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Zurich gold: 0.015kg @ €35,677/kg [7:14:11 AM WAT] London gold: 0.139kg @ £30,290/kg [7:13:18 AM WAT]

Dear Reader,

This report is a collection from various well-respected writers, and would give

you an insight what has happened to gold the last week or so. There are

different views, and could be confusing for a investor/trader how to react

towards gold, buy or sell. My own opinion was and is till the same: “If you want a

solid assets and be save, and not end up under the water- then buy physical gold bullion

like the smart central banks and investors are. Ask yourself this question. Has any paper

currency ever survived its use as a store of value?”

Download, read and act wisely. Please forward to your colleagues, friends, whom ever you

know.

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Jeff Christian: “The Reason Gold Prices Fell So Hard”

And why does the US Mint struggle to meet silver coin demand...?

FOUNDER of CPM Group and frequent market commentator Jeffrey Christian explains

the triggers behind heavy selling of gold last week and why there really isn't a silver shortage at the US Mint in this interview with Hard Assets Investor.

Hard Assets Investor: What was the catalyst behind last week's historic downward

moves in gold?

Jeff Christian: There were two big groups selling. One was what we call "nervous

longs," people who were still long gold and silver. They had bought it because monetary

accommodations could be hyperinflationary and Europe and the banks were going to

collapse. None of that stuff has been happening. And the price of gold had come from

$1,900 to $1,600 to $1,550, and they're saying, "Gee, maybe all these gurus are wrong, because there's no hyperinflation."

The other group was "emboldened shorts." Even before last week, even before April, if

you go and look at the Commitment of Traders reports from March 26, you had a sharp

increase in February and March of gross short positions on the Comex gold and silver

contracts. For 12 years these guys said, "I'm not so foolish as to short gold." But they

had been willing in the first quarter of this year to build up short positions sizes not seen since the bear market of 1990s.

So you had a lot of people who were more and more willing to go short gold in the

expectation of lower prices already. Then on Friday you had the price just sort of

pancake down, dropping below $1,530, which brought in a round of sell orders both from

nervous longs and fresh short selling. That took the price below $1,500 where another

round of [sell] orders cascaded in. And it was just like stories of a building cascading—

pancaking on top of each other.

HAI: How have the last few days changed your view, if at all, on not just gold itself, but

also in regard to your price range of between $1,400 and $1,700? Do you feel that needs to be adjusted?

Jeff Christian: We had been using $1,700, $1,750 as a high just on the idea that there

could be an outlier. We were saying we didn't think it would necessarily get there. And

really, the last couple days have basically reaffirmed our view pretty much. But the big

change is that those highs that we were thinking were possible are probably even less possible now than they were back then.

HAI: Is the gold market too volatile for investors right now?

Jeff Christian: It really depends on the investor. Today [Tuesday, April 16] has been a

very constructive day. The question facing investors is: Is today a dead-cat bounce or

the buyback? We're waiting to see the data, but our gut feeling is that what you're

seeing right now is that the last two days were so intense in terms of the selling because

the weak hands reflected that nervous-long position, and they probably sold. Similarly,

the shorts have probably built up as large of a short position as they dare take.

When I say "dare," you have to understand two other things. It's not just what they dare

to take; it's what their banks will allow them to hold given the fact that they use

borrowed money. It also has to do with the margins. If you were going to short silver at

$28 and now it's $22 or $23 and the margins are rising, you've got to say, "Well, what's my risk/reward ratio? Maybe I should buy back some of these shorts."

Investors ask, "What will turn the price around?" The answer is the cessation of price

flowing. Because as soon as the price stops flowing, you'll see some of those shorts

liquidating, which will cause the price to rise, and you'll also see bargain-hunting. You're

seeing some of that today, and our gut feeling, without having the data confirm it, is

that we may see that continuing. Yesterday [Monday, April 15] probably saw the lows for

gold and silver, and the prices could rise maybe to $1,400 or $1,450 for gold, and maybe $25.50 or $26.50 for silver in short order.

HAI: Do you think that the maturity of the gold ETF market has added a new dynamic to the way the gold price moves?

Jeff Christian: ETF holdings have done two things to gold. One is that it's made it a lot

easier to buy and sell. It's a simple click of a button. You don't have a manager on the

other side of that button. I've seen it in the futures market where banks can assure

producers, "Yes, we can handle 400,000 ounces of gold." And so the producer says "Fine,

I want to sell 400,000 ounces of gold." And the bank says, "Well, we've got to work this order."

But with the ETF, no one is saying, "I've got to work this order." It's like, "No, I'm selling

400,000 ounces now." That gold goes off into the system and it cannot be denied. Then it increases the volatility and the prospect for sharp moves on both sides of price.

And the other thing is that the ETFs provide a daily reckoning of physical-investor buying,

at least for a small portion of the physical market. You always have daily futures and

options data, but there's never been a good measure of how much gold is being bought

or sold on a daily basis in the physical market.

Now, the ETF is still a small portion of the total physical market. Most of the gold is

bought in China and India, in the Middle East, and it's not bought through ETFs. So you

still don't get 80-85 percent of the gold market reflected, but you have at least a

measure. And I guess that is bad and good: a) You have a measure; b) You have a

measure that's not necessarily reflective of the total market. But in the absence of a

good measure of the total market, a lot of investors will rely on it as a reflection. So it's a bad barometer, but a measure nonetheless.

HAI: George Soros floated the idea this past month that gold has disappointed the

public in the sense of its safe-haven qualities. Do you agree with that?

Jeff Christian: I don't think gold has changed its attributes in terms of its uses for

investors. I always am very cautious to say that I'm disagreeing with George, because I

think George is probably more often misunderstood when he makes public comments,

especially about gold, than wrong. And one of the points that he was making was that

what we've seen is the gold prices come off—for example in late 2008 into early 2009—and that, as such, maybe it wasn't as great of a safe haven.

My view of gold through history is that it does several things for investors. It is a store

value, it's a safe haven, it's a portfolio diversifier, but it's also a source of liquidity in

times of emergencies and crises. And it's always been. It's done that during World War II,

World War I, the Napoleonic Wars and it did that in 2008. The price will come off when

you get to a point where people all of a sudden need cash, and they liquidate their gold to get at their cash.

