Exploration Value

I've come up with a new matric, called "exploration value", which is calculated by dividing the exploration budget for 2007 by the market cap (as of May 11). Here are the results for a few companies. According to this matric, GSS has the largest exploration budget to market cap ratio.

Company Exploration Budget Market Cap Exploration Value

GSS 15m 0.965b 0.015544
NEM 175m 18.54b 0.009439
AEM 40m 4.35b 0.009195
GG* 120m 17.07b 0.007029
AUY 32m 4.95b 0.006464


(*GG expressly stated in its annual report that it will focus on development rather than greenfields exploration or "wildcatting" as it calls it).

If you happen to know the exploration budget for 2007 of any metal company, let me know, and I will compare it in the table above, and send you an updated link.

Update - Kimber Resources (KBX)

Not much has happened at Kimber and the company has been eerily quiet on the news front. No news on the CEO search--maybe because potential CEOs are wary of an activist shareholder looking over their backs. The latest news has been a joke. For instance, Kimber recently announced that it drilled one hole for a possible extension to the Carman deposit. Total fluff.

Just how far things have fallen at Kimber is indicated by the new description of "About Kimber" which is included in KBX news releases. Previous releases stated to the effect that Kimber is hoping to prove up a resource of 3 million gold ounces at Carmen and nearby structures. Now, at the end of the description, we instead get to read about Carman's most promising "grab sample" results from a completely unrelated property.

The Carmen prefeasibility study, originally scheduled for February last year, rescheduled for November last year and then indefinitely put on hold, remains a major question mark.

The potential upside is that some of the drill results at Carman have not been reflected yet on their resource updates, the prefeasibility study may come through one day and many of Kimber's properties still remain unexplored. Also, KBX is close to major support now. But don't hold your breath. This company has made many mistakes.

I have a feeling that once the CEO is appointed, Kimber will shortly thereafter come out with the prefeasibility results. I'm guessing that the largely completed but unannounced prefeasibility results are being currently withheld to help attract the new CEO, since that will give the newcomer some momentum, starting off. But who knows what is really going on there.

Charts of Interest Gold / HUI / GSS / BVN

Comments: Gold looks like it may be getting close to support, if it hasn't reached it yet. COT numbers are still bearish though.


Comments: HUI close to support and may be bouncing from 200 day MA.



Comments: BVN looks like it's trying to go parabolic, but RSI looks like it's making a lower high. Non-confirmation...


Comments: Chart a little scary. Let's hope old channel line holds as support, though any rallies might be capped by broken trendline at around $4.40. Weakness is Gold could easily see GSS go to $3.87... maybe even $3.75. GSS has a lot of intriguing prospectss, but it just can't completely get its act together. Last quarter was another loss with one of their two mines having spectacularly horrible cash costs, and there's likely more to come in Q2.

They've already missed their guidance for the year in terms of production and cash costs, since their previous estimates assumed that BIOX would be commissioned by April 1. On the other hand, the future looks much brighter if the BIOX plant can be commissioned and if the energy problems can be solved, the HBB feasibility study was fantastic (though analysts had expected lower capex), and there are plenty of exploration efforts in the works--results from Sierra Leonne (of all places...) are due in this quarter.

Precious Metals Sector Recap

1. There was only one analyst who had an estimate, but RGLD missed it by 33%, making 14 cents per share earnings vs. estimate of 21 cents per share. With a P/E ratio of 45, it's hard to imagine how it is possible that RGLD could be trading up today with such a miss, though admittedly, I didn't read through the whole report or listened to the CC yet. By the way, it seems strange that the analyst keeps missing the earnings numbers for RGLD. I'm hardly an expert in this but it seems that royalty streams shouldn't be too difficult to estimate once you have an idea of the approximate production from the relevant mines.

2. CDE announces a merger with 2 companies that are affiliated with each other for a deal value of $1.1 billion. CDE only down about 2% so far however and it's trading right at that support which is just below $4.

3. PAAS has bounced back nicely since their miss of a few days ago. It seems that this PAAS has stockpiles of concentrate that had not been sold yet so that mined ore should create revenues this coming quarter.

4. As for gold, I don't think the bottom is in place yet. Still need lower Gold to work off some of that bearish COT commercial net shorts. In fact, I don't see how we can get a sustainable rally without lower Gold prices, unless the Commercials pull back on the net shorts at the end of the week.

HUI to Bottom Soon

I think we'll see a HUI bottom between 325 to 330.

