Dennis Gartman is an experienced commodity trader. Dennis has been very cautious about gold; he “sort of” likes gold, so he calls himself a “gold agnostic.” For this reason it’s most interesting to read what Dennis says about gold in today’s report.

“Turning, then to gold and other metals, prices turned sharply for the better yesterday as the world rushed out of equities and looked for any safe harbors that were available. Certainly the rush to the Swiss franc was obvious, as noted above, and so too the rush into sovereign debt securities. But frankly, the rush was on to gold once again. We remain long what we have referred to as an ‘insurance’ position in gold, but we own it in terms of EUROs and /or of British pounds sterling, otherwise we remain an agnostic. To assuage our friends who are gold-bug-leaners, we shall not be short of gold. Nothing likely shall ever turn us manifestly bearish of it. But for the moment we are simply hard upon the sidelines, owning only this small ‘insurance’ position and comfortably in that position.

“Might we be enticed back to the bullish side of the market eventually? Of course we might. If the situation in the global equities markets became dire, we might move from agnosticism to ‘faith.” If we were to see the monetary authorities throwing caution to the wind and massively explode their balance sheets, we might be enticed away from our agnosticism to ‘faith.’ If the political situation were to become untoward, and patently uncomfortable, we’ll throw our agnosticism in to a heap and join the gold market faithful. But until then, agnosticism works for us.”

Russell Response

I can understand Gartman’s caution. Dennis is an old-time trader, and he’s seen a lot of traders get killed by taking huge and wrong positions.

My own position is that gold is in a clear and obvious primary bull market. These situations come along maybe two or three times in a lifetime. I was convinced back in 1999 that the bear market in gold had ended with gold selling at 256. In the year 2000 they were literally giving gold mining shares away. At that time gold shares were so ridiculously cheap that I told subscribers that they should buy these stocks (many selling for just a few dollars a share) and hold them as perpetual warrants.

At the same time I told my subscribers to start buying bullion one -ounce coins and “put ‘em away.” I’ve suggested that my subscribers do the same thing ever since.

I know bull markets, and I’ve never seen or experienced a primary bull market that didn’t end with a third speculative phase — this is the time when a bull market “blows its top”. I feel certain that the current huge bull market in gold will do the same.

But I have other reasons for being bullish about gold. Gold is the only real Constitutional money. The fiat paper that we’ve been using as money is only money because our government says “it’s money.” If the US government told you that printed paper was real money and legal for the payments of all debts, would you believe them. Well, you already have believed your government.

But I maintain that the truth will out, and that fiat paper is a fraud that will be found out. When that happens and people realize that they have been hoodwinked by their government, there will be such a rush (including both fear and greed) for gold that it will make the recent tech mania look like conservative investing.

As I write at midday, Dec. gold is up over nine dollars. Gold has been up 8 out of the last 10 days. As the months go by, we are pressing ever-closer to the speculative phase of the gold bull market. That will be something and even terrifying to see.

I am pleased to say that many of my older subscribers are now in the process of getting rich on their gold holdings. I’ve said over and over that one of the most difficult things to do in investing is to get in early on a primary bull market and ride the bull through to the latter part of its final speculative third phase.

The market seldom gives you the chance to get rich. This gold market has defied the odds and allowed its early followers and believers to get rich.

Anyway, that’s my take on gold and why you should own it and why you should follow my advice.

By: Richard Daughty, The Mogambo Guru - The Daily Reckoning

CEO and chief investment officer

U.S. Global Investors

I’ve done a number of interviews on gold recently and the number one question I get most from reporters is—can gold prices go higher?

My answer is yes.

Short-term, “record gold prices” are a bit of a misnomer. On an inflation-adjusted basis, gold’s real record price would be over $2,300 an ounce.

Looking at our oscillators, gold appears to be far from overbought. The chart shows the 60-day oscillator for gold (yellow) and the U.S. dollar (green) for the past 10 years as of August 31. One standard deviation represents a 7.3 percent move in gold prices.