In 1997, during the Asian currency crisis, the people who really survived in Thailand

were the people who still owned gold. The Thai Baht sold 70 percent against the Dollar in

a very short period of time. Those businesspeople who had been doing very well prior to

1997 and converting their wealth into Dollars and Deutschmark and other currencies and

investing on a leverage basis of building new factories were crushed. Those people who

did that, but kept some of their money in gold, did OK, because the gold price went up

70 percent against the Thai baht. They actually wound up buying the factories that other people were selling in distress.

Gold has always provided liquidity in times of stress. Investors shouldn't be disappointed

if gold does its job. Investors imbue too much expectation in gold and then they get disappointed.

HAI: What is one of the most important metrics that you watch for in gold?

Jeff Christian: We have a proprietary program to develop estimates of supply and

demand, and investment demand. We pay a tremendous amount of attention to

investment-demand flows. We really want to know what investors are doing. ETFs only

represent a small portion of the total gold market. So you can't just look at ETFs and say,

"Well, this is what gold investors are doing. But what we do is we try to be in continual

conversation with gold market participants around the world—India, China, the Middle East, Europe, the United States—so that we can get a sense of what investors are doing.

Sometimes it's anecdotal information. So for example, a week after the Lunar New Year,

the gold price fell sharply. One of the reasons was that the sales to investors of gold

during the Lunar New Year were disappointing. You had a lot of bullion dealers in China

who had stocked up gold inventory in anticipation of very strong sales during the holiday

period. The sales didn't materialize, and a lot of their clients were bad-mouthing gold's price prospects.

So when the dealers came back, they unloaded their inventories. They don't have gold

options there, so they don't have an effective way to hedge their inventory. These guys were long and exposed, and they were seeing weaker investor sales, so they sold gold.

HAI: Does that include jewelry demand?

Jeff Christian: One of the problems we have is trying to decipher aggregate-investment

demand from gold jewelry. You can to some extent, but there's clearly overlap. In China

and India, you find a lot of gold statues and decorative objects, little trinkets made out

of gold. On the one hand, they're jewelry or decorative objects, but on the other hand,

they're investment demand. So you can talk about the purchase of gold in bars and

coins and medallions, but you also have to pay attention to some of the jewelry demand, simply because some of it is quasi-investment.

HAI: What are some of the best reasons to sell gold? Or are you a buy-and-hold gold

philosopher?

Jeff Christian: I am a gold agnostic. One of the reasons people would sell gold is

because they expect the price to fall. Then you say, "Well, why would you expect the

price of gold to fall?" If you see a sharp diminution in the amount of economic and financial uncertainty in the world, that's a good reason to sell gold.

Another thing to pay attention to is an increase in gold supply. And the third thing goes

back to that first one: if you see investors pulling back from the market. One of the

metrics that we use, that I didn't mention earlier, is that we pay attention to the premia

that are available for American Eagle gold coins and Canadian Maple Leaf coins. When

investors get negative on gold's immediate price prospects, they'll actually pull back

from buying Eagles, or in some cases, sell Eagles and the premiums will fall.

Over the last 18 months, we've watched the premia very closely. When the price spiked

down to $1,530 or $1,540, the premia shot up, which tells you that investors are buying

gold at those dips. And then when the price would shoot up—as it did three times in late

2011 through 2012—to $1,780 or $1,790 or $1,800 an ounce, you would see the premia

fall, which would tell you investors at least are not buying, and in fact they may be selling gold coins. So that's a good metric.

HAI: Silver production continues to grow despite falling prices. What is really driving

silver production? And is there a point where, as with natural gas, the producers are going to say, "We need the price to be higher for us to continue to do this profitably"?

Jeff Christian: The short answer is mine production's rising because the price of silver

is sharply higher. Silver traded between $4.50 and $5.50 for most of the period from the

late 1980s until 2005. There were a lot of properties that were not profitable to mine or

develop at $5.50 an ounce that are now profitable. And so you're seeing production rise as a result of that.

Now costs are rising too, but these guys still have on average a pretty good margin.

There were some producers that were very high priced, and are really at risk with the

price coming down now to $26 and $27 an ounce. If the price continues to fall, there are

some guys who are at risk. But the vast majority of the producers are very profitable

even at $20 an ounce. So I think that you'll see that production continue to rise for the

next several years.

HAI: Since we have this growing production, why does the US Mint continually run out of silver for its coins?

Jeff Christian: I don't know the Mint's operations as intimately as I knew in the '80s

and '90s when we were advising them. But the Mint doesn't run out of silver; it runs out

of silver blanks. And I think that that's the key. You have to understand that to have

silver inventories tied up in blanks and in struck coins waiting to sell is very costly. The

Mint tries to minimize the amount of money it has tied up in working inventories. And that's why they keep running short.

A lot of companies built capacity to make blanks and rounds and small bars in the 1980s

because of the run-up in demand and prices then. By the late 1980s, no one was buying

that silver, they were selling it back to the market and these guys were writing off their

factories. So when you saw the price started to rise again in 2005/2006, what you saw

were a lot of people who make small investment products saying, "I'm not going to

make that same mistake again, and build up manufacturing capacity for something that could be gone in 24 months." Well, it's been six years now and it's not gone.

Some companies have given in and they've built up capacity, so there is more capacity

now than there was in 2008 when they really had problems sourcing blanks. But it's a

matter of very cautious businesspeople in the blanking business saying, "I'm not sure I

want to build up capacity for something that could go away for the next 20 years the

way it did last time." And the Mint is saying, "We don't want to necessarily build up inventories here and then investors turn off their demand for silver."

Hard Assets Investor, 22 Apr '13

Hardassetsinvestor.com is a research-oriented website devoted to sharing ideas about

investing in the natural resources sector. Published by Van Eck Associates Corporation,

the site offers an educational resource for both individual and institutional investors

interested in learning more about commodity equities, commodity futures, and gold –

the three major components of the hard assets marketplace.

Is Gold as an Investment Finished?

Before delving deeper into that question, perhaps we should see what the mainstream

media thinks. In fairness to the MSM, we note there are plenty of articles on both sides

of the debate. Yet there has been some media piling-on since the recent hard

breakdown in gold. The aptly named Howard Gold explains:

The Case for Owning Gold Has Collapsed; Yellow metal could be headed much, much

lower .

