big industrial miners are outperforming the S&P 500 and hitting new 52 week highs.

The majors are becoming less picky and some of the undervalued juniors sitting on developing mines may attract the hungry giants who may pay exciting premiums.  Do not forget many of these majors are sitting on large holdings of U.S. dollars, which is increasingly losing value.  They must work speedily to transfer that capital into resource growth.  Many of their large and high cost miners are riskier then some assets being held by undervalued juniors.
I have learned through experience that following the majority or the mass media is dangerous.  How soon we forget the tech collapse where many of our colleagues who became day traders and web entrepreneurs were wiped out.  The housing crash is almost completely forgotten by the mainstream media or the average investor.
Many of my contemporaries who became mortgage agents or real estate brokers are getting back into the real estate business as the Fed has been throwing tons of fiat dollars into those markets.  Be careful of a double dip in the housing market as there is still a huge inventory of homes and condos which have not hit the market.
Despite these two major bubbles just in the past 15 years, some pundits claim we are in a gold bubble despite the miners being at record low valuations.  Most of my friends in the mining industry are 60-90 years old and they are concerned that there may be an entire generation that is not well equipped with the ability to explore and develop mining operations.  There is a huge generation gap and a lack of technical skill with few discoveries being made despite record exploration budgets.
Just like the .com bubble or the real estate bubble, there will come a time when all your friends will be discussing mining stocks or going into the mining industry.  We are far away from that time as the majors trade at a record discount P-E Ratio compared to the S&P500.  When your taxi driver starts talking gold stocks with you that is the signal to take profits and that we may be near a bubble.

Recently, sellers predominantly large hedge funds who have been highly leveraged to the price of gold are rushing to the exits as margin calls and fund redemptions increase.  This is a shakeout of the weak hands before a potential breakout move which may be completion of basing process.  While many are discussing the death cross on gold, they fail to speak about the death cross in long term treasuries.  This may be indicating increased risk appetite and a rotation into equities.
Many times bottoms come with capitulation or panics as investors rush to get out at any prices.  Usually after capitulation great bargains are available.  Remember we are witnessing increased margin calls and commodity fund redemptions that is causing forced selling.

After these volatile periods, major reversals tend to occur, which I will be monitoring for in my newsletter.
Many precious metals investors are scared and beginning to panic.  We are witnessing a selloff in precious metals and miners as the general equity market continues to move parabolically higher.  More specifically the mortgage, bank and homebuilders are leading the overbought rally.
Investors are confused as these are the sectors which almost caused the entire capital system to almost collapse.  Massive bailouts, mark to market and refinancing debt at artificially low interest rates have been tools to manipulate these sectors higher.  For a few weeks, I have been warning my readers about the extremely overbought conditions in the general equity market despite a weak economy and the risk of hyper-inflation.