Despite its recent run, gold was down 0.38 standard deviations as of the end of the month. More importantly, we’re not seeing the huge price spikes that are typical when investments get overheated.

Long-term, I think gold prices could double over the next five years. If this happens, the effect on gold stocks could be tremendous. If gold manages to double over the next five years we could see the values of some miners triple.

This would not take place in a straight line. Investors must be aware of the volatility inherent with these investments. Assuming normal historical volatility, these stocks could up or down 40 percent over any 12-month period.

*Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is also known as historical volatility.

To receive weekly commentary from Frank Holmes and the rest of the U.S. Global Investors team, sign up to receive our free enewsletter—the Investor Alert. Visit www.usfunds.com/alert to read this week’s edition.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

By Jeff Clark, Casey’s Gold & Resource Report
I get this question a lot: “Should I buy gold now, or wait for a pullback?”
It’s a valid question. For nearly two years, gold hasn’t had a serious decline. There have been pullbacks, of course, but nothing assumption-challenging. In fact, since October 2008, gold’s largest price drop is 10.6% (based on London PM fix prices), and yet the average of all declines since 2001 is 13% (of those greater than 5%). The biggest pullback we’ve seen this summer is 8.2%. Technically the summer’s not over, but I’ll admit I’m surprised we haven’t had a better buying opportunity.
So, is now the time to buy? It depends on your honest answer to another question: “Do you own enough gold?” By “enough” I mean an amount that lends meaningful protection on your assets. By ”meaningful” I mean that no matter what happens next – another financial blow-up, accelerating inflation, crushing deflation, war, a plummeting dollar, more reckless government spending – you won’t worry about your investments.
Whether you should buy now is almost irrelevant if you don’t already own a meaningful amount of gold. If you earn $50,000 a year, how is one gold Eagle coin going to protect you if the dollar plummets and sends inflation soaring? If your investable assets total $100,000, is your nest egg sufficiently protected owning two gold Maple Leafs? This is all akin to buying a $50,000 insurance policy for a $500,000 home.
Today we face the prospect of prolonged economic stagnation, and most governments are administering grossly abusive monetary policy as a remedy. While some of the consequences are already being felt, the full ramifications have not hit your wallet yet. But they will.
If you don’t have at least 10% of your investable assets in physical gold, or at least two months of living expenses, you have your answer: Buy. Don’t use leverage, don’t borrow money, and don’t buy with reckless abandon, but yes, get your asset insurance policy and tuck it away. And then start working toward 20% (we recommend a third of assets be in various forms of gold in Casey’s Gold & Resource Report).
Back to the original question: should we buy now, or wait for a pullback?
The answer comes when you look at the big picture. If you pull up a 9-year chart of gold, what sticks out is that the price is near its all-time nominal high. One could be forgiven for thinking it looks toppy or at least ripe for a pullback. But I assert that the highs for gold have yet to be charted.
What will a gold chart look like after adding five years to it?
When projecting gold’s potential price peak, there are many ways to measure it. Conservatively, gold reaching its inflation-adjusted 1980 high would have it topping around $2,400 an ounce. More radically, if the U.S. tried to cover its cumulative foreign trade deficit with its current gold holdings, gold would need to hit about $32,000/oz.
Let’s take something more middle of the road, and apply the same trough-to-peak percentage advance gold underwent in the 1970s. (I think there’s a greater than 50/50 chance it does more than that, given the precarious nature of the U.S. dollar.) Gold rose from $35 in 1970 to $850 in 1980, a factor of 24.28. Our price bottomed in 2001 at $255.95; multiply that by 24.28 and you get a gold price of $6,214 per ounce.
Sound too high? Well, would it feel high if you had to pay $12.50 for a Big Mac? At $3.39 today at my local McDonald’s, that’s about what it would cost ten years from now if we get the same rate of inflation we had in the late 1970s.
So if gold hits $6,214, what might it look like on a chart if you bought today around $1,200?