Gold could be headed not much lower, but much much lower. This was written on April

18, when the value assigned to the monetary relic (AKA its nominal price) resided at

$1391 per ounce. So be warned, Mr. Gold advises that gold could go much

much lower. Gold bugs take heed; Mr. Gold himself has put the double ‘much’ whammy

on you!

After critical support at 1524 was lost our first downside target of 1440 or so was sawn

through like Balsa Wood. Okay fine. For those who micro manage every tick in

the price of gold (I am not one), then here is the situation; the current little rebound

must extend back up to and through the broken support level at 1440 or the next target

in the low 1200’s is up next.

See the weekly chart on page 3, which was produced 5 weeks ago in NFTRH 230. While

not a favored outcome, recent events with gold’s price are not surprising.

To review, the two potential points to watch for in the event of a breakdown from 1524

were the weekly EMA 200, which supported the 2008 decline and then the conservative

measurement from the pattern breakdown, which is in the low 1200’s, which also

includes a visual support shelf from 2010. The less conservative measurement (the top

at 1900 to 1524) would target around 1150.

So that is the price picture, now on to the fundamentals courtesy of Mr. Gold. From the

article linked above:

“But gold’s price could be headed much, much lower, said Campbell Harvey, a professor

at the Fuqua School of Business at Duke University. Harvey has looked at gold prices

over the centuries, and concludes that it’s still trading at lofty multiples of inflation.”

In the article linked above there is another link where you can download the research of

Mr. Harvey and colleague Claude Erb – currently making the rounds like a good gold bug

horror movie – that talks about gold’s “real” price as measured by CPI and GDP. Boiling

it all down, gold is historically over valued as compared to measures of the effects of

inflation on consumer prices and relative to GDP.

We will steer clear of the debate about government number fudging, because it is a

battle that is not necessary. The Federal Reserve and many of its counterparts around

the globe are inflating, or trying their damnedest to inflate. They are using debt

instruments to create money out of nowhere and pumping it into big banks, which are

supposedly expected to release the money out to the public.

This could one day manifest in an out of control inflation problem (as measured by the

lagging effects that Harvey and Erb call inflation, or resolve into a more intense

deflationary phase as the thing that is just a whiff now gains momentum and swallows

the entire spectrum of inflated assets in one big gulp of illiquidity.

The economy has depended on inflationary policy since the age of Inflation on Demand

began under Alan Greenspan’s oversight in and around 2000.

Ask yourself this; why are they inflating? Why are they printing money at a furious pace

if the GDP is real and sustainable? The answer is likely because they know that the

financial system is a leveraged thing that must not be allowed to start deflating because

if it starts deleveraging, it is not going to stop until the books are cleared.

Gold vs. Commodities, What is the Message?

The authors noted above measure gold’s ‘real’ price in CPI and GDP. Here we have

always measured it relative to the commodity complex, which is generally positively

correlated to the global economy. Above is gold vs. the CCI commodity index.

I had originally thought that a decline to the lower moving average would come with a

continued economic bump, stock bull market and inflation-fueled commodity

bounce. But instead, gold has tanked vs. commodities even as a deflationary pull starts

to take hold with signs of economic deceleration, commodities down and the stock

market potentially in some kind of a topping process.

Yet the ‘real’ price is still in a secular uptrend because the ratio has held above another

parameter point we noted as important. If the blue arrow is confirmed by turning green

one day, the message will continue to be a secular era of economic contraction, which

has thus far been fought tooth and nail by inflationary policy. That is and has been the

case for gold since day one. Not the case most gold bugs root for, which is

inflationary effects, the likes of which are used as data points by Harvey and Erb. See?

Of course Harvey and Erb scare the gold “community” because a majority of the

“community” sees gold as a hedge against higher prices. If the above chart breaks down

and makes a lower low to the spring of 2011 (the height of the last commodity/inflation

blowout) then we may have to admit Bernanke wins, Draghi wins, BoJ, China Central

Planning and all other inflators win. They will have managed to create sustainable

economies literally out of thin air.

The alternative to that is hyperinflation, where an asset grab of epic proportions could

engage with gold under performing things you can actually eat, keep warm with and use

for fuel. This asset grab would come out of a debased monetary system.

More realistically however, we might look for the real price of gold to gain support in its

secular uptrend. This would see economic contraction and by extension, further decline

in commodities and stocks markets. We have noted all along that the nominal gold price

can decline in this environment, so people should know why they own the thing. Also,

getting out of the ‘death of the dollar’ cult might be wise as well.

The USD, as long as implied confidence in our leaders remains intact, may be pulled

upward with the real price of gold as a contraction phase bites harder. This is the

world’s reserve currency in which a majority of global transactions are settled. As long

as this remains the case, there will be claims on Uncle Buck. USD, as of the moment, is

liquidity within the system. Gold by the way, is liquidity outside the system.

The average gold bug’s worst enemy is… the inflation tout. It is not the government or

the big banks. It is the individual’s expectations of a lump of shiny metal. If they have

not gotten this simple concept yet, after the recent damage, I am afraid they will never

get it. And they will puke up their gold, which failed to protect them from the dreaded

inflation that wasn’t.

Bottom Line

The “dreaded inflation” is measured in the mainstream by prices (CPI, etc.), not policy-

making actions. Gold is a barometer and the pressure it would indicate could be

inflationary or deflationary.

If one day you see the gold price skyrocket, then be prepared for a coming (lagging)

inflation problem that would indeed eventually show up in prices. This could propel

commodities, resources, productive economies and even stock markets to new heights.

If on the other hand gold just hangs around or declines, yet the ‘real’ price as measured

in commodities rises again, the backdrop would be one of continued economic

contraction and declining asset prices.

The third alternative is the least likely; gold hangs around or declines and yet the ‘real’

price loses its secular uptrend. This would indicate a sustainable economic expansion,

created by inflationary policy has engaged. Thus far, inflationary policy has served to

build in distortions that subject the system to extreme liquidations. That right there is

the continuing case for gold – and for the time being I might add – cash, lots of it.

Okay now, that’s the theory. I have got a technical report to write, so lets get to

it. NFTRH 235 then goes on to review the technical pictures of the precious metals,

precious metals stocks, commodities and stock markets in an unbiased manner. This

has kept the analysis on the right side of the markets throughout recent dynamic

events. If you would like a hard-working service that does whatever it takes to be

prepared for what the market throws at us, consider a subscription to NFTRH.

