Red-Hot Resources

"Luck is not chance, it’s toil; fortune’s expensive smile is earned.”

Friday, December 29, 2006

I'm Appearing on CNBC This Morning

I'm slated to be on CNBC at 10:40 this morning. I'll be the guy who forgets his own name (LOL!). They've asked me on to talk about hot commodities for 2007. I' m planning to talk about uranium and gold. I believe energy (oil in the first part of 2007, natural gas in the second half) will be hot, too, but the producer I talked to yesterday and I agreed that CNBC has covered energy to death in the last couple days.

They don't want picks, so I guess it will be a free-ranging discussion between me and another analyst. I hope he's bearish on commodities -- mud will be flung (just kidding).

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Thursday, December 28, 2006

Gold, the Greenback, and the Persian Gulf

Here's an interesting trend ...

According to the Bank for International Settlements, the share of foreign-exchange deposits held in dollars by OPEC, including Saudi Arabia and the UAE, fell to a two-year low of 65% during the second quarter, from 67% in the first quarter.

Now we hear that the United Arab Emirates (UAE) will switch 8% of its foreign-exchange reserves from U.S. dollars into euros before September.

The U.A.E. is already “in a limited way” selling part of its dollar reserves, according to UAE Central Bank Governor Sultan Bin Nasser al-Suwaidi. The total value of the UAE's current reserves is $24.9 billion, 98% in dollars and 2% in euros, so the diversification means the UAE will dump nearly $2 billion in greenbacks.

The UAE is just following the trend set by Russia, Switzerland, Sweden, Italy, New Zealand and Qatar -- to stop piling up so many US dollars.

To me, this casts a shadow over the Dollar's rally off its November lows ... that move is starting to look a little long in the tooth. It wouldn't surprise me to see the US dollar start sliding sooner rather than later.

And yes, that should be good news for gold -- which was up $6.60 today, by the way.

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Wednesday, December 27, 2006

Energy Sector Bargains

I just received this from Wayne Burritt, head researcher for Energy Options Alert and Energy Windfall Trader...

Wayne adds: In spite of big upward price surges, the shares of many energy-related companies are still dirt-cheap. As you can see from this graph, shares of Major Integrated Oil & Gas companies carry an average price-to-earnings ratio (P/E) of just 8.6. Meanwhile, Independent Oil & Gas companies have an 8.8 P/E, Oil & Gas Drilling & Exploration companies a 10.1 P/E, Oil & Gas Refining & Marketing companies carry a 10.5 P/E, and Oil & Gas Equipment companies a 17 P/E. Compared to the 21.2 P/E for the S&P 500 -- a good proxy for the broader market -- all these energy groups are way, way undervalued.

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M&A Feeding Frenzy in Gold Stocks to Continue

Here are some excerpts from a Bloomberg news story about takeovers in the gold mining industry...

Gold-company acquisitions this year surged to the highest level in at least a decade, and the industry may continue its buying spree in 2007 as producers struggle to find new deposits.

There were 357 deals this year valued at $24.3 billion. That eclipsed the $16.2 billion spent last year on 341 transactions.

Mines are being depleted faster than new reserves are being found. The number of discoveries of at least 2.5 million ounces has declined for eight straight years, according to Metals Economics Group inHalifax, Nova Scotia.

From 1992 to 2005, the world produced 1.1 billion ounces of gold, or 1.8 times more than the new resources discovered among deposits of at least 2.5 million ounces, Metals Economics Group said.

Global gold production in the nine months ended September fell 2.2% to 1,804 metric tons from a year earlier, London-based researcher GFMS Ltd. estimated. The lack of new supply will help boost gold prices by $200 over the next two years, topping $800 an ounce, according to Goldcorp Chairman Ian Telfer.

There is a lot more in the story. To read it,


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Money Is Pouring Into Silver and Gold ETFs

There was a very interesting story over at Resource Investor the day before Christmas -- it's easy to miss this kind of stuff around the holidays, so I'm going to reproduce some of the "Got Gold" report here...