$1,200 doesn’t seem so pricey, does it?
I’m not saying there won’t be pullbacks or that you shouldn’t try to buy at lower prices. Just keep a big-picture perspective. Let’s say gold falls to $1,100 and you’re kicking yourself for having bought at $1,200… if gold reaches $6,200 an ounce, the profit difference between buying at $1,200 and buying at $1,100 is only 1.6%. If gold gets whacked to $1,000 (at which point I’ll be buying with both hands) the difference is still only 3.2%.
Heck, even if gold peaks at $2,400, you still get a double from current levels. (But unless government monetary policies immediately reverse course, gold isn’t stopping at $2,400.)
So there’s my answer. Yes, you have to accept my projection of gold’s ultimate price plateau. And you have to sell at some point to realize the profit. But if the final chapter of this bull market looks anything like the chart above, I don’t think you’ll be too upset having bought at $1,200.
Carpe gold.

By: Adam Hamilton, Zeal Intelligence LLC

– Posted Friday, 13 August 2010 | Digg This Article | Share this article | Source: GoldSeek.com

Precious-metals stocks really haven’t had a great summer by any means. After rallying initially in June, they started relentlessly drifting lower in July. The net result of this lackluster summer trading is a lethargic drift sideways. Naturally this listlessness has weighed on sentiment among this sector’s traders.

At the end of May just before the dawn of the financial-market summer, the flagship HUI gold-stock index closed at 454. Since then, it has generally been flat averaging just 458 on close. At best so far this summer, the HUI was up 8.8% in mid-June. At worst, it was down 4.7% in late July. For a sector accustomed to wild volatility and exciting action, 10 weeks of drifting can feel very discouraging.

But it shouldn’t be. Gold stocks almost always tend to drift sideways to lower in the PM summer doldrums. Such uninspiring behavior is par for the course this time of year. I wrote an essay explaining the research behind the PM summer doldrums that was published the very day the HUI peaked this summer (June 18th). At that time when traders were pretty excited about PM stocks’ prospects I concluded…

“The bottom line is summer isn’t a great time for precious metals. Led by gold, the entire PM complex tends to drift sideways to lower in the summer doldrums in June, July, and August. This listless price action is driven by the combination of no seasonal gold-demand surges and the general lack of investor interest that plagues all markets in the summer months. Sun, sand, and surf simply provide too much competition for traders’ attention this time of year.”

But today a couple months later, the financial-market summer is starting to wane. We’re on the verge of emerging out of the wilderness that was the summer of 2010. After forming a relentless headwind retarding gold stocks’ progress this summer, the major seasonal influences affecting this sector are shifting back towards a favorable tailwind. The HUI bull seasonals are looking up, a very bullish omen.

Yes, believe it or not seasonals do affect gold-stock price levels! This probably sounds counterintuitive initially. Investors and speculators can buy and sell gold stocks anytime regardless of the passing of the calendar year, so why does the time of year matter? The answer is quite logical. It matters because calendar seasons greatly affect gold investment demand, and the gold price is the primary driver of gold stocks’ ultimate profits. When it rallies, they rally. And when it falls, they follow.

Gold seasonals are extremely important for all PM-stock traders to understand. Read my latest essay discussing them in depth if you are not up to speed. In a nutshell, deeply-ingrained income-cycle and cultural incentives drive big gold demand spikes in the autumn, winter, and spring. But in the summer, there is nothing to drive above-average capital inflows into gold. Thus it tends to grind sideways to lower, and the gold stocks trail in sympathy.

These gold-driven seasonal trends are readily apparent in the HUI. Since markets behave quite differently in secular bulls and bears, I like to start my seasonal analysis when today’s secular gold-stock bull was born in 2000. To distill out the HUI bull seasonals, I individually index each calendar year’s HUI action from the first day of that year. This ensures percentage changes within each year are perfectly comparable across years despite the HUI trading at progressively higher levels as its bull marches on.

Finally I average together all these individual-year HUI indexes and chart the results. This process reveals the HUI bull seasonals rendered below, which are very valuable for traders to understand. Regardless of everything else going on in the markets, gold stocks tend to be consistently strong and weak at certain times of the calendar year. These tendencies can be used to help investors and speculators execute superior trades.

