What happens if the United States economy continues its recent recovery next year and the Federal Reserve carries on printing money?

American banks are awash with cash. What if borrowing suddenly has a revival to match the new life in the US economy? Inflation could very quickly pick up.

US stocks have outperformed commodities for the past three years. That position could be quickly reversed in an inflation scare, with commodities the prime beneficiary.

And what commodity has been beaten down the most this year?

Silver.

….continue reading the case for a Silver Surge HERE

Here are today’s videos:

Silver:Gold Ratio Versus Gold Charts

Silver Intermediate & Long term Target Charts

Gold Slow Stokes & Fib Line Target Charts

Gold Stocks Bull Wedge & Fib Line Target Charts

Thanks,

Morris

Morris Hubbartt
trading@superforcesignals.com
trading@superforce60.com
Super Force Precious Metals Video Analysis
posted Dec 27, 2013

“Our main format is now video analysis…”

As a general rule, the most successful man in life is the man who has the best information

The current investment market for junior gold companies is arguably one of the worst since the United States went off the Gold Standard in 1971.

Despite the current high price of gold (and many other commodities), investors have almost abandoned the junior gold mining sector to invest in physical bullion, ETF’s, and producing companies. The value of the TSX-Venture Composite Index, shown below, is similar to what it was in the early 2000’s when the price of gold was below US$300 per ounce. 

In 2013 I expect to see the equity market in the junior gold sector begin to correct itself and investors should currently be taking advantage of the investment opportunities resulting from the severely beat up junior sector. There presently exists a great opportunity for those investors who are “ahead of the herd” and want to invest in the market at or near the bottom.

TSX-V Composite Index 10 Year Chart

The Venture exchange is down over 50 percent from its March 2011 high.

The questions become – How does an investor take advantage of the dislocation in the junior markets?  What might be a good junior to have on our radar screens?

Investing in junior gold miners is a speculative business at best, with risk on the downside but the potential for significant reward on the upside.

Two ways to mitigate risk for investors is to buy at market bottoms and have a long-term view of their investments to take advantage of a company’s increasing value as its projects move through exploration and development while markets recover. Ideally, the pay off comes when a project is brought into production, gets joint ventured, or is sold by the junior. 

So in this environment, companies should have the following key attributes:

• Established track record
• Experienced and competent management teams
• Established mineral resources
• Projects in safe and stable jurisdictions of the world
• Strategically located properties – existing infrastructure
• Significant upside potential

One junior to consider when looking at the many juniors available to investors is Emgold Mining Corporation (TSX-V: EMR). Emgold has been in existence since 1989 and has survived numerous equity and mining cycles. It has an experienced management team with background in all facets of the mining industry, including exploration, permitting, project development, and mine operation.

The Company has a solid resource base in its Idaho-Maryland Project in California.  And this resource has grade – something operating companies are looking for as mining costs continue to rise (higher grades typically equate to lower cost per ounce production). Emgold’s Idaho-Maryland Deposit was listed as the 9th top undeveloped deposit by grade in the Global Gold Mines and Deposits2012 Ranking, for deposits over one million ounces of gold, by Natural Resource Holdings.

“Another data point we found fascinating was that out of 439 mines or deposits, 189 are in fact producing mines owned by companies with an average market capitalization of $1.8 Billion. This leaves us with a universe of undeveloped deposits over 1 million ounces of just 250. Of course some of these 250 deposits are owned by miners (84) while just 166 are owned by independent junior companies, private companies, or government sponsored enterprises. Investors seeking leverage to gold should focus on these companies as they provide the best exposure to a rising gold price environment…In the United States we found only 33 deposits owned by 26 companies (23 Independents).” Global Gold Mines and Deposits 2012 Ranking

In emerging markets, political strife and resource nationalism have triggered increased taxation, social unrest and changing regulations which is hindering resource development and scaring away investment. Emgold works solely in North America with its transparent and structured regulatory regime. Its properties are located in California, British Columbia, and Nevada, some of the most attractive mining regions in the world being internationally known as safe and stable mining jurisdictions. 