While silver metal on the cash market was mistreated over the past two weeks and plunged as much as $1.89 the ounce, metal holdings for Barclays’ iShares Silver Trust [AMEX:SLV], the U.S. silver ETF, skyrocketed by a stunning 325.5 tonnes to total 3,768.02 tonnes (121,144,585 ounces) worth $1.51 billion as of Friday’s figures. And get this; 279.02 tonnes of that titanic increase in silver holdings occurred on Thursday, December 21. Talk about positive money flow!

To put this eye-opening liquidity-induced silver positive money flow event into context, consider that the 279 tonnes of silver metal added to SLV’s holdings Thursday 12/21 is higher than each of the previous four monthly additions (November 153.8, October 14.09, September 123.02 and August 247.35 tonnes of silver added to SLV holdings). Not since the week following SLV’s April 28 inception has there been a 200-plus tonne addition in one day and only a few weekly totals top 200 tonnes, the last one way back in June (June 19-23, 264.16 tonnes).
So, positive money flow continued for SLV in a huge way.

Now for gold...

This week gold holdings at streetTRACKS Gold Shares, the largest gold exchange traded fund [NYSE:GLD], added another 3.09 tonnes to 452.01 tonnes of gold bars held by a custodian in London for the trust. The previous week saw an addition of 7.4 tonnes.

That's 10 tonnes of gold added in two weeks. Wow!

XX My take -- we're seeing investment dollars "buy the dips" in both silver and gold. This is being helped by end-of-year rebalancing. Many investors probably figure that both gold and silver will be higher six months from now, so they're allocating money to ride that wave. And it looks to me they're getting gold at a sweet deal.

As for stocks -- Australian gold stocks are already going ballistic as Red-Hot Asian Tigers subscribers well know. Canadian stocks not so much -- but they should follow the trend. Sit tight, hold on, and we could be in for a rocket ride in precious metals in the first quarter.

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Tuesday, December 26, 2006

...some stars and planets in scale

Earlier this month I posted some photos showing the Earth in scale compared to other planets in our solar system, the sun, and some well-known stars in the heavens. It gives you a perspective of your place in the Universe. Here's the same thing only in video form ...
from mercury to vv cephei

- update in progress -
+highres-version will be available soon ||
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Gold and Iran

I apologize for my light posting schedule during the holidays. But it has been a parade of people and presents through our humble home. We hosted Christmas Eve dinner AND Christmas Day dinner. And today, (Boxing Day) I spent the morning playing with the new pressure cleaner that Santa brought me. Nothing says the Day after Christmas like blasting the scum off your sidewalk, eh? LOL!

And yet the world doesn't stop. So, I've spent this afternoon catching up to speed. Did you see the nice bounce in gold today? It was as much as $9 higher thanks to Iran. You'll remember that last Thursday I told you to "Keep Your Eye on Iran," because it was "likely
we're about to enter a new cycle of escalated rhetoric between the US and Iran."

And that's just what is happening.

The headline on Bloomberg says: Gold Prices Gain as Iran Nuclear Dispute Spurs Demand for Haven
Dec. 26 (Bloomberg) -- Gold in New York rose the most in a week after Iran rejected a United Nations resolution imposing sanctions and said the country will continue its nuclear program, boosting the appeal of the metal as a haven.

Read the rest here:
Now, most people roll their eyes when they hear the Iranians say they need nuclear power for fuel. After all, Iran is sitting on one of the richest desposits of oil and gas in the world, right? But it's also one of the most mismanaged oil and gas deposits in the world. Hence, we get headlines like this...

Iran’s nuclear drive linked to looming oil crisis

For at least 18 months, Iran has failed to meet its quota for oil production set by the Organisation of the Petroleum Exporting Countries, he said.

The strong suggestion, Stern said, is that Iran's oil production is now actually falling, despite the bonanza that exporters have enjoyed from a period of record-high crude prices.