Is it time to give the gold miners another look. As with every investment idea, there are pros and cons and in the end, an element of luck and chance is involved, but I think there are some interesting fundamental factors that argue in favor of the miners getting their groove back soon.

Let's review some of the Pros and Cons for investing in the miners at around here or a bit lower.

PROS:

• The miners have been selling off yet again and as the sell off has progressed, valuations are becoming more attractive.

• As a significant contrarian indicator, there is very little interest in investing in gold miners these days. Traditionally, gold miners give 2 to 3 times leverage in the movement of gold, but during the last 12 months, returns from the main gold mining index are below that of Gold itself, which is a significant anomaly and gives a good idea about how little interest there is in this sector right now. The miners are considered by at least one important indicator, the Gold to XAU ratio, to be extremely undervalued relative to the price of the metal.
  
• The fundamental picture remains sound and has probably improved since 6 months ago. Briefly reviewing the fundamental picture: (1) US trade and domestic debt continue to be high, (2) inflation continues to be an issue, it's not spiralling, but it's not going away completely either... inflation has not had a super spike as some people feared, but on the other hand, the Fed hasn't totally dealt with this issue either so that it has continued to act like a gnawing cancer, rather than a heart attack, (3) U.S. economic growth has slowed, creating pressure on the Fed to lower interest rates, and high interest rates (or should I say interest rates that are higher than in Europe and in Japan, since 5.25% is not "high" by historic standards) are one of the few remaining pegs keeping the USD afloat (though I recently read an interesting argument that lower interest rates will decrease the debt load owed to foreigners in the future, so that we can't say for sure that lower interest rates would be USD negative), (4) geopolitical factors continue to argue for a risk premium in Gold, Iraq, Iran are the main issues obviously, but there continues to be trouble in important oil producers in Africa and South America, among other issues Generally speaking, although it could be debated, I think we continue to live in a world where there is a greater chance of some horrible disaster or war breaking out, than for some incredible peace to break out, if you know what I mean.

• Chart factors are quite favorable--though technical analysis is a bit like astrology. Sometimes it works well, sometimes it doesn't. Adam Hamilton recently posted an interesting piece at www.zealllc.com in which he argued that the HUI has already started its inexorable climb to 550 or higher!

CONS (or should I rather call them risks)

• May to August are seasonally the weakest months for physical Gold demand. In fact, last May was simply a total catastrophe and people still have painful memories of that. Traditionally, physical gold demand (most of it jewelry demand) accounts for 70% to 80% of total gold demand so weakness in this type of demand is significant. However, there are two counter arguments to that (1) I believe that the next wave up in Gold will be driven primarily by USD currency hedging concerns rather than women buying jewelry in India, and (2) I think last year's painful May dropoff and the specter of weak physical demand during the summer, creates a kind of psychological wall of worry that markets like to climb.

• A gold rally would depend in large part on the USD breaching levels against competing currencies that have never been seen before. I think this is possible, and in fact inevitable, in light of what I have learned about the economic outlook and current status, however, betting on it happening in any particular time period is "risky" in the sense that it's difficult to predict when exactly it will happen and betting at the wrong time, could end up costing.
  
• The USD is very oversold. You've probably heard of the Euro making new all time highs against the USD recently. A relief in the USD is possible, which could potentially be Gold negative. My counter to that is that there is a pretty good chance that any relief rally would fizzle, as neither the fundamentals nor the chart of the USD index are very encouraging going forward. I'll be looking for the 82.5 to 83.0 level on the USDX to stop any USD rally.

Precious Metals Sector Summary

Recent highlights from the Precious Metals sector:

1. Vista Gold (VGZ) announced on Monday that its delayed arrangement whereby it will spin off shares of a new entity named Allied Nevada Gold Corp. will finally close on May 10. VGZ had a breakout recently, so it will be interesting what happens to the shares of the two entities. I have a feeling that the Allied Nevada Gold Corp. spin off will be a success, since this entity will own VGZ's Nevada properties, which could be in high demand.

