Manipulation and money that's been on the sidelines are driving the market, according to TraderTracks editor Roger Wiegand in this exclusive interview with The Gold Report. He see the makings of some "pretty exciting" action in precious metals front, forecasting that gold could go beyond $2,960, and with the next big drop in the stock market, the gold and silver shares could really depart from the rest of the mainstream market, especially with the dollar being so weak. He likes companies that have good projects and strong partners, and cash in the bank.

The Gold Report: Roger, when we last spoke, at the end of August, you expected the stock market to have a pretty good fall after Labor Day. So, the market didn't collapse. . .what's your view on why it keeps appreciating?

Roger Wiegand: Well, part of it has to do with manipulation and part of it has to do with an awful lot of money that has been on the sidelines. A couple of months ago I heard there was around $8.5 trillion in cash that was not invested. I couldn't believe it. A lot of the money is starting to come back because investors are persuaded things are going to really pick up. Typically, what happens in the cycles is November 1st is the time to buy, after the September-October event sell-off is over. And, if you buy on November 1st forward, you usually do pretty well. This year it was delayed a little bit, and some of those charts look a little bit sloppy and choppy, and that's what got everybody confused, including me. As of November 24, 2009, the news is reporting smaller investors are running to the bear funds for security. If the correction is now imminent, it is off-cycle and late by at least three to four weeks.

TGR: Are you saying that you're expecting the markets to go up now that it's late November?

RW: We could go either way. I really believe that. We've got some interesting charts. There's the S&P chart, which has a double top on it right now, indicative of a selling point, obviously. I don't think there's going to be that much of a selling event. I think it's going to stay propped-up. Last week we saw a gravitational pull from the smaller cap stocks into the larger ones. Usually, when they go into the S&P 100 and they get out of the trading 500, it's because they're looking for security and safety, and they're looking to buy those consumer cyclical stocks, like household goods and toothpaste. There's a heavy load in that regard right now in the market, but I think they're going to get out—the people in the funds are going to get their bonuses, and they're going to get out of town with some pretty big money. But I don't think there's going to be very much selling right now. I really don't. The selling is coming but it is delayed until the funds exit and close the books for bonuses at year end next week.

A big part of this has to do with inflation, too. I know a lot of people say, "Well, there's no inflation now; it's all deflation." We disagree; we say that the inflation is now 7% and rising more quickly. Unemployment is a lot higher than people are discussing, and others are saying, "Well, this is a jobless recovery." Well, it may be a jobless situation, but it's certainly no recovery. What's happened here is a lot of corporations have laid-off so many people and run down their inventory so much that their overhead was cut back tremendously and they're showing profits, at least where we are right now. And those profits are going to be a one-off deal, I think. They're going to last for maybe a few months but come spring again, we're back to the same old problems. We're overloaded on debt. The bond market in Japan is looking absolutely horrifying right now; it's really scary. The government is selling bonds to pay pensioners and I don't think they've ever been in that position before. The amount of paper that is out there in Japan relative to GDP and the currency is way beyond where it is in the U.S. And I thought ours was bad!

So, in all likelihood, something is going to snap here pretty soon; it's got to. But it's confusing a lot of people because several good reports continue to be reported.

TGR: If you go back a year ago, everyone was looking at the balance sheets of the gold juniors, looking for those who weren't overloaded with debt who could survive the downturn in the capital markets. And so we've had a shake-out, and we're back to having free markets determine and who's going to make it...

RW: Absolutely. I think your example with the gold juniors is perfect. A lot of the ones who shouldn't have been in the business anyway are shaken out and gone because they didn't have capital; they didn't have the proper reserves; they didn't have any good partnerships. A lot of those projected mines were located in spots where they shouldn't have been politically. So, what have we got now? I don't know how many there were—I heard numbers like there were 5,000 of them (I don't think there were that many), and I hear now that there's something like 1,500. I have watched the charts and trading activity of these juniors that we like and those we dislike. We've thrown out the dislikes; we've made money on some like Canplats Resources Corp. (TSX.V:CPQ) now because Goldcorp (TSX:G) (NYSE:GG) bought them. The stockholders there obviously did very well, but there's more out there like Canplats. Timmins Gold Corp. (TSX.V:TMM) is another good one; I think Bravo Venture Group (TSX.V:BVG) is going to be a candidate for a buy-out on part of it.

Miranda Gold Corp. (TSX.V:MAD) is in the same position. They've been slowly and carefully building it up and shepherding their capital, and as a result, they've got some cash, they've got good projects, and they've got strong partners. And the deeper we get into the gold rally, which is going to last a long time, with companies like that, bits and pieces if not all of the company are going to get bought out. And, the people who hold the shares going to be very happy.

The experience we've been through is going to helps us with what's coming next. The thing that's really interesting is that a lot of these stock buyers who focus on the juniors are not really educated in the industry—they don't understand, especially in America; as they do in Canada—how much further we've got to go on this thing. I just wrote in my letter this morning that some of the people that are involved in silver are thinking that because we are up to $22 and fell back to $9 that that's the end of the game. I think if you look at where we are in gold and silver right now we're basically on page two of a ten-page story. I believe that's how much longer we've got to go.

TGR: You've previously mentioned all currencies are devaluing almost simultaneously. Other than currency devaluation, what's driving the price of gold and silver?

RW: Well, a lot of it is fear; gold is now basically considered to be money in many of the foreign countries, partially in the U.S., more overseas. I think a perfect example is Vietnam. It looked like they were going to have some things that would work out in their economy, and unfortunately for them, a lot of it's coming apart. And they know from experience that if they can get into gold and hang on, they're going to be a lot better off.

And, China is the number-two gold producer now, we've been told. They're not selling any and not only that, they're buying it. Further, they're encouraging gold sales to consumers. And Japan has been doing the same thing. The supply of gold is not going to be able to meet what people are after here, and that's the reason for this breakout we're looking at right now. We felt gold shares would separate from the regular stock market. I saw early glimmers of that this fall, a little bit of that in late summer. And now I am more convinced than ever that with the next big drop in the stock market, the gold and silver shares could really depart from the rest of the mainstream market, especially with the dollar being so weak.

TGR: You've said that you see a lot of money moving from the smaller cap stocks to the larger cap stocks. Is the smart money moving to the seniors in the gold equity plays?

RW: Well, two things happen when you get into a market where the gold really starts to take off. Before we were in a long, slow climb from $200 up to $850—that was one marker. And then we got up to a $1,000 and hung around there for quite awhile, and it looked like it was going to sell-off, and did, and then came right back. But we are now in the next price range, which is beyond $1,000, and Mark Faber of The Gloom and Doom Report, said this morning, "If gold will say above $1,000, it's never going under $1,000 again." And I agree with him; I really don't think it's going to. Next, as of November 24, December gold futures are trading at $1,165 and have enough cycle room to reach $1,200.

Again, getting back to the senior versus junior, keep in mind when these markets get so crazy and convoluted like they are there's so much money looking for a place to go, that when a sector like gold takes off, where does the money go? It's going to go to NYSE gold companies, and who are those? Goldcorp (TSX:G) (NYSE:GG), Newmont Mining Corp. (NYSE:NEM), Barrick Gold Corp. (NYSE:ABX), and Hecla Mining Company (NYSE:HL), and you've got some foreign ones; you've got Newcrest Mining Ltd. (NYSE:NCMGY) from Australia; and there's some in Africa. I don't like anything in Africa except the gold royalty companies.

Post your comment  (0)

Connect:

Post to Twitter

Post to Facebook