Midway in Play: Gold Penny Stock worth Tracking

As gold asserts its role as money amid the battle across the Atlantic, for which currency is more flawed, early birds to the coming explosion in gold penny stocks may find themselves as the new millionaires in the coming years.

It might be wise to begin the due diligence process and add the very best prospects to your portfolio, keeping in mind that these stocks are high risk.  But when the juniors start to fly, there’s no higher high than a gold rush.

Because the choice of hundreds of gold pennies is difficult to narrow down to, say, five to ten stocks to watch, a competent analysis who’s done his homework may be good place to start.  And one analyst who’s reputation is among the highest on the Street, Louis Navalier, already published his picks on March 31.

After researching the performance of his six picks, four of the six stocks have traced a similar path to the gold junior mining index (GDXJ).  One of Navalier’s stock picks truly stands out as an explorer that’s gaining the Big Mo, Midway Gold Corp. (AMEX: MDW).

Exploration-stage company Midway Gold stock has skyrocketed to 175% gains year-to-date, and a monstrous 463%, year-over-year.  The stock currently trades at $2.31, well above its 13-week and 52-week moving averages of $1.96 and $1.28, respectively.

Midway’s properties, located in Nevada and Montana, include the Midway, Spring Valley, Pan, Gold Rock and Golden Eagle.  Of the five properties, the Pan, located at the northern end of the Pancake mountain range in western Nevada, approximately 22 miles southeast of Eureka, has been where the action is, as the company has to date reported drill results of 21 holes, some results were so-so, some pretty good, and a couple of drills flew off the charts.

The latest drill result, the most impressive of them all, was reported on June 13, popping the stock 7.4% to $1.87 from the previous trading day close of $1.74 as well as triggering a 32% rally to day’s $2.31 print.

“Drill hole PN11-09 contained the longest and highest grade gold intercept yet encountered at its 100% controlled Pan Project, White Pine County, Nevada,” the company stated in the June 13 news release.  “This 30 meter intercept of 3.15 grams per tonne (gpt) gold includes a zone of 13.7 meters of 5.79 gpt gold which also includes a 1.5 meter interval of 10.1 gpt gold.”

And, two weeks later, on July 27, MDW announced that it has been added to the Russell 3000 Index.  Initially, the stock sold off a bit after the run up on the 24th, the day MDW was added to the Russell 3000.  Then it traded sideways for a couple of weeks before rallying as high as $2.89 on July 18.  The stock has since succumbed to profit-taking back down to the $2.30 level.

According to yahoo Finance, MDW has attracted 16 institutions.  Two investors hold more than $35 million worth of shares, of which, half of 15.5 million shares held by the two investors was recently been purchased by Hayward Securities.

Marc Faber’s Latest S&P Outlook; 3 China Stocks under Fire

Featured on Bloomberg this morning, Marc Faber said he doesn’t see a resumption of the risk-on trade until Bernanke and the Fed resume quantitative easing once again after the Fed’s program to recapitalize the banks ends June 30.

Assets benefiting from the Fed’s extraordinary measures to prime the pump of the U.S. economy won’t get the gusty tailwind that assets such as stocks, commodities and precious metals have been enjoying since the March 2009 low of 666 for the S&P.

“I think we’ve seen the high for the year,” Faber said of the S&P.

“I think the Fed, they could print money, QE3, QE4 and so forth,” added Faber.  “But they’re going to wait, because Mr. Bernanke, very clearly understands.  A year ago, he talked about deflationary pressures.  Now he can see that his money printing has led to unintended consequences.  So is he going to wait until the S&P is down percent or more?”

Faber also suggested that his sanguine outlook for U.S. stocks includes an assumption of an impending slowdown in the Chinese economy, where the recent evidence of a “proliferation of fraud on a massive scale” by Chinese companies demonstrate to him a “very clear symptom of a bubble, a mania” in the People’s Republic of China.

Investors in America are “stupid” and don’t see this, Faber asserted.  But in Hong Kong, if the local Chinese get cheated, “you have to watch your kneecaps,” he said, inferring that Mainland Chinese are more apt to try and cheat more American investors instead.

Asked if the commodities boom is still intact, Faber said, “Yes, I like gold and silver, but I think they go down for the next three months, or so.  But I wouldn’t short them, and I keep accumulating gold.”

