Precious, Pallid, Constipated, Agonized, Verklempt Top-Calling Contortionists

The following is an example of the contorted top-calling in the market as concerns the gold price. The mathematics may be sound, but before you jump on the top-calling bandwagon in anything you simply have to adjust for inflation. Everybody screams: INFLATION the sky is falling!! But nobody even bothers to take a quick peek at inflation-adjusted charts. (or stop for a moment to realize that bond prices are subject to inflation as well.) The nominal chart is the absolute fact, and the inflation adjusted charts (which are the real fact) are now totally ambiguous.

http://pragcap.com/when-will-the-gold-bubble-burst

In the MD&A, the GBN.V management low-balled the project again, basing their Net Present Value analysis of the project on $825/oz. U.S. gold. This is an atrocious misrepresentation. But we have a clear view into how the difference engine of Netoliztky's miserly mind functions. Probably he can see that bullion will eventually be selling ~$1673/oz. U.S., a fact which does not escape him. But to be safe, we cut it down by half.

(Is this the same way the grades are treated by any chance?)

I wonder if it dawns on him in his lowballing process that if the company be profitable at a minimum all-in cost of ~$825/oz. U.S., including development, then the rest of the available cash on hand belongs to whom by chance? Obviously, this does not hide the clear possibility that this mining project will be very cash rich.

The best available forecast for the gold price going forward is here:

http://www.realterm.de/DAXinGold.php

Translation from babelfish.yahoo.com

http://tinyurl.com/daxingold

Weekly Analogous Gold Chart

The weekly Analogous Gold Chart is unfolding finally as it should, we could be looking at new historic highs in the gold price next week should the analogy hold. The choppy gold price going into November/December threw off the count, though the last two weeks at the end of the year set things back on track again.

Still anticipating an average gold price of ~$1500/oz. going into Q1. This means the company will make about ~$22 million in Q1, based on production of 15koz. If you will remember, the original outlook was for a profitable company that could turn over $24 million a year. How will they manage to hide this fact? Rely on numbers which were valid in year 2000 and clearly disabused by now?

supersize: http://www.flickr.com/photos/11747277@N07/5312700368/sizes/l/in/photostream/

stockcharts.com

-F6