Daily Profit : gold

How The Pros Analyze Gold Stocks: Part II

Ian Wyatt — Thu, 26 Apr 2012 15:41:00 GMT

Last week we published the first of two articles on how professionals are able to analyze gold stocks. This second installment comes from Tyler Laundon, one of my top research analysts with Small Cap Investor Pro.

-- Ian

Too many investors buy mining stocks with no idea what they are really worth. We're going to change that by giving you the tools to figure out if that exploration stock is a good buy or not.

Last Thursday I discussed the reasons behind regulation in the mining sector and described, at a high level, this regulatory framework.

Today I'll get into the nitty-gritty and outline the different classifications of gold and silver ounces in the ground, what each is worth and how you can tell if a mining stock is a good buy based on how the market values those ounces.

Admittedly, this isn't the most riveting material. But if you own even one share of a mining company you need to know how valuable 'your' ounces are, so this information is critical.

Since a mining company's exploration efforts take years, the regulatory framework of the Canadian Institute of Mining, Metallurgy & Petroleum (CIM) requires companies to incrementally gather and report the data to you in the form of scoping studies, prefeasibility studies and feasibility studies - and updated versions of any of the above.

This reporting format is a good thing. It provides transparency to the market on an ongoing basis, creates milestones that help a company seek funding, and tells you if a mining project is likely to be profitable - and thus make your shares of stock go up.

Without these checkpoints you'd be flying blind.

The CIM's framework outlines three main categories and two sub-categories for exploration-stage projects. The category each potential ounce falls into depends on the quality, quantity, detail, and interpretation of geological data, and ultimately the level of confidence in this data.

Typically, a miner's goal is to move ounces that fall into a 'lower confidence' category up to a higher confidence category by gathering more data (i.e. drilling) to increase confidence that the ounces can be profitably mined.

This hierarchy of categories creates intense motivation for mining companies to firm up their resource base because higher-confidence ounces typically receive a higher valuation by the market.

While all three main categories are deemed to have some economic value and are worth considering as part of a mining operation, it's the two sub-categories that include the “high value in ground ore.”

If there is one thing you take away from this article it should be this - the CIM's three main categories and two sub-categories, and their definitions, are as follows:

1) Measured Mineral Resource - These are the highest-confidence ounces based on reliable drilling and sampling data.

a. Proven Reserve - The economically mineable part of a Measured Resource that has a determined value as outlined in at least a Preliminary Feasibility Study.

2) Indicated Mineral Resource - There is enough data on grade and quality to conservatively estimate the value of these potential ounces, but there is still some uncertainty.

a. Probable Reserve - The economically mineable part of an Indicated Resource (and sometimes a Measured Resource) that has a determined value as outlined in at least a Preliminary Feasibility Study.

3) Inferred Mineral Resource - Data shows these ounces exist but you can't put an economic value on them without more drilling and sampling.

This couldn't be easier to understand, right? Well, not exactly. But as you evaluate mining stocks it'll make more sense. I adopted this figure from the CIM and I keep it on my desk for quick reference.

One of the things that make this framework confusing in practice is that companies are constantly updating their reports as they try to showcase the economic value. And some ounces can fall into two categories, such as Measured Resource and Proven Reserve, for instance.

This has led the industry to group categories together in a modified way to show a climb up the value chain from Inferred to Measured and Indicated (M&I), and ultimately to Proven and Probable (P&P).

The bottom line is as a company moves ounces up the value chain, they become worth more. And they should - because drilling is very expensive.

So how much are these ounces worth?

Generally speaking, the industry rule of thumb is that inferred ounces are worth $20 per ounce, Measured and Indicated are worth $30 per ounce, and Proven and Probable are worth $160 per ounce.

Now this is a huge generalization, and the law of averages suggests that in reality the values that a company gets for its in-ground ounces are all over the map.

This is where the modifying factors come in, and are often what differentiate an attractive miner from an unattractive one. These include things such as grade of the ore body, method (and associated cost) of the proposed mine, timeline to development, political risk and availability of capital, to name a few.

The easiest way to compare one mining stock to another is to look at a ratio called Enterprise Value per Ounce, or EVO. To calculate EVO, divide a company's ounces into its Enterprise Value (which is simply its market cap plus debt, minus cash and is available on most financial websites). Because market cap is determined by the share price (and thus the market) and the ratio includes cash and debt, the EVO ratio does a fairly good job of stating how valuable the market believes the company's ounces are.

You can do this for all ounces, or break them up into the various categories and industry averages I listed above; $20/oz. for Indicated, $30/oz. for M&I and $160/oz for P&P.