...Overall, according to Stern, it "seems plausible that Iran's claim to need nuclear power might be genuine, an indicator of distress from anticipated export revenue shortfalls."

And at this link, we read: "Iran earns about $50 billion a year in oil exports. The decline is estimated at 10 to 12 per cent annually. In less than five years exports could be halved and then disappear by 2015, Stern predicted."

Ay-yi-yi! Will a Iran that is seeing its oil revenues plunge be more dangerous or less dangerous? Anyway, you can see that with a new nuclear brouhaha brewing between the US and Iran, the "safe money" will likely migrate into gold. Again.

Of course, rising geopolticial tensions are also good for the US dollar (because that's seen as the safe-haven currency). So, we could be entering one of those periods where the US dollar and gold go higher at the same time. But for how long?

Meanwhile, OPEC seems to be proceeding with production cuts and Kuwait says its Burgan Oil Field -- already known to have peaked -- is seeing production drop even faster than expected.

But you want to think about something really scary? I keep raising the alarm about Mexico's giant Cantarell oil field, which is serious decline and probably headed for catastrophic decline. Hence, I find it interesting to read:

Declining output from the aging Cantarell field will trim Mexico's output of Mayan heavy crude oil by 50,000 barrels per day from early January, a leading oil official in the country said.

Mexico's oil exports of 1.85 milllion bpd will dip to 1.8 million bpd from 8 January, said Raul Cardoso, the head of Mexico's delegation attending Thursday's Opec meeting in Nigeria.

Read the rest by CLICKING HERE. PEMEX says it will bring more production online later next year to make up for declining production. Anyone who thinks it will matter more than a fart in a whirlwind needs their head examined.

Finally, I about fell out of my chair when I read this take on America's financial situation, The US Is Insolvent.

What do you think that will do to the price of gold?
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Friday, December 22, 2006

Bullish Outlook for Gold?

Jack Crooks is one of the best currency traders on the planet, and I don't just say that because he's my friend, or because his son, John Ross, works with me on Red-Hot Resources (the trading service, not the blog). Jack approaches the currency markets with emotionless, even merciless logic. You never call Jack up for comfort. You call him up for the truth.

So I was really interested by a chart Jack sent me. Jack is currently long the eur/usd, that is he expects the euro to rise versus the US dollar. So, he's probably heartened by the fact that that the U.S. core PCE price index -- an inflation gauge the Fed watches closely -- was unchanged in November from October, versus economists' forecasts for a rise of 0.2%. Indeed, that has sent the greenback lower this morning.

But even before that news came out. Jack sent me a chart. Here it is...

Using Elliot Wave analysis, Jack is forecasting a potentially strong rally in the euro. Naturally, the US dollar would be on the losing end of that move. And as the US dollar goes down, gold usually goes up.
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Gold Demand in India -- the Good News and the Bad News

This headline from Reuters does not sound like good news for gold: "India 2006 gold demand seen below 700 tonnes" But read down in the story. The guy they interview also says "Indians are spending more on gold purchases than at any point in the past" and "We remain very bullish. I think we are looking at $700 an ounce in the first six months of next year," he said. "It could be sooner rather than later."

Honestly, I don't know what to think. I thought gold was going to make a charge in the waning weeks of the year, but that doesn't seem to be panning out. Still, the longer-term uptrends are in place, so maybe it's just pushed off until after the New Year.

To read the whole story, CLICK HERE.

Oh, and here's a link to calculate the worth of your weight in gold. I weigh in at close to $1.5 million! Time to go on a diet!

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Some Fun on the Web

Turns out there's only one of me. Somehow I thought there were more...
LogoThere is:
person with my name
in the U.S.A.

How many have your name?

Anyway, you can check and see how many there are of you. This has nothing to do with commodities ... just my brain going 90 miles a minute early in the morning.
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Thursday, December 21, 2006

The Coming Fight For Oil

The Chicago Tribune has an interesting story titled: "The Coming Fight for Oil." It's part of a 3-part series called "China's Great Grab." You have to do the free-registration mambo to read the whole three-part series, but you can read "The Coming Fight for Oil" without registering.