The Idaho-Maryland Project is in the historic Grass Valley District which produced over 17 million ounces of gold historically. The Stewart and Rozan Properties are in the historic Nelson Mining District of British Columbia, which hosted many small gold and silver mines. The Company also has the Buckskin Rawhide East, Buckskin Rawhide West, and Koegel Rawhide Properties all located in the historic Rawhide District in Nevada.

What is strategic about these locations? Obviously the Idaho-Maryland deposit in California represents grade. The mine historically produced 2.4 million ounces of gold at a recovered grade of 0.43 ounce per ton gold and holds a measured and indicated resource of 472,000 ounces gold (1.7 million tons at 0.28 opt gold) and an inferred resource totaling 1,002,000 ounces gold (2.6 million tons at 0.39 opt gold). The potential exists to delineate a 3-5 million ounce resource at Idaho-Maryland, subject to additional exploration.

In California, we are seeing a resurgence of mining activity with New Gold Inc.(NYSE:NGD, TSX:NGD) operating the Mesquite Mine, ATNA Resources Ltd. (TSX:ATN) operating the Briggs Mine, and Sutter Gold Mining Inc. (TSX-V:SGM) reopening the Lincoln Mine.  Emgold is arguably undervalued because their main property is in California. While the state is sometimes viewed negatively by the mining investment community for its stringent environmental standards (not a bad thing), regulations for mine development and operation are clear and straightforward. A misunderstanding of California’s regulatory environment presents a significant opportunity for investors to capitalize on mispriced equities.

While historically there has been a lot of focus Emgold’s substantial Idaho-Maryland Project, many investors have failed to realize that the Companies other projects provide considerable opportunity as well.  For example, the Rozan Property (Nelson Mining District, South West British Columbia, Canada) is adjacent to Altair Gold Inc.’s (TXV-V:AVX) Kena Property.

The Kena Property has a measured and indicated resource of 549,000 ounces of gold and an inferred resource of 513,000 of gold. Altair is well on its way to potentially delineating a plus one million ounce bulk disseminated resource which is sure to attract the attention of the majors. The Stewart Property is adjacent to the historic Yankee Dundee Mine that is owned byDuncastle Gold Corp.(TSX-V:DUN). Duncastle has just signed a production agreement with a private company called Armex Mining Corp. who appear to be looking to advance the property into production.

Emgold’s Nevada properties also represent substantial unrecognized potential. Over the past several years, Emgold quietly acquired a number of properties adjacent to or near the historic Denton Rawhide Mine in Nevada’s share of the prolific Walker Lane Gold Belt.

The Walker Lane shear zone straddles the border between Nevada and California and has a long history of exploration and mining, dating back to the discovery of the world famous Comstock Lode in the 1850s. The Walker Lane is notable for its numerous occurrences of volcanic-hosted epithermal gold and silver deposits.

The majority of gold deposits occur in the Walker Lane shear zone, which is a 100-km wide, NW-trending structural corridor extending southeast from Reno towards Las Vegas. The Walker Lane gold belt has historically produced over 50 million ounces of gold and 400 million ounces of silver.

The Denton-Rawhide Mine was owned and operated by Kennecott Minerals Company from 1988 to 2010. From 1990 through 2010, the Denton-Rawhide Mine produced 1.5 million ounces of gold and 12.7 million ounces of silver, according to Muntean (in Nevada Bureau of Mines and Geology Special Publication MI-2010, 2011). In 2010, the Denton Rawhide Mine was acquired by Rawhide Mining Company LLC (“RMC”) a private company, who continued to produce gold from historic heap leach pads. In late 2012, Rawhide Mining Company re-commenced production from the mine. 

In late 2012, Emgold announced a deal whereby RMC is doing a CDN$1 million private placement into Emgold.  Emgold will use part of the proceeds to buy out the underlying property interests in the Buckskin Rawhide East Property, which it will subsequently lease to RMC. RMC is now acquiring a second property, the Regent Property, from Pilot Gold Corporation (TSX: PLG), as per Pilot’s January 15, 2013 press release. Emgold’s Buckskin Rawhide East Property is surrounded by Denton Rawhide Mine on the east and south, and by the Regent Property on the west and north. Emgold’s Buckskin Rawhide West Property is adjacent and to the west of Regent and its Koegel Rawhide Property is just three miles south of Denton Rawhide Mine.