Source: Watch Todays 1pm Market Update

Portfolio Manager Greg Orrell: 'My Belief in Gold Has Not Wavered' april 25, 2013

The Gold Report: How has your bullish view on the gold sector evolved as a series of

crises has jolted both the international stock market and the price of gold?

Greg Orrell: First off, my belief in gold as a monetary asset has not wavered. Japan

basically admitted that it is bankrupt with its intention to aggressively debase its

currency. Normally such actions would invoke, and may still, a race to the bottom as

each country engages in economic warfare to deal with its debt issues. At this juncture

the fear of global deflation among the G7 crowd remains its worst nightmare, especially

as additional stimulus by the Federal Reserve is showing diminishing returns. With high

debt levels in both the private and public sectors around the world, stimulating economic

growth is proving elusive. These alarming events are setting the stage for the next leg

up in the dollar gold price, in my opinion. The fiscal and monetary crisis is ongoing and

underscores the necessity of owning gold assets.

Though agonizing, the past 18 months have been nothing more than a consolidation for

gold from the September 2011 highs of $1,900/ounce ($1,900/oz). The recent decline in

gold prices below $1,500/oz is not the end of the bull market in gold, despite the

barrage of negative commentary by those wanting to dance on gold's grave. The

destruction of currencies is in full bloom, but it is not a straight line. The problem for

many gold investors is that they can see the endgame. Gold prices rise in a straight line

at the end of a monetary system, but we are not there yet. It takes some patience to

hold the course while the establishment fights tooth and nail to keep the dollar system

from failing.

TGR: The years 2009 and 2010 were better for gold stocks. Can you talk about how

things changed after that and how investors can best respond to the precipitous drop in

market value?

GO: A number of factors go into the poor performance of the gold shares over the past

couple of years besides the gold price. We have seen investor rotation out of defensive

posturing and then the gold miners ended up being their own worst enemy. Gold share

investors became concerned, and rightfully so, with rising operating and capital costs,

poor capital allocation and growing resource nationalization. This in turn made bullion

exchange-traded fund (ETF) products more attractive and prompted a trend of shorting

the miners versus long gold positions.

Let's look at the world's largest producer, Barrick Gold Corp. (ABX:TSX; ABX:NYSE). It

incurred cost overruns at the Pascua-Lama project in Latin America. And it overpaid for a

copper asset in Africa after spinning off its African gold assets a couple of years earlier.

Each of these instances led to contraction of cash flow and net asset value multiples for

the whole sector, and set a theme for the industry. At this point, the pendulum has

swung too far, with the shares basically discounting everything that could go wrong and

more. Therefore, if an investor is not in the gold sector, now is an opportune time to

take advantage of the significant decline in share values as there are signs of positive

change taking place within the sector.

TGR: Can you provide any insight as to why longer-term investors, and also new gold

investors, should buy into the current gold market?

GO: The rationale for owning gold assets remains simple: global deterioration of

sovereign credit and a growing need to debase currencies in order to meet future

obligations, whether it's here in the U.S., Europe or Japan. The policy of socializing risk

with monetary and fiscal policy has destroyed the balance sheets of the Western world.

We are in a phase of experimental central banking, which I believe is going to end badly

due to the dislocations of capital it has caused through prolonged periods of negative

rates.

In the event economic growth were to take hold, an unleashing of built up reserves in

the system would set off inflation with a corresponding rise in rates. Just imagine the

effect of a change in the direction of interest rates and the collateral damage that will

create in the bond markets and the interest rate derivative markets after all of these

years of managing a zero interest rate policy. The cost of funding the U.S. deficit will rise

exponentially. More quantitative easing begets more quantitative easing. Investors need

to have some type of asset to balance their portfolios. Policymakers who got us into this

mess are unlikely to navigate us out of it. History tells us that only gold is a good place

to be.

TGR: Is now a good time to be looking at the gold miners, including the juniors?

"The recent decline in gold prices is not the end of the bull market."

GO: Absolutely. With current sentiment negative on the miners, it is an incredible

opportunity to buy gold shares and recapture lost value. A major problem for the mining

industry is that its business model is flawed. Gold investors are not strictly interested in

taking money from one hole in the ground and putting it in another. Investors want

participation in cash flow through dividends and earnings leverage to higher gold prices

along with the potential for increased shareholder value through discovery . Not paying

dividends was great for management, geologists, engineers and everyone but the

investor who was locked out of the cash flow.

Now falling share prices have put the onus on management to compete with the ETFs for

investor dollars. A number of CEOs are being shown the door. Marginal projects are

being shelved. Dividends are increasing. Management is beginning to understand that

the needs of shareholders must be prioritized. Granted, the decline has been painful, but

in my 30 years in the business, this is exactly what needed to happen.

TGR: Has the balance in your portfolio between bullion, large caps, mid caps, small caps,

ETFs, royalties and cash changed over the last five years?

GO: Because production is cheap, we are weighting toward the large- and mid-cap

producers. They are poised to recapture value as sentiment turns around in that space.

The smaller, macro-cap exploration and development companies are bombed out, and a

number of companies are trading where market cap per resource ounce is down to $10

or lower. Those companies are interesting as long as they have a balance sheet and

they're not diluting their shares to keep the lights on. Royalty companies have

outperformed along with bullion over the last five years because of all the negative

factors that I mentioned previously. But I'm not adding to the royalty companies right

now because the operating companies offer better value.

TGR: You're not adding to bullion?

GO: Not at this time. We're keeping bullion around 56%. The miners, in my opinion,

offer tremendous value at this point with gold reserves in the ground.

TGR: Who are some of the companies you think are attractive in the middle and small

spaces?

GO: Endeavour Mining Corp. (EDV:TSX; EVR:ASX) is interesting right here. The share

price has been washed out because it is a higher-cost producer, around $900/oz. Its

market cap is down to under $400 million ($400M) with 300,000 oz (300 Koz) of annual

production in West Africa, but is slated to grow to 450 Koz over the next couple of years.

That's a 50% increase. Endeavour is driving expansion mostly from internally generated

cash flow.

"In the past, the majors looked for big projects because they did not want to operate the

smaller mines. Now they are focusing on grade and smaller projects that won't blow up

the company."

