Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
AI Tech Stocks Investing Portfolio Buying Levels and Valuations 2021 Explained - 2nd Mar 21
There’s A “Chip” Shortage: And TSMC Holds All The Cards - 2nd Mar 21
Why now might be a good time to buy gold and gold juniors - 2nd Mar 21
Silver Is Close To Something Big - 2nd Mar 21
Bitcoin: Let's Put 2 Heart-Pounding Price Drops into Perspective - 2nd Mar 21
Gold Stocks Spring Rally 2021 - 2nd Mar 21
US Housing Market Trend Forecast 2021 - 2nd Mar 21
Covid-19 Vaccinations US House Prices Trend Indicator 2021 - 2nd Mar 21
How blockchain technology will change the online casino - 2nd Mar 21
How Much PC RAM Memory is Good in 2021, 16gb, 32gb or 64gb? - 2nd Mar 21
US Housing Market House Prices Momentum Analysis - 26th Feb 21
FOMC Minutes Disappoint Gold Bulls - 26th Feb 21
Kiss of Life for Gold - 26th Feb 21
Congress May Increase The Moral Hazard Building In The Stock Market - 26th Feb 21
The “Oil Of The Future” Is Set To Soar In 2021 - 26th Feb 21
The Everything Stock Market Rally Continues - 25th Feb 21
Vaccine inequality: A new beginning or another missed opportunity? - 25th Feb 21
What's Next Move For Silver, Gold? Follow US Treasuries and Commodities To Find Out - 25th Feb 21
Warren Buffett Buys a Copper Stock! - 25th Feb 21
Work From Home Inflationary US House Prices BOOM! - 25th Feb 21
Man Takes First Steps Towards Colonising Mars - Nasa Perseverance Rover in Jezero Crater - 25th Feb 21
Musk, Bezos And Cook Are Rushing To Lock In New Lithium Supply - 25th Feb 21
US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) - 24th Feb 21
Should You Buy a Landrover Discovery Sport in 2021? - 24th Feb 21
US Housing Market 2021 and the Inflation Mega-trend - QE4EVER! - 24th Feb 21
M&A Most Commonly Used Software - 24th Feb 21
Is More Stock Market Correction Needed? - 24th Feb 21
VUZE XR Camera 180 3D VR Example Footage Video Image quality - 24th Feb 21
How to Protect Your Positions From A Stock Market Sell-Off Using Options - 24th Feb 21
Why Isn’t Retail Demand for Silver Pushing Up Prices? - 24th Feb 21
2 Stocks That Could Win Big In The Trillion Dollar Battery War - 24th Feb 21
US Economic Trends - GDP, Inflation and Unemployment Impact on House Prices 2021 - 23rd Feb 21
Why the Sky Is Not Falling in Precious Metals - 23rd Feb 21
7 Things Every Businessman Should Know - 23rd Feb 21
For Stocks, has the “Rational Bubble” Popped? - 23rd Feb 21
Will Biden Overheat the Economy and Gold? - 23rd Feb 21
Precious Metals Under Seige? - 23rd Feb 21
US House Prices Trend Forecast Review - 23rd Feb 21
Lithium Prices Soar As Tesla, Apple And Google Fight For Supply - 23rd Feb 21
Stock Markets Discounting Post Covid Economic Boom - 22nd Feb 21
Economics Is Why Vaccination Is So Hard - 22nd Feb 21
Pivotal Session In Stocks Bull Bear Battle - 22nd Feb 21
Gold’s Downtrend: Is This Just the Beginning? - 22nd Feb 21
The Most Exciting Commodities Play Of 2021? - 22nd Feb 21
How to Test NEW and Used GPU, and Benchmark to Make sure it is Working Properly - 22nd Feb 21
US House Prices Vaccinations Indicator - 21st Feb 21
S&P 500 Correction – No Need to Hold Onto Your Hat - 21st Feb 21
Gold Setting Up Major Bottom So Could We See A Breakout Rally Begin Soon? - 21st Feb 21
Owning Real Assets Amid Surreal Financial Markets - 21st Feb 21
Great Investment Ideas For 2021 - 21st Feb 21
US House Prices Momentum Analysis - 20th Feb 21
The Most Important Chart in Housing Right Now - 20th Feb 21
Gold Is the Ultimate Reserve Asset - 20th Feb 21
Is That the S&P 500 And Gold Correction Finally? - 20th Feb 21
Technical Analysis of EUR/USD - 20th Feb 21
The Stock Market Big Picture - 19th Feb 21
Could Silver "Do a Palladium"? - 19th Feb 21
Three More Reasons We Love To Trade Options! - 19th Feb 21
Here’s What’s Eating Away at Gold - 19th Feb 21
Stock Market March Melt-Up Madness - 19th Feb 21
Land Rover Discovery Sport Extreme Ice and Snow vs Windscreen Wipers Test - 19th Feb 21
Real Reason Why Black and Asian BAME are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 19th Feb 21
New BNPL Regulations Leave Zilch Leading the Way - 19th Feb 21
Work From Home Inflationary House Prices BOOM! - 18th Feb 21
Why This "Excellent" Stock Market Indicator Should Be on Your Radar Screen Now - 18th Feb 21
The Commodity Cycle - 18th Feb 21
Silver Backwardation and Other Evidence of a Silver Supply Squeeze - 18th Feb 21
Why I’m Avoiding These “Bottle Rocket” Stocks Like GameStop - 18th Feb 21
S&P 500 Correction Delayed Again While Silver Runs - 18th Feb 21
Silver Prices Are About to Explode as Stars are Lining up Like Never Before! - 18th Feb 21
Cannabis, Alternative Agra, Mushrooms, and Cryptos – Everything ALT is HOT - 18th Feb 21
Crypto Mining Craze, How We Mined 6 Bitcoins with a PS4 Gaming Console - 18th Feb 21
Stock Market Trend Forecasts Analysis Review - 17th Feb 21
Vaccine Nationalism Is a Multilateral, Neocolonial Failure - 17th Feb 21
First year of a Stocks bull market, or End of a Bubble? - 17th Feb 21
5 Reasons Why People Prefer to Trade Options Over Stocks - 17th Feb 21
The Gold & Gold Stock Corrections Are Normal - 17th Feb 21
WARNING Oculus Quest 2 Update v25 BROKE My VR Headset! - 17th Feb 21
UK Covid-19 Parks PACKED During Lockdown Despite "Stay at Home" Message - Endcliffe Park Sheffield - 17th Feb 21
How to Invest in ETFs in the UK - 17th Feb 21
Real Reason Why Black and Asian Ethnic minorities are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 16th Feb 21
THE INFLATION MEGA-TREND QE4EVER! - 16th Feb 21
Gold / Silver: What This "Large Non-Confirmation" May Mean - 16th Feb 21
Major Optimism for Platinum, Silver, and Copper - 16th Feb 21
S&P 500 Correction Looming, Just as in Gold – Or Not? - 16th Feb 21
Stock Market Last pull-back before intermediate top? - 16th Feb 21
GAMESTOP MANIA BUBBLE BURSTS! Investing Newbs Pump and Dump Roller coaster Ride - 16th Feb 21
Thinking About Starting to Trade This Year? Here Are Some Things to Keep in Mind - 16th Feb 21
US House Prices Real Estate Trend Forecast Review - 15th Feb 21
Will Tesla Charge Gold With Energy? - 15th Feb 21
Feeling the Growing Heat and Tensions in Stocks? - 15th Feb 21
Morgan Stanley Warns Gasoline Industry Is About to Become Totally Worthless - 15th Feb 21
Debts Lift Gold - Precious Metal Prices Will Rise on a Deluge of Red Ink - 15th Feb 21
Platinum Begins Big Breakout Rally - 15th Feb 21
How to Change Car Battery Without Losing Power, Memory, Radio Code Settings - 15th Feb 21
Five reasons why a financial advisor can make a big difference to your small business - 15th Feb 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Volume Telling the Tale for Metals and Resource Stocks