By comparing the values, you can get some sense of whether the stock is trading at a premium or a discount to its peers.

Now if you've read this far, I suspect you have the patience to go out and try this. I also suspect you'll be among the minority - and that's why you'll have an edge.

Take pride in the fact that you're figuring this out on your own. I guarantee that after you do it three times, it'll make a heck of a lot more sense. And you'll get a lot faster at evaluating new stocks as well as understanding new reports from the mining stocks you currently own.

You'll also have the confidence to know if that mining stock you want to buy is a good deal or a rip-off. As time goes on you'll be able to bring some of the modifying factors into the fold, and you'll likely be a much more successful mining investor.

Good Investing,

Tyler Laundon, MBA

Editors Note:

You can download the CIM's NI 43-101 Standards document here and print it out for future reference. You can also access a PDF of "CIM Definition Standards for Mineral Resources and Mineral Reserves" on the same webpage.

P.S. My colleague Ian Wyatt has recently added an interesting gold stock to his Top Stock Insights portfolio that has a sole focus of paying out dividends to shareholders and has been raising its dividend by 20% a year. Click here to find out the details on this stock he calls "Forever Gold".

How the Pros Analyze Gold Stocks: Part 1

Ian Wyatt — Thu, 19 Apr 2012 19:20:00 GMT

Today I'm sharing with you an update from my resident gold stock expert, Tyler Laundon.

I spend a huge amount of time trying to value gold and silver stocks for the simple reason that they have the ability – unlike many other asset classes – to generate massive returns in a very short time frame. But in order to see those gains materialize you have to understand a little about the intricate processes of mining and the regulatory framework that miners must follow when reporting their gold and silver reserves.

Now that I understand the process I can say that it is interesting work, but the first few times I was completely lost in a sea of technical reports and mining lingo that might as well have been written in Mandarin.

So I'm extremely sympathetic to those of you who aren't versed in this foreign language of mining economics, but want to invest in the space. When Kevin forwarded me an email from a reader that asked all the right questions I decided to tackle the subject in as close to plain English as I'm capable of.

Here's my best effort to translate...

Subscriber comment: I have some questions regarding mining companies as I am a little bit lost and confused when it comes to the technical reports and the resource reserves. Hopefully you can provide answers and explain to me these issues in more detail.

Tyler Response: First off, this reader is not alone. He's lost because mining is complicated business, and honestly the technical reports don't really simplify it. But if you focus on the big picture, and understand the analysis framework you'll be able to dissect and interpret the reports pretty quickly. There really is a pretty sharp learning curve - if you can focus.

As an aside, the regulatory body responsible for the framework and definitions is the Canadian Institute of Mining, Metallurgy & Petroleum (CIM). Its regulatory standards are outlined in its National Instrument 43-101 - Standards of Disclosure for Mineral Projects (or NI 43-101 for short), which is why you'll see companies list their gold and silver ounces as 'NI 43-101 compliant'.

The trick to understanding this whole mess is to remember that we need the regulations to govern how companies report their 'in ground' gold and silver ounces because, well, they are underground and we can't see them.

The regulations also create a framework that helps companies access the capital markets and raise funds to build mines. Since investors like to know they'll get their money's worth (and there is ample room for fudging numbers) mining companies are required to complete very detailed economic studies which show how many ounces they have in the ground, how much a mine will cost to build, how long the mine will be in operation for, and all the associated costs, cash flows, and so on.

These studies can take three forms: a Scoping Study (very early stage), a Prefeasibility Study or a Feasibility Study, depending on how advanced the project is.

Since the basis for these studies (and the company's future for that matter) depend on how many ounces are on the property and how many makes sense to mine, the regulations state that ounces must be classified into different categories depending on how much confidence a 'qualified person' has that they actually exist. The qualified person functions a bit like an auditor, and needs to be a licensed engineer or geoscientist who demonstrates that he knows what he is talking about.

So that's the big picture. In my next issue I'll explain what the different classifications of ounces are, what they are each worth, and how you can tell if a mining stock is a good buy based on how the market is valuing its ounces in the ground.

In the meantime, Ian's found a great dividend paying gold stock that's raised it's dividend 20% a year. It's the kind of stock you'll never want to sell and as such we call it "Forever Gold". Click here for the full story.

A Gold Company that Raises Its Dividend 20% Every Year

Ian Wyatt — Mon, 26 Mar 2012 16:11:00 GMT

If you've never heard of today's best gold investment, you're not alone.

