The Mistakes Ppl Can Make

This week we are treated to the failure of MF Global. Not only do we have one commercial trader succumb to the European debt debacle, but there are others that may have identical problems. The sad news is that under pressure from larger institutions in the same trading space, they raided their own client accounts. There will probably be more of the same to follow.

In the gold markets, we are anticipating a top and a correction. This might be ill-advised, since the Eurozone is lowering interest rates as of this morning. The interim top can take longer than anticipated, and the correction be deeper than supposed.

Very highly likely one of the Eurozone debt defaulters will seize upon the idea that they can mitigate their own disaster by selling their gold into the market. As the following discussion on a pending gold price correction seems out of place, gold can certainly reach ~$1033/oz. range in elliot wave terms. The average price should be in the 89-week EMA range. A gold price correction can be very nasty and drag on forever. (You have to remember that the company only needs ~$900/oz. U.S. to continue on, and not have to dilute any further.)

http://www.bloomberg.com/video/78409176/

It might also be considered a mistake to typically withhold information from the shareholders in a publicly traded company, fill out your requirement depending on how much of the company you want to own and dilute as you see fit, without really revealing what you're doing. What that has led to is a deeply undervalued company, a life's work that can easily be bought out by an entrepeneurial carreer disaster waiting to happen, for the sake of shyits & giggles.

We have had a news septa-fecta and no share price movement whatsoever. The smaller shareholders in the company must be the most frustrated people on the planet, and looking for the exit. They are also holding the vast majority of the shares. A hostile offer will give them the chance to save face in the short run, not having to explain their investment to anybody and not being able to convince anyone, including themselves, of the value proposition here. Can anyone REALLY say what the tonnage rate or grade was for Q2, fiscal 2012 or how much tonnage is anticipated for Q3, 2012??

The one advantage that depression-era gold miners had over their contemporaneous counterparts was a fixed gold price. They could pay out a dividend without giving much thought to price volatility. Nowadays, the big doubt about gold is its price volatility. People see the price volatility as a problem with gold, not with the markets. They also see gold miners as not being part of the gold markets themselves.

For GBN.V to consistently pay a dividend of 1¢/share per month, it would require a processing rate upwards of 700tpd, ~10g/t, ~$1450/oz. + average. In order to compete with the markets, GBN would have to pay a high risk junk bond rate. The assumed cost of ~$900/oz. to continue developing and growing is more than likely to stay the same for the foreseeable future.

We have also had the most egregious series of naked shorting campaigns(not just in GBN.V shares and not just gold mining companies) for the longest period. The price arbitrageurs have complete control of the price, regardless of actual business activity. They are hugely confident they'll win in the end, otherwise they wouldn't constantly lay on so much risk, day after day. Perhaps they know something we don't, such as how much leverage is being used to buy the stock, or that they have knowledge about how the banking sector is looking to trash the gold price once and for all.

supersize: http://www.flickr.com/photos/11747277@N07/6309186655/sizes/l/in/photostream/

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GBN Daily

The GBN.V daily chart is showing an inverted diamond formation, which would appear to be a layup for a rally on the test and breakout of the diamond. If you are a stockcharts.com subscriber, you can remove all of the background noise to see this more clearly.

Note that the GBN.V share price has followed the discount rate decline since the price peak. It should be the reverse case scenario, which I was contemplating. Looks like I'm completely wrong on that score so far.

supersize: http://www.flickr.com/photos/11747277@N07/6309736278/sizes/l/in/photostream/

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