It’s been two-and-a-half years since I last updated this thread of research, with an epic discontinuity defining the period since. During that crazy once-in-a-century stock panic we weathered in late 2008, gold stocks were ripped to shreds in the belly of the beast. Between July and October 2008, the HUI plummeted a jaw-dropping 67.7%! And around half these losses accrued in this span’s final month alone! It was not a fun time to own PM stocks.

Then between its brutal October 2008 lows and the end of that year, the HUI rebounded 99.5% higher. This index has never witnessed anything remotely like that panic span, so I was really curious about how such wild swings would alter the HUI’s seasonals. Surprisingly though, the blue HUI seasonal line in this chart didn’t change too much at all. This shows the value in averaging over a decade’s worth of years. No one year, even one as crazy as 2008, wields an outsized influence.

On average since 2000, the HUI has rallied around 27.6% per year (from an indexed level of 100.0 to 127.6). These are stupendous gains over an ugly decade where the general stock markets have languished in a secular bear. As a matter of fact, on the day the HUI bottomed in November 2000 the flagship S&P 500 stock index closed at 1383. Today a decade later it is 21% lower while the HUI is 1151% higher! Gold stocks have been a spectacularly-lucrative investment since 2000!

In this secular bull the HUI has tended to trade in the well-defined seasonal uptrend channel shown in this chart. It hits its seasonal support four times a year, in mid-January, mid-March, late July, and late October. These are the best times of the year seasonally to add new gold-stock and silver-stock positions for investors and speculators alike. Your odds of “buying low” around these support approaches are far better than they are the rest of the year.

Out of these major seasonal lows, the HUI’s largest seasonal rallies of the year emerge. The first runs from mid-March to early June and has averaged 14.5% over the course of this gold-stock bull. As long as gold stocks aren’t radically overbought in March, we diligently play this strong spring gold-stock rally every year. Our subscribers have made lots of money over the years buying PM stocks with us around mid-March and then selling them in late May or early June.

After this first big seasonal rally, the PM stocks enter the dreaded summer doldrums. They tend to drift sideways to lower for much of the summer. The summers are, without any doubt, the weakest time of the year for the gold stocks seasonally. Every year in May I warn our subscribers about these dangerous PM summer doldrums. They not only result in real trading losses and even bigger opportunity costs, they can really devastate traders’ psychology and confidence.

The second big seasonal rally of the year erupts out of exceptionally-oversold HUI lows in late July. It tends to run 15.1% higher on average between late July and late September. Of course right now, in mid-August, we are early on in this HUI seasonal rally. This is very encouraging and ought to excite PM-stock traders bummed out from weathering the summer doldrums. PM stocks almost always rally big heading into autumn, and statistically this seasonal rally is probably already underway.

If you follow our research work at Zeal, you are probably scratching your head at this point. I imagine you thinking, “But Adam, you often write about a mid-August seasonal low. Doesn’t this late-July HUI seasonals data contradict this?” Yes, it certainly does. But this apparent contradiction highlights the supreme importance of broad and well-rounded research. Indicators must be considered in concert, not isolation, to optimize trade timing.

Remember that gold stocks (and silver as well) are ultimately driven by the fortunes of the gold price. If gold is weak, the entire gold complex has a tough time rallying. And gold seasonals bottom in mid-August. Of course silver seasonals dutifully follow gold, bottoming between mid-August and mid-September. And just last week, my business partner Scott Wright published some landmark research on junior seasonals. Junior gold stocks are hyper-sensitive to gold sentiment. And when do they bottom? You guessed it, mid-August!

So if you want to buy PM stocks in late July due to these HUI bull seasonals, your odds for success are high. And indeed this year, the HUI’s 432 low on July 27th may indeed prove to be summer 2010’s closing low. But I’ve seen plenty of really ugly HUI selloffs into mid-August, like 2007’s sharp 13.6% loss over 6 trading days ending August 16th. So personally, I feel more comfortable waiting for the probable mid-August gold lows before adding new long positions. Gold is gold stocks’ primary driver.

