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Step 1: Pick the right company!

In the beginning of 2009 I finally realised that the continuous devaluation of fiat currencies like the US Dollar and the Euro was likely to go on the coming years. Both in the USA and in Europe money is being printed at alarming rates, yet the only thing you’re hearing lately is that we are all doing so well! Well, don’t believe it! All that money being printed has to go somewhere, and there you have your equity bull-market explained. I realised that true value could only be stored in silver and gold.  How could I benefit from the enormous gold and silver bull-market that I was expecting. The largest leverage to gold and silver prices is always found in junior mining stock. I am a big admirer of Warren Buffet and believe in value investment. Using value investment principles and after months of research and reading piles of year-reports and books, I finally picked six companies.  With all my saving money transferred to a on-line broker I bought shares of six companies.

Step 2: Take your profit, and gain “free” stock.

With prices of gold and silver soaring in 2010 just like I expected, many shares in my portfolio were exceeding 250% gains. So I sold about 40%-50% of all my shares in these companies getting back even more than the original investment. The remaining shares in these companies were now basically “free” shares. Since large corrections in gold and silver prices are likely each time after another record is shattered, I just waited for this correction, and used the money to GO BACK TO STEP 1!!! So far I picked five new companies to invest in, and am looking for one more to complete my second round of step 1. With prices of gold and silver prices rising for years to come I hope to repeat step-1 and step-2 many times. I now have created what I call step-3 companies.

Step 3: Wait, wait, wait

As you might have noticed I only sold about half the shares of the companies I picked. All the companies I picked mainly have developed from explorers to producers. I intend to NEVER SELL the shares I own. There might always be a exception in special circumstances however. Where will these companies be in 10, 20 or even 25 years from now. I strongly believe that all companies will continue to develop, mergers take overs etc. who knows…. But with governments making the same mistakes over and over again, the way up for gold and silver still is very long. In the years to come the new Goldcorp, Barrick or Rio Tinto will present its-self and I am certain that parts of my portfolio will be or be part of that company. It is very likely that companies in the portfolio will start paying dividends at a certain point (e.g. 5-15 years)

These step-3 companies are my retirement, my protection against inflation!

Can you prove this?

Well, step-1 and step-2 have been proven already. Step-3 only partially.

How did you do so far then?

Bought in 2009:

International Royalty Company: Got lucky on that one, made a 101% profit in a take-over battle just months after buying it. Sold all shares.

Avino Silver & Gold mines: bought @ US$0.63 : sold 40% of my shares @ US$2,57 (a 307% gain) creating a step-3 company for my portfolio.

First Majestic: bought @ CA$2.66 : sold 45% of my shares @ CA$10.88 (a 309% gain) creating a step-3 company for my portfolio.

Great Panther: bought @ CA$0.84 : sold 50% of my shares @ CA$2.75 (a 227% gain) creating a step-3 company for my portfolio.

Minera Andes: bought @ CA$0.72: sold of my shares @ CA$2.56 (a 255% gain) creating a step-3 company for my portfolio.

Silver Wheaton: bought @ US$9,95 and a second step-1 for Silver Wheaton @US14,95 in 2010. I sold 50% of all my Silver Wheaton shares @US$39.07 creating a step-3 company for my portfolio.

Bought in 2010:

Seabridge Gold: bought @ US$28.36 is still a step-1 company! We think it might take up to 3 or 4 years to reach step-2 but if investors discover the true value of this company it might come much sooner as well!

Rubicon Minerals: bought @ CA$3.49 today the stock closed @ CA$5.49 meaning a 57.3% gain. In between step-1 and step-2.

Copper Creek Gold (Highly Speculative!!): bought @ CA$0.075 today the stock closed @ CA$0.09 meaning a 20% gain. Still step-1, but highly speculative!

Excellon Recources: bought @ CA$0.99 today the stock closed @ CA$1.18 meaning a 19% gain. Still a step-1 company!