That's because it's not your typical "high-flying" gold mining stock.

But while most gold investors are waiting for the next big boom in gold mining stocks, a small number of savvy individuals are buying this OTHER gold investment.

I'm talking about a unique gold investment that's made some savvy investors quite wealthy, independent of recessions, zero interest rate policy from Ben Bernanke, and even dips in gold prices.

It's basically the only way to make money in gold no matter what's going on in the markets.

That's why I call this investment "Forever Gold." It's a way to CONSTANTLY profit from gold, even if it drops in price.

I've recently put together the details on "Forever Gold" for the paid-up subscribers to my Top Stock Insights service, but I've recently been thinking that this information needs to get out to all investors. So if you're interested in how you can get solid, reliable dividend payments from a gold company--no matter which way gold prices go--then check out my most recent update on "Forever Gold".

Their next payout is April 15th, so you'll want to hurry.

Click here for details.

Central Banks Seizing Gold

Ian Wyatt — Fri, 24 Feb 2012 17:44:00 GMT

This disconcerting story was brought to my attention by our resident commodities expert at Wyatt Investment Research, Kevin McElroy. It's been mostly buried by the main stream media but has substantial implications for exposing the hypocrasy of central bankers tellling us that gold isn't money and worse, that they will go to any means to get it. On a positive note, it means that gold will continue to be a safe asset for gold investors like us.

Kevin's politely allowed me to share with you his recent article on how central banks in Europe are eyeing up gold seizure to shore up sovereign debt problems.

Ian Wyatt

It's bad enough that Greeks are losing their sovereignty. When officials from Germany, Belgium and other north-European states can come in and tell Greeks how to run their government it's simply wrong.

And listen, I'm the last person who will defend the Greek state and its terribly indebted government. But that shouldn't make it okay for Greeks to lose their sovereignty to a group of unelected bankers.

But these Euro-states CAN'T let Greece default now. They've made a suicide pact to keep the Euro solvent and all member states as members forever.

And to seal the deal, lenders are now eyeing up the collateral they're willing to grab in the event that Greece gets any bright ideas about defaulting.

Top of my list of interesting "assets" is Greece's gold.

Yes - though many Greek citizens have no interest in accepting these loan terms, that's the deal now in place.

According to The New York Times, "Greece's lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal."'

Remember though, Central Bankers have come out and vehemently denied that gold is money.

Moreover, this "new deal" does NOT reduce Greece's debt burden.

It increases it by 30% - only offering a longer loan repayment.

It's like the over-the-top used car salesman who tells you that he can put you in a car for $199 a month while obscuring the fact that you'll be paying $199 a month for the next 8 years.

And in the mix-up, lenders get access to Greek gold in the event that there is a default.

Amazing.

So, the next time you hear Ben Bernanke or a European Central Banker say that gold isn't money, ignore their words - and focus on their actions. These bankers are trying to transfer gold from sovereign entities into the coffers of central and private banks for the very simple reason that gold is money - and they know it.

At the same time, we also know that China is now the world's largest gold importer.

The Chinese are no dummies. They'll gladly continue to trade excess foreign reserves for gold.

And that's why you - as an individual - should do the same thing. Be like the Chinese, and ask yourself: do we want to hold dollars over the coming years, or do we want to hold gold?

Don't end up like Greek citizens - who are now at the beck and call of bankers who want to strip the company bare before letting it default from the Euro. Take action.

Good Investing,

Kevin McElroy
Editor
Resource Prospector Pro

Note: Kevin runs an amazing service called Resource Prospector Pro where he brings you the very best commodity investment ideas from the entire research team at Wyatt Investment Research. The best part is that for a limited time you can test drive a subscription for only $5 a month--that's less than what we'll soon be paying for a gallon of gas and a whole lot more profitable.

Click here to find out more about this unique service for just $5 a month.

Gold Approaches $1,800: A Very Easy Gold Investing Strategy

Ian Wyatt — Thu, 23 Feb 2012 21:26:00 GMT

With gold ramping over the past few days I've had a lot of reader questions about the best way to play this or even if now is the right time. One of my favorite ways to play gold is through the miners, particularly the junior miners demonstrating an ability to consitently grow production.

At the end of the day, there's one thing I look for in a mining company - production growth.

This is the key ingredient to a successful precious metals investing recipe. Grow production steadily and a lot of the other things - high profit margins, revenue growth and funding for exploration - fall into place.

But don't grow production and, well, I'm not too interested.