Esperanza Resources Corp. (EPZ:TSX.V) is cashed up with over $70M and with

experienced management is developing a couple of attractive heap-leach projects in

Mexico. One project can put up 35 Koz/year and another one can do 110 Koz/year. Pan

American Silver Corp. (PAA:TSX; PAAS:NASDAQ) is a major shareholder. Esperanza

could be an early day Alamos Gold Inc. (AGI:TSX).

Avala Resources Ltd. (AVZ:TSX.V), 50% owned by Dundee Precious Metals Inc.

(DPM:TSX), is trading down at dirt prices. The company has an entire Carlin-style belt

tied up in Serbia where it has outlined close to 3 million ounces (3 Moz) so far. The

company's market cap is $1215M, with $9M in the bank; it's not a bad optionthe market

will appreciate the optionality value on the company's assets at some point.

TGR: Are you a fan of the royalty model?

GO: I am a fan of royalty companies. The revenue comes right off the top so royalty

holders have no exposure to increases in costs and typically have exposure to increases

in reserves. Royalty companies often acquire the royalties from the original property

owners. Another form of royalty is the creation of a gold or silver stream: the royalty

firm helps to finance the project and receives gold or silver in return. We have seen a

pick up of companies selling either net smelter royalties or streaming deals on projects

as a way to finance in a marketplace where equity capital has become expensive.

TGR: Are there any royalty companies that people should be looking at?

GO: We own a couple of the big ones in our portfolio Royal Gold Inc. (RGLD:NASDAQ;

RGL:TSX) and Franco-Nevada Corp. (FNV:TSX; FNV:NYSE). We also own Silver Wheaton

Corp. (SLW:TSX; SLW:NYSE). Sandstorm Gold Ltd. (SSL:TSX) is the up and coming

player in the royalty space. It's a highly competitive business. Recently a number of

junior companies have cobbled together questionable projects that most likely won't

come into production in order to claim that they are royalty companies. Franco, Royal

and Silver Wheaton have committed significant dollars to individual projects of late,

which increases their risk profiles. However, with the diversification of their asset bases

at this point, it should not be a problem with all three positioned to grow revenues

substantially over the next three years. So overall I do like the royalty model.

TGR: What is your take on pure-play gold producers?

GO: I prefer pure-play gold producers, but those deposits are hard to find. Randgold

Resources Ltd. (GOLD:NASDAQ; RRS:LSE)is a good example of a pure gold play, as are

a number of other intermediates and juniors. But often base metals accompany gold. All

of the major gold producers produce copper: Goldcorp Inc. (G:TSX; GG:NYSE),

Newmont Mining Corp. (NEM:NYSE), Yamana Gold Inc. (YRI:TSX; AUY:NYSE;

YAU:LSE), New Gold Inc. (NGD:TSX; NGD:NYSE.MKT) and Barrick. Production has been

shelved in many big copper-gold porphyry deposits because it is so capital intensive.

Consequently, we are more likely to see the smaller, pure gold projects go forward.

In the past, the majors looked for big projects because they did not want to operate the

smaller mines. Now they are focusing on grade and smaller projects that won't blow up

the company. It may be smarter to take on 10 projects producing 150 Koz than to try

and capitalize one project capable of producing 1.5 Moz.

TGR: Do any particular firms come to mind in that area?

GO: Gold Fields Ltd. (GFI:NYSE) out of South Africa says it is going to focus on smaller

projects, around 150200 Koz. I've heard the same thing from Newmont. Management is

not going to be punished for making a small acquisition versus a buy of $5 billion. The

big buy days are not likely to return any time soon. Managements' excuse that it was

difficult to manage multiple smaller assets rather than a couple of large ones has been

cast aside as the large projects have shown to expose companies to too much risk.

TGR: We both live in California where there's a history of gold mining, but current public

awareness is limited. What the story?

GO: There is gold in the Mother Lode Belt in Northern California, in Imperial County in

Southern California and in Siskiyou County in far Northern California. The unemployment

rate in those areas is pretty high, so the residents are open to mining's economic

benefits. It is the outsiders who are up in arms about mining. Regulations have been put

in place by a very staunch environmental crowd in California, but it's no different than

what we see around the world where local residents are in favor of a mine because of its

economic benefits, only to have the professional environmentalists come in and oppose

the project.

TGR: What junior gold miners in California are worthwhile?

GO: One project that has the potential to turn mining around in California is the Sutter

Gold Mining Inc. (SGM:TSX.V; OTCQX:SGMNF) start up of the Lincoln mine on the

Mother Lode Belt in Amador County. It's a high-grade, underground mine that's financed

by its 50% shareholder, the Rand Merchant Bank. The first 150200 feet (150200 ft) of

that deposit is going to pay back the capital cost of building and developing the mine.

The mines on either side of it historically produced down to 4,000 ft. Production will start

off relatively low at about 22 Koz/year. But there are significant growth opportunities at

the Lincoln mine and along the Mother Lode Belt for Sutter to exploit once it has

established itself. I am very excited about its prospects.

TGR: How do the California companies stack up against Nevada-based mining companies?

GO: Atna Resources Ltd. (ATN:TSX) has a heap-leach mine down in Southern California

that has been going for quite some time. New Gold has the old Mesquite mine, which is a

heap-leach mine near the border of Mexico. But California has hardly any mining activity,

or even exploration activity. So I would say it doesn't stack up at this point.

TGR: Is that primarily because of environmental regulations or the political climate or

the availability of gold?

GO: The perceived difficult environmental and permitting climate in California has been a

deterrent. If a company wants to do open-pit mining in California, it must be prepared to

backfill the pit. That is not required in most places.

TGR: How expensive is it to backfill?

GO: Handling waste material can be quite expensive. So the real California-based

opportunity is underground mining in the Mother Lode Belt and that also is where the

higher-grade ore is.

TGR: Maybe we'll see a replay of 1849.

GO: We're not going to see a replay of 1849. What we'll see is a replay of the

underground mines of between 1900 and 1940. Some of those were just great mines

and were the blue chip companies of their day. The gold is still there.

TGR: Thank you, Greg.

Greg Orrell is the portfolio manager of the OCM Gold Fund. He is also president of Orrell

Capital Management, the investment adviser to the fund. Orrell has over 28 years of

experience in the gold sector as a retail and institutional broker, investment banker and

portfolio manager.

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DISCLOSURE:

1) Peter Byrne conducted this interview for The Gold Report and provides services to The

Gold Report as an independent contractor. He or his family own shares of the following

companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Gold

Report: Royal Gold Inc., Franco-Nevada Corp. and Goldcorp Inc. Streetwise Reports does

not accept stock in exchange for its services or as sponsorship payment.