2. Barrick (ABX) announced the closure of its corporate hedging program, reporting a one time charge of $557 million in connection therewith. ABX will now be selling all its gold at spot prices. Barrick also raised its dividend by 36%. ABX's chairman and founder Peter Monk recently mulled the possibility of ABX's diversifying further into base metals in light of ABX's underperformance relative to other miners. It's hard to understand that logic however, considering that base metal miners actually have much lower P/E ratios than Gold miners. Though, it is true that they tend to be significantly more profitable. Maybe in the long run, the market will recognize and fully value that profitability. Obviously, when the biggest player in the industry closes out its hedges, that is a sign that industry insiders definitely expect higher Gold prices going forward. In that sense, this news is bullish. On the other hand, it also eliminates a further source of future buying so in that practical sense, it is also not bullish.

3. Mine workers launched a nationwide strike in Peru on Monday to demand better job benefits, but it was unclear to what extent the country's silver, copper, zinc and gold producers would be affected. This is potentially bullish for metals prices as Peru is an important metal mining country, though for now, the strike is not that significant and has only just started. Companies with mines in Peru include ABX, BVN, NEM, PCU, Swiss-based Xstrata, and local miners Volcan and Cerro Verde.

4. My buddy Dean sent me the following interesting article about Gold and other precious metals and gem stones becoming an

E-Gold Indicated for Money Laundering

A federal grand jury returned the following indictments on April 24 with respect to E-Gold and its owner: each with one count of conspiracy to launder monetary instruments, one count of conspiracy to operate an unlicensed money transmitting business, one count of operating an unlicensed money transmitting business under federal law and one count of money transmission without a license under D.C. law. Subsequent to the indictment, the Department of Justice also obtained a restraining order on the defendants to prevent the dissipation of assets by the defendants, and 24 seizure warrants on over 58 accounts believed to be property involved in money laundering and operation of an unlicensed money transmitting business.

The indictment alleges that E‑Gold has been a highly favored method of payment by operators of investment scams, credit card and identity fraud, and sellers of online child pornography. The indictment alleges that the defendants conducted funds transfers on behalf of their customers, knowing that the funds involved were the proceeds of unlawful activity; namely child exploitation, credit card fraud, and wire (investment) fraud; and thereby violated federal money laundering statutes.

According to this, it appears that gold is passing the ultimate litmus test for validity as a currency: acceptance by organized crime. An anecdotal factor that is definitely gold bullish.

Charts of Interest

Some interesting charts.


Comments: SLW looks like it's getting ready to break out. SLW recently announced the acquisition of two new silver streams, including all of the silver produced from the Stratoni mine in northern Greece operated by Hellas Gold S.A. a majority owned subsidiary of European Goldfields for $57.5 million and, more importantly, 25% of the life of mine silver production from Goldcorp’s Peñasquito Project, located in Zacatecas, Mexico, for $485 million.



Comments: This company continues to issue press releases that are little more than fluff, at an alarming rate. Nevertheless, it is at around support at $5. Further support appears at around $4.50. Jim Sinclair wants a partnership with the Chinese regarding the Kigosi nickel exploration project. But the recent terrorist strike on a Chinese oil exploration base in nearby Ethiopia, which resulted in the killing of 65 Ethiopians, 9 Chinese and the kidnapping of 7 other Chinese, is hardly wonderful PR for Chinese resource projects in the Horn of Africa. Needless, to say, the attack didn't get any airtime whatsoever on JS's Mineset.com since JS's Mineset.com policy seems to be not to comment whatsoever on what is happening in the Horn of Africa region.

Comments: I predicted in late February, that the price target for GSS's breakout would be $4.90. I was only 5 cents off as GSS skied to $4.95 before selling off. After GSS's great run up, it appears that GSS is trying to find a bottom on its consolidation. I think around $4.25 and just below $4.00 are two areas where GSS could see support, assuming that Gold continues to sell off.

Tom recently gave the following, fairly exciting, update about GSS.

"Between now and May 10th I expect to see the following news released in either PR's or on the Q1 CC:

1) Commissioning of Biox.

2) A full month of Biox recovery rates and production numbers from Module #1.

3) The feasibility study from Hwini-Butre / Benso.

4) BoD approval of the above mentioned project. This is extremely important to the Wassa mill, as the blending of the new ore with the existing feedstock will increase production from 110,000 ounces to 200,000 per annum.

5) Possibly an increase in reserves as a result of the drilling programs there. If they do include the reserves, it should be very substantial."