Brigus Gold: bought @ US$1.88 today the stock closed @ US$1.77 meaning a 5,9% loss. Very much a step-1 company!

What do I expect in 2011?

More volatility is likely to rule the commodity markets. Food prices will soar, the oil price will rise gradually as will the price of copper. For a gold rally we will have to wait till August again, then I see a spot price of about $1600-$1700 before the end of this year. Silver will outperform gold again in 2011. I expect the price of silver to be less volatile than the price of gold. When the gold rally in August commences again, silver will shoot up like a star! During the year I think the gold/silver ratio will decline gradually as a result of this. At the end of 2011 I expect the gold/silver ratio to be below 35. IF this happens, I will be able add some step-3 companies to my portfolio from the 2010 stock picks, and use the money at the next correction to buy new step-1 companies.

Alexander Aardema, CEO @ CashInfo.org

Disclaimer:

The information provided on or within this article, website or in documents available herein is for assistance only and is not intended to be and must not be taken alone as the basis for an investment decision. Each recipient of this information should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities offered hereby, and should consult its own legal counsel and financial, accounting, regulatory and tax advisors to determine the consequences of such an investment.

Read this Reuters article about a new Bretton Woods like system

An article about this possibility appeared on this website in September 2009

Today a fresh all-time high was set for gold at $1399,40 and silver hit another multi decade high at $26,95

How is our portfolio doing? In 2009 we bought:

Avino Silver and Gold Mines Ltd. up 219%

First Majestic Silver Corp. up 274%

Great Panther Silver Ltd. up 85%

Minera Andes Inc. up 176%

Silver Wheaton up 231% and in 2010 we bought:

Seabridge Gold Inc. up 6%

Rubicon Minerals up 18%

Not a bad result so far we think. What to expect? Expect lots of volatility and a continuing bull market. We think gold will hit $1400 in the beginning of next week, and silver will break trough $27,00 Before we enter 2011 we see gold going as high as $1500 – $1550 When that major psychological barrier is near we might even see more volatility than last day’s. A passage of the $1500 mark can result in so much selling pressure, that daily gains or losses could surpass $100 It might take till the summer for prices to settle near the $1400 level again.  Than we have to wait till fall again to gain much, much more. Silver gains will continue to outperform gold. If you are planning to invest in gold or silver wait till gold has surpassed the $ 1400 mark, then selling pressure will push gold back to $1320 – $1350 and the perfect buying moment has come.

In 2009 we already discussed the possibility of a new Bretton Woods on this site. Since then not much has happened, but if governments don’t act, people will.
Please watch this video, it is part of a documentary broadcast by the Dutch network VPRO. Back to gold and silver coins, so simple. The gold Dinar and silver Dirham are accepted widely in Indonesia. Most governments would not allow such a system to develop. But in Indonesia the government allows it (for the time being). That is because this monetary system is according to Islamic law, and the fiat currency system most counties use is not. The best part of this documentary is that “people on the street” tell you what some of the best economist of the world have already told you. How paper money is just a means for governments (a.k.a. “the rich”) to take your belongings.
“The creation of dirhams (silver) and dinars (gold) is one of the blessings of Allah.
Allah has created dirhams and dinars as judges and mediators between all commodities so all objects of wealth are measured through them.” Imam al-Ghazali

Sorry I haven’t posted anything for such a long time, I am very glad I am blogging again! After almost six months yet again another all-time high has been reached in the price of gold. Last week there was is slight pull-back, but today we see bargain hunting again.  I expect the gold price to remain in the $1160 – $1250 range for the coming months. This is not what happens in ‘normal’ years, than there always is a drop of the gold price in the summertime, so not this year!  The biggest development in the last moths has been the fact that the gold price now moves independently from the dollar index. I visit www.kitco.com on a daily basis. The Kitco Gold Index gives the investor a better view of the price development. We probably will have to wait till September before we will see a steady price of about $ 1300 However, there may also be upward as well as downward spikes these coming months. We still advise to buy gold whenever is falls below $1180 I myself don’t do trackers or Forex trading, but this volatile market is sure making them interesting tools for the more aggressive trader.