He added, “Not to own any gold is to trust central bankers, and that you don’t want to do in your life,” he chuckled to end the interview.

China Media Express (PK. CCME), Harbin Electronics (Nasdaq: HRBN), Sino-Forest (PK. SNOFF) are three of several Chinese stocks in question as regulators and independent research firms take action to crack down on alleged fraud.

Here we go! Gold News floods Mainstream Media

After India’s bombshell imports report released on Monday—which showed that the largest democracy on the planet took in 500% more gold and silver as imports during the month of May than it imported in April—mainstream news outlets have posted a few more articles about the relatively quiet stampede (up til now) into (physical) gold.

Today follow-up gold news articles from Monday include three from Bloomberg and one from The Financial Times.

Bloomberg’s article entitled, “UBS Gold Sales to India Rise 23% So Far in 2011; Demand ‘Robust.’” confirms Mineweb’s article on Monday—which originally reported the mind-blowing gold and silver import statistics for India.

“Physical bullion sales in May rose ‘a very substantial’ 76% from the previous month and 161% from a year ago,” according to Bloomberg. So far this year, UBS said that UBS bullion sales to India are already up 22% from the same period last year.

“The value of India’s combined gold and silver imports soared 500%  in May from April, and 222% from May 2010,” UBS’s Edel Tully stated in a recent report given to Bloomberg. “While import volumes rather than values would be much more accurate, given the run-up in gold and silver prices in May, the figures still provide a good indication of the country’s robust appetite for precious metals.”

Another piece from Bloomberg, entitled, “China Central Bank Plans to Double Issuance of Gold Panda Coins,” gives us a clue to retail demand from the people of China.  We know the China’s central bank is on a tear, scooping up domestic mining supply within the borders of the People’s Republic.  It’s been reported that China’s central bank buys all available supply from domestic mining operations.

“The People’s Bank of China said on its Web site that it plans to issue about 1 million ounces of its 2011 panda commemorative gold coins compared with plans at the end of last year for 500,000 ounces of the coins,” according to Bloomberg.

One million supply of Pandas for a population of 1.3 billion?  Now let’s wait for another Bloomberg article which will cover an announcement from the People’s Bank that it ran out of Pandas within the first few weeks of issuance.

China and India have indeed hogged the gold and silver headlines this week. But not to be outdone (let’s say, on a per capita basis) are the good folks from Down Under, who have accommodated those (mostly Westerners) wishing to load up on silver—the second go-to safe-haven currency after gold.  Bloomberg got this story, too, and was very busy uploading all these articles in time for the Greek crisis to head into the final inning deadline of July 3.  The article from Bloomberg, entitled, “Silver-Coin Sales Booming at Perth Mint on Demand for Haven” stated that demand out of the Perth Mint bustles along as it has since the beginning of the year.

“Silver-coin sales from Australia’s Perth Mint, which was founded in 1899 and processes all of the country’s bullion, have surged to a record as buyers seek to protect their wealth with the metal known as poor man’s gold,” according to Bloomberg.

Bloomberg noted that the mint sold 10.7 million 1-ounce silver coins since July 1 last year, according to sales and marketing Director Ron Currie.  “That’s 66 percent higher than the previous full fiscal year and about 10-fold more than five years earlier. Sales of 1- ounce gold coins will be close to a record,” Currie told the leading business media outlet.

And kodos goes to the Financial Times (though, the online journal forces readers to sign up), which reported that Greeks have been dumping euros for gold, recently.  No surprise there.

In the FT article, entitled, “Greek savers rush for gold,” the gist of the article read:

“Greek citizens are emptying savings accounts and buying gold as they brace themselves for the possibility of a sovereign default and a run on the banks,” according to FT.

Savers making the switch out of euros into gold has decidedly, it reported.

“When the global financial crisis started, our sales of coins to investors overtook bullion for the first time,” Harry Krinakis, at Sepheriades, a Greek precious metals trader, told FT. “Now the sales ratio has reached five to one.”

Wondering why CNBC doesn’t have at least one article about gold’s lure during the protracted and dramatized Greek crisis?  You aren’t alone.  But when it comes finally time at CNBC to broadcast a segment on the gold and silver market, you’ll be sure Steve Liesman will be waiting in the wings to offer the latest talking points hatched from his group of Fed lackeys and wannabes.