The HUI tends to see another seasonal pullback in October. Provocatively, the wicked-sharp plunge in October 2008’s stock panic stretched this seasonal tendency considerably. Prior to that anomaly, the HUI tended to bounce in the middle of its seasonal uptrend in mid-October, not near support as this latest seasonal chart shows. Since that panic was such an exceedingly-rare event, I certainly wouldn’t hold out for a seasonal support approach in Octobers in general. But an early-October pullback is still highly probable.

The third big seasonal rally launching out of October’s low actually lasts until late February of the following year. All together it accounts for a 17.6% average HUI rally over this past decade, which makes it the seasonally-strongest time of the year for gold stocks. So as long as gold’s fundamentals remain bullish, and neither gold nor the gold stocks have just rapidly spiked to very-overbought levels, it is prudent to be heavily long gold stocks in the winter. Throw in autumn and spring as well, for the other two big seasonal rallies.

So boiled down, these HUI seasonals are really pretty simple. Expect weakness in summer since there is nothing then to drive gold investment-demand spikes. If you are an investor, just gird yourself psychologically for this weakness and don’t get caught up in it or worry about it. If you are a speculator, you can sell long positions between late May and early June and then redeploy between late July and mid-August. And then stay long and deployed for the rest of the other three seasons.

This simple truth is so powerful and really highlights the value of expert market research for all traders. Every year without fail, I receive tons of e-mails from discouraged PM-stock investors and speculators in this late-summer timeframe. They are frustrated, discouraged, and have either given up on PM stocks or are considering capitulation. Yet if you study the markets, or spend a little time and money learning from those who do, there is nothing to fear in the summer. Don’t expect too much, and you won’t be let down.

This next chart takes an alternative view of HUI seasonals, this time dissected monthly. Every calendar month of this gold-stock bull is individually indexed, and then each month is averaged with the same months across all other calendar years. In addition, as in the first chart above, standard deviations are rendered in yellow. The smaller inset charts show the full range of these standard deviations.

Standard deviations, of course, are measures of dispersion. When you are running averages for market-analysis work, the tighter the underlying data the higher the probability your average is meaningful. The narrower the yellow bands (closer to the core blue average), the less dispersed the underlying data is. The sequences 4, 5, 6 and 0, 2, 13 both average 5, but obviously the tighter first one is more likely meaningful.

In calendar-month terms, November, May, and September are the best months for the HUI on average. We are talking gains of 9.2%, 7.7%, and 4.6% respectively. The worst months of the year for gold stocks on average are October and July. This is skewed by the panic October and November of 2008, however. While these two months were still weak and strong pre-panic, they weren’t as extreme as they look above.

The 2008 panic and its 2009 aftermath had a much more-pronounced impact on the smaller monthly seasonal datasets than it did on the annual ones. It flattened January, March, and August while extending October and November. If you want to see the panic changes with your own eyes, compare this chart to the last one I built before the panic with data current to February 2008.

These monthly seasonal tendencies reinforce the annual analysis. Summers, especially June and July, tend to be weak during the PM summer doldrums. August looks strong above in monthly terms, but realize most of these gains merely offset July’s big losses. The result is the flat late summer seen above on the annual chart. But once summer passes, gold stocks tend to rally on balance in most months except October. While they can drift lower other times, these non-summer pullbacks tend to be trivial.

So once again the core thesis of the HUI bull seasonals emerges. Write off summer, but make sure you are deployed in high-potential gold and silver stocks for the autumn, winter, and spring gold rallies. Thanks to summer’s dampening effect on sentiment among naive PM-stock traders, this time of year almost always sees nice bargains in PM stocks. August is the perfect time to stock up and prepare for the highly-probable large autumn gold rally.

Gold tends to rally sharply in autumn because of big Asian buying. After harvest, farmers can invest in gold once they know how big their profits are. And gold demand in India in particular, the world’s largest consumer, rockets higher during autumn’s festival season. If you have any Indian friends, ask them about Indian wedding season. It is fascinating and often drives big gold rallies which PM stocks leverage.