Commodities / Metals & Mining Nov 09, 2009 - 04:29 PM GMT

By: HRA_Advisory

Commodities Best Financial Markets Analysis ArticleIndia’s central bank taking 200 tonnes (6.4 million oz) of gold from the IMF in an off market trade has certainly lit a fire under the yellow metal.  While a trade of that nature was anticipated, India, which is about the savviest of commercial gold players, was not atop the expected buyers’ list.  Given the greenback was steady and that gold’s chart went near vertical when the overnight rumor became official, it is likely that the big long position that came into the market forced some covering on the short side.  Is this more than a spike? 


We think India’s move could be, in part, a signal it should have a bigger chair at economic tables, which we agree with.  Since Indians are the biggest gold buyers on the planet, lifting a perceived overhang from its market has the side benefit of protecting an existing wealth pool of its citizens.  And the near US $7 billion price tag is not large against India’s $260 billion foreign reserve holdings. 

However, it does have a bigger impact on gold’s market (about $115 billion annually, now) and that got noticed.  Also, it will further establish the notion of a currency basket that includes gold as a global trading medium, and conversely a weaker greenback.  That should continue the move of capital into gold as $ hedge.

In saying that, we realize that it would be tough for gold to replace the oil market as a home for dollar hedge trades simply because of the oil markets much larger scale.  But oil can not continue to gain without causing major problems for the near term economy, nor can oil rise if other energy components are not doing the same.  Scale aside; gold makes sense as a place to place anti-dollar bets, and especially for players worried about longer term wealth preservation.  But so too do other metals.     

If copper does truly have a PhD in economics (not that that title has quite the allure of a few years ago), our take has to be that the Doctor is mulling over an extended lunch.  The red metal’s price continues to bounce against the $3/lb ($6600/t) level even while available stockpiles have grown.  There has been a slight decline of stockpiles in the past few days, but that was after having recouped 60% of the drawn down earlier in the year.

