RE: ACA, VERY BULLISH CHART.....12 Feb 2016 07:55
BROKER Paradigm Capital
Gold Price – Safe-Haven Reputation Rebuilding & USD Rolling Over | These
two factors are working in gold’s favour, the latter because expectations are
growing that the Fed will delay rate increases. The former is a constructive sign
that a bottom has been put in place for the cycle; this, along with encouraging
technical/chart action, is helping draw a wider buying audience than we have seen
for several months.
Deflation – Increasingly a Consideration | The number of signals that the global
economies are descending into a deflationary environment continues to grow. We
have analyzed gold’s historical performance in deflationary circumstances. Like a
currency, gold retained its buying power better than other asset classes, which
suffered value deflation.
Learning From Past Cycles | In 2015, the seasonal rally peaked in late February,
and in 2014 it ended in mid-March. It is too early to say that this rally is part of a
“new paradigm”. Past cycle recoveries have generally started haltingly. Recall that
gold anticipates the dollar by 3–5 months and gold stocks anticipate the metal by
a similar amount, so we must think at least a half year ahead. Given how quickly
conditions have changed since December (ask the Fed), it’s hard to imagine what
the global economy and markets will look like by mid-2016.
Gold Miners – A Better Business Model | While they still have much to do to
convince generalist investors that their business model is worthy of investment,
gold miners should show a meaningful improvement in margins this year. The
current $1,189/oz metal price compares to the $1,109/oz it averaged in Q4/15 and
the $1,160/oz it averaged in 2015. Major producer exchange rates are 10–20%
lower than a year ago, while the oil price is more than 40% lower
Senior share prices are 38% higher than at the start of the year, while the
Intermediate, Junior and Royalty tiers are up 14%, 24% and 7%, respectively.
Impressive as these might seem, they still leave the median Intermediate-tier producer
at only 27% of its high price since 2010. The Intermediates are the most functional tier
for investment purposes, in our opinion, particularly for generalists.
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