Which stocks to buy? We can help you with that. At Zeal we deeply research entire PM-stock sub-sectors (gold producers, silver stocks, advanced-stage junior golds, early-stage junior golds) to uncover what we believe are the best stocks fundamentally. We publish comprehensive profiles of our dozen favorite stocks (out of initial universes often in the hundreds) in our popular Zeal Reports. You can enjoy the benefits of hundreds of hours of our expert research for a mere pittance. Buy a PM-stock report today and take advantage of the late-summer bargains!

We also publish acclaimed monthly and weekly newsletters that are invaluable to investors and speculators. All of our research and wisdom flows into these products, helping traders better understand what is going on in the markets, why, and how it can be profitably traded. There is no need to ever be anxious about the financial markets! The more you understand, the less you will worry and the better you will do. Subscribe today and take charge of building your personal fortune!

The bottom line is precious-metals stocks have exhibited very definite seasonal tendencies over the course of their secular bull. This is largely the result of gold demand spikes driven by income-cycle and cultural factors that are tied to the calendar year. While PM-stock seasonals are often secondary drivers that can be temporarily overridden by short-term technical and sentimental extremes, prudent traders still pay close attention to these headwinds and tailwinds.

HUI bull seasonals show investors and speculators when they have the best odds of buying low and selling high. They reveal that summer tends to be a poor time of the year for PM stocks, but the rallies in autumn, winter, and spring far more than make up for these summer doldrums. They also show that our current mid-August timeframe is one of the best times of the year to add new long positions.

Adam Hamilton, CPA

August 13, 2010

So how can you profit from this information? We publish an acclaimed monthly newsletter, Zeal Intelligence, that details exactly what we are doing in terms of actual stock and options trading based on all the lessons we have learned in our market research. Please consider joining us each month for tactical trading details and more in our premium Zeal Intelligence service at … www.zealllc.com/subscribe.htm

Questions for Adam? I would be more than happy to address them through my private consulting business. Please visit www.zealllc.com/adam.htm for more information.

Thoughts, comments, or flames? Fire away at zelotes@zealllc.com. Due to my staggering and perpetually increasing e-mail load, I regret that I am not able to respond to comments personally. I will read all messages though and really appreciate your feedback!

Copyright 2000 - 2010 Zeal Research (www.ZealLLC.com)

A professional investor with Boy Scout genes in his DNA, Mercenary Geologist Mickey Fulp picks winners in the junior resource sector based on three criteria: share structure, people and projects. In this exclusive Gold Report interview, Mickey touches on how he studies up on such key factors as insider holdings that indicate management’s skin in the game and the public float necessary for liquidity. He also suggests that the summer slump—with low volumes and low prices—is a good time for some homework on equities that could double within 12 months.

The Gold Report: So far in 2010, there’s been both positive and negative economic news. We now have health reform, about to have financial reform and stimulus money is still working its way through the system. The markets are bumpy. What’s your view for the second half of 2010?

Mickey Fulp: We always see volumes take a nosedive in the summertime, as everybody in the business goes on vacation. We’re in the summer doldrums right now, and so I think we would hope for a better market after Labor Day. Amongst the juniors, liquidity has been the real problem. Volumes have been way down on the Toronto Venture Exchange; that’s one of the criteria I always look at for the health of the market. We’re down to around 150 million per day; you want to see something on the order of 250 million in a robust market. There’s not been wholesale divestiture, though, so after Labor Day I think we’d expect higher volumes for the juniors and, hopefully, a better market. I even saw some Canadian analysts the other day talking about how the World Cup has affected volumes in that country.

TGR: You’ve talked about junior resources as a very high-risk, high-reward sector where people must be prepared to lose, as well as win. If they consider this gambling money, your “Power of Two” concept helps them improve their odds. Could you explain this concept?