3) Greg Orrell: I or my family own shares of the following companies mentioned in this

interview: Endeavour Mining Corp., Avala Resources Ltd., Esperanza Resources Corp.,

Newmont Mining Corp., New Gold Inc., Sutter Gold Inc., Randgold Resources Ltd., Royal

Gold Inc., Silver Wheaton, Barrick Gold Corp. and Gold Fields Ltd., all owned through

holdings in the OCM Gold Fund. I personally am or my family is paid by the following

companies mentioned in this interview: None. My company has a financial relationship

with the following companies mentioned in this interview: None. I was not paid by

Streetwise Reports for participating in this interview. Comments and opinions expressed

are my own comments and opinions. I had the opportunity to review the interview for

accuracy as of the date of the interview and am responsible for the content of the

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Source: Watch Todays 1pm Market Update

Paper Gold, Physical Gold: The Ultimate Disconnect

A look at the recent gold price crash...

HOW CAN we explain gold dropping into the $1,300 level in less than a week? asks Casey Research chief economist Bud Conrad.

Here are some of the factors:

George Soros cut his fund holdings in the biggest gold ETF by 55% in the fourth

quarter of 2012.

He was not alone: the gold holdings of GLD have contracted all year, down about

12.2% at present.

On April 9, the FOMC minutes were leaked a day early and revealed that some

members were discussing slowing the Fed $85 billion per month buying of

Treasuries and MBS. If the money stimulus might not last as long as thought

before, the "printing" may not cause as much Dollar debasement.

On April 10, Goldman Sachs warned that gold could go lower and lowered its

target price. It even recommended getting out of gold.

COT Reports showed a decrease in the bullishness of large speculators this year

(much more on this technical point below).

The lackluster price movement since September 2011 fatigued some speculators

and trend followers.

Cyprus was rumored to need to sell some 400 million Euros' worth of its gold to

cover its bank bailouts. While small at only about 350,000 ounces, there was a

fear that other weak European countries with too much debt and sizable gold

holdings could be forced into the same action. Cyprus officials have denied the

sale, so the question is still in debate, even though the market has already

moved. Doug Casey believes that if weak European countries were forced to sell,

the gold would mostly be absorbed by China and other sovereign Asian buyers, rather than flood the physical markets.

My opinion, looking at the list of items above, is that they are not big enough by themselves to have created such a large disruption in the gold market.

Paper Gold

The paper gold market is best embodied in the futures exchanges. The prices we see

quoted all day long moving up and down are taken from the latest trades of futures

contracts. The CME (the old Chicago Mercantile Exchange) has a large flow of orders and

provides the public with an indication of the price of gold.

The futures markets are special because very little physical commodity is exchanged;

most of the trading is between buyers taking long positions against sellers taking short

positions, with most contracts liquidated before final settlement and delivery. These

contracts require very small amounts of margin – as little as 5% of the value of the

commodity – to gain potentially large swings in the outcome of profit or loss. Thus,

futures markets appear to be a speculator's paradise. But the statistics show just the

opposite: 90% of traders lose their shirts. The other 10% take all the profits from the

losers. More on this below.

On April 12, there were big sell orders of 400 tonnes that moved the futures market

lower. Once the futures market makes a big move like that, stops can be triggered,

causing it to move even more on its own. It can become a panic, where markets react more to fear than fundamentals.

Having traded in futures for over two decades, I want to provide some detail on how

these leveraged markets operate. It's important to understand that the structure of the

futures market allows brokers to sell positions if fluctuations cause customers to exceed

their margin limits and they don't immediately deposit more money to restore their

margins. When a position goes against a trader, brokers can demand that funds be

deposited within 24 hours (or even sooner at the broker's discretion). If the funds don't

appear, the broker can sell the position and liquidate the speculator's account. This

structure can force prices to fall more than would be indicated by supply and demand

fundamentals.

When I first signed up to trade futures, I was appalled at the powers the broker wrote

into the contract, which included them having the power to immediately liquidate my

positions at their discretion. I was also surprised at how little screening they did to

ensure that I was good for whatever positions I put in place, considering the high levels

of leverage they allowed me. Let me tell you that I had many cases where I was told to

put up more margin or lose my positions. Those times resulted in me selling at the worst level because the market had gone against me.

The point of this is that once a market moves dramatically, there are usually stops taken

out, positions liquidated, margin calls issued, and little guys like me get taken to the

cleaners. Debates rage about the structure of the futures market, but my personal

opinion is that a big hammer to the market by a well-heeled big player can force

liquidations, increase losses, and push the momentum of the market much lower than

the initial impetus would have. Thus, after a huge impact like we saw on April 12, the

market will continue with enough momentum that a well-timed exit of a huge set of short positions can provide profits to the well-heeled market mover.

Moving from theory to practice, one of the most important things to keep your eye on is

the Commitment of Traders (COT) report, which is issued every Friday. It details the

long and the short positions of three categories of traders. The first category is called

"commercials." They are dealers in the physical precious metals – for example, gold

miners. The second category is called "non-commercials." They include hedge funds and

large commercial banks like JP Morgan. Non-commercials are sometimes called "large

speculators." The rest are the small traders, called "non-reporting" since they are not

required to identify themselves. The ones to watch are the large speculators (non-

commercials), as they tend to move with the direction of the market. Individual entities could be long or short, but in combination the net position of the group is a key indicator.

The following chart shows the price of gold as a blue line at the top, and the next panel

down shows the net position of these large speculators as a black line. You can see that

over the long term, they move together. When the net speculative position is above zero,

this group is betting on rising gold prices. Of course, the reverse is true when it's below

zero. In this 20-year view, the large speculators were holding net negative positions

during the lowest point of the gold price, around the year 2000. As the price of gold rose, their positions went net long, and they profited.

An interesting thing about the chart above is that the increasing amount of net longs

reversed itself before gold peaked in 2011, suggesting that these large speculators

became slightly less bullish all the way back in 2010. The balance remains net long, but it remains to be seen how long that lasts.

What is not so obvious is that these large speculators are so big that they can affect the

market as well as profit from it; when they initiate massive positions in a bull market,

they drive the price of the futures contracts even higher. Similarly, when they remove

their positions or actually go short, they can push the market lower.

