2012: THE YEAR OF COPPER NOT SILVER
Henry Weingarten Last Updated:
GOLD IS AS GOOD AS GOLD”
Q4 2011 Gold FV $1388 = Commodity
FV: 1088 + Currency FV: 1341 + Inflation Metal FV: 1200
+ Crisis FV: 1920
Q1 2012 Gold FV $1430 = Commodity
FV: 1125 + Currency FV: 1445 + Inflation Metal FV: 1200
+ Crisis FV: 1950
AFUND 2012 FORECAST
Probability of 1250 gold in 2012
Probability of 1430 gold in 2012
Probability of 1550 gold in 2012
Probability of 2000 gold in
Current Probability of 2500 gold in 2012
Current Probability of 3000 gold in 2012
Fair Value is $25 ($22) as an Investment and $18 ($16) as a Commodity.
1.Looking ahead, we see a
mixed to positive picture for Gold but NEGATIVE for Silver by Q2 2012!
2.BY SPRING TO FALL 2012 THE SILVER BUBBLE IS LIKELY TO BURST (80%+ Probability).
We prefer to Buy and Hold Copper ($4+ Target) over Silver in 2012
AFUND VIEW: GOLD IS IN MID STAGE BUBBLE
SILVER IN IN A LATE STAGE BUBBLE
Gold is in a Mid stage Bubble: not so unlike the Internet bubble or real estate
bubble, but can be expected to last for several more years.
Commodity prices today are beyond
fundamentals of supply and demand.
- High prices are dependent on
Some say this is a
permanent fixture of markets and its different this time. I do not believe
My definition of a Bubble: The false View that prices ONLY go up.
I would remind all, what happen to oil approaching $150 with calls for $250
and then it fell to $90, then $60 and bottomed at $37.
Think this can't happen to gold and silver? Think again!
Characteristics of a Bubble:
1. Price Insensitive
2. There is no price "investors" are willing to sell
3. Like Tulip mania, when investors sold all their assets (homes, business) for a tulip, so do some "investors" today.
•Central Banks are becoming net buyers of gold, while mine output
is not sufficient to keep up with investor demand.
ratio 9 was well above classic buy signal of 5; currently 8.65.
ratio of 51 still low; can easily go back up to 54-64.
term Gold: Seasonality shifting soon after Chinese New Year (less relevant factor).
- Intermediate term Gold: Mixed to positive Astro.
term Silver Positives: Some positive Astro January/Seasonality..
- Intermediate term Silver: Mixed then Negative Astro.
INVESTING & TRADING
widely available and
- Low interest rates
M & A
unrest and cost rising,
costs are high
royalties and taxes,
resource nationalization and expropriation threats.
THREE VIEWS OF GOLD over next year*
Range bound $1500 to $2050
RALLY to $2000 - $3000
Return to VALUE: $1430*
Gold as a hedge.
remains cheap insurance against both declining US dollar and
and precious metals can perform well in either an inflationary
or deflationary environment.
Investment Demand is driving precious metals. But remember: Investors
can become fickle. Remember how quickly Oil dropped from $147 to $38?
Silver bugs especially beware!
Today (July 21) gold stocks are discounting gold
prices 25% below current spot ($1160-$1190).** Think about
This is one key reason we prefer gold stocks to gold and silver stocks to
silver. We use a base line calculation for our valuation of precious metals stocks (currently
Gold $1280 and Silver $18). Then we calculate cash flow. Obviously if PM
prices are higher, this would all be gravy for a value investor.
* Thanks to the August Fed
meeting, gold's range was increased from $1500 to $1800 to $1500 to
$2000. FV increased from $1280 (7/21/2011) to $1380.
Thanks to the January 25, 2012 FED pledge to keep US interest
rates low until 2014, FV inceased again to $1425.
** Some analysts use a higher $1400 gold figure.
We did finally see P1
of our gold investing December 29, 2011 with the GDXJ ~22.
Our Fair Value for
Gold in Q1 2012 is $1404. GDXJ at 18-22 is a long term buy and hold; GDX at
44-48. That will be true for many of the higher quality precious metals
stocks. While we are close to finally (like 2010 and before) buy and hold, we
are NOT forecasting major gold moves- although it is always possible and a good
hedge. Think of gold companies as cash flow manufacturers and juniors as biotech
or technology discoveries plays. More on this as time goes
There will be plenty of short term and daily trading opportunities, long and short ahead!
On the positive side Gold has seasonality and positive momemtum going
into Q1 2012. However, from a valuation side, it is overvalued
20%. While that doesn't always matter in short term trading, I
usually prefer the "hard way" - to sell Resistance than buy Support
more often than not. However, should Ben announce QE3, then that
easily could add another $50-$100 to gold's valuation in the blink
of an eye: cf his January 25, 2012 pronouncement.
Trading Targets arrived earlier and revised higher. However, in Q2 2012, they may be revised lower.
2012 GOLD TRADING RANGE $1430 to $2170.
2012 SILVER TRADING TARGET $21-$28 or lower.
Gold and Silver
continue to often trade somewhat irrationally e.g. I believe gold should RISE on Euro
problems not fall! Be that as it may,in Q1 2012, we
will buy AND sell the precious metals.
