An exploration-stage company released positive metallurgical test results. Read our comment. Silver Stocks (SIL) 24.37 22.54 22.91 Gold Junior Stocks (GDXJ) 24.01 23.09 31.00 Silver 33.79 33.93 32.89 Dear Reader, Gold is not cheap, compared to the $200-per-ounce range of a decade ago. No argument. However, as our hockey-playing friends like to say, you don’t skate to where the puck was, you skate to where the puck will be. In financial terms, the causes for the rise of the precious metals continue unabated – if not accelerating and indicating higher prices in the future. BIG GOLD’s Jeff Clark throws caution to the wind and makes a price prediction in the article below. History is never linear for long, but I think Jeff’s projection is quite reasonable. Sincerely, Louis James Senior Metals Investment Strategist Casey Research P.S. Our friends at the Hard Assets Alliance are looking for someone to join the growing customer support staff. Candidates must be familiar with precious metals and have a sincere interest in assisting customers with account setup and purchases. The position requires contacting potential customers to offer assistance and answer questions. No heavy selling. If you are comfortable using an online purchasing website and would enjoy helping precious metals investors reach their goals, please send a note and your résumé to [email protected] Rising premiums. A natural consequence of tight supply is higher commissions. They won’t stay at current levels indefinitely. Premiums doubled and more in early 2009, and mark-ups for silver Eagles and Maple Leafs neared a whopping 100%. Gold Producers (GDX) 51.66 50.01 57.39 Oil 92.07 97.01 85.57 (Click on image to enlarge) You can see the trends are very similar. In fact, the correlation coefficient is an incredible +0.94. Since the Fed has declared “QEternity,” it’s logical to conclude that this expansion of the monetary base will continue. If it grows at the same pace through January 2014, there is a high likelihood the gold price will reach $2,300 at that point. That’s roughly a 30% rise within 15 months. And by year-end 2014, gold could easily be averaging $2,500 an ounce. That’s 41% above current prices. Some may argue that there’s no law saying this correlation must continue. That’s true. And maybe the Fed doesn’t print till 2014. That’s possible. But it’s not just the US central bank that’s printing money… European Central Bank (ECB) President Mario Draghi has declared that it will buy unlimited quantities of European sovereign debt. Japan’s central bank is expanding its current purchase program by around 10 trillion yen ($126 billion) to 80 trillion yen. The Chinese, British, and Swiss are all adding to their balance sheets. The largest economies of the world are all grossly devaluing their currencies. This will not be consequence-free. Gold and silver will be direct beneficiaries – as will mining companies – starting with rising prices. There are other consequences, both good and bad, of gold hitting $2,000 and not stopping there. We think investors should be prepared for the following: Tight supply. As the price climbs and attracts more investors, getting your hands on bullion may become increasingly difficult. Delivery delays may become commonplace. Those who haven’t purchased a sufficient amount will have to wait in line, either figuratively or literally. A stock we put a sell on jumped dramatically this week – are we still selling? A company we recommended recently has published exploration results that triggered a recommendation update. BIG GOLD This royalty company issued more shares to raise money for an acquisition. How bad is the dilution? Rock & Stock Stats Last TSX Venture 1,292.81 1,282.65 1,542.77 Swelling profits for the producers. If margins on gold production average $1,000 per ounce now, what will earnings be like when they average $1,500? At $2,000? Gold can rise much faster than operating costs, so this could happen. Imagine what this could do to dividend payouts, especially those tied to the gold price and/or earnings. Copper 3.76 3.71 3.39 Gold 1,766.75 1,737.00 1,682.00 $2,300 Gold, Here We Come By Jeff Clark, Senior Precious Metals Analyst While many of us at Casey Research don’t like making price predictions, and certainly ones accompanied by a specific date, it’s hard to ignore the correlation between the US monetary base and the gold price. That correlation says we’ll see $2,300 gold by January 2014. There are plenty of long-term charts that show a connection between gold and various other forms of money (and credit). Most show that one outperforms until the other catches up. But let’s zero in on our current circumstances, namely the expansion of the US monetary base since the financial crisis hit in 2008. Here’s the performance of the gold price compared to the expansion of the monetary base since January 2008. Tipping point for a mania. There will be an inflection point where the masses enter this market. The average investor won’t want to be left behind. Will that happen when gold hits $2,000? $2,500? The message from these likely outcomes is to continue accumulating gold – or to start without delay. Waiting will have consequences of its own. People say that there’s nothing certain in life except death and taxes. In my view, $2,300 gold is a close second. Gold and Silver HEADLINES Miners Reject South Africa Gold Producers’ Wage Proposal (Bloomberg) The recent attempt by South African gold producers to end a wave of strikes with a proposal to raise wages failed, as members of South Africa’s biggest union rejected the offer. AngloGold Ashanti and Gold Fields Ltd. offered a 2% increase over an earlier agreement, and Harmony Gold Mining 1.5%. Another proposed concession was to eliminate the entry-level worker category, meaning the lowest-paid miners would move up to the next level. Since the proposal was rejected, the situation in South Africa has remained tense, with about 41% of the country’s gold output idled. South Africa is no longer the world’s top gold-producing nation, but the countrywide labor disruptions impact the market – and to a larger degree for platinum. We continue monitoring the situation and will let our subscribers know about speculative opportunities the current turmoil may present. Ten Countries Sitting on Gigantic Piles of Gold (Business Insider) Business Insider lists the top ten countries by official holdings. The list, based on the data regularly published by World Gold Council, hasn’t changed to a significant degree for years now. However, China, India, and Russia caught our attention. As opposed to the majority of the countries in the list that have 50-70% of their reserves in gold, these three important players are much less exposed to the yellow metal. Given the uncertainty about the future of reserve currencies like the US dollar and the euro, this fact outlines a huge potential for future gold demand. Recent statistics support this view: central banks bought 157.5 tonnes (5.1 million Troy ounces) of gold in the second quarter, up 63% quarter over quarter and up 137.9% year over year. Infographic: Gold as an Investment (Visual Capitalist) This infographic shows how successful gold has been as an investment and gives examples of its behavior as both commodity and currency. The infographic educates on fundamentals of investing in gold and lists ways to add exposure to gold one’s portfolio. We like it; it’s a condensed and comprehensive presentation on why investors should appreciate gold. This Week in International Speculator and BIG GOLD – Key Updates for Subscribers International Speculator This silver producer continues delivering excellent operating results, and we expect Q3 financial results to reflect that. One Year Ago TSX (Toronto Stock Exchange) 12,202.04 12,232.62 12,029.96 One Month Ago This silver producer experienced a short work stoppage by some of its employees. Here’s how quickly management rectified the problem. This Best Buy announced an increase in production by a full third, but the stock has almost doubled from its May low. We’re still suggesting placing bids for a first tranche.