The story is subtitled:
"The roaring Chinese economy needs more oil. It's turning to America's friends to get it."

Here are some stats from the story...

* China had enough oil to sustain itself just 15 years ago. Now it is one of the world's thirstiest oil addicts, importing 40 percent of what it needs. Only the U.S. consumes more.

* This past summer, a power shortage forced China to ration electricity to its factories for the fourth year in a row.

* With its economy on pace to surpass that of the U.S. by 2050, China will have to find more places like this, just as it will have to find more sources of corn, pork, fertilizer, coal, steel, wool, copper, cement and timber.

* China has built a new 620-mile pipeline, hailed as "the new silk road," into Kazakhstan,
home to one of the largest oil fields discovered worldwide in the past 30 years. The article explains this pipeline is "a milestone for the world's newest empire--one forged not in the name of destiny or God, but in pursuit of the planet's most valuable resources."

That's pretty good writing, eh? I'll have to look up more stories by Evan Osnos.

Anyway, the whole thing is a good read. You can find it by CLICKING HERE.

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Energy Prices Ease, But Keep Your Eye on Iran

Natural gas stockpiles were in line with expectations this week, and the energy complex is flat-to-down right now. But keep your eye on Iran.

See, one reason that energy prices have eased since August is the geopolticial risk premium is going down. People aren't that worried about the Middle East, since Iran has eased off on its war of words.

But now, the New York Times confirms that "The United States and Britain will begin moving additional warships and strike aircraft into the Persian Gulf region in a display of military resolve toward Iran."

Later in the article we read: "Senior American officers said the increase in naval power should not be viewed as preparations for any offensive strike against Iran. But they acknowledged that the ability to hit Iran would be increased and that Iranian leaders might well call the growing presence provocative. One purpose of the deployment, they said, is to make clear that the focus on ground troops in Iraq has not made it impossible for the United States and its allies to maintain a military watch on Iran."

Does our government really think those paranoid mullahs running Iran will see this as anything but a set-up for an attack? Especially when, as blogger Glenn Greenwald points out, "President Bush has given speeches in the recent past in which he spoke of Iran exactly the same way he spoke of Iraq in late 2002 when, in his mind, an attack on Iraq was already a fait accompli."

Greenwald also notes: "Any military conflict with Iran would be so disastrous for the U.S. that it cannot be adequately described." Maybe so. I really hope it doesn't get that far. What I'm thinking is it's likely that we're about to enter a new cycle of escalated rhetoric between the US and Iran. And what do you think such an escalation in the war of words will do to energy prices? I'd say it could light a fire under oil prices.

But we shall see what we shall see. This conflict between Iran and the US is part of what I see as the global war for natural resources, a conflict that could define the 21st Century.

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Wednesday, December 20, 2006

Bullish Inventory Numbers for Crude

The has the news for us...

Last week, crude stockpiles plunged by 6.3 million barrels as imports fell and production of gasoline and distillates rose. The drop, the fourth straight, was much larger than the 2.25-million-barrel decline analysts polled by Bloomberg had expected.


Refiners were able to increase their run rates overall to 90.7%, up from 89.1% the previous week, to produce more gasoline and distillates, which include fuels such as jet fuel, diesel and heating oil. Last week, gasoline supplies climbed by 1 million barrels, and distillates shot up by 1.2 million barrels.

The increase in distillates stunned analysts, who had been expecting a drop of 500,000 barrels, because they assumed colder weather and the closure of Texas and Louisiana shipping channels would shave production.

So, it sounds like a lousy time to be in heating oil. Keep your eye on gasoline, though. Gasoline stockpiles are currently about 3% below last year, and they should be building at this time of year. Instead, thanks to warmer-than-normal weather, everyone's been driving to the mall!
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Warming Up to Jerry Pournelle

I've always found Jerry Pournelle an interesting science fiction writer. He and his sometimes partner Larry Niven sometimes write books about humans using their brains to overcome stronger, faster, often more technologically advanced alien adversaries (see The Mote in God's Eye, or any of the Man-Kzin Wars series -- the earlier ones are quite good). Well, Jerry has an interesting solution to Global Warming.