Some people say we are in a bubble

We’re not! When your taxi driver or shoe polisher advises you to buy gold, than we are in a bubble. You do see the financial media have picked up the marked trend, and are following it closely.  This merely was the first step towards bubble forming. This will end in a bubble, that’s for sure as well. But with ever diminishing gold and silver deposits on this earth make sure a firm bottom for prices has been formed now.  When you correct the 1980 prices of gold and silver for inflation, the all time gold price would be around $6000 and that of silver about $120 when we reach these ranges, and we will, we can talk about a bubble again.

What about the silver price?

The price explosion I discussed in the previous post has not happened, yet. For this event we probably have to wait for September as well. With rising gold prices the material becomes more and more ‘out of reach’ for some small investors and the general public.  This will result is a correction of the gold/silver ration to its historical value of about 15. If we apply this ratio to today’s gold price of $1200 silver should cost $80 per ounce. One reason for prices not to have exploded yet is the price manipulation of this market.  You can read some very interesting facts about this manipulation via this link. For information about manipulation of the gold price please visit www.gata.org

Buy gold and silver! Bullion, coins, nuggets, and Silver Wheaton (SLW)

The European dept crisis will continue at least for two  years. The so much discussed PIIGS countries will contribute to a further decline of the Euro. Now about them PIIGS, this surely must be the best marketing hoax since the Blair Witch Project.  The people who made up this term confidently left out Great Britain and the United States. Those two countries have issues with their money base and depts. far greater than the PIGGS counties. Therefore physical gold and silver will give the best ‘insurance’ for the longer term. We managed to pick up some more shares of Silver Wheaton (SLW) at a price of $14.95 We have put in another buy order at a price of $17.50 We will monitor the price of this stock closely. Established in 2004, Silver Wheaton has quickly positioned itself as the largest metals streaming company in the world. The company currently has thirteen silver purchase agreements and two precious metals agreements where, in exchange for an upfront payment, it has the right to purchase all or a portion of the silver production, at a low fixed cost, from high-quality mines located in politically stable regions.

Forecast 2010 production, based upon the company’s current agreements, is 22.2 million ounces of silver and 20,000 ounces of gold, for total production of 23.5 million silver equivalent ounces. By 2013, annual production is anticipated to increase significantly to approximately 38 million ounces of silver and 59,000 ounces of gold, for total production of over 40 million silver equivalent ounces. No ongoing capital expenditures are required to generate this growth and Silver Wheaton does not hedge its silver production.

Silver Wheaton’s industry-leading growth profile is driven by a portfolio of world-class assets, including silver streams on Goldcorp’s Peñasquito mine in Mexico and Barrick’s Pascua-Lama project straddling the border of Chile and Argentina. The company’s unique business model creates significant shareholder value by providing considerable leverage to increases in the silver price while reducing the downside risks faced by traditional mining companies. Silver Wheaton has an experienced management team with a strong track record of success and is well positioned for further growth.

For more information on silver streaming and Silver Wheaton’s silver stream agreements, please click here.

Own physical silver and gold? Visit BullionVault via our link. Note: CashInfo.org will earn commission if you use this link to sign on and trade. You can also visit your local stamps and coinage shop if you want to keep your gold and silver close to you, and store it safely at home.

Development of the Kitco Gold Index (KGX):

Since last week prices of both silver and gold went into a sharp correction. And that is what it is, a correction!

This might be the last change to buy in on physical gold and silver and mining stock at reasonable prices. This correction is a healthy step in the way up. The majority of investors are interpeting the GDP data of the U.S.A  totaly wrong. We see  the first signs of inflation in these numbers. And inflation should mean higher prices for gold and silver. The stock markets are experiencing a classic end-of-year rally, and a large correction into the new year is inevitable.