Tom also provides the following update regarding the energy crisis in Ghana:

"The power problem is still there, but it is improving IMO. I monitor 14 sites in Ghana and Burkina Faso that feed the Akosombo Reservoir. The drought is over and the rains are increasing. Every week a handfull of the areas have between 1" and 5" of rain. In the meantime, the government is installing emergency generating units as fast as they can. The bottom line as I see it, is that for the remainder of Q2 GSS will be operating at a 75% power allocation, plus whatever they choose to produce themselves from their own diesel units. These units can potentially supply them with 30% of their total power, but are extremely expensive and difficult to keep running. Q2 should be profitable, but only by $.03-.04 as best I can tell at this point."

Tom predicted the imminent breakout of GSS in early November, commenting at that time on a press release ""Game winning home run in the bottom of the 9th!" At first, GSS didn't do anything particularly interesting, but within a few weeks after Tom's comments, GSS started to skyrocket on its way to a 66% gain.

In light of the foregoing, I think it would be a good idea to buy up GSS on this pullback. I already made a couple of buys.

Comments: AEM is close to support. A breakout of the slightly declining (bullish) wedge would lead to a rally of about +$8.

Trading Yamana Gold (AUY)

Comments: AUY has periods of in line performance with the HUI, followed by periods during which AUY strongly outperforms the HUI. I believe that AUY recently completed a period of outperformance of the HUI, as you can see in the chart above. Accordingly, even if the HUI rockets up, I think AUY will only follow in-line with the HUI, at least for a while. The period of in-line performance seems to last about 6 to 8 months.

Royalty Companies set to Underperform?

The COT numbers showed the all time second biggest net short gold position by commercial traders, which should be bearish in the short term.

If there is any pull back or consolidation, and I think there is a pretty decent chance of one occurring, two companies to be wary of are RGLD and TRE, both of which employ a royalty model.

Neither company really participated in the recent gold and HUI rally. The only caveat to that comment is that these two companies tend to be less correlated (for some reason) than the average gold mining company to the Gold indices, so it's possible that they may hang tough on any pullback. Still, I wouldn't bet on it.

Comments: TRE went nowhere fast during the recent upswing. With no significant royalty payments on the horizon and with press releases that would be best described as "fluff", it's probably not a big surprise.

Comments: RGLD, a fully developed company whose royalty revenues TRE could only wish for, also did not respond very positively during the recent gold rally. The surprising thing was that there was little bounce back after the recent share offering was completed. RGLD has solid royalty revenues from various properties, but with a P/E ratio of 44.7, it may be vulnerable.

Update: Compania de Minas Buenaventura SA (BVN)

Comments: BVN has broken out of a 1.5 year trading range on nice accumulation. I'd be a buyer on any pullback, such as the one that we are getting right now. BVN is an equity partner at the Yanacocha mine in Peru and operates 4 other smaller mines as well. Yanacocha, operated by Newmont, is one of the two biggest gold mines in the world. The main complaint against BVN has generally been that it has been a partial gold hedger. However, on March 9, BVN announced that it had bought back 25% of its hedge book, which apparently helped to spark the current rally.

Update on Kimber Resources (KBX)

Comments: After failing to get back up above resistance, looks like Kimber is falling away and will likely retest at least recent lows, especially if the gold price turns south for a change. The company recently announced, among other things, that Darren Klinck, Kimber's Vice President of Corporate and Investor Relations, who put up an excellent IR front on behalf of the company, will be departing the company. Despite my anger with the company because of their shenanigans, I really wish Darren all the best. He took his job very seriously and, in my opinion, he did a great job. He timely responded at length to all of my questions about Kimber. Too bad the company has performed so poorly.

HUI Approaches Sell Zone

Comments: I sold down as the HUI has been up four days in a row and is now approaching significant lines of resistance along the channel line and lateral resistance. I expect the area HUI 358 to 362 to provide significant resistance for reasons that should be obvious when looking at the chart above. The surprising thing is that Gold and the HUI isn't down more after the news of the release of the British serviceman by Iran. That potentially bodes well going forward as I was sure that Gold would come at least temporarily under pressure following the revelation that they aren't going to get the Abu Ghraib treatment in Tehran. GSS and CUP did best for me during the recent run, TRE did the worst.

The Spin Starts Here

I guess you sometimes have to excuse Jim Sinclair for some of his more over the top comments at his website www.jsmineset.com . After all, Jim is a gold fan and enthusiast.

When you see statements like "the man in charge in Iran now was the man in charge of taking US hostages in the Carter Administration" you just have to grin and bear it, even though you know that nothing has ever been found to support the statement and believe me, if there was the slightest piece of evidence to support it, the current U.S. government would have jumped at it, not to mention the fact that the current President of Iran appears to look younger than the hostage taker in the pictures that have been circulated in media reports, which seems a bit inexplicable, considering that 27 years have passed since the incident.