Take Endeavour Silver (NYSE:EXK) for example. In 2009 the company produced 2.6 million ounces of silver. With two mine expansions, production grew to 3.3 million ounces in 2010 and will likely hit 4.3 million in 2012. The share price has risen 210% since mid-2010. But those who bought when production just began in 2004 have seen their position grow 10-fold.

Because production growth is so important - and is likely to dictate which way a company's share price goes - you've got to understand where a mining company is along its life cycle before you jump in.

This is pretty easy to do because mining companies tend to follow a fairly distinct growth curve. In the early stages of life these companies are primarily explorers - they're out in the field looking to acquire and explore properties that may have valuable ore deposits. Canadian explorer ATAC Resources (ATC.V) falls into this category.

Explorers have no revenues and rely on the debt and equity markets for necessary capital. Some of these companies are attractive investments, and offer huge upside potential if they can get a property to development stage. They also can carry higher risks since they don't yet have cash flow, permits, and proven reserves.

On the opposite end of the life-cycle spectrum are established producing and silver streaming firms.

Companies in this category include Hecla Mining (NYSE: HL) and Silver Wheaton (NYSE: SLW).

These are relatively stable companies, but they don't have the same upside potential as the explorers. That's because it takes exponentially greater production and estimated reserve base to justify a big increase in share price.

In between the explorers and the producers are the developers. This is the sweet spot for investors.

These companies are developing productive assets and just starting to generate stable revenues from selling silver, gold, and other metals.

These are the best companies to buy because their risk-reward profile is so attractive. They are currently (or just about to) producing gold and silver so they have immediate leverage to precious metal prices now, not at some ambiguous point two or three years down the road.

They are generating revenues (or are about to) and are becoming profitable - two things the market loves.

These revenues also help emerging producers fund exploration of undeveloped properties. So the exploration upside is huge, but there is less risk than with a non-producing explorer.

The emerging producers have immediate, mid-term and long-term upside. But they also have some downside protection.

For me, this is about as good as it gets.

Fortuna Silver Mines (TSX: FVI) is one of my favorite emerging silver producers and a best pick for 2012. Silver production from the company's second mine - this one in Mexico - should be a major positive catalyst for the stock.

I've also recently recommended an emerging gold producer in Africa. I expect this stock to do as well as both Endeavour and Fortuna over the coming years because of its new production. I can't release the name because that wouldn't be fair to paying subscribers. But if you're interested in a great gold growth story and more about EXK then please click here for the full story.

My advice - keep it simple and focus on gold and silver miners that are growing production. These are the ones that can lead to life-changing gains.

Buy this gold stock in the next 90 minutes

Ian Wyatt — Wed, 24 Aug 2011 20:09:00 GMT

If you're not constantly watching the gold markets, you might be unaware – but we're in the middle of a massive sell-off.
The thing is, my commodity expert, Kevin McElroy of Resource Prospector, called this sell-off a mere 90 minutes before it began on Tuesday morning at 11 am.
And now that gold is tumbling, the best gold stocks are selling for extremely cheap prices.
I don't think they'll stay this cheap for long. In fact, I believe a resumption of the bull market in gold could happen anytime in the next couple weeks -- but it could be days -- or even 90 minutes from now.
But I'm not in the business of picking tops and bottoms. The fact is, we got kind of lucky predicting this sell off in gold (well, okay a lot of research and analysis was behind our position that we had a quick sell-off coming soon, but the fact that it was just 90 minutes later was uncanny).
All I know is that gold stocks are selling for great bargains -- which means you should consider buying some very soon.
And I've worked closely with Tyler Laundon, one of our best analysts here at Wyatt Investment Research, to create a brief write-up on one of the safest gold stocks out there.
Why is it so safe? Well, it pays a 7% dividend, which means even if gold prices continue to fall, it has some dividend cover. People are less likely to sell a stock when it's paying a 7% annual yield.
If you're interested in this gold stock, read my write-up now by clicking here.

Market Demolition Continues: Here’s What to Do

Ian Wyatt — Mon, 08 Aug 2011 19:21:00 GMT

Today I spoke with a reporter from a local Fox News affiliate who asked me, "what's going on in the markets – and why does gold keep going up?"
I'm sure you've been asking yourself these same questions.
I told her what I've been telling you for months now: the U.S. Government has significant debt problems and no easy solutions.
That's causing investors to feel uncertain about the U.S. dollar.
And many of them are piling into gold. It's up 20% for the year and 5.7% just in the first eight days of this month.
And while I hope you own gold (as I do) I'm more interested in another asset class entirely.
Because while gold will certainly keep pace with inflation (or hyperinflation) it simply can't give you a return on investment when adjusted for inflation. (Gold stores wealth, but it doesn't create wealth.)
That's why the world's richest and most successful investors are turning to another, time-tested investment. I'm talking about Privatized TIPs. This unique asset is owned by all of the world's richest investors: Carlos Slim, Bill Gates, and Warren Buffett, among others.
They use Privatized TIPs not just to protect themselves from market calamity and uncertainty – but to profit during market upheavals.
Time is running short to get into these investments before the dollar completely crashes. So read the full report on Privatized TIPs to secure your wealth, starting today. Click HERE.