Clearly, new metrics are at work.  We and others have already pointed at Dollar roulette as one.  In fact that is a big part of the whole market these days, and it’s an issue that will grow in the telling.  There has also been a build up of small supply disruptions in copper, such as the shut down of most output from BHP’s Olympic Dam mine in South Australia.  The mine’s capacity is less than 1% of global copper supply (but a big chunk of uranium output), but this isn’t the only mine at reduced capacity.

The psychology of relatively minor supply disruptions when new mine development is still limited may be adding some price support.  The other base metals are similarly in a neural pose these days.  Rumblings about a better market are most prominent around zinc, as are concerns about maintaining concentrate streams to smelters outside of China.  That would be next year’s story, but it is worth noting.  For the past century or so mines were dictated to by smelters, but now smelters are worried about keeping their market shares and the balance of power has been shifting. 

As with most things in this changing market landscape, it is tough to make assumptions about the next six months.  That simple truism is driving things right now, if being in neutral could be called “driving”.  Producers’ share prices are shifting down with the market, but still finding support.  It may well be the balance of the year will mostly be about ensuring gains after a strong uptick, and making cash for future events.

There has been more weakness due to profits taking in some of the early exploration gainers.  Conversely, former laggards have been able to pick up steam by showing project advancement.  There is a general sense of rotation out of strength and into future potential, at least in our part of the playground.  That is meaningful.

As broader stock market gains began to peel away, we have been struck by a consistent lift in one measure.  While other North American equity markets saw share turn over slide along with prices, the TSX Venture exchange has actually seen daily volumes as strong as they have ever been.  This is not dollar-volume, and some of it can be accounted for by share issuances that are bloated by historic standards.  It does however indicate that there are still punters out there.

While we think of the Venture exchange as a proxy of the junior resource sector, other sectors are obviously part of it.  Funding for the Tech space is reviving a decade after that bubble burst, and green energy concepts are growing in number.  However, on checking volume leaders most days the lists are at least nominally composed primarily of resource deals.

Bears might argue this is desperate averaging down ahead of the next major down shift in the market.  It doesn’t look to us like the random buying during the bounce of a bear market rally.  That type of buying typically comes in spurts, and focused on companies based on their previous market strength. Nor frankly do we think such buying is very likely after last year’s market drubbing. 

This is a sustained turn over that relates to broader markets only in terms of showing patience on weak days.  It is focused on companies that do have underlying assets, regardless of how well they made markets in the past.  We see a concerted effort to own resource assets in juniors while they are still in the bargain bin.  And we believe this is being done by folks who have been around the sector long enough to recognize that US$ roll over and supply constraints are still near and mid term factors.

To anyone who thinks we are drinking our own bathwater we can only say, you’re right.  We are not suggesting that simply because “the usual suspects” are coming to the venture side of mining that prices will go up.  Nor does this buying mean they all expect immediate gratification.  However, there is a mood building for significant gains for the sector this coming year.  Even market watchers with large concerns about the broader economy are recognizing that the resource sector has good fundamental potential.  Both supply-demand against Asian growth and the shifting currencies market favour it.

We do expect the balance of the year to have a significant cash generating ethic.  After the roller coaster ride we have had that kind of prudence is to be expected.  Despite base metal prices holding up, that kind of thinking is evident by consolidation amongst the producers in that space.  Gold producers have been doing better, and for the time being we continue to expect this to be the preferred subsector in the metals market.

There may be some frustration with explorers who seem not to be living up to their results, relative to peers, after putting in strong performances.  Taking gains along the way will continue to be important, but we also expect rebalancing that will include stronger recognition for undervalued assets.  That is usually a question of moving through volume, and the market shifts that take place through year end.

Barring an “event” of some magnitude, it will take an accumulation of stats indicating how well economies are doing as their government stimuli slow down to shift the market too far off its current groove.  That is will be next year’s story, and we think it’s too soon to make assumptions on the outcome  

For the time being we will remain on volume watch, both in terms of metals directly and the equities that deal with them.  We continue to favour speculations that can generate drilling success, while accumulating those that are still waiting for a mood shift in the market that will lead traders to recognize their already established values.


Gain access to potential gains of hundreds or even thousands of percent! From March to June, HRA introduced four new gold explorers to subscribers. Those four companies have generated an average gain of 205%, to date! SPECIAL HRA OFFER: For a limited time only, HRA is offering free reports and a subscription savings. Click here for more information: http://www.hraadvisory.com/sh2009.html

By David Coffin and Eric Coffin
http://www.hraadvisory.com

    David Coffin and Eric Coffin are the editors of the HRA Journal, HRA Dispatch and HRA Special Delivery; a family of publications that are focused on metals exploration, development and production companies. Combined mining industry and market experience of over 50 years has made them among the most trusted independent analysts in the sector since they began publication of The Hard Rock Analyst in 1995. They were among the first to draw attention to the current commodities super cycle and the disastrous effects of massive forward gold hedging backed up by low grade mining in the 1990's. They have generated one of the best track records in the business thanks to decades of experience and contacts throughout the industry that help them get the story to their readers first. Please visit their website at www.hraadvisory.com for more information.

    © 2009 Copyright HRA Advisory - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

    HRA Advisory Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules