A Holiday-like atmosphere will be with us for the balance of the week in North America.

U.S. Stock Market – A no-where’s fast outlook continues to be my best assumption. We’ve defined a trading range and the market should look to buy the bottom of it and sell the top until such time the bands change.

U.S. Bonds – Thankfully I gave up betting against the bond market months ago but I remain extremely bearish going forward. Talk of a bubble should only be addressed to the U.S. bond market. The difficulty is bubbles can grow bigger and last longer than anyone could imagine. That appears to be the case here.

Gold – Despite all the bubble nonsense and predictions of its demise a dime-a-dozen, gold has risen in a very constructive manner. I sooner see it move sideways into next week than a vault up here in this holiday atmosphere.

U.S. Dollar – The technical bounce is playing itself out and it would come as no surprise to see us testing the 80 area in the 4th quarter.

Oil and Natural Gas – Serious conflict in the Middle East is the only factor I see that can cause oil prices to rise dramatically. I have avoided natural gas despite numerous bullish calls for the last couple of years. I continue to see over supply and suggest the sidelines remains the best position until there’s clear evidence the oversupply has truly dissipated or disappeared.

Gold and Junior Mining Stocks

Michael Campbell’s Interview with Peter Grandich

Michael: What does it mean for the junior resource market if that’s the case?

Peter: Well the junior resource market is probably in one of the worst states it’s been in almost the entire time I’ve been around it. Given where metal prices are compared to where they were, juniors in general are probably performing worse now than I can remember in a couple of decades.

Part of that is funding is difficult.  There’s not a lot of money that’s flowing into this industry. Secondly, despite the great increases in the Bullion prices we don’t have the same activity level of people participating in the junior resource market that we used to. The US market is all but closed for business for junior resource companies. The ability for an average individual down here to purchase or be solicited to purchase a junior resource stock trading up on the Toronto stock exchange has become almost impossible. Where a lot of Americans used to play the junior market they are just not doing that anymore. So the, all in all it’s a very tough time for the junior resource market despite still very, very attractive prices.

Part of the reason is there’s just been very little overall success in the junior market. We have really only one or two area plays and I wouldn’t even call them an area play compared to how they used to be 10 or 20 years ago. Most notably now in the Yukon we don’t have widespread interest. The hedge fund industry and funds are closing out not getting into juniors. The flow through funding is still there in Canada but it’s not as big as it used to be. So it doesn’t hold well and we see that. We see companies have great news trade up 10% or 15% on that news and two or three days later, all that gain evaporates. I don’t see any significant change in that for the foreseeable future. That’s why despite still being very bullish on precious metals and particularly gold, the junior resource market is still a very tough market. It’s not something you can just buy and be successful because the overall market’s going up. There’s just no way the general stock market’s gonna fall 20 40 50% and the average person’s gonna turn to their advisor and say “listen sell my IBM sell my treasury bonds but buy me some junior resource stocks.”  

Michael: In 2008 I was very liquid thanks to Peter Grandich and Bob Hoye I might add, who came out unequivocally and said sell the market October of ’07 right at the top. Peter made no bones about it, he said it’s gonna be the worst bear market in his lifetime. Bob Hoye said it’s gonna be a credit tsunami when we featured both of them on the show in mid October ’07. I took their advice got down to about 92% cash but I  kept this little group of juniors.  I got it handed to me. My joke Peter, was I found out the term popular prices meant they were free.

Peter: Well I didn’t take all of my advice either as I noted to my readers I kept some juniors and they got hit. But overall we did much better by stepping aside. But I just want to really just close on the point that if you believe it is going to be terrible times the junior resource market is not going to avoid that. I think that’s one of the fallacies that’s been presented at times in our business.

Michael: Does any action that you’ve seen in the market discourage you from a long term view on Gold?

Peter: Mike we’re in the mother of all Bull Markets. The very fact that almost no one can grasp and believe that, when even the most ardent bulls are really concerned every time we have these one step back corrections in this mega bull market just refortifies my point. Recently in these past couple of weeks we’ve seen the correction again. In the last few years, as we went into 2008 we tested 1,000 dollars, then we all know 2008 was a bad year in the market and we got down to nearly 700 and everybody predicted the end of the Gold Bull market. By early 2009 we were testing 1,000 again,  then the pull back happened but this time only to 900 and again we were told it was the end of the bull market. Then we got to a thousand again and we finally broke through to a little over 1,200  before pulling back again almost to 1,050 beginning of this year. When that happened again we were told it was the end of the bull market before of course it went to higher highs early this year. Now during the more seasonally weak period which July and August gold had another correction and yet again everybody and his mother seems to suggest that gold has again reached it’s end. Nothing I have stated has changed.

There are three dynamics to this gold bull market. The first is the big sellers are no longer there. Now I’m not talking about the manipulators and the gold cartels I’m talking about what we knew openly and that was during the 90s and the early part of this decade central banks were aggressive net sellers. They aren’t selling anymore and part of the reason is because I believe they just don’t have the gold to sell. Second the mining companies who literally used to cut their nose to spike their face by hedging have now made hedging a four letter word. We don’t have that continuous supply being placed forward in front of us by mining companies. And third and perhaps the most important of that part is gold has returned to it’s rightful place for the last couple of thousand years an alternative to paper money. Think about it, would anybody today, outside of the Canadian dollar which  I like very much,  entrust my daughter’s life savings to any other currency. But I can deal in gold. And I think gold will continue to be more and more an alternative to paper money in this debt ridden world society that we’re in. So I don’t see anything other than these normal corrections and I still believe before the year is out we’ll see 1,300 on gold. And then depending on what happens, especially some geo-political issues that could come to the forefront next year, we could see substantially higher prices next year. So I remain an ardent bull.

Michael: Do you think there’s strong potential in Silver too over time?

Peter: Over time I think a few times Silver will lead Gold but it will lag overall as one of the reasons is it doesn’t have the monetary attractiveness that gold does. Also unfortunately it’s heavily manipulated in that there’s so few players in the Silver market. Most of them play to the short side and will until  someday the commodity commission makes some changes. I think it’s a lagger but I still think it will work it’s way higher. Ultimately, the one metal that I think people need to own first is Gold, before you start trying to play the Bull Market through mining shares and juniors.

Michael: You offered up earlier that things are changing in a dramatic and profound fashion. But it’s those people who end up not having lost are the ones who will be the winners in the end.

Peter: Yes and where the opportunity’s going to come is you need to buy assets on the cheap. Cash is king again. It really is even though it doesn’t pay much interest having liquidity and being able to step in when other people don’t have liquidity is really gonna separate the winners from the losers Mike.

Michael: Great stuff Peter as always I very much appreciate you stopping your weekend for us. Listeners can follow Peter by going  to www.grandich.com. We’ll chat in the near future.

Peter: Thank you Mike!