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We have been firmly in the bullish camp for these three precious metals for some considerable time. Our peers may argue that Uranium is not a precious metal but as it now costs around $138/lb or $8.6 an ounce we think it is time that uranium was elevated to the top table.
Anyway we will begin with the metal of Kings, Gold.
The summer doldrums arrived and the Hooray Henrys did their seasonal now almost tribalistic ‘sell and go away’ routine that is their tried and trusted routine each year. But just what if this year is different?
The HUI, which had fallen 50 points from 370 to 320, played its part in reassuring the sellers that spring is here so its time take a breather. Maybe they are right and they can come back in the fall to a platter of cheap gold stocks, we wish them luck.
So what’s the difference this year? Well gold itself is holding up very well at $676.90 and the gold stocks have, as evidenced by the HUI, bounced back some 20 points in 2 days. Now we all know that one swallow does not make a summer so what can we attribute this pleasant surprise too? Well the ECB has announced that its gold sales are over for this period of their agreement, which bodes well for gold. We take this news with a pinch of salt, as the players on the ECB are as about as trustworthy as a bunch of oil ministers ratifying oil production quotas. But, taken on face value it is good for gold. The second reason is the up coming Broadway production entitled “The Bounce” starring the US Dollar as the dead cat. Throw in a few nervous Finance Ministers heavily overloaded with paper reserves and gold along with gold stocks start to look attractive when compared to the vanishing wealth of their paper pile. It’s now a question of who will make for the exit door first an ignition that will then stampede the others (after all we are talking about followers and not leaders, as leaders are not attracted to a public service life style)
We have not sold any of our gold stocks as we took the view that we should ride out whatever summer selling came along and we are still of that view. The last few days as seen a reversal to the expected continuing down trend for gold and those who sold must now start looking for a re-entry point.
And now to Silver which has many industrial uses but is often referred to as poor mans gold.
The last few days has seen silver form a base from which the beginnings of a rally can be detected.
We normally do not like to look at silver on such a micro level but this chart could be telling us that silver has indeed found some support on which to base a rally. We could still experience some more of the sideways action typified by the summer doldrums but May is now behind us giving us some room to feel a little more optimistic about the future.
As we can see from the chart, silver appeared to form a double bottom at the $12.80 level and as we write has moved up to $13.52 for a gain of $0.72 or 5.6% since the 24th May 2007.
Although this is a small move and could reverse as silver has often done in the past, we see this as an indication of better things to come. So if you have a few favourite silver stocks start accumulating now even if it is only a few for now and then buy again a little later down the line when you are more confident that silver is actually on the move.
Finally we have Uranium whose spot price is moving faster than a speeding bullet:
The second uranium auction in two days is believed to have pushed the spot price higher with a gain of another $5/lb. The utility companies that missed out on the first auction had another chance to buy uranium on Friday. We won’t know the exact price until next week and rumour has it that it could be as high as $140/lb. This we should be able to confirm next Monday or Tuesday.
What is important to note is that the price rises are coming through quicker than ever as the scarcity of the product heaps pressure on the users. It is sweaty palm time for the Procurement Officers responsible for securing the supply for their power plants to remain operational. For the producers it is a question of holding ones nerve while the pressure builds and higher prices are placed on the table.
Uranium started the year at around $74/lb so in just 5 months it has gained a whopping $64/lb or about 86%!
Is it over yet? No way, there is another auction on the 12th June 07 just 10 days to go. Can you imagine the hastily arranged meetings currently being scheduled in order to formulate a winning strategy? All of the best negotiating skill sets in the world are sidelined and useless at this juncture. If your company is in the ‘Must Have’ boat or else, then you have to bite the bullet and get your hands on uranium regardless of cost, as the alternative is a shut down, unthinkable!
So what about uranium stocks you ask? And a good question it is too! Since the beginning of the year many of these stocks are now trading at lower levels than they were then. To what can we attribute this disparity? Well for starters there is the seasonal ‘Sell in May and go away’ crowd who have been selling across the precious metals board. There is also a certain amount of profit taking going on as investors take money off the table. This is a sensible thing to do in a normal situation. These moves may well prove to be correct, as uranium stocks are lower. However the question those sellers must now wrestle with is when do they get back in. This is a red-hot market sector that moves very quickly at times as evidenced by particular stocks gaining 15% in a single day. Ouch that hurt if you were on the sidelines.
As we have said many, many times over we see uranium at $200/lb coming to a screen near you in the short term. We will use this disparity between the metal and the stocks to invest in a few more of our favourite uranium stocks.
Have a very precious day!
For ideas on which precious metal stocks to invest in, subscribe to our newsletters completely free of charge at: www.uranium-stocks.net
Bob Kirtley
bob@uranium-stocks.net
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