LONDON – Let’s study the next paragraph and see when we will be making money from the liquidity gap we’re seeing in natural-resource companies – especially silver ones.
“The bull market in gold and silver equities started after the 2008 Lehman Bros. bust. If you look at the increased cash flows and raised dividends from miners, their output prices (of gold, silver, etc) are far exceeding the input prices. The major trend is much higher for gold and gold stocks.”
To be candid, puzzlement splayed itself across people’s faces this past week in central London. And this was before the riots started over there in north London.
GATA’s Gold Rush gathering examined gold (and silver) as money, and why governments, central banks and the IMF, among others, have it in their interest to deflate prices for precious metals. And quite possibly, why public institutions mislead market about the number of metric gold tons – is it the World Gold Council figure of 29 thousand tons or is it 19 thousand or nine thousand tons – that central banks hold securely, with no fiscal or figurative tethers attached?
James Turk, economist and gold-gram payments transactor, is the owner of that confident quote just above. The GoldMoney.com founder and researcher is relatively unknown outside gold circles. Inside them, he is legion.
Why, puzzled attendees from 32 nations were asking at the conference hotel, why are the stock-market’s resource companies getting pounded. Mr. Turk, age 64 and a student of the Austrian school of economics favoured by U.S. Rep. Ron Paul and others who question the relentless distribution of central bank paper (currencies), reflected for a moment at this GATA.org gathering in the belly of the London banking beast, then said, “You don’t have pilot error with bullion.”
Pilot error. Lazy geologists. Lack of cash. Bad luck. Fraud. Poor timing. Mineralogical challenges. Environmental protests. Lack of aggressive stepout drilling by prospectors. Expensive fuels costs. Oh, and the notion that 166,000 tons of gold ever have been mined throughout world history … so what makes geologists and prospectors think they know how to find a lot more in Ghana, Colombia, Nevada, Mali, Yukon and South Africa?
Mostly, says Mr. Turk, and who among us can disagree, mostly we have whacked out, synch-less financial markets and clueless investors, even professional dumbasses who never have bought an ounce of gold or a gold/silver equity in their careers.
Not for long. (My investment choices close out this article below.)
Before I return to Mr. Turk, whom I have known since 2000 or so, allow me a detour toward silver. The cheaper of the bullions also is whacked-out, under-pacing the record highs that gold is achieving.
In an article today, Andy Hoffman, a Denver-based colleague and a contributor to www.babybulls.com, cites Mr. Turk’s payments company and the silver business of Sprott Asset Management’s Eric Sprott, who also attended the Savoy GATA gathering in London. They were joined by 500 Gold Antitrust Action Committee members and several dozen CEOS, money managers and miners. (See photo here: Gold Antitrust Action Committee Chairman Bill Murphy leaning in to chat with Golden Predator CEO Bill Sheriff and his wife, Janet Lee – Thom Calandra photo)
Pick one: 45-to-1, 16-to1, 1-to-1
During these past six months, several of the largest bullion dealers, such as James Turk’s goldmoney.com and Eric Sprott’s sprottmoney.com, “have been selling MORE dollars worth of silver than gold,” says Mr. Hoffman, who attended the GATA conference. (Please see coverage.)
“Gold costs 45 times more than silver, but more than cash is being spent on silver than gold. Throw in the historical 16:1 ratio of gold/silver … and the fact that silver’s industrial uses have essentially wiped out (most of) the world’s inventories, and you can make the case that that ratio will be undershot significantly once the silver locomotive starts again.”
Current gold-silver ratio is above 43-to-1.
Regarding the nominal prices of gold and silver, Mr. Hoffman, a partner of mine at Torrey Hills Capital of Del Mar, California, notes: If you thought about buying fractional gold ounces, even a 1/10th-ounce gold coin costs close to $200, and premiums on fractional amounts of gold increase exponentially the smaller the size you go to.”
As for Mr. Turk, he is one of those directive humans whose phonemes carry all meaning and few empty calories.
“While the shorts undoubtedly have a hand in the weakness in silver the past few days, it is also a natural reaction to current news events,” Mr. Turk says today, several days after the GATA gathering. “Also, as I mention in my interview with Eric Sprott, silver is still in Stage One of its bull market.” (See: GoldMoney interview.)
A resident of London, Spain and New Hampshire, Mr. Turk adds, “Because silver is still mainly seen around the world as an industrial metal and not as money (i.e., again this is stage one thinking), silver has been hit. So don't be misled by the weakness the last few days, even as gold rallied. Silver won't be far behind gold's advance I expect.”
As for my personal choices, I own and am continually purchasing more physical silver and gold, as well as Central Fund of Canada (AMEX: CEF and TSX: T.CEF.A, Stock Forum) as a proxy.
Among silver equities, my million-dollar quartet, to borrow the title of the ripping musical I attended in London with Golden Valley Mines’ (TSX: V.GZZ, Stock Forum) Glenn Mullan, his friend, Jackie, and one other, are the same I have researched and bought these past three and one-half years.
Bob Archer’s Great Panther Silver (AMEX: GPL and TSX: T.GPR, Stock Forum) will continue to make more people more money with its producing silver and polymetallic mines in Mexico than almost any other small producer in the world. Mr. Archer attended the GATA gathering and was seen interacting with several silver investors of note.
John Shanahan’s producing Revett Minerals (AMEX: RVM and TSX: T.RVM, Stock Forum) in Montana is another polymetallic and silver company that I believe will show rapidly rising net income in the next four to six quarters.
I own as well Fortuna SilverMines (TSX: T.FVI, Stock Forum), whose Peru mine I have visited. I believe Fortuna soon will see its Toronto shares listed as well on another major stock exchange. Finally, among silver candidates whose shares I do not own, to finish up the quarter, I am looking again at Serafino Iacono’s silver-denominated note-maker Gran Colombia Mines (TSX: T.GCM, Stock Forum), whose properties in Colombia are ramping up silver production each month.
Note: I own shares of GOZ, FVI, GPL and RVM. In addition, GPL is a client of Torrey Hills Capital.
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