MF: It’s actually simple: The Power of Two is the idea that you take your money off the table when a stock doubles, so you’re playing with somebody else’s money. Let’s take an example: Say you invest $10,000 in a junior stock that costs $0.20 per share. When it reaches $0.20, sell half; take all your initial investment off the table. Then take your $10,000 and find another stock that will double within 12 months and do exactly the same thing. It’s an iterative process. You’re accumulating positions in a basket of juniors and preserving your initial capital. If you do it five times, you still have your $10,000 ready to go into stock number six; and 25,000 shares each of the five investments with a zero cost basis. It’s an infallible way to make money in a bull market.

TGR: What if the stock halves instead of doubles?

MF: There’s only one reason to buy a stock—because you think it’s going to go up, or if it’s a blue chip, to generate cash flow through a dividend. There are myriads of reasons to sell a stock. If the reason you bought has changed, sell it; if not, hold it or average down on weakness, because you still think it will double within the original 12-month period. Part of the Power of Two concept is to buy stocks you think will double within 12 months, and nearly all active exploration juniors will have a low-to-high in any 52-week period of at least a double. In other words, during any given year, the stock’s high will be at least double its low. The key is to buy at low volumes at low prices and sell at high volumes and high prices.

TGR: And when do you sell?

MF: If the reason you bought the stock has changed, when do you sell? It depends on many things. Perhaps it becomes deadwood and doesn’t perform. You hang on to break even. Perhaps there are better opportunities, so you sell at a loss and move money elsewhere. Perhaps you sell it at the end of the year for a tax loss, because if you’re doing your homework—and doing it right—you will have profits so you can take tax losses and write off against your capital gains. If it was a bad investment decision, just take your lumps and move on.

TGR: If the key is to buy at low volumes at low prices and sell at high volumes and high prices, does it make sense to buy now, during the summer doldrums?

MF: Yes, the summer doldrums always present buying opportunities. But make sure you don’t buy too early. If you buy stocks with underlying good fundamentals and value, you will be rewarded at some point.

TGR: Aside from juniors, what would you advise investors?

MF: It’s important to have a nest egg, and I have that outside of the money I have in the junior equity market. It’s important to spread your assets and, therefore, your risk. I’m a bit of a Boy Scout, so I’m prepared. It’s necessary to own your own shelter, and hopefully you don’t have a mortgage on that. I have some farmland, keep some cash on hand and own large market cap equities, mainly in a managed IRA. I own gold, guns, gas and goods. I’m a bit of a survivalist. It’s important to be prepared.

TGR: You say you look for three critical components in any public company: Share structure, people and projects. Tell us what you want to see in share structure and why that is important to you?

MF: You want a low number of shares outstanding, but it’s a floating target that depends on the stage of the flagship project. I have some rules of thumb that I use for what constitutes a low number of shares. If it’s a startup company, you want a low number of shares—10 million to 20 million—that are tightly held. If it has an advanced project, the acceptable number of shares would be higher, perhaps in the range of 40 million to 60 million. For a company going into the development stage, I like to see no more than 100 million shares outstanding. You want insider holdings to be significant, and you want insiders to participate in their company’s private placements. They need to have skin in the game.

Institutions can be good or bad. Companies with advanced projects often have a large institutional fund holding. I am very particular about seeing a spread of institutions, and not one institution controlling a significant number of shares, because management then becomes beholden to that institution.

The Achilles heel for most of the juniors is the lack of liquidity, or trading at low volumes. Volume is generated in the market by a healthy retail public float, so although you want companies that are relatively tightly held by insiders, families and friends, you also want a significant retail public float because that’s what generates liquidity.

TGR: What do you consider significant?

MF: 50% or more. Retail investors are the ones that provide trading volume.

TGR: What percentage of insider holdings do you like to see as opposed to, say, institutional holdings?

MF: I certainly prefer at least 10% to 20% insider holdings, sometimes more. I don’t have strong feelings about institutional holdings. Oftentimes, it depends on the institutions and how committed they are to the junior resource market. Institutional funds need to make money, so they often do not have the company’s best interest in mind. If any institution holds 10%, 15% or 20%, you want to make sure they are pros and committed to the company business.

TGR: Any other share structure factors that you consider important?