Don’t Trust the U.S. Government, says Marc Faber

Speaking with UK-based financial magazine, Money Week, famed Swiss investment manager Marc Faber said America needs to experience “a devastating crisis” before real growth and jobs can be created.

Foretelling the inevitable burst in debt several years before the collapse of Bear Stearns, Faber’s has gained a reputation as someone who is able to spot the effects of years of mal-investment within the U.S. (and globally), dispassionately, while others cannot, or won’t.

As today’s disciple of the Austrian School’s Karl Menger, Ludwig von Mises, and Friedrich Hayek, Faber’s track record of “getting it right” has amassed him a huge following of investors grown weary of the 1984-like communications and deceptive practices of the U.S. government and its financier cohort, the U.S. Federal Reserve.

Faber’s forecasting record and delivery style on the deteriorating state of the U.S. has taken on a air akin to the counterculture revolutionaries of the 1960s but with a viewpoint more focused on financial and economics matters—ironically, maybe, directed to the same a demographic most affected due to inability to recover in time for retirement—the Babyboomer.  Faber, himself, is 65-years-old—another Babyboomer who still sports a ponytail and distrusts those in authority to take selfless actions for the sake of the greater good.

Faber told Money Week that the debt hasn’t gone away in the U.S.  Instead, it’s grown much larger but shifted into the form of public debt and away from the ones who created the original oversized debt load in the first place.  And the only way out of a default (either outright, or through inflation) is “to impose a flat tax and cut government expenditures by 50%.”  But only a financial catastrophe would affect those cures, he said.

The consequences of attempting to solve a U.S. solvency crisis with ever more debt from Treasury and the Fed doesn’t have Faber chanting the “king dollar” mantra on public airways to millions of U.S. viewers each day on programming outlets such as CNBC.

He points out that in dollar terms, the rebound in the S&P from the March 2009 low appears to some investors that an economic rebound in the second half of 2011 and 2012 is expected.  But when the S&P is priced in other currencies, such as the Swiss franc, Australian dollar, Japanese yen, as well as the monetary metals, gold or silver, equities have dropped from 50% to 80% since the market peak of 2007, he said.

Of the various forms of protection from future dollar declines, gold is his favorite.  Gold (and silver) doesn’t have a constituency to placate, especially as it relates to the U.S. dollar.

“Not to own gold is to trust the value of paper money and the government’s integrity,” said Faber.  “No one in his right mind could trust the U.S. government any more.”

And finally, Faber shrugs off the talk of a gold bubble.  He insists that the bubble is NOT in the gold market.

He said the world is, instead, “grossly underweight gold” but “flooded with U.S. dollars.”

London Gold Market Report: Dismal Jobs Data good for Gold

An unexpected bad print in Friday’s Labor Department’s non-farm payroll report for May is gold bullish, according to premiere bullion storage service BullionVault.

After successive months of hobbling, yet hopeful, job creation in the U.S. (though many economist doubted the overall quality of the new jobs added from the depths of the initial shock to the U.S. economy), the Labor Department laid an egg for May when it was revealed that only 54,000 jobs were created, far less than the mean estimate range of 150,000 to 190,000 by analysts.

Those investors, believing that the Fed may pull off a slow recovery, could be rethinking that premise and instead begin fretting about the possibility of a double-dip recession, while others—who never believed that the U.S. economy ever emerged from recession in the first place—may fear an all out 1930s-style depression and food and energy price inflation to make matters worse.

But for gold and gold stocks investors, the latest data are good news, according to Swiss precious metals firm MKS.

“Speculations of a generous third quantitative easing (QE3) package will grow” if a string of subsequent depressed data come in, MKS told BullionVault. “Expectations in the market suggest that gold prices will benefit in the short term by the belief that slowing growth in the U.S. will prompt the Federal Reserve to maintain favorable monetary conditions.”

That means some form of QE3 by the Fed could be inevitable by as early as the third quarter some economists speculate, which will result in a further expansion of the U.S. monetary base and put a strong bid under the yellow metal.

“This is gold-friendly data,” said Credit Agricole analyst Robin Bhar. “In the worst case scenario, we could have a double-dip in the U.S. economy and possibly deflation, which would also help gold.”

