With gold falling more than $300 in the last three
weeks from highs over $1,900 to under $1,600 and silver plummeting from over $42
to under $30 in the same time period, the mainstream media was ablaze with
talk of popping bubbles. Of course, the fact that mainstream media has never,
in its history, called a bubble top correctly - or even recognized a bubble -
is besides the point.
Charles Sizemore at Marketwatch.com raced to his
keyboard, "Is
it Time to Call the (Gold) Top?" he questioned, although it sounded
more like a statement. Marketwatch has been dying
to call a gold collapse for a while. Remember, Cody Willard's brazen call in
June 2009 to "Sell
Gold Now - It's Headed Below $500/oz"?
Nice call, Cody.
If/when we do reach the end of this gold bull market
there is one thing that is certain: it will not be called by the mainstream
media. In fact, the nightly newscast will likely lead off with the
"news" readers telling you to rush out and buy gold.
For now, gold and silver haven't even entered into a
bubble yet. They are still catching up to the price of everything else... and
lag dramatically the one true bubble. The bubble in government debt.
PANIC IN PHOENIX
The sentiment on the street also does not signal any
sort of top in the gold/silver market.
In Phoenix, on Thursday and Friday of last week, after
gold and silver had fallen dramatically there was a panic. A buying panic!
According to a good friend and Dollar Vigilante
subscriber who lives in Scottsdale, the Coin Gallery (off I-17 in Dunlop) had
lines stretching well outside of the store on both Thursday and Friday. Our
friend has visited the store on many occasions to purchase gold and silver
coins and told us that on any given day there are usually a decent amount of
people buying and selling.
But, when he arrived on Thursday he couldn't believe
his eyes. The lines were long and every single person was there to buy. By
the time he reached the front of the line they were sold out of almost
everything except for a few silver bricks. He ended up getting into a pushing
match to be able to buy them as the crowd fought over them.
Finally, he prevailed and asked management what was
going on. They told him that they had sold over 12,000 ounces of gold and
silver in the last 24 hours (note: entrepreneurs, open precious metals coin
stores!).
As the crowd began to filter off after hearing that
there was nothing left to buy, my friend headed to the parking lot where
someone offered to buy his silver at a profit over what he bought in the
store.
If gold and silver were going up dramatically in price
and we heard of this type of panic buying at physical shops we would be wary.
But, the fact that this type of panic buying comes in AFTER a large
correction shows the amount of real physical buying power that underpins the
metals.
The Coin Gallery says they won't have any new supply
until Wednesday or Thursday of this week.
I arrive in Phoenix on Friday night as I am speaking at
the Casey/Sprott Summit, "When
Money Dies". I am hoping that gold and silver remain at these levels
or below until Monday and I will go to the Coin Gallery myself to see if they
have any physical left to sell.
It is my belief that this is probably the last chance to
buy physical gold and silver at these levels. As the bull market moves on it
will become increasingly difficult to buy any physical metals in quantity.
STINK BIDS
The Canadian junior markets have all kinds of colorful
colloquialisms. Dead cat bounce and "stink bids" are typical
market-speak around the old Vancouver Stock Exchange (now called the TSX
Venture Exchange, or TSX-V).
A "stink bid" is a term for putting in a
ridiculously low bid on a stock on the off chance that market illiquidity and
a distressed seller (usually on a margin call) makes it so that you get the
stock at a truly cheap level.
Times like we have had last week and possibly for the
next week or two are prime "stink bid" environments. Friend, and
TDV subscriber, Danny Deadlock of the excellent Microcap.com
newsletter, recounted how some lucky stink-bidder hit the jackpot last week:
In one of the harshest cleanouts I have seen yet - and
it was so aggressive I wonder if it wasn't a margin call and a forced sell - Lignol Energy (LEC.V $0.11) which I was
just discussing last night.
The stock has been trading at 0.12 and 0.13 all
morning. Mid day someone through QTrade dumped 240,000 shares "at market" - what
an idiot !! They collapsed the stock from 0.12 to
0.03 within seconds and someone sitting with a stink bid of 60,000 shares
at 0.03 was filled.
It didn't take long for the stock to clean back up 200%
with buyers trying to get cheap paper near 0.08 and 0.09 - myself
included with no luck. I am leaving the buy order sit there till month end
and maybe I will get equally lucky. I am just mad I wasn't the guy sitting at
$0.03 who just had someone hand him 60,000 shares.
CONCLUSION
If prior to last week you hadn't bought your full
allotment of gold/silver and precious metals stocks, you've been given a
gift. A short term "sale" on those assets.
And for those who follow our newsletter and
recommendations, we have been very clear about keeping a 20% cash cushion for
exactly times like these. Put in stink bids on any/all of the stocks in our
portfolio for the coming days and see if you can take advantage of the
imprudence of others who bought on margin - something we NEVER recommend in
these markets... they are just too volatile.
A number of the stocks in our portfolio were hit over
the last few days so use this time to purchase some more with the 20% of your
portfolio that is in cash. As well, in our October 1st Premium issue of The
Dollar Vigilante (sign
up to receive it), Ed Bugos will be featuring
an exciting near-term Canadian gold producer that has also been hit by the
recent turbulence.
As Steven Saville of Speculative-Investor.com recently
stated, "Buying gold stocks following a multi-month decline into the
October-November timeframe is one of the surest ways to make money in the
financial markets. At least, it has always worked that way over the past 10
years."
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