Why Stocks Collapsed and What You Can Do About It Now

Ian Wyatt — Fri, 05 Aug 2011 19:28:00 GMT

Goldman Sachs says there is a 1 in 3 chance the U.S. will slip back into recession. Harvard economics professor Martin Feldstein from Harvard University is says it’s 50/50. At least one strategist is saying the U.S. economy is already in recession.

Investors aren’t waiting around to see who’s right. They are selling stock and buying safe haven assets like precious metals and Treasury Bonds.

Gold has rallied as much as 13% in a little over a month. And silver has added as much as 29%.

With silver prices currently around $40 an ounce, you'd probably think I was crazy to suggest that you could buy silver for just $3.90 an ounce...

However, I've got the next best thing: a company that has locked in a 20-year supply of silver -- at $3.90 an ounce. The terms of this deal mean this company will get around 12 million ounces of silver every year. And the price is locked in at $3.90 an ounce.

No matter if production costs escalate or how high silver prices go, this company won't pay a penny more for its silver supply. Most analysts, including those at Wyatt Investment Research, are calling for silver prices will be higher, much higher and in years to come…

I'm Ian Wyatt, and I've put my own money in this stock as part of Ian Wyatt's $100k Portfolio, where I'm using my own money to show individual investors like you how to turn $100,000 into $1 million. And this $3.90 an ounce silver stock is helping us achieve our goal.

Please keep reading to learn more how this silver company could add substantial profits to your portfolio...

Click here.

Raising the Debt Ceiling Expected to Boost Gold Prices

Ian Wyatt — Wed, 20 Jul 2011 19:12:00 GMT

If President Obama and Ben Bernanke had it their way, they’d have you believe that a higher debt ceiling means prosperity. It will somehow raise employment, increase wages, end the debt crisis and restore faith in the credit of the United States.

But nothing could be further from the truth. Raising the debt ceiling is like giving your teenage daughter a credit card with a higher limit once she’s maxed out the previous limit. It doesn’t make you richer. It won’t make you more prosperous. The only thing it’s likely to do is to make you much poorer when the bill comes due.

President Obama and Ben Bernanke have to realize the truth of these facts – but they won’t ever admit it.

In truth, raising the debt ceiling doesn’t just make us poorer. It also has the eventual effect of pushing commodity prices higher.

Korean economist Julia Yoo recently pointed out the biggest and best example of this phenomenon – rising gold prices.

The price of gold rose almost step for step with the debt limit.

It’s not all that surprising.

And while our leaders might be quibbling about the specifics of the debt limit, we know they’ll eventually raise it. And in order to avoid taking blame for any fall-out from not beating the August 2nd deadline, a deal will happen before then.

Which means gold prices can only rise. And in the very near future, too.

To take advantage of this trend, we’ve put together a report on how to collect income from gold.

It’s a simple strategy that could easily put thousands of dollars in your pocket from the continued strength of the gold market.

Click here to read about this report now.

Why Gold Prices Hit a New Record High

Ian Wyatt — Thu, 14 Jul 2011 15:22:00 GMT

Quietly and without much fanfare, gold prices broke all time record dollar denominated highs on Wednesday.

At the same time, Ben Bernanke testified in front of Congress saying that gold is not money. The end of day chart below tells a different story.

If the Chairman of the Federal Reserve is not ready to admit that gold is indeed money, and that it has been for the length of human civilization, you have to wonder what he’s afraid of.

So why is gold rising in price?

You don’t have to look far for a reason.

But two of the biggest reasons are demand and uncertainty.

We’re seeing more and more demand out of Asia, especially as new ETFs in India allow regular investors first-time access to the gold markets. India has traditionally been the world’s largest buyer of gold for jewelry (more as a store of wealth than for status, though that’s important, too) and now that market is set to buy bullion itself through ETF investments.
We’re also seeing increasing uncertainty about world sovereign debt issues, whether we’re talking about broke Italian banks or an American Congress that’s befuddled about how to cut one penny of the world’s largest debt.