MF: You want to be wary of overhanging warrants, especially if they’re marginally in or out of the money, because that can cap the share price. A company can go on a run but, in times of low news flow, drift back toward the price of overhanging warrants.

I always run working capital in with share structure. You want to make sure the company has sufficient working capital for a year or the ability to raise money—at non-dilutive share prices—when necessary.

The other thing I very much watch is insider selling. As a general rule, I want insiders not to sell. They should make their money on options and not huge salaries. If they sell into positive news or front-run, that raises a big red flag as does selling before or during bad news I’ve dropped coverage of three companies in my two-year newsletter history; two because of insider selling. It’s very easy to find out about insider selling, assuming those people file transactions on time. There’s a website called CanadianInsider.com that shows the last 10 insider transactions for every listed company, and sedi.com lists all the insider transactions in the history of a company. It’s all available but no different: I look a lot of people pay attention to it. They absolutely should.

TGR: How are you feeling about the future for silver?

MF: I call silver the bipolar metal. In good economic times, it functions as an industrial metal, which makes sense because the majority of the world’s silver is produced as a byproduct of lead, zinc and copper mining. So when base metal is in high demand, silver producers do very well. In times of economic crisis and duress, it acts as a precious metal. For me, silver is a hedge against calamity, the same as gold is but to a lesser extent. I own silver—bars and so-called junk silver, which is silver-bearing U.S. coins minted prior to 1965. When I buy precious metals, I look at the gold-silver ratio. It’s currently in the upper 60s, which is not attractive to me. When the ratio was in the low 80s, in October and November of 2008, I bought silver. So I buy silver when that ratio is high, meaning the price of silver is relatively depressed. Otherwise, I default to gold.

TGR: Mickey, you are a big proponent of investors doing their own due diligence. What conferences, books, seminars or newsletters would you recommend to those who might be new to the gold sector?

MF: There are numerous investment conferences every year, and I personally speak at about 10 or 12 of them. They’re held in various large cities—Vancouver, Toronto, Calgary, Chicago, Phoenix, New York City, New Orleans, San Francisco. I encourage investors to go to these. Most of them are free to the investing public. At the upcoming San Francisco show (Hard Assets Conference, November 21-22), there are educational workshops, some of which are free and some requiring small fees.

TGR: You’ll be there?

MF: Yes. I will be presenting my educational workshop called “Geology for Lay Investors.” Probably the most difficult thing for lay investors to get a handle on is the geology of these junior resource companies’ projects. We geologists tend to speak our own language. We understand the jargon but it’s probably puzzling to the investing public who has no background in the science. So in an hour-long seminar, and however long I stay for questions—which tends to be quite a while—I try to boil it down into the basics of geology. Geology is a science, but the best geologists are artists. So through these educational seminars, my mentoring of investors and a book I’m writing on resource investing for the lay investor.

TGR: When is that coming out?

MF: I keep saying a year, but it keeps getting put off as I keep adding more chapters, kind of like most juniors’ Gantt Charts. I’m chipping away at it but then I get busy with other things. I’m writing it chapter by chapter, so it’s a work-in-progress. Stay tuned.

TGR: Any final thoughts you’d like to share today, Mickey?

MF: Yeah, I’ve got one. “There ain’t no cure for the summertime blues.” Except that. . .”Time is on my side, yes it is.”

TGR: You ought to set that to music.

MF: I think that’s already been done.

The Mercenary Geologist, Michael S. “Mickey” Fulp is a Certified Professional Geologist with a bachelor’s degree in Earth Sciences with honors from the University of Tulsa (1975), and a master’s degree in Geology from the University of New Mexico (1982). He has more than 30 years’ experience as an exploration geologist searching for economic deposits of base and precious metals and other resources. Mickey has worked for junior explorers, major mining companies, private firms and investors as a consulting economic geologist for the past 22 years, specializing in geological mapping, property evaluation and business development. Respected throughout the mining and exploration community due to his ongoing work as an analyst, newsletter writer and speaker, Mickey can be reached at Contact@MercenaryGeologist.com.

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