Jerry writes on his blog: The problem is not warming, it's CO2; and if that's the problem, why not address that problem? But we see almost no studies of how to reduce the CO2 levels, which certainly are high, perhaps alarmingly so. We are running an open-ended experiment on CO2 levels, and this is not a sensible thing to do.

Jerry's solutions include stimulating plankton blooms. He says this would cause ocean life to make insoluble carbonates out of CO2 extracted from the atmosphere: they then sink and the CO2 is gone.

Jerry also writes: "there are processes that will remove CO2 from the atmosphere. Some of those may require power; lots of power; but we have nuclear power technology. If CO2 levels are critical, why are we not trying to DO something about it?"

His final suggestion is to create a scientific contest, loaded with rich prizes, to DO something about it. It's one of the better ideas I've heard. Go, Jerry!


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Tuesday, December 19, 2006

Another chart for ya!

Here is a chart of the US dollar. We may not be ready to stick a fork in this counter-trend rally yet, but that's coming. Today's action was not good for dollar bulls. It was blamed on raised expectations for improved economic activity in Europe, which in turn raises expectations that the European Central Bank will be raising rates soon. With the Fed fence-sitting on rates -- not likely to cut soon, but no way in heck are they going to raise with the housing market on life support -- the dollar suddenly starts to look overpriced compared to the euro.
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Oil Money Pours Into Gold

Sheesh, I've been busy today -- Issues of Red-Hot Resources, Red-Hot Asian Tigers, and the first draft of the last update to my gold report, which should (probably) go out tomorrow.

Anyway, nice bounce in precious metals today, eh? During the recent decline, the big jewelers were buying gold all the way down. It's bargain hunting time for them. Who are they selling to? Well, with oil seemingly stuck over $60 a barrel now, who do you think has a lot of spare cash laying around...

The World Gold Council’s regional office in Dubai announced that the retail gold sales increased by 41% in the third quarter of 2006 compared to the same period of 2005. Sales figures in the UAE increased from 1.4 Billion Dirhams in the third quarter of 2005 to 2 Billion Dirhams in the third quarter of 2006.

A dirham is fixed against the dollar at a rate of 3.67. So 2 billion dirhams is 545 million in US money.

If you click through this link, you'll find that the money is going into bullion rather than jewelry. And sales are falling in Saudi Arabia and the other Gulf states. I guess the rich oil sheiks are parking their wives (and credit cards) in Dubai, just in case the sand hits the fan.

The story is full of interesting stats. Read it HERE.

And here is a chart of gold. Me likee...

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Monday, December 18, 2006

'$100/Pound Uranium Is No Longer Out of The Question.'

A story on Yahoo Finance repeats what I've told you for some time -- uranium is going to the moon, and likely in a hurry, too. This article quotes one expert as saying, "$100/pound is no longer out of the question.”

The story also says that the junior (smaller-cap) uranium miners are the place to be for this boom.

I've been talking about $100-$120 uranium for months, and if you read my uranium report, you already know the right junior mining stocks to ride that wave. And you know what, it's not too late. Even though one of my picks just went into TRIPLE-DIGIT GAINS since October 3, I believe these stocks have a long way to go. If you haven't checked out my uranium report yet, CLICK HERE.


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Gold catches a bounce this morning

The real trick will be how gold ends the day. From Bloomberg:

Gold Rises From Six-Week Low Amid Buying by Jewelers, Investors

Dec. 18 -- Gold rose from its lowest in more than six weeks amid buying from jewelers and investors in Asia.

And note this line...