As long as the world’s investors see no improvement in sovereign debt problems, and as long as the China and India growth stories continue, we’ll see gold prices rise.
Today, we’ve made available to you a simple investment report all about collecting income from a specialized gold stock.

This stock currently yields over 8% annually. It’s a direct play on the strength of gold’s price.

If you’re interested in this report and how you can get paid from a specialized gold investment (next payout is less than a month away), click here now.

Gold Collapsed: Are Precious Metals a Buy?

Ian Wyatt — Fri, 01 Jul 2011 15:44:00 GMT

The stock market has put together a furious rally to end the second quarter. The S&P 500 took out two important resistance levels at 1,280 and 1,301. It is currently up against yet another resistance point at 1,320. TradeMaster's Jason Cimpl thinks we hit 1335 before a pull back, and told his subscribers this morning that he too thinks a pull back is near.

It's interesting to note how quickly the mood shifted from bearish to bullish. The Greek debt situation suddenly became manageable, Bank of America (NYSE:BAC) settled a huge number of mortgage put-back issues for $9 billion, and the drumbeat of a stronger second half of the year was quite loud.

Financials, technology and energy stocks have been out in front of this relief rally. These stocks were also leading the recent declines, so we can certainly conclude that short-covering has been an important aspect of the recent move higher.

It's easy to imagine that traders would not want to be short heading into 2Q earnings season. Even though there is skepticism that earnings can continue to grow at such string pace, the reality is that earnings have been growing steadily. It would not be wise to simply assume that earnings (and guidance) will be poor for the second quarter.

While we have seen some weak earnings reports over the last two weeks, most notably from Micron Technology (NYSE:MU) and Oracle (Nasdaq:ORCL), we've also gotten solid reports from FedEx (NYSE:FDX) and Nike (NYSE:NKE).

I realize that doesn't help much. But it shows why shorts might cover their positions ahead of earnings -- there's just no telling how earnings will come in. (Though if I had to guess, I would say that earnings will be solid and companies will talk about a stronger second half.)

In any event, earnings season kicks off on July 11. I don't expect much more upside before then. But I would point out that the mood can easily shift back to bearish just as quickly as it went bullish a few days ago.

I'm going to keep today's letter a little short. I'm sure many of you are getting started on your Independence Day holiday a little early. Have a great holiday, and if you're driving, please be careful out there.

Happy 4th of July!

IMF Completes Sale of $19 Billion Worth of Gold

Ian Wyatt — Wed, 22 Dec 2010 19:30:00 GMT

Yesterday, the International Monetary Fund quietly announced that it had completed the sale of over 400 metric tonnes of gold to Central Banks and other giant institutions.

Though it's one of the biggest single sales of gold in world history, it was largely ignored in the mainstream press.

Most remarkably, this record gold sale has had little effect on the price of gold futures.

The lack of transparency in this matter tells us that Central Bankers don't really want to advertise their own use of gold as a hedge against the likelihood of a currency crisis.

There's really no way to tell what level of price manipulation this sale has, or will have, on the price of gold in the future...

That level of uncertainty means that it's important to invest in gold vehicles that have the added built-in safety of income.

To that end, Ian Wyatt of Wyatt Investment Research recently published a research report on the highest dividend paying gold stock in the market. Amazingly, this company currently pays a 9% yield.

Click here to read all about Ian's research.

How to Play the Irish Bailout

Ian Wyatt — Mon, 22 Nov 2010 17:37:00 GMT

*****How to Play the Irish Bailout
*****U.S. Dollar vs. euro
*****One Ounce Silver American Eagle

Fellow Investor,

It’s one of those situations in investing that often defies logic – and leads to big opportunities. When the majority of investors become convinced that a trade can only go one way, well, it often doesn’t.

And as I’ll show you, there can be easy gains to be had when you understand this.

For this example, I’m talking about the U.S. dollar.

You’ll probably recall the vicious downtrend the dollar entered in the two months leading up to Ben Bernanke’s second round of quantitative easing.

Investors were convinced that QE2 would pump a ton of cash into the system, thereby diluting (destroying) the dollar’s value. So, stocks and commodities started running higher, pricing in the dollar’s falling value.

Bonds also rallied.

But a funny thing happened on the way to the dollar de-basement. Once QE2 was announced, the dollar started to rally, and the long bond sold off.

The dollar was clearly not following the script. And what had been one-way trades – like gold, silver, bonds – started selling off.