And then, there are grave warnings on Jim's site about the recent protectionist measures imposed against China, with grim references to the protectionist Hawlet-Smoot Tariff Act of 1930, while a free trade agreement with South Korea that is the largest of its kind since NAFTA is dismissed by Jim as irrelevant.

That's all fine, since, like I said, Jim is an enthusiast so a little bit of spin is expected (even though his website purportedly claims that "The Spin really does stop here."

However, when it comes to company related information, that is an area where the Spin really does need to stop and, judging by Tanzanian Royalty Exploration Corporation's (TRE) news release last Friday, unfortunately it didn't. Apparently, the British Columbia Securities Commission caught on that TRE had made several misstatements as a result of which investors may have been misinformed causing TRE to make a news release (tactfully titled "News Release") to correct certain misperceptions that may have arisen as a result of previous releases, repeatedly pointing out that certain pieces of information released by the company relating to mineral deposits were not compliant with Canadian regulations and therefor "should not be relied upon".

Also, I personally wasn't all that impressed with TRE's previous news release about the startup of work on its purported nickel bearing properties. The first three paragraphs of the release seem primarily to tout the nickel project in the Kabanga region which is being conducted by Xstrata and Barrick and have little to do with TRE.

When it comes to opinions about Gold, a bit of over the top spin is fine from time to time, but when it comes to company news releases, the Spin really does need to stop there.

Gold Chart

Comments: I just returned from an unexpected business trip to Nigeria, hence the lack of updates recently. The above chart shows that Gold has been creating a channel with some obvious buy and sell points. The HUI seems overbought in the short term, but it is now consolidating for a couple of days. My exposure remains 31% and I think I sold a bit too early. Hopefully I'll be able to get back on board with at somewhat lower prices, though it's unclear where we are going next in Gold. The COT report remains bearish in my opinion.

On a side note, an interesting article about a company (Nautilus Minerals Inc.) listed on the Vancouver exchange that will be trying to prospect for metals below the ocean.

Gold to XAU Ratio

Comments: The Gold to XAU ratio is at it again, testing 5.00. Usually values at around 5.00 have resulted in relative buying of the mining shares, but I have a bad feeling about it this time. As I mentioned before, it is possible that the Gold/XAU ratio may have had a "bullish" breakout with a price target of 5.8 to 6.00, which would be very bad for the mining shares--though eventually it would mean a great buying opportunity. All this suggests that GLD and SLV may be better than the miners for now. Let's keep in mind that during the year and a half period of consolidation in 2004 and 2005, the Gold/XAU was well north of 5.00 for 6 weeks. That is quite possible again here because, obviously, we are again currently in a period of major consolidation.

Among the miners, I'm currently looking at CUP (copper not gold, but that's the whole point) and UXG. UXG has been poor but I think that is partly because of the bad experience investors had after their previous merger attempt with their Nevada neighbors collapsed. If they can pull of the merger this time, UXG could potentially enjoy a nice markup, but it is a speculative play. The offer expires March 23, so pretty soon. I also like it because it's correlation to the HUI is relatively low.

My buddy Dean recently sent me an article from the left-leaning NY Times titled "China to Open Fund to Invest Currency Reserves". According to the article, "China will create an agency to invest its immense reserves of foreign currency, now totaling more than $1 trillion, the country’s finance minister announced on Friday."

"They’re not going to be looking for financial assets, but energy assets and natural resources, minerals, things China desperately needs,” said Jing Ulrich, an analyst at JPMorgan.

Although no mention is made of Gold, the mere act of diversifying away from US Dollar-denominated reserves could potentially have positive spill-over effects on Gold.

Following the Commercials

Comments: Last week's Commitment of Traders report showed the largest net short interest in Gold contracts during the last year, which definitely helps explain the action of the last week during which gold gave up around $45. Major tops in Gold have frequently been marked by peaks in the net short interest of commercial traders.

Unfortunately, it typically takes about 8 weeks for this kind of situation to reverse itself so I'm not expecting any huge comeback rallies anytyime soon, though a bounce here seems quite plausible. Hopefully this week's report will show commercial net short interest falling precipitously again.