Still, the precious metal is unlikely to rise beyond $630- $640 an ounce as the year ends because of clusters of orders to sell at that level

Have you noticed how bearish sentiment is getting on gold all of a sudden. At the same time, we're seeing bullish sentiment on the US dollar, even though our Treasury secretary was just in Bejing, groveling before the Chinese to ask them to modify their policies and let their currency rise against ours. Well, considering the fact that the Chinese turned him down flat may be reason enough to be bullish on the dollar.

But I don't think so. Nor do I believe the near-insane levels of bullishness on the Dow Jones Industrial Average are warranted. I'm still bullish on the economy as a whole for 2007, but I think we're approaching correction territory, don't you? Look at this chart... it's classic divergence.

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Sunday, December 17, 2006

China awards massive nuclear deal

Westinghouse signs a $8-billion deal to build four nuclear plants in China

This has been a while in coming. Westinghouse won the deals in a very competitive field.

I found this part interesting...

The fact that Westinghouse is now owned by Japan's Toshiba may also have helped secure the deal, especially after Japan's new Prime Minister Shinzo Abe signalled an intention to restore friendlier ties with China.

Of course, the deal involves transfer of nuclear technology to China. And after China buys these four plants from Westinghouse, it will "clone" that technology and build 20 nuke plants all on its own. But good for Westinghouse for getting the deal.

Maybe this is why Australian uranium stocks are jumping today.
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China's Oil Imports Up 10.2% YoY

Sorry, I don't see the huge slowdown that the IEA, Morgan Stanley and others keep predicting in China's oil imports...

BEIJING, Dec. 16 (Xinhua) -- China's crude oil imports are expected to reach 140 million tons in 2006, up 10.2 percent on last year, according to the Ministry of Commerce (MOC).

Liang Shuhe, deputy director with the Foreign Trade Department of the MOC, said that China's demand for crude oil would total about 290 million tons this year, of which 48 percent were imports.

According to Liang, China's total output of crude oil is expected to reach 183 million tons in 2006, with 7.40 million tons for exports.

Liang said the fast growth of the economy has forced China to depend more and more on imports because of the limited domestic production, predicting that the steady increase in imports was likely to continue.

Statistics from the MOC show that China's crude oil imports increased by 14.1 percent in the first ten months of this year to reach 120 million tons.

The Chinese government removed tariffs on oil imports in November and opened its domestic oil market to foreign companies in December to cut the cost of oil imports.

I guess the oil bears will say that China's crude oil imports are slowing down, from 14.1% growth in the first 10 months of the year to 10.2% for the whole year. But what is China's seasonal oil import demand? I'll check into that and see if it normally slows down in November and December anyway.

You can read the original story here:

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Saturday, December 16, 2006

2007 Vancouver Resource Investment Conference

If you're attending the 2007 Vancouver Resource Investment Conference in January, I'll see you there.

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Useful Link: Sector Report Card

Are you using ETFs for sector rotation? Then you might want to check out the Sector Report Card published by Standard and Poors. You can find it by pointing your browser to this link:

It tells you the returns on each sector in the most recent week, 13 weeks, year-to-date, 2005 and five-year return. It also has the breakdowns on returns in each sub sector.

And in case that link changes, here is the main S&P sector indices page:

If you want to learn more about ETFs, check out my new ETF report:


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Friday, December 15, 2006

Silver Gets Hammered By Thin Trading

This is the first day of Hanukkah. A friend of mine on the trading floor described it as "dead." Everyone's off for the holiday ... and that's why you can see something like this ...
Ouch! Silver nosedived nearly a buck an ounce. Sure, part of that was a rally in the US dollar. This morning, the greenback swooned on news that inflation is in check -- removing the risk of more Fed rate hikes. But then the greenback jumped when US Treasury data showed that international investors poured money into US securities in October. Foreign purchases of US securities (including stocks and Treasuries) rose by $82.3 billion in October, building on a $70.2 billion rise in September. That lit a fire under the US dollar.

But the dollar's rally didn't justify the 7% swoon in silver that sent the metal to a four-week low. For its part, gold fell 1.9% to a six-week low.

