GBN.V vs. $Gold

Since the $CDN is trading at parity with the $U.S. for the time being, it's a fair assessement to divide the value of the stock by the $U.S. gold price. That may change in future, as the $U.S. is pegged to the Renminbi, and not the other way around - in a manner of speaking.

I had to put in another horizontal line depicting how many times the stock must appreciate over the low of 15¢ in order to catch up both to the gold price and previous highs set in 1996. For my part, we are in the seasonal window for the lows being set here.

The big question is whether gold stocks can advance during an equity decline. Gold prices aught to be a layup for new highs, and gold stocks the immediate beneficiary of such a move.

My opinion on that would be if interest rates remain at a low or start paying out negative rates on 3-month treasury bills, then the Net Present Value of gold mining stocks in particular will increase as the rest of the economy is exposed to currency depreciation, or loss of purchasing power. That means internal rates of return will increase exponentially, foreseeably adding multiples onto projected earnings.

Now, the banks are very anxious to control prices of gold mining stocks as they are overwhelmingly short these companies. They also now own the stock exchange, and have the advantage that the 'no down-tick rule' was conveniently abolished. That means the door is open for price fixing in share prices. Moreover, no specific rules regarding hedges are in place, which means you can sell a stock without first owning it in volumes and take that money and parry directly into the rising trend. The regulators have turned the history clock back decades and we have returned to the pump-and-dump bucket-shops of the past.

Very likely you will see P/E ratios being closely watched, and carefully administered share prices to follow, but the trump card for gold mining companies, which can no longer grossly exaggerate 'cash costs,' which happened under GAAP, and were obliviated under IFRS, will be to pay excellent dividend yields as margins increase. Especially important to this are grade controls.

The Wilder's ADX is very handy for picking out a top in the market over the long term, but not so good at picking out bottoms. The black momentum line is at an extreme low, which was only arrived at in Dec. 2010, and Dec. 2000. Thus you can assume that the 75¢ high in Dec. 2010 was nowhere near the top. The extreme low valuation against gold over the last 20 years aught to give you the hint.

By the news release at the close on Friday, GBN.V anticipates a continued rise in the gold price.

http://scharts.co/OyXFEJ

-F6