The showdown in Greece over its failure to achieve budget metrics attracted safe haven buying of the metal throughout the past two to three weeks, taking the Euro from the high of 1.49 in May to approximately 1.41 against the dollar as well as providing ammunition for firming gold prices above $1,520.

Following the Labor Department’s disappointing jobs number on Friday, however, the euro soared against the dollar to a one-month high of $1.46, or a 2.3% again, before retracing some of the day’s earlier gains.

“The turning point was Greece, and we can suggest Greece is out of the way for the short term,” said Kurt Magnus, executive director of currency sales at Nomura Holdings, referring to reports that the European Union (EU) and the International Monetary Fund (IMF) have agreed to extend the next installment of last year’s €110 billion bailout to Greece.

Now the focus among traders has shifted to the dollar and its lingering problems accentuated by Friday’s dismal economic data and the partisan stalemate in Washington regarding the U.S. federal budget deficit and debt ceiling.

At 11:40 a.m. in New York, gold trades at $1,552.03, up $10.43.

A Gold crash coming?

If you’re loaded up on gold, silver and commodities, congratulations, you’re in good company.  Mega hedge fund managers John Paulson, David Einhorn, and George Soros (rumored to have sold his GLD for gold stocks) are with you.  Iconic investors and gurus, Marc Faber, Jim Rogers, Jim Sinclair, James Turk and Richard Russell are on board the gold train, as well, along with many more lesser-known brilliant investors.

So, should the above-mentioned investors be frightened by articles published by Reuters, entitled, “Gold crash: What could trigger the inevitable”?  That’s the title of a piece posted on the news agency’s Web site over the long weekend.

From the start, the premise of the article’s title, that a gold crash is inevitable, is flawed.  Long-time gold expert Jim Sinclair, Richard Russell of the Dow Theory Letters, James Grant of Grant’s Interest Rate Observer, and World Bank president Robert Zoellick would most likely disagree with a gold crash theory, as these three men suggest highly that some form of a gold-backed currency, including a gold-backed U.S. currency, or not, must eventually become part of the new international monetary regime.

Under that scenario, as outlined on many occasions by James Sinclair, gold would most likely trade within an elevated band (instead of fixing the price) as central banks become locked in a gold-backed regime that loosely resembles the articles set forth at Bretton Woods in 1944.

The inevitable gold crash?  It’s much more likely that a crash in the U.S. Treasury market should be assessed as inevitable.  PIMCO’s Bill Gross would be loaded to the gills with U.S. Treasury notes bonds if gold was destined to crash.  Gross is not. In fact, the Bond King has no bonds in his BOND fund.

Can you imagine McDonald’s not offering hamburgers?

The article goes on to suggest that betting on the dollar’s next direction is akin to gambling.  In the short run, the author is spot on.  But, as a long-term investors, which the author believes is the only way to play this financial debacle, betting on the dollar’s demise is for the foolhardy—better yet, for the “nervous Nellies.”

“The clearest threat to gold’s reign as the reserve currency of nervous Nellies is a possible rebound of the dollar,” according to Reuters. “Given the congressional wrangling over the debt limit, budget and growing inflation, betting on the buck is like trying to figure out whether a racehorse will finish. They often pull up lame.”

The author suggests that a miracle is in the offing and that politicians who know that shutting down the U.S. Government to save the dollar is political suicide (the 1992 Congress comes to mind) and will miraculously learn the meaning of noblesse oblige and do the right thing for the country.  But, until we see Ben Bernanke and Ron Paul scheduled to a duel on the White House front lawn, the author may be onto something.

Holders of gold will take the other side of this author’s bet in a New York second, and have, by betting on a racehorse that’s come in first, without except, for more than 5,000 years. And not only have the heavy weights of finance mentioned above taken that bet, but central banks around the world, who have collectively become net buyers of gold, are increasingly placing that bet, too.  According to another Reuter’s article published in April 2010, central banks have become net buyers of gold in 2009, a first since 1989.

And as far as the author’s points regarding a “strengthening U.S. economy and rising interest rates . . . derailing the epic yellow metal mania,” they are as flawed as the title of the piece.

Mania?  This Reuters writer originally suggested that gold investors are nothing but “nervous Nellies,” which is quite the opposite mindset to the greed thesis characterized by manias?  So, which is it? Is fear or greed driving the decade-long gold price rise?