We repeat on a long
term investing basis, however, many small and midcap gold stocks are undervalued
while some energy ones are very fairly valued.
For the former, we are
ideally are looking to a repeat of GDXJ 22 (to 18) buys, for the latter Oil at or under $85.
FOUR FACES OF GOLD
Gold Fair Value $1430
Gold is a commodity, currency, inflation measure & crisis metal
2011 Gold FV: $1430
Metal FV: $1200
These numbers are very dependent on current valuations and future projections of the $US and Oil.
WSNW premium subscribers (gold, platinum and diamond levels) have daily access to our views.
Commodity traders (daily, swing & positional) require a platinum or higher level subscription.
Our view of
1) Gold is
There are risks to both buying gold AND selling gold short
3) Gold shares offer
more value than gold itself.
would like to leave you with three thoughts:
The commodity sector continues to be recommended multi year investments for both wealth
preservation and wealth creation.
Ben Bernanke has been, and unfortunately probably will continue to be, great for Gold.
3. Cheap food and energy are ANCIENT HISTORY.
So too are cheap metal prices ANCIENT HISTORY.
HYDE PARK SOAPBOX
If $400 gold
indicates the presence of inflation, how can there be $900 gold
and virtually none? Must
it be $1200 before the talking TV heads acknowledge what every
living and breathing American
knows: Living in the REAL world costs are far HIGHER than the official US
government statistics pretend!
2010 Update: $1200
wasn’t high enough. Must it be $1500? $2000?
2011 Update: $1600 wasn't high enough. Must it be $2000 or higher?
Or like food and energy, will the price of gold no longer "count"?
QUOTES IN THE NEWS
Prices - Silver Prices - Revisiting Our Proposal for an Overnight
Prices to Peak in 2013, Says GFMS
positioned for takeovers, IPOs
Rich trim gold holdings, buy art
Soros Sees Gold Prices on Brink of Bear
trading no longer just risk-off,
Subscribers should review our premium S:
READER: If the odds favor a market rally, how
will that affect the price of gold and silver? Higher or
HW: Could be either
depending on WHY markets are rallying. But the odds are more
likely they would rally short term in January with a market rally.
READER: I have silver bullion that I purchased in the mid-teens. I'm going to
sell, but my question is: Should I sell ALL or do you see silver coming back in
1 or 2 years and setting previous highs or going lower than the mid-teens?
Wait until at least Friday - silver should be up tomorrow.
[It did] And not totally safe to short until
the March/April period so be cautious and step in. You can take your profits (tomorrow)
or half your profits- that way you don’t lose whether Silver continues to rally
much higher or falls back down to earth next.
READER: Will you guide us in the buy of copper? What is your target
price of copper? Where is the place to buy? (better stocks or ETFs?)
HW: We are preparing a special 2012 WSNW subscriber post on copper which will
answer these questions.
In the meantime, we believe :
1) Buy as soon as Jan 1, 2012,
2) Our 2012 target is above $4.
Ways to Play Copper's Seasonal Strength
READER: RE: GOLD stocks not the same
Can you explain the meaning of that?
HW: 1) I find many gold stocks sport a better intermediate term
valuation than physical gold.
2) They do not trade as much in tandem as one might expect. Circa
November, they should be more in sync.
READER: I'm sure you'll read Krugman's piece on gold prices but perhaps
not this reply: http://econospeak.blogspot.com/2011/09/gold-and-oil.html#more
Interesting, but I think this misses the MAIN point - the gold price today is
NOT so much about supply and demand fundamentals or even interest rates as much
as INVESTOR FEARS, i.e. a traditional source of preservation of wealth. Additionally, if I were Chinese, it would be
rational to buy gold with Yuan to diversify my (limited) asset base.
Granted the Chinese argument, but for the rest of us, if interest rates rise,
gold becomes less rational; no?
Depends if interest rates are greater or less than inflation (as is the case
Certainly, as long as real interest rates are negative, the world-wide search
for secure assets will continue.
Bearish for silver but not gold? I
thought they went in tandem those two. Crazy times right now.
HW: Silver is primarily an economic metal
and the world economy will remain weak into 2012.
Gold is mixed and has many different drivers (commodity, currency,
READER: RE: Gold $2000. Just checked your web site dated 9/24/2011 where
you show gold has a 90% chance to reach $2000 by 2012. Do you feel that this
price is still attainable in the 4th Qtr?
Also, do you still see silver making a move in the 4th and the 1st of
2012 before the bubble burst? Will your answer be based on Astro?
HW: Yes, almost anything is possible in today’s markets. Currently we
see an 85% chance by 2012, not necessarily by the end of 4Q 2011. We raised our
Fair Value for Gold in Q4 2011 from $1380 to $1385. Also, unlike previous years, we may LOWER our
gold targets as time goes on, not raise them as we have in the last few years.
Note: as we said at our July Triple Gold conference, there is likely more US$
strength ahead short term. Silver reached our P1 $26 target only briefly last
month and the Gold/Silver ratio has risen to 54 and getting closer to our P1 of
58. After that, there may be a short term opportunity to buy silver closer to
Fair Value ($16, 18, 21) and then sell after Q1 2012 (not H1 2012).
My answers are usually based on a combination of astrology, technicals