So what happened a week ago was that a massive order to sell 400 tonnes of gold all at

once hit the market. Within minutes the price plummeted, and over a two-day period

resulted in the largest drop of the price for futures delivery of gold in 33 years: down $200 per ounce.

We don't have the name of the entity that did this. However, the way the gold was sold

all at once suggests that the goal was not to get the best price. An investor with a

position of this size should have been smart enough to use sensible trading tactics,

issuing much smaller sell orders over a period of time. This would avoid swamping the

market; and some of the orders would be filled at higher prices and thus generate more

profit. Placing a sell order big enough to affect the overall market price suggests that

someone with powerful backing wanted to drive the price of gold down.

Such an entity could have been a large speculator who already had a sizable short

position and could gain by unloading some of its short position once the market

momentum had driven the price even yet lower. Or it could be a central bank – one that

might be happy to have the gold price move lower, as it would provide cover for its

printing of more new money. Of course, it could be some entity that owned long

contracts and wanted to get out of the position all at once. We don't know, but this kind

of activity, resulting in the biggest drop in 30 years, raises more than just suspicion

when we consider how important the price of gold is to many markets around the globe.

Can markets really be influenced by big players? Well, was the LIBOR rate accurately

reported by huge banks? Have players ever tried to corner markets? The answer to all the above, unfortunately, is yes.

There's an even bigger problem with the legal structure of the futures market: even the

segregated funds on deposit can be pilfered by the broker for the brokerage's other

obligations. That is what happened to MF Global customers under Mr. Corzine. (I had an

account with a predecessor company called Man Financial – the "MF" in the name. I also

had an account with Refco, which is now defunct. Fortunately, the daggers did not hit my

account, since I was not a holder when the catastrophes occurred.) My take: the futures

market is dangerous, and not a place for beginners.

One last note: after the Bankruptcy Act of 2005, the regulations support the brokers, not

the investors, when there are questions of legality about losses in individual investment

accounts. Casey Research will be producing a report with much more detail on this subject in the near future.

So, what now? We aren't going to see a secret memo – no smoking gun to confirm that

what happened on April 13 was an attempt to affect the market. Still, the evidence is

suspicious. When big entities can gain from putting on big positions, the incentives are

big enough for them to try – LIBOR, Plunge Protection Team, Whale Trade, etc., all support this view.

Physical Gold

Previously, there was little difference between the physical and paper markets for gold.

Yes, there were premiums and delivery charges, but everybody regarded the futures

market as the base quote. I believe this is changing; people don't trust the paper market as they used to.

Instead of capitulating to fear of greater losses, the demand for physical gold has hit

new records. The US Mint sold a record 63,500 ounces – a whopping 2 tonnes – of gold

on April 17 alone, bringing the total sales for the month to 147,000 ounces; that's more

than the previous two months combined. Indian markets, which are more oriented to

physical metal, now have a premium of US$150 over the futures price in Chicago.

Demand at coin dealers has increased as the price has dropped. And premiums are much bigger than they were as recently as a week ago.

Here is a vendor page that quotes purchase prices and calculates the premiums on an

ongoing basis. It shows premiums of 50% and more in many cases. On eBay, prices for

one-ounce silver coins are $33 to $35, where the futures price is quoted as $23. A look on Friday April 19 shows one vendor out of stock on most items:

Clearly, the physical gold market today is sending different signals than the paper

market.

The Case for Gold Is Still with Us

The long-term fundamental reasons to hold gold are undeniably still with us. The central

banks of the world are acting in concert in "currency wars" or "the race to debase." As

they print more money, the purchasing power of each unit declines. They are caught

between the rock of having to keep interest rates low to support their governments'

huge deficits and the hard place of the long-term effect of diluting their currency. If rates

rise, even First World governments will be forced to pay higher interest fees, leading to

loss of confidence in their ability to pay back their debt, which will bring on a sovereign

debt crisis like what we have seen in the PIIGS or Argentina recently.

The following chart shows the rapid growth in the balance sheets as a ratio to GDP for

the three largest central banks. I've extrapolated the expected growth into the future

based on the rate at which they propose to buy up assets. One could argue about how

long these growth rates will continue, but the incentives are all there for all central

banks to bail out their governments and their commercial banks. I fully expect the

printing game to continue to provide the fuel for hard-asset investments like gold and silver to increase in price in the years to come.

Buying Opportunity or Time to Flee?

So what does it all mean? The paper price of gold crashed to $1,325 in the wake of this

huge trade. It is now hovering around $1,400. My first reaction is to suggest that this is

only an aberration, and that the fundamentals of the depreciating value of paper

currencies will eventually take the price of gold much higher, making it a buying

opportunity. But what I can't predict is whether big players might again deliver short-

term downturns to the market. The momentum in the futures market can make swings surprisingly larger than the fundamentals of currency valuation would suggest.

Traders will be looking for a significant turnaround to the upside in price before entering

long positions. However, a long-term, fundamentals-based trader has to look at the low

price as a buying opportunity. I can't prove it, but I think the fundamentals will drive the

long-term market more than these short-term events. The fight between pricing from

the physical market for bullion and that from the "paper market" of futures is showing

signs of discrimination and disagreement, as the physical market is booming, while prices set by futures are seemingly pressured to go nowhere.

In short, I think this is a strong buying opportunity.

Bud Conrad, 24 Apr '13

Bud Conrad holds a Bachelor of Engineering degree from Yale and an MBA from

Harvard. He has held positions with IBM, CDC, Amdahl, and Tandem. Currently, he

serves as a local board member of the National Association of Business Economics and

teaches graduate courses in investing at Golden Gate University. Mr. Conrad, a futures

investor for 25 years and a full-time investor for a decade, is also a regular lecturer for American Association of Individual Investors.

As a senior researcher for Casey Research, LLC., he produces original research and

analysis for the International Speculator.

The 'Real' Gold Price - 24 April 2013

How the fundamentals drive gold...

THERE HAS been some media piling-on since the recent hard breakdown in gold,writes Gary Tanashian in his Notes from the Rabbit Hole.

The aptly named Howard Gold explains: "Gold's price could be headed much, much

lower".

This was written on April 18, when the value assigned to the monetary relic (AKA its

nominal price) resided at $1391 per ounce. So be warned, Mr. Gold advises that gold

could go much much lower. Gold bugs take heed; Mr. Gold himself has put the double 'much' whammy on you!