Conclusion

If you are looking for a junior gold company to put on your radar screen, one with an existing substantial resource and many paths to significant potential upside, Emgold definitely qualifies to be there. Is Emgold on your screen?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:

WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Londonthenews, Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTReport, Vantagewire, Indiatimes, ninemsn, ibtimes and the Association of Mining Analysts.

If you’re interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us atwww.aheadoftheherd.com

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission.

Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.

Richard does not own shares of Emgold Mining Corporation (TSX-V: EMR). 

Many times in our previous essays we have written that if you want to be an effective and profitable investor, you should look at the situation from different perspectives and make sure that the actions that you are about to take are really justified. Therefore, at the beginning of the month we examined gold and silver mining stocks to find out what kind of impact they could have on precious metals’ future moves. Back then, we concluded that the medium-term outlook for gold was bearish and mining stocks seemed to be leading gold lower. To make sure that our assumptions were correct, we decided to check the chart featuring gold’s price from the non-USD perspective and also from the European perspective. You could read the conclusions in our essay from Dec. 6, 2013. 

A week ago we introduced you to 3 signs of gold’s upcoming decline. At that time we wrote in the summary:

(…) the medium-term outlook for gold remains bearish and it seems that we might see another sizable downswing shortly.

In the following days, after the essay was posted, gold, silver and mining stocks reversed and started their recent declines. Day by day, we saw lower values of gold, silver and mining stock indices. With this downward move, the yellow metal, the HUI Index and the AXU Index declined below their December’s lows (to be precise: at the same time silver dropped to slightly above its previous low). 

Taking these circumstances into account, you are probably wondering whether the recent declines will continue or not. Although we saw a small rebound in the early European session, we clearly see that the precious metal sector remains weak.

As we emphasized in our previous essays, many times in the past the situation in the U.S. dollar and the euro gave us important clues about future precious metals’ moves. Therefore, today we’ll examine the US Dollar Index (from many perspectives) and the Euro Index to see if there’s anything on the horizon that could drive the precious metal market higher or lower in the near future. We’ll start with the medium-term USD Index chart (charts courtesy by http://stockcharts.com).

Looking at the above chart, we see that earlier this week we had a similar situation to the one that we saw last week. Just like a week ago, the USD Index broke below the medium-term support line based on the February 2012, September 2012 and January 2013 lows (the bold black line) and the lower medium-term line based on the September 2012 and the January 2013 lows (the thin black line). However, once again this deterioration was only temporary. The dollar quickly rebounded and invalidated the breakdown below both medium-term support/resistance lines, which is a sign of strength and a bullish factor. From this perspective, there was no true breakdown and the trend remains up.

Let’s check the short-term outlook.

On the above chart, we see that earlier this week, the USD Index tried to break above its horizontal support line based on the June low without a positive result. These circumstances triggered a sharp decline on Wednesday – just before the Fed released its statement. However, the greenback quickly reversed course when the Federal Reserve announced that it will start winding down its stimulus program (small, but still) and rallied above the 80.5 level. 

With this upswing, the U.S. dollar broke above the declining short-term resistance line. Although, the USD Index declined in the following hours and came back below both resistance lines, it turned out on the following day that this small deterioration was temporary. On Tuesday, the greenback extended its rally and moved higher breaking above both resistance lines once again. Taking this fact into account, we can conclude that the outlook remains bullish and that it could be the case that the decline is already over and that another rally in the US Dollar is just starting.

Let’s now take a look at the long-term Euro Index chart. (larger view click on image or HERE)

The first thing that catches the eye on the above chart is the target area, which was reached once again. 

In the previous week, the European currency almost reached the October high. Back then, it seemed that further growth was limited, not only because of this resistance level, but – even more importantly – because of the long-term declining resistance line based on the 2008 and 2011 highs (in terms of weekly closing prices). As a reminder, this strong resistance line successfully stopped growth in October and triggered a sharp decline. Additionally, at that time, a similar situation preceded a local top in precious metals. On top of that, previous tops (in 2008 and then in 2011) were followed by major declines in the precious metals sector. If history repeats itself, we may see similar price action in this situation. 

