Gold Hotline for Thursday, March 4.
Yesterday's price action in gold, silver, the mining shares, and the currencies has the look of a bottom. And today we're seeing some follow through as gold is up $1.60, the HUI is up 4.05 points, the Canadian dollar is up 31 ticks, and the U.S. dollar index is down 4 ticks after being up earlier this morning.
Only silver is not cooperating at the moment. It is still down two cents.
The U.S. dollar index has just made a good run from below 85 to almost 90. Since its low was yet a new multi-year low, I expect this rally to run out of gas quickly and then to see the dollar resume its bear market.
I can't say for sure, but it appears the rally in the dollar may be over. If so, then this will be good for our gold shares. Also, I looked at the weekly charts for both the Dow and the 30-year bonds. They are both overbought and look ready to roll over to the downside. The Dow has been in overbought territory on the weekly chart for nearly 10 months and that's a long time in this business. And the bonds have been unable to retrace the sharp decline they had last June/July, after seven months of trying.
The next leg in these markets should see higher gold prices, a lower dollar, lower stocks, and lower bond prices. It should make us a lot of money. It may have begun already but we don't have enough evidence to say that. What I can say is that in a bull market, you buy the dips. Gold has dipped from $430 to a low of $391 yesterday. This is a dip that should be bought. It could fall another $10 to the low $380s and test the 200-day moving average, but there's no reason it has to.
As for our stocks, European Minerals (EPMU) released a study this morning that increases the net present value (NPV) of its Varvarinskoye mine from $146 million to $237.5 million. An independent consulting company of high repute restudied the resources, reserves, and pit design of this mine in light of the higher gold price. And this resulted in a much more valuable mine than the last time such a study was done.
The company has a market cap of $52 million and it has $14.6 million in cash. With a deposit that is worth $237.5 million plus the cash, you can see it is very undervalued. While it is getting a "political risk" discount because of its location, it should still see some serious appreciation as we move forward. This kind of wealth can not be ignored no matter where it is. So EPMU remains a buy.
Genco Resources (GGC) announces it has completed 700 meters of ramp development into the San Raphael zone. The decline has intercepted the vein just like they hoped it would. Genco plans to increase its silver production to 220 tonnes per day by the third quarter of this year. This would be about a 50% increase. And it plans to move to full production of 330 tonnes per day by the end of the year.
This company is on the way up and so is its stock. Genco, which is raising C$1.0 million right now at C$1.50 per share, remains a buy.
That's it for today. I'll be back with another Gold Hotline on Tuesday, March 9. Take care now.
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