Goldfinger’s Revenge

Sean Brodrick

Boy, last week was an interesting one in the precious-metals markets. There are forces at work that would make Auric Goldfinger happy.

Do you remember that James Bond villain? He was obsessed with gold bullion.

Goldfinger would have laughed at paper gold. He wanted the real stuff.

And guess what’s happening in the world today? People want REAL GOLD. And they will stand in line to get it.

Just look at what’s happening in China  …

China’s Gold-Buying Hits Fever Pitch. One of this year’s most-popular phrases in the gold markets may be “Chinese housewives.”

No, that’s not a new reality TV show, although I’m sure one of the cable networks is already working on it.

What’s the real reason behind this new phrase making the rounds?

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China’s housewives are getting credit as a major force in gold buying. They reportedly spent $16 billion over the past two weeks … as they purchased 300 tons of gold.

In fact, the China Gold Association reported that gold sales had tripled on many days, and there were long lines outside many shops.

It’s not just mainland China. Hong Kong retailers report they were swamped over the three-day May Day holiday by tens of thousands of mainlanders in search of one thing: cheap gold.

In April alone, Hong Kong gold sales soared 150%! However, there is a method to their gold-buying madness.

These buyers are price-sensitive, so we can’t expect this feverish pace to continue if prices go higher. But it should put a floor under the price of gold.

Here’s why this is so important  …

Booming Jewelry Demand Usually Leads Gold Prices. According to research from Citigroup, an increase in jewelry purchases like we’re seeing now is usually associated with gains in gold prices. Here’s a chart from Citigroup (jewelry demand is shown in blue)  …

As you can see by looking at the chart, rising prices usually weighs on gold jewelry demand. Likewise, rising jewelry demand usually sparks higher prices.

India is Catching Gold Fever, Too. Demand for gold in India — the world’s biggest consumer — is double the level for this time of year, as Rajesh Mehta, chairman of Rajesh Exports Ltd., told Bloomberg last Wednesday. Premiums paid by jewelers in India to secure supply surged as much as fivefold in 10 days.

Some estimate that India will boost its gold purchases by 20% year-over-year. If India and China together were to boost consumption by 15% in 2013, that would result in 250 metric tons of gold being acquired by the two countries.

U.S. Mint Gold Sales are Booming. Sales of gold U.S. Eagles totaled 209,500 ounces in April, up from 62,000 ounces a month earlier, and up 10 times year-over-year, according to data on the Mint’s website. That’s the highest level in three years, since 231,500 ounces were sold in December 2009.

Central Banks Keep Buying. Central banks own about 19% of all the metal ever mined. Their combined reserves have risen to an eight-year high as nations from Russia to Kazakhstan to Mongolia expanded holdings, International Monetary Fund data show.

The banks bought 534.6 tons last year, the most since 1964, and may add as much as another 550 tons in 2013, according to the London-based World Gold Council.

Gold Buyers Forced to Go on Waiting Lists. According to a report in the London newspaper, The Telegraph, one company is reporting waiting lists of three weeks for some coins, and four to six weeks for gold bars.

The Telegraph reports that investment company Physical Gold says “many clients are willing to ‘do a deal’ and wait for delivery, as they want to secure the current price as they feel it will be higher in the near future.”

My take …

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Hope for a Deeper Pullback

 …  But Don’t Count on It

Are there bearish forces in the market? Absolutely. Investor selling is the biggest force, as the SPDR Gold Trust (GLD) and other ETFs dump bullion into the market.

The question is whether fund selling is enough to overwhelm new demand from consumers. I think we’re already approaching the end of fund selling, and mom-and-pop buyers are just getting revved up.

Add it all up, and I’m still bullish.

That doesn’t mean prices can’t go lower, and I would welcome a retest of the April lows.

Will we get it? I don’t know. It’s best to remain cautious. But that doesn’t mean you can’t make a profit!

Last week, my Junior Resource Millionaire subscribers should have been able to bag double-digit percentage gains on one gold mining position, if they bought near our tracked entry point. They still have three other positions — and I’m going to add more.

One of those new picks could very well come from …

My Trip to Utah’s ‘Golden Ghost’

As you read this, I’m in Utah checking out a VERY interesting project. This is a former producing gold mine with a mill that was caught up in a financial fiasco.

A new company scooped up the project for pennies on the dollar and has plans to start production as soon as possible.

My Junior Resource Millionaire subscribers will receive my report on it soon. But if this company is what the owner promises, then we’ll have a chance to buy it for pennies now, and see it worth dollars later.

I don’t want to give too much away. This should be a great trip, and if you’re subscribed to my service you’ll get all the details about it in the coming days.

But if you’re doing this on your own, you might want to get your own shopping list ready.

If you know what you’re looking for, it’s a great time to go bargain-hunting in select miners. Do your due diligence, good luck and good trades.

All the best,

Sean

P.S. If you haven’t yet taken my special investor survey on gold, it’s easy, fun and takes just seconds to complete. When I receive your answers, I will automatically reserve a place for you at my upcoming gold presentation with my detailed forecast on gold. Click here to share your gold outlook with me before midnight Eastern tonight!

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.