Looking at the above chart, we clearly see that earlier this week the Euro Index reversed course after reaching a strong resistance zone and declined below the level of 137. What’s most interesting, precious metals followed that decline, which suggests that we’ll likely see further deterioration in the PM’s sector – similarly to the one seen in the past.

Please take a moment to compare the euro’s performance in the past few weeks with the performance of the precious metals sector (lower part of the above chart).

Let’s now take a look at the medium-term Euro Index chart.

Looking at the above chart, we see that the Euro Index climbed once again this week and reached its very strong resistance zone created by the previous 2013 high and the short-term rising support line based on the July and September lows. As you see on the weekly chart, the European currency didn’t manage to break above these levels, which triggered a sharp decline and pushed the euro slightly above the 38.2% Fibonacci retracement level based on the Nov.-Dec. rally. From this perspective, the outlook for the coming weeks is bearish.

Having discussed the above, let’s take a look at our Correlation Matrix to find out how all this can translate to precious metals and mining stock prices.

Basically, the short-term numbers don’t tell us much at this time when we look at them directly, but can tell us something if we look a bit beyond them.

The correlation between the USD Index and the precious metals sector is slightly positive in the 30-day column (and even moderately significant in the case of the mining stocks), which tells us that in the past 30 days PMs and the USD Index have moved on average in a similar direction. However, this was the case when they both declined. When the USD moved higher (this week), metals and miners declined even more. This is a very bearish combination – whatever the USD does, the precious metals sector seems to either decline modestly or strongly.

Once we know the relationship between the U.S. currency and the precious metal sector, let’s check the current situation in gold. 

(Larger click image or HERE)

In our essay on gold from Dec. 6, 2013 we wrote the following:

(…) earlier this week we saw a major change on the above chart as gold broke below the rising long-term support line (…) the implications are bearish, especially that the RSI indicator is currently not oversold – it’s above 30 and well above its previous 2013 lows. Back in 2008, the RSI indicator moved close to its previous lows when the final bottom was in. In this case we would need to see much lower gold prices to have RSI close to the 20 level. The next stop for gold is at its 2013 low, slightly above $1,170. It seems to us, however, that this will not be the final bottom for this decline, we expect the final one to form close to $1,100, possibly even at $1,050.

Last week, we saw a very temporary move above the previously-broken rising long-term support line, which was followed by another decline. In our previous Premium Update, we wrote that if gold was not able to hold above this line despite a decline in the USD Index, then it was truly a weak market and quite likely to decline much more. 

Looking at the above chart, we see that earlier this week we had such price action. Gold didn’t manage to successfully climb above the rising long-term support line (not to mention staying above it), which triggered a sharp decline. With this downward move, the yellow metal not only declined below last week’s low, but also slipped below the level of $1,200. These circumstances clearly show the weakness of the buyers and it seems that the previous 2013 low will be reached quite soon.

The exact target for gold is quite difficult to provide. For silver and mining stocks there are, respectively: combinations of strong support levels, and a major support in the form of the 2008 low. In the case of gold, there are 4 support levels that could stop the decline and each of them is coincidentally located $50 below the previous one starting at $1,150: $1,150, $1,100, $1,050, and $1,000. 

Summing up, the current situation in both currencies suggests that we are likely to see further deterioration in the Euro Index and improvement in the USD Index in the near future. Taking these facts into account and combining them with the current relationship between the U.S. dollar and the PMs, we can conclude that the implications for the precious metal market are bearish. Please note that the exact target for gold is quite difficult to provide based on the gold chart alone. While it’s likely that the final bottom will form below $1,150 and above $1,000 (or at least not much below this level), if we want to get a more specific price projection, we should use other techniques, especially those which worked in mid-2013 when the previous gold’s low was formed.

Thank you for reading.

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Tools for Effective Gold & Silver Investments – SunshineProfits.com

Tools für Effektives Gold- und Silber-Investment – SunshineProfits.DE

* * * * *

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Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.