The COT report is not perfect as a timing device and commercials are not always right. For instance in April to May of 2006, it seemed that the trade went against them as Gold soared higher while net short interest stayed about constant. More often than not, however, commercials have been in control and it has paid to follow them.

Gold to XAU Ratio

Comments: The Gold to XAU ratio flashed an ominous sign on Tuesday by appearing to break out of a long symmetric triangle consolidation. If that is the case, the "price" objective for the ratio would be around 5.7 to 5.8, which would mean continued massive underperformance of the mining shares to Gold for at least several months.

However, it's unclear that it's going to necessarily go that way just yet. The USD has done basically nothing during the last few days and Oil is still well over $60 per barrel so the current action in Gold is a bit strange. However if the Gold to XAU ratio continues to climb above 5.00, the writing will be on the wall for the miners even if Gold maintains itself above $600--which I think would be quite likely.

Comments: Upon a further measurement, it appears that the price target would be 6.00 not 5.80. That is suspiciously close to a potential channel line.

Accumulate GSS on Pullbacks

Looking for a Gold stock that is really on a roll? Look no further than Golden Star Resources. After frustrating investors for so long during a long period when everything seemed to just go wrong for GSS, it looks like GSS management is finally putting the pieces together.

Even after getting slammed down after the announcement of a secondary offering earlier last week, GSS just roared right back and is trading right around the same price as it had when the offering was first announced 3 days ago. Hard to imagine more bullish action than that. I believe that the current price level (i.e., around $3.90) should be short term resistance, but I would be a buyer on any dip here. My price target for GSS is about $4.90 for the current move.

Here is Tom's latest about the upcoming schedule and prospects for GSS:

"GSS has a steady stream of news and events scheduled between now and June. They aren't planning on giving the manipulators time to put on a raid again. Every one to two weeks something positive is planned to happen:

• Biox #1 commissioned


• Successful offering


• Q4 earnings CC


• St. Jude feasibility study and BOD approval


• Biox #2 commissioned


• Biox in service


• Q1 earnings CC and


• first Biox production numbers


• Power plant in service

Add in a couple more PRs covering exploration, JVs, upgrades, or whatever, and it averages 1 every 10 days.

At this point my only regret is not taking advantage of the pullback to add to my positions. Afraid I was waiting for a lower price like everyone else.

As far as I can tell, the long awaited upmove has already begun, and is rapidly gathering speed and momentum. By Q3 we should have proof that Biox works. If the production and recovery rate meets expectations, Golden Star's stock price may surpass AUY in a year or so."

Very few investors put in as much time and effort into researching a company as much as Tom does and he's been really on the ball about GSS a number of times now.

Tom also subsequently adds the following notes of caution to balance out his positive comments which I posted above:

* We are talking about Ghana...a third world country. They are a democracy, and are making great strides in developing the country and bringing it into the 21st century. Although they are making progress, much work remains to be done.

* I am not an expert on arbitrage. I would think that the arbs would have shorted the stock and planned to buy shares to cover out of the new issuance for a quick profit. For all I know, this may still happen over the next 3 days. It is also possible that some selling may occur after the issuance due to profit taking...I just don't know.

* The size of the offering surprised me, as I saw no need for that much additional cash with Biox on the verge of adding a flood of cash to their coffers. My gut tells me they want to expedite development of a number of projects to add to production and lower costs, but I don't know that for a fact.

HUI 400

Comments: I'm guessing the initial target for this move will be HUI 400 or so. That would mean a double top in the HUI. Hopefully it won't stop there however. Still, the gold miners for the most part are not maintaining that much leverage during this move, which makes me wonder whether this move will be all that great. The Gold chart suggests that the measured move will be to about $750 however. Maybe it will be better to be in SLV or CEF than in miners. Or maybe a mix of SLV/CEF and miners.

Comments: Although we've been in a uptrend recently, the XAU to Gold ratio has not yet tipped its hand. In fact, the leverage, with the exception of the occasional upburst, has not been that great so far into this move. Once the formation is broken, it will be a very big move in one direction or the other. About 1.00 up or down. So up to 5.7 or down to 3.4.

From the low in January to the close in Friday, the percentage gains for precious metals investments have been:

SLV: 18.66%

HUI: 16.75%

GDX: 15.58%

CEF: 14.68%

GLD: 13.50%

XAU: 13.00%

The fact that the XAU is the worst performer of the 6, i.e., that Gold and Silver stocks as measured by the main index have underperformed Gold and Silver, definitely raises some issues about the destiny of this move.