This week we sold all our shares of International Royalty Company (AMEX:ROY | IRC:TO) @ US$ 7,15 we bought IRC in June (before our website was launched) at a price of $ 3,55 a very nice profit so we think! IRC was the very first company we invested in. You can look into our entire portfolio at http://cashinfo.org/about/

We wired some of our profits to our gold account at BullionVault.com and will buy gold when once the transfer is complete. Please click our affiliate banner below to find out how this company works by receiving a free gram of gold to practice with! Note: If you sign up via the banner below CashInfo.org will earn commission if you fund your account and start trading.

There are some interesting companies we are following at the moment. When we decide to invest in one of these companies we will let you know immediately on this website!

Today gold rose to a new all time high (again). The up-trend in gold is going much faster than we expected, so actually we were wrong. Though, you won’t hear us complaining of course. The brilliant price of $ 1122 was reached shortly. The temporary downturn we predicted did happen, just not as far as we expected, from $ 1050 in went down to $ 1030.  Why did gold go up so far? One side is the downturn the dollar has taken. So your gold only appears to have gone up for a part. The second contribution we have to thank the central bank of India for. They bought the gold the IMF was selling, we wrote about this in a previous post. So after 50 years of gold selling by central banks we now see them buying again (in an other part of the world though). Both these factors had the effect that investors started buying  again, resulting in an even bigger gain. We expect the gold price to remain stable for about 1 or 2 months or decline slightly before yet another rise. When we look at the technical chart of gold, and the expectation that both banks and investors will keep buying, we set the new price target for January 2010 at $ 1150.

What about silver? There we did not see such a large gain. This is the direct result of the industrial demand for silver. For a rising silver price we have to count on investors, they still seem to be focused on gold at this moment however. Once they finally realise that silver is undervalued big time, we might see the price of silver explode. We expect that the price will be around the $ 22 level at the end of this year. The big correction in the silver price, that we keep waiting on, should result in a real price explosion . We predict this will take place in beginning of next year. A price of $ 50 or even $ 60 is not unthinkable. Read our previous post on silver to learn why this will happen.

Conclusion, for both gold and silver we remain bullish. The last chance to buy at a reasonable price is now! The biggest “discount” however, is to be found in silver.

Today the G-20 summit in Pittsburgh will commence. Many world leaders are now convinced that the dollar should be replaced by a new monetary standard, we might be on the brink of a new Bretton Woods. In November 2008 Gordon Brown and Nicolas Sarkozy were  the first to publicly state that the current system is out-of-date and that a new world monetary standard is needed. Gordon Brown stated that a new Bretton Woods Conference should take place. Article in the Times. The IMF has posted an interesting article on its website, preparing the world for a new conference. Since many renowned economist are calling for a new Bretton Woods like conference we can only hope that today’s world leaders are brave enough to show leadership and take action.

But how should this new system look like?

For many reasons gold on its own is not likely to return to its historical importance. It is most likely that a new currency is created where it’s value is measured by a basket of the most important currency’s, oil, gold and other commodities. This idea is not that new, in fact John Maynard Keynes called for it in the Bretton Woods conference. The name of the proposed currency was the Bancor. The U.S. government was so powerfull that it could push forward their proposal of fixing the gold price to the US dollar, so this plan eventually won. This system worked till 1971, after that the costs of the Vietnam  War became so great that the Fed had to print so much money that the ratio could not longer be sustained. In the meanwhile European countries like France started demanding gold instead of the dollar, and shiploads were being pulled from Ford Knox. The US government was forced to let the fixed gold price go, and also stop the ban on gold ownership for US citizens. From 1972 till 1980 the price of gold exploded. If we correct the gold price of 1980 with inflation the price was $ 2000 an ounce in today’s dollars.

We will follow the G-20 summit with great interest and hope that the leaders will show leadership and vision. Will they finally decide that a new Bretton Woods should take place, or are they even more decisive and let Pittsburgh become the new Bretton Woods.