******I’ve heard the situation likened to what happens when too many people move to one side of a boat at sea. The boat lists and may capsize. In investment terms we can understand this is what happens when there are no more buyers left to enter a position.

Gold, which had run to a new high above $1,430 an ounce fell 6%. The long bond, as measured by the iShares Barclay’s 20+ Year Treasury ETF (TLT), fell from $106 to $94.

Now, the dollar’s case is particularly interesting. Because the dollar is not valued in a vacuum, but rather against other currencies like the euro, it often takes some news event to catalyze the market’s predisposition.

And the currency market got that catalyst in the resumption of debt problems in Ireland. The euro started falling as investors started pricing in the possibility that the European Union could collapse.

Now, as an aside, I understand it may seem far-fetched that the EU could simply collapse. But Germany threatened it before the Greek bailout was finalized. And even in the latest case with Ireland, we heard that at least one EU member nation was none too happy about having to bail out a weaker member.

It’s not surprising that traders would trim their euro holdings. After all, you sure don’t want to be the one holding euros if the EU dissolves. That would be as embarrassing (and painful) as holding banks through the financial crisis.

It’s true, Wall Street often goes into “sell first, ask questions later” mode.

*****So anyway, the net result of this was a surprising rally for the U.S. dollar. Now, it’s certainly a worthy endeavor to discuss how particular situations seem to find a catalyst. In this case, Ireland’s debt problem weren’t unknown. And it’s probably more than simple irony that brought these issues to the fore right when the dollar was hitting support in extreme oversold territory.

In fact, the old saw that the market’s job is to make as many investors appear foolish as possible was coined to describe exactly this situation.

But we’ll have to save that discussion for later, because I told you there was a profit opportunity here, and I’m sure you’d like me to get to the point.

And the point is that any large macro trend will correct, or reverse, at times. But that doesn’t mean the trend is done. It’s simply washed out some longs and created an opportunity for new buyers.

In my opinion, that’s exactly what’s happening with the weak dollar trades right now. And chief among them is precious metals.

*****Now let’s turn our attention to the U.S. dollar-euro chart. It’s a 2-year look at the dollar. Daily Profit readers are familiar with this chart…

What we see here is that the dollar has rallied close to a support/resistance point. In fact, it’s already moved incrementally lower. And that move has coincided with a rebound for precious metals.

And we can see that the Gold ETF (GLD) is bouncing of its 50-day moving average...

So, if you’re looking for an entry point to catch the next rally for precious metals, this looks a good one.

*****Now, one more thing. Many investors may not know it, but silver prices are outperforming gold prices this by approximately 35%. There are several reasons for this, one of them being that silver has industrial uses (like solar panels) as well as “store of value” uses.

So for my money, silver is the place to be. And I’d like to tell you about a silver stock I’ve recommended in my Small Cap Investor PRO. I first recommended it at $3.45 per share in June. It’s been as high as $7 recently, but backed off to the $6 area when the dollar rallied.

I think it’s gearing up for a run to $9. That’s a 50% gain from current levels for investors getting in now.

Even better, I’m offering a brand new, 1 oz. Silver American Eagle coin to all new Small Cap Investor PRO subscribers who sign up today using the link below. So if you’re ready to profit from silver in two ways, please, CLICK HERE.

Until tomorrow,

Ian Wyatt
Editor
Daily Profit

P.S. The American Eagle one ounce silver coin offer for new subscribers to Small Cap Investor PRO ends today.

Click here now for yours.

Gold Not at Record High

Ian Wyatt — Thu, 11 Nov 2010 22:16:00 GMT

While most of the mainstream media readily announces new "highs" for the price of gold, The New York Times just published an article denouncing such statements.

From the story: "The actual record was set 30 years ago, when the price of gold, in today's dollars, hit $2,387, or 71 percent higher than it closed on Tuesday."

It's important to remember that gold's price has much further to run before it matches inflation adjusted highs set in 1980.

Many investors might be wondering if gold will meet or surpass that $2,387 number - but as The New York Times story points out, gold is "a hedge against a weak dollar, not a hedge against inflation."

As long as the U.S. dollar continues to fall, gold will continue to rise.

So as long as the Federal Government continues to print money in order to pay for its expenses, we can expect the dollar to continue its long term downward trend (the occasional up day notwithstanding) - and gold to continue to rise.

In order to profit from this trend, Ian Wyatt recently put together a special research report on his three favorite gold stock investments. Gold stocks tend to outperform price appreciation of the physical metal - typically returning 2-5 times more profit than gold alone.

You can read all about these investments right now.

CLICK HERE.

