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
The Truth About “6G” - 30th Nov 20
Ancient Aztec Secret Could Lead To A $6.9 Billion Biotech Breakthrough - 30th Nov 20
AMD Ryzen Zen 3 NO UK MSRP Stock - 5600x, 5800x, 5900x 5950x Selling at DOUBLE FAKE MSRP Prices - 29th Nov 20
Stock Market Short-term Decision Time - 29th Nov 20
Look at These 2 Big Warning Signs for the U.S. Economy - 29th Nov 20
Dow Stock Market Short-term and Long-term Trend Analysis - 28th Nov 20
How To Spot The End Of An Excess Market Trend Phase – Part II - 28th Nov 20
The Gold Stocks Correction is Maturing - 28th Nov 20
Biden and Yellen Pushed Gold Price Down to $1,800 - 28th Nov 20
Sheffield Christmas Lights 2020 - Peace Gardens vs 2019 and 2018 - 28th Nov 20
MUST WATCH Before You Waste Money on Buying A New PC Computer System - 27th Nov 20
Gold: Insurance for Prudent Investors, Precious Metals Reduce Risk & Preserve Wealth - 27th Nov 20
How To Spot The End Of An Excess Market Trend Phase - 27th Nov 20
Snow Falling Effect Christmas Lights Outdoor Projector Amazon Review - 27th Nov 20
4 Reasons Why You Shouldn't Put off Your Roof Repairs - 27th Nov 20
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Gold and Silver Stocks at Historic Lows Relative to Gold Price

Commodities / Gold & Silver Stocks Nov 10, 2008 - 09:20 AM GMT

By: Peter_Zihlmann


Best Financial Markets Analysis ArticleTHE TIMELESS PRECIOUS METAL FUND




The price of gold, after a short excursion to $ 1,005 in March 2008, started to slide down. One of the main reasons pushing down the gold price, in our opinion, was the massive decline of the oil price. It fell from its high of $ 140/barrel to presently $ 61 und has consequently lost more than 50%.

As a result of this drastic decline and the expected world-wide economic slow-down, the anticipation of a reduced inflation has had a negative consequence.

As share prices world-wide moved into an accelerated general decline culminating in a veritable October crash, the gold price held its ground fairly well and tested successfully various support levels around $ 730 where it is still holding. The next major test level would be around $ 650/670 as a worst case scenario.

We also believe that gold shares are technically and fundamentally absurdly undervalued. In relation to the price of gold, gold and silver shares, as represented by the Gold and Silver Philadelphia Index, have fallen to a twenty-five year low (see chart below).

Such extreme distortions seldom last long.

Once the gold price finds strength from the technical picture, having successfully tested the support levels, we expect fundamental factors to come into play more substantially.

In our opinion, several fundamental arguments should help to push the gold price higher:

•  The enormous deficit in the balance of transactions of the US should weaken the US$ in the medium-term and support the price of gold.

•  The low interest rate level world-wide traditionally favours investments in gold.

•  Risks in the financial system (gigantic indebtedness, collapse of real estate prices in the US), and political turmoil

•  Central banks are expected to reduce gold sales or may have already sold what was earmarked for sale.

•  Mine production is likely to stagnate or will even fall as rising costs and a presently low gold price could lead to closures.

•  Demand from Asian central banks will increase as they tend to diversify out of $-holdings.

•  Private demand for gold from Chinese and Indians should increase with their increasing purchasing power and the desire to increase holdings in the traditional store of value: precious metals

•  Even Europeans rediscover gold as a safe store of value in troubled times and find out that they cannot find the gold coins they want to buy.


Technical und fundamental reasons speak for a rising gold price and especially for investing in the extremely undervalued gold shares.

Comments on gold shares

There are several method to analyse gold shares

  1. Cash flow per share (CFPS) - The cash flow as a percentage of the share price has dropped to low levels and many companies, especially in the mid-sized and smaller segments, offer excellent opportunities.
  2. Net Asset-Premium (Share price less NAV as a percentage of the share price)  

How much profit remains after a company has mined the total mineral reserves of a deposit? What kind of premium is the market willing to pay? Such premiums have fallen drastically lately and attractive low percentages in the “mid tier” and “junior” sectors can be found.

While a range for the Net Asset Premium of 70% to 120% are common in “normal” times, this figure in many cases has fallen now to a “ discount ”.

Today the Mid-Tier-Sector sells at a Price/ Net Asset Value of only 0.8 times on average.

In the Junior as well as in the emerging gold producers' sector, there are companies at an extremely depressed ratio of only 0.4 times their Price/ Net Asset Value.

•  Market Capitalisation in relation to liquid assets : Many companies trade below liquid assets

•  Market capitalisation in relation to annually produced ounces: Major companies trade at 6,000 times annual production. Find those which trade at a fraction of 6.000.

•  Market capitalisation in relation to total reserves and resources : Major companies pay at least $ 50 for one ounce of gold in the ground. Find those that trade at less than $ 10.

•  Market capitalisation in relation to expected dividend payout ratio: Dividends is the prove of a successful operation. Find those which are cheap in relation to their payout ratio.

While major gold producers have also suffered major stock price corrections, medium and junior producers have been hit hardest and have put them on an extreme low valuation. These companies promise the biggest gains once the market will turn.

As a consequence, we urge you to buy gold and silver shares now . Do not pick just a few stocks but diversify into at least twenty-five companies or buy a diversified fund specialised in junior stocks like 


Find out which companies we recommend at  

Technical Considerations

By Kurt HugManager



By Peter Zihlmann
phone +41 44 268 51 10
mobile +41 79 379 51 57

Disclaimer: P. ZIHLMANN INVESTMENT MANAGEMENT AG does not accept any liability for any loss or damage whatsoever, that may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in the trading recommendations or in any accompanying chart analyses, whether communicated by word, or message, typed or spoken by any of its employees.

Peter Zihlmann Archive

© 2005-2019 - 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