$USB Weekly

One aspect to trade in GBN.V shares I had been watching for quite some time are the strong rallies in the stock price on bond market sell-offs. Its very apparent from the weekly USB chart that a strong inverse correlation with the U.S. long dated treasury bond chart, that rallies occur on sharp sell-offs.

So far, we haven't seen that kind of reaction since August of last year. Certainly the stock is trading well below 1P/E, even if production was drastically curtailed and the company could only produce 28k oz. in a year. If you discount depreciation due to massive stockpiling well in advance of production rates, and use results obtained during Q2 and Q3 fiscal 2012 in terms of actual cost, the stock is trading well below its price to earnings ratio.

By far and away the biggest problem facing this company is the sell-side broker with regulatory support on their side. They probably go down to the pub and quaff a beer, joking the while how proposterously absurd it would be that some schmuck proposes to start a gold mine in Saskatchewan. Where the sell side broker is wrong is that GBN.V intends to close up as a business.

We are in a time of capricious pricing for the stock since the parabolic decline, and have seen no end to short selling since that time. The telling move will be seeing further declines in treasuries, where there is probably a point of no return, and the sell side broker will lose money on leveraged positions.

A 1/2 ¢ move in the GBN.V stock price to the upside would mean a short covering rally, since the percentage will be large enough to force a buy-in and cause a significant short fall in leverage treasury futures positions, especially after options expiry.

There is no techincal basis for a recovery in the treasury market before an interim decline.

http://scharts.co/122ulv8

GLD Weekly

It has been stated ad-nauseum that selling from GLD is basically hanging over the gold price since more inventory is doubtless going to be sold. For the most part, GLD is forming a plain vanilla continuation pattern, with technicals indicating a very oversold condition.

The selling is really coming from JP Morgan Securities' inventory held in other people's custodial accounts at COMEX warehouses, as has been factually demonstrated.

The important action has actually been in 3-month treasury bill prices. Yields closed this week @0.04%.

A stock market decline could flip short term rates into the negative, which would benefit gold prices directly, as lease rates remain above this level. This is not something closely watched, simply because people believe rates are fixed by the central bank, rather than being determined by the market.

Certainly Canadian short term rates remain comparatively lofty, when they should have been in decline, given the move in the TSX over the last year, plus bond market sell-offs.

Changes in bond market will likely have a direct effect on gold bullion prices, especially should it become the least risk option in a return-free risk market.

Times Colonist:

http://ow.ly/m40Az

Stockcharts.com:

http://scharts.co/147jqo8

Golden Band is hiring, or has Netolitzky fired everyone in sight by now? Is the work-to-rule managing director's production strike over by now?

Golden Band Website

-F6