Coal Dominates

Ian Wyatt — Thu, 11 Nov 2010 13:03:00 GMT

Fellow Investor,

QE2 has unleashed a raging bull market for gold and silver. But the falling dollar is also pushing oil prices higher, too. Oil is zeroing in on its 52-week high. And oil stocks have been performing very well.

Now, as you now, I was recently at the Association for the Study of Peak Oil (ASPO) conference in Washington, D.C. The main reason I went was to see my friend and Energy World Profits editor Gregor Macdonald speak on the "Rise of Coal."

I will offer Gregor's perspective on coal later. First, I want to tackle some of the bigger issues of Peak Oil, the most important being that global oil production appears to have peaked in 2004.

This chart, from the September 22 issue of Energy World Profits shows the supply situation.

One of the most interesting observations from this chart is the supply response during 2007 when oil prices ran to $147. You might think that oil companies would pump as much oil as possible to take advantage of record high prices. I know I would...

In fact, oil companies probably did pump as much as they could. But it wasn't enough to match peaks from 2004 and 2005.

Again this year, we can see that supply has failed to increase as oil prices have moved above $80 a barrel. In fact, supply has been falling this year.

*****Many economists, investors and even oil traders have a tendency to use U.S. oil demand as the driving force for oil prices. From the April issue of Energy World Profits, Gregor wrote:

"To economists, oil analysts, and political scientists the conditions we face today, just five years later, would have seemed bizarre. And I don't refer so much to the financial crisis. No, I refer to the fact that oil now trades at $82.00 dollars during the worst recession since WW2. And not only is the recession the worst in size and scope, but it's the worst in duration also.

It would have been unthinkable to the Wall Street Journal, Foreign Policy Magazine, The James A. Baker Energy Institute in Houston, The Department of Energy, and many TV pundits that oil could be at $82.00 dollars in the aftermath of a financial collapse. In fact, it was indeed unthinkable to all those organizations and media outlets just mentioned--and they said as much, week after week.

As Dan Yergin wrote in 2005, only "above ground" factors could push oil higher in the years ahead. My comment: any 2005 roundtable on the future price of oil would have agreed that only an attack on Saudi Arabia could place oil at $82.00 dollars a barrel in the midst of a severe recession in the United States. After all, the United States with its outsized demand has historically set the price of oil. During a deep recession in the US, oil should be at $12.00 dollars, not $82.00. How did the US lose control, of the price of oil?

The controlling factor now in global oil prices are the five billion people in the developing world. They use less oil per capita and derive more utility from each barrel. Which is a good thing, as the global supply of oil is now unable to make a sustained response to higher prices."

*****Ever since the financial crisis of 2008, Americans have been plagued by the feeling that we, as a country, have squandered our surplus wealth and now are a nation in decline.

After all, driving a Hummer was a status symbol just a few years ago. But today, you'd probably get some dirty looks tooling around in a gas-guzzler like that.

On an individual level, Americans may feel as though we took asset prices (like houses) for granted and spent too much money and failed to save.

A similar situation exists for the country as a whole. But Gregor suggests that the root cause is energy prices...

"...the West, both in its private balance sheet and public balance sheet, is carrying very high debt levels that are marked to even higher nominal prices. There is simply not enough cheap energy to fund the type of very, very fast growth required to pay back this debt. And it’s no longer just a question of debt-saturation in the private sector, and impending private defaults."

"Economists who propose creating a lot more government debt, in order to fund stimulus, clearly do not understand that these new tranches of debt -- which, by the way, become someone’s savings when they purchase that debt -- cannot possibly be paid back given that the world has now reached a plateau in oil production."

*****Now we can easily see why the world is transitioning back to coal. The bottom line is that it's cheap. And as oil prices rise, and we continue to resist greater investment in renewable energy sources or even natural gas, the only way to maintain a profit margin and grow an economy is with cheap energy.

In the following chart, you can see the path that coal use is on. Gregor projects that coal use will surpass oil sometime in 2014.

*****If you don't have energy stocks in your portfolio, you should. Oil, coal, renewables, these stocks will only get more valuable as investors become more aware of the true energy situation.

In the Energy World Profits portfolio, we have a Chinese coal stock with a forward P/E of 4.5. We have a top wind power stock and a top solar stock. We have a pipeline MLP paying a 7.3% dividend. We have three of the oil stock in North Dakota's Bakken oil oilfield. And we're currently building a strong position in Canadian oil.

I don't mind telling you where Energy World Profits subscribers are investing. And if you decide you'd like to try a trial subscription to Energy World Profits, even better.