Copper fell to its lowest level since January. I"m glad we exited two copper stocks (with gains) in Red-Hot Asian Tigers. And while that short position we took in a copper stock in Red-Hot Resources (the trading service, not this blog) moved a little against us today thanks to renewed takeover rumors, it's under some important trendlines and is well set up for a potential pay-off next week.

Anyway, back to silver and gold. Is this a buying opportunity? We'll have to see how silver ends on Monday, but my feeling is probably yes. After all, silver stocks didn't sell off much -- the smart money has an eye on the longer term.

As for gold, while we could see more short-term weakness, the mid- to longer-term outlook for gold remains bullish. If you were waiting for an entry opportunity, it's knocking now.

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Thursday, December 14, 2006

End-of-Year Junior Crunch

I was on the phone with an executive of one of my favorite copper companies -- Red-Hot Canadian Small-Caps subscribers know which one I'm talking about -- as he wished me a Merry Christmas before he took his family off to a Mexican beach ... a beach that still hasn't been discovered by tourists. Meanwhile, my kids (Florida-born and raised) are threatening to run away unless I take them to see snow -- I guess everyone has their own idea of holiday heaven, LOL.

One of the things we discussed was how some Canadian junior natural resource stocks are getting beaten with a stick lately. It's not much to worry about -- it's just the end-of-year crunch we always see in Canadian Juniors It's when investors look at their accounts and decide what profits they want to take and what losses they want to cut. And it happens at a time of year when there is thin volume. Hence ... stocks get pushed around a lot.

For example, one of my favorite Canadian silver producers fell five percent yesterday -- on NOTHING. There is nothing wrong with this stock. It makes me want to issue a "BUY" recommendation, it's so cheap. But you know what, we already own plenty of it, and we have plenty of time to load up. For the next three weeks, the Canadian market tends to be on one big holiday.

Will I pick up extraordinary bargains? Sure. But it's really a time to pause, reflect, and figure out what I did wrong and right, with the hope that I can do even better in 2007. If you're a subscriber, look for an issue to that effect in the next few weeks.
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Every Day Feels Like Sunday

Cool Song that Charles Schwab uses a snippet of in its ads. To hear the whole thing, CLICK HERE.
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Wednesday, December 13, 2006

The Atomic Clock Is Ticking

I've been as busy as a bee today -- slinging trades for Red-Hot Asian Tigers and Red-Hot Resources -- but I just wanted to give you an update. Follow the link to read my latest column, "The Atomic Clock Is Ticking."

In other news, oil and gold are up on lower stockpiles of crude (and the falling gasoline stockpiles should start to worry somebody ... why isn't that market moving higher yet?). The IEA says said China's 2006 oil demand growth will be 5.6 percent, down from a previous estimate of 6.2 percent. Oh really? I'll take that bet!

Copper has hit a six-month low ... and mortgage applications in the US are jumping along with retail sales. Has the economy dodged a bullet? We'll see!

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Tuesday, December 12, 2006

Energy News Roundup

Exploration & Production Spending to Cool Off in 2007
(Rigzone)After two years of massive increases, the pace of oil and gas capital spending growth will slow down in 2007, as U.S. companies temper their North American budgets in the wake of weakening natural gas prices, according to a survey released Monday by Lehman Brothers.
Exploration and production spending will increase by 9% in 2007 to nearly $300 billion, according to a Lehman survey of 300 public, private and government-owned oil companies. In 2005 and 2006 capex among these firms grew 20% and 30%, respectively.

XX My take -- E&P is slowing down because oil companies say they're taking a more conservative view on natural gas prices. However, internationally, E&P spending will rise 13% (thanks, Saudi Arabia!) and Chevron is planning to spend $20 billion in 2007 -- 20% more than this year.

Still, we need more spending in North America if we're going to become more energy independent.

