$CDW/$Gold Weekly

The Gold Price

We are in the throes of a major correction of the gold price since Fall of 2011, and still have not climbed out of the trough.

Certain technicals would say that we are in a layup position for the rally to previous highs. You can see that a little clearer in the $CDW/$Gold weekly price. And there's more support for this idea in drawing a line across the peaks, but cutting the absolute price peak.

Moreover, we are re-testing near the 89-week EMA, and the breakout line all at the same time. All together, this is a backdrop for a rally to previous highs. No moving average crossover has occurred.

Given that options in the treasuries market close quarterly on the last day, that would mean that so do options on derivatives contracts which are the greater financial liability, settling quartery as well.

The gold price sold on options expiry, but settlement for derivatives is still in play, meaning the underlying commodity has to be bought to settle.

Ore Stockpile

If the company intends to stockpile enough ore for two years of production, then this is an obvious strategy for obtaining the highest price possible. There was at least one year's worth of stockpile at the mill last April, according to Bing Maps' aerial photo, and the company had been processing lower grade material first.

It takes two years to build a new mill, so the company must have stockpiled for two years' worth of ore should they engage a bankable feasibility study for the purposes of financing. And then once financing is in place, they need to operate for two years without interruption. A bankable feasibility study would give some coherence to this company's outlook.

A bankable feasibility study would also be accompanied with a reserve calculation that reflects the potential in available deposits, rather than merely satisfy reporting requirements for the merest fraction of available ore.

Conflict Of Interest

One thing that might occur given the poor performance of the stock, and the possibility that a conflict of interest has been settled this year, is that Sprott will cross trade GBN.V from their Canadian Equity account to their precious metals equities account, which should be watched for in the next two weeks.

Their position in the company has fallen behind substantially with dilution, and they might want to buy more shares. I presume changing accounts by the end of the year means a tax write-off for them, taking a tax loss. I would also be looking for their equity swap position with TD Securities to be closed, finally in the last quarter of 2012. That should be reported in their financials for 2012.

Its the same for everyone, that dilution means you have to buy more shares to keep up, making your investment far more expensive than you would like. But look everywhere around you, gold mining shares as an underperforming sector have unbelievably expensive valuations.

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http://scharts.co/M09HGl

-F6