3 Reasons Gold Was Up When the Market Went Down

The last few weeks have seen a furious correction in stocks. But do you know what didn’t get pulled into the abyss?

Leading gold and silver miners. They held up just fine.

Take a look at this chart showing a recent 10-day period of activity in the S&P 500 (the red line) versus gold (the orange line), silver miners (green) and junior gold miners (blue).

(Updated chart)

I’m using junior gold miners and not the senior gold miners because the junior gold miners are leading EVERYBODY.

And THAT tells you a bit about where you should be investing in this market.

Can this outperformance continue? First of all, it wouldn’t surprise me to see more zigging and zagging as stocks of all types try to establish new trends … some up, some down.

But yeah, I think this outperformance could continue. That’s how we’re playing it in my Junior Resource Millionaire service. Let me give you three good reasons why …


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here’s how it happened

After a flurry of gains last month, Tony Sagami is back at it this month.

In 4 days, he has delivered a 30% gain to the investors who are jumping on his recommendations. That means, in less than a full week, every $100 invested into his play returned a gain of $30.

Or, every $5,000 could have handed you a gain of $1,500.

Either way, you could have made a bundle of cash to spend a great weekend with your friends and family.

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#1: U.S. Bullion Coin Demand Is Soaring.

The head of the U.S. Mint said last week that demand for U.S. gold and silver bullion coins is still at “unprecedented” high levels.

Mom-and-pop buyers have been scooping up gold and silver bullion coins hand over fist since mid-April, and the Mint is hard-pressed to keep up with demand.

Richard Peterson, acting director of the U.S. Mint, told the press that “Demand right now is unprecedented. We are buying all the coin (blanks) they can make,” referring to the Mint’s suppliers.

As you can see, the U.S. Mint’s sales of gold bullion coins really spiked in April. While sales eased back in May, they were still way-above 2012’s sales.

#2: Mining Supply Gets Squeezed.

Last week, I gave you a long list of mining projects — including the world’s biggest — that were scaling back production for one reason or another. And the longer gold prices stay low, as they are now, the more mining projects are likely to be shut down or scaled back.

Back in 2007-‘08, gold prices fell by 26%, and that caused world gold production to fall by 9.4%, according to a report on Silverdoctors.com. Recently, we saw gold prices fall 22% — a similar decline.

Making matters worse, many gold mining companies are in much worse shape financially now than they were in 2007. This means companies will likely be forced to make even-more hard choices when it comes to production.

#3: Lack of Physical Gold for Traders.

I keep pounding the table about this, but the news gets more interesting by the day.

The latest news is that “registered gold” bullion stored at the COMEX — that is, bullion that is available to futures contracts for delivery — is nearing an all-time low.

Now, there is a much-larger number of ounces stored at the COMEX — according to reports — that is “eligible” to be sold, if the owner of the bullion should decide to place it in the “registered” category.

So why aren’t bullion owners placing their gold in the “registered” category? I’ll tell you why.

Owners of bullion are not willing to put their bullion up for sale at the paper-gold-market price set by COMEX. They would rather let it sit in storage and pay fees.

This just shows us that that the paper market for gold is broken, absolutely broken.

  • That’s why we’re hearing that what the premium buyers of physical gold are willing to pay in Singapore is surging from week to week. And anyone who buys that gold for delivery now? They won’t get it until next month!
  • That’s why the premium paid for gold bullion in Shanghai has soared from $7.22 above the spot price in the 12 months through April 12 to $32 an ounce since mid-April.

So here’s a question for you — you know how bullion banks “re-hypothecate,” or lend out the bullion they have in storage? What if they are having trouble getting that bullion back?

Maybe that’s why we saw paper gold get dumped in a hurry.

Maybe the bullion banks are doing anything they can to push the price of gold down so they can buy it back on the cheap.

Of course, that’s speculation. But as the registered gold inventories at the COMEX are showing, many owners of gold are not taking the prices that the COMEX and the big money-center banks are offering.

I say, if you own physical gold, you might want to hang onto it. And those companies that produce physical gold — which have been hammered mercilessly in recent months — may be about to shine like torches in the darkness, if the trend in physical gold continues.

In Junior Resource Millionaire, we’re already putting money to work. If you’re doing this on your own, be careful. Avoid those companies that are at risk of seeing production go DOWN and costs go UP.

All the best,


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Sean travels far and wide to seek out small-cap values in the natural resource sector. His journey started in New England. As a youth he worked on Mt. Washington, on the cog railroad that runs to the summit.