After critical support at $1524 was lost our first downside target of $1440 or so was

sawn through like Balsa Wood. Okay fine. For those who micro manage every tick in the

price of gold (I am not one), then here is the situation; the current little rebound must

extend back up to and through the broken support level at $1440 or the next target in the low $1200s is up next.

Now on to the fundamentals, courtesy of Mr. Gold:

"But gold's price could be headed much, much lower, said Campbell Harvey, a professor

at the Fuqua School of Business at Duke University. Harvey has looked at gold prices over the centuries, and concludes that it's still trading at lofty multiples of inflation."

In the article linked above there is another link where you can download the research of

Mr. Harvey and colleague Claude Erb – currently making the rounds like a good gold bug

horror movie – that talks about gold's 'real' price as measured by CPI and GDP. Boiling it

all down, gold is historically over valued as compared to measures of the effects of

inflation – which I define as a rising money supply – on consumer prices and relative to GDP.

We will steer clear of the debate about government number fudging, because it is a

battle that is not necessary. The Federal Reserve and many of its counterparts around

the globe are inflating, or trying their damnedest to inflate. They are using debt

instruments to create money out of nowhere and pumping it into big banks, which are supposedly expected to release the money out to the public.

This could one day manifest in an out of control inflation problem (as measured by the

lagging effects that Harvey and Erb call inflation, or resolve into a more intense

deflationary phase as the thing that is just a whiff now gains momentum and swallows the entire spectrum of inflated assets in one big gulp of illiquidity.

The economy has depended on inflationary policy since the age of Inflation on Demand began under Alan Greenspan's oversight in and around 2000.

Ask yourself this; why are they inflating? Why are they printing money at a furious pace

if the GDP is real and sustainable? The answer is likely because they know that the

financial system is a leveraged thing that must not be allowed to start deflating because if it starts deleveraging, it is not going to stop until the books are cleared.

The authors noted above measure gold's 'real' price in CPI and GDP. Here we have

always measured it relative to the commodity complex, which is generally positively

correlated to the global economy. Below is gold vs. the CCI commodity index.

I had originally thought that a decline to the lower moving average would come with a

continued economic bump, stock bull market and inflation-fueled commodity bounce. But

instead, gold has tanked vs. commodities even as a deflationary pull starts to take hold

with signs of economic deceleration, commodities down and the stock market potentially

in some kind of a topping process.

Yet the 'real' price is still in a secular uptrend because the ratio has held above another

parameter point we noted as important. If the blue arrow is confirmed by turning green

one day, the message will continue to be a secular era of economic contraction, which

has thus far been fought tooth and nail by inflationary policy. That is and has been the

case for gold since day one. Not the case most gold bugs root for, which is inflationary effects, the likes of which are used as data points by Harvey and Erb. See?

Of course Harvey and Erb scare the gold "community" because a majority of the

"community" sees gold as a hedge against higher prices. If the above chart breaks down

and makes a lower low to the spring of 2011 (the height of the last commodity/inflation

blowout) then we may have to admit Bernanke wins, Draghi wins, BoJ, China Central

Planning and all other inflators win. They will have managed to create sustainable economies literally out of thin air.

The alternative to that is hyperinflation, where an asset grab of epic proportions could

engage with gold underperforming things you can actually eat, keep warm with and use

for fuel. This asset grab would come out of a debased monetary system.

More realistically however, we might look for the real price of gold to gain support in its

secular uptrend. This would see economic contraction and by extension, further decline

in commodities and stock markets. We have noted all along that the nominal gold price

can decline in this environment, so people should know why they own the thing. Also,

getting out of the 'Death of the Dollar' cult might be wise as well.

The US Dollar, as long as implied confidence in our leaders remains intact, may be pulled

upward with the real price of gold as a contraction phase bites harder. This is the world's

reserve currency in which a majority of global transactions are settled. As long as this

remains the case, there will be claims on Uncle Buck. USD, as of the moment, is liquidity

within the system. Gold by the way, is liquidity outside the system.

The average gold bug's worst enemy is the inflation tout. It is not the government or the

big banks. It is the individual's expectations of a lump of shiny metal. If they have not

gotten this simple concept yet, after the recent damage, I am afraid they will never get

it. And they will puke up their gold, which failed to protect them from the dreaded

inflation that wasn't.

The "dreaded inflation" is measured in the mainstream by prices (CPI, etc.), not policy-

making actions. Gold is a barometer and the pressure it would indicate could be inflationary or deflationary.

If one day you see the gold price skyrocket, then be prepared for a coming (lagging)

inflation problem that would indeed eventually show up in prices. This could propel

commodities, resources, productive economies and even stock markets to new heights.

If on the other hand gold just hangs around or declines, yet the 'real' price as measured

in commodities rises again, the backdrop would be one of continued economic contraction and declining asset prices.

The third alternative is the least likely; gold hangs around or declines and yet the 'real'

price loses its secular uptrend. This would indicate a sustainable economic expansion,

created by inflationary policy has engaged. Thus far, inflationary policy has served to

build in distortions that subject the system to extreme liquidations. That right there is the continuing case for gold – and for the time being I might add – cash, lots of it.

Gary Tanashian, 24 Apr '13

Gary Tanashian successfully owned and operated a progressive medical component

manufacturing company for 21 years, through various economic cycles. This experience

gave Gary an understanding of and appreciation for global macroeconomics as it relates

to individual markets and sectors. Along the way, Gary developed an almost geek-like

interest in technical analysis (TA), to add to a long-time interest in human psychology.

Various unique macro market ratio indicators were also added to the mix, with the result

being a financial market newsletter, Notes From the Rabbit Hole (NFTRH) that combines

these attributes.

Panic and chaos management? No just plain good common-sense investment:

Trade smart, not with Greed

Pierre A Pienaar

Resources for the Independent Trader Blog

http://sulia.com/pierreapienaar/

Pierre A Pienaar retired in 2011 from business.

I would like to share my passion, my interests, knowledge & experiences in Forex,

Options, Gold Investments, Futures, Stocks, Binary Options, Economics, Stamp

Collection, Sports, Gardening, Reading, Photography, and Politics

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You should therefore carefully consider whether such trading is suitable for you

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the Risk Disclosure Statement that is provided by your broker before you

consider trading.