Reuter’s point that a strengthening U.S. economy will save the day and stop the embarrassing ascent in the gold price may well be true in a relativistic context, but not in real terms, however, which is the whole point of the Fed’s zero interest rate policy (ZIRP) and the investor revolt into the gold market.  Real interest rates at, or below, zero propel the gold price, not nominal GDP.  So, the notion that gold doesn’t throw off income is a species one within today’s financial environment of near-zero Treasuries at the short end while food and energy prices soar well past the double-digit mark.

And as far as the case that higher stock prices presage an economic turnaround in the U.S. economy has less to do about a real strengthening economy, but has more to do with institutional investors locked into the bond/stocks allocation charters betting on a devaluation, a la Zimbabwe—wherein the Zimbabwe stock market, in one year, outpaced the returns of the S&P over its entire history as an index.

And lastly, higher interest rates, as Swiss money manager Marc Faber has stated, mean nothing if the rate of inflation is higher than the Fed’s federal funds rate—as during the 1970s. Maybe the author was too young to remember that golden decade of wealth destruction, which in real terms eclipsed the the wealth destruction of the Great Depression.

And since this present crisis is expected to dwarf the financial pain of the 1970s, it makes a lot of sense for investors to become “nervous Nellies”—and fast.

Yamana Gold Inc. (NYSE: AUY)

Gold Corp. Inc. (NYSE: GG)

Barrick Gold Corp. (NYSE: ABX)

Marc Faber could be right about Stocks

Marc Faber’s noticeable absence from financial reporters and television interviewers questions in the past two weeks hasn’t left investors without his previous guidance.  His last call, reported by Wall Street Pit, in which he stated that U.S. equities markets are in the midst of a correction, appears to be still operative.

In his last interview of May 4, Dr. Faber, the publisher and editor of Gloom Doom Boom Report, told Wall Street Pit he anticipates a tumble in U.S. stocks of 10%, noting weakening market internals, including a drop in the number of stocks reaching new 52-week highs.

The S&P500 peaked at 1,364.14 on April 29, a 10% decline from the April high calculates to 1,228.10, or 43 points higher from the close of 1,185.64 on Oct. 26, 2010—the date Faber made his first call for a 10% correction in the 500-stock average—which illustrates the difficulty of timing market tops, even among the best.

In contrast, Faber’s miraculous call of a market bottom on March 6, 2009, when the S&P500 did, indeed, reach the low of 666.79 was much easier for him.  In fact, the call for a bottom on the day during the panic of March 2009 was the easiest call he’s ever made, according to the Swiss money manager who lives in Chiang Mai, Thailand.  As a contrarian market timer, Faber noted the record bearishness in sentiment for stock on March 6 as the basis for his call for an imminent rebound rally in stocks.

But calling tops involves more than watching for extremes in market sentiment. Among many popularly followed indicators and a rather reliable one, is the price of copper, which is also referred to as Dr. Copper for its highly correlated and leading price patterns to equities.

While the S&P500 reached new multi-year highs early this month, the copper price failed to confirm the rally in the S&P, moving lower in May from its February highs, further buttressing Faber’s case for an imminent decline in stocks.

On Feb. 15, copper reached $4.65 per pound, but the price has trended sideways to down since then, trading as high $4.05 in the June contract, yesterday.

However, Faber’s call for a correction in stocks shouldn’t be construed that he is an U.S. equities bear.  Though, when priced in gold, the S&P500 will drift significantly lower, he has repeatedly said, but in nominal terms, Faber expects equities to move higher as long as the Fed continues its zero interest rate policy (ZIRP)—that is, real interest rates after the inflation rate is deducted from the Fed’s overnight federal funds rate target.  Presently, overnight real interest rate is  negative.

In an April 27, 2009, Bloomberg interview, at a time of heightened fear of a global meltdown in the equities markets, Faber cautioned investors to not be too pessimistic as long as the Fed has the power to inject endless capital into the banking system.

“Don’t underestimate the power of printing money,” said Faber.

“The more things will go bad, the worse things become, the more the money printer at the Fed, Mr. Bernanke, will print,” he added. “He will print endlessly. Even if things go bad economically, you could have no revenues at companies and no earnings and stocks will go up because of money printing.”