Even with cheaper oil, energy hot in '07
(AP/Business Week) While supplies look ample now, "the continuing demand for oil and gas is unrelenting," said John Hofmeister, president of the U.S. subsidiary of Royal Dutch Shell PLC. The International Energy Agency forecasts world oil demand to rise to almost 86 million barrels a day, with consumption growing in China and across the Middle East at an annualized rate of 5.4 percent. At the same time, potential supply problems loom, including the war of words between Iran and the West over Tehran's nuclear ambitions and unrest in Nigeria.

XX My take -- $80 oil in 2007. That's my target.

Nation's energy grid could power almost 185 million electric cars
(TG Daily) Washington DC - A Department of Energy report shows that the U.S. energy grid could support up to 185 million electric or hybrid cars. The department believes a switch to the newer vehicles would clean up the environment and could even improve our national security situation by reducing the need for imported oil.

XX My take -- this is where my interest in oil and my enthusiasm for nuclear power come together. Our EXISTING energy grid could support 185 million electric cars. Let's build more nuclear power plants, upgrade the power grid, and tell the Sunni and Shiite extremists what they can do with their oil.
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Good News on Gold

This has been reported recently, but it's nice to see more of this...

``Jewelers across Asia are buying gold on every dip, said Si Kannan, an analyst at Mumbai-based Sharekhan Commodities Pvt. said. ``There is also some physical buying from investors.''

This helps put a floor under the yellow metal. Now all we need is for the US dollar to start its next leg down. However, the US trade deficit narrowed in October to $58.9 billion from $64.3 billion in September. October's number was better than estimates of $63 billion. So this could give the greenback some more legs (for a while).

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Sign Up for Your Arctic Tropical Vacation Home Now

Interesting story in the Times of London yesterday ...

Ice is melting so fast in the Arctic that the North Pole will be in the open sea in 30 years, according to a team of leading climatologists.
Ships will be able to sail over the top of the world and tourists will be able visit what was, until climate change, one of planet’s most inaccessible landscapes. In between 30 and 50 years, scientists concluded, summer sea ice will have vanished from almost the entire Arctic region.

Well, it sounds like we should get out the tanning butter and hop aboard those cruise ships, eh? But what kind of impact will the melting Arctic ice have on our economy ... even our civilization? Because while the Artic melts, the Greenland ice cap also melts and the Antarctic ice cap also melts. Maybe they aren't melting as fast, but they're still melting.

And here's the bad news: Scientists have long realized that ice reflects heat and as the quantity reduces so, too, does the amount of heat that can be bounced away from the Earth. So, the warmer the Arctic gets, the faster the Earth warms up.

Read the rest HERE.

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Monday, December 11, 2006

The New US Strategic Partner is Good for Business

And very good for commodities. I'm talking about India. With congressional approval of a new deal that gives India the right to buy fuel, reactors and other technology to expand its civilian nuclear program, the US hopes to balance both regional heavyweight China and potentially bedbug-crazy Pakistan.

But since India's economy is growing at over 8% a year -- with more American IT jobs flowing to India all the time -- this is a partner that can afford to pull its own weight. Then next items on the table include over 100 new fighter plans and an $11 billion Boeing deal for 68 commerical airliners.

And then there is putting the "softs" in software -- soybeans, soybean oil, wheat and more.

The New York Times has a story on the nuclear deal and what comes after HERE.
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Merrill Lynch Raises Uranium Forecast

From our "Better Late Than Never" department, and hot on the heels of Merrill Lynch's decision to up its target on gold to a laughably-low $650 in 2008, the big broker is now raising its target on uranium.

Merrill Lynch & Co. raised its 2008 uranium price forecast by 78 percent, citing delays in new mine output and increased demand for the fuel from nuclear reactors being built in China and India.

Oh really? Yep, that's why they get paid the big bucks at Merrill Lynch. Anyway, some more interesting tidbits from the story...

"We don't see a major trigger on the horizon that will force spot prices down,'' Merrill analysts Vicky Binns and Daniel Hynes said in the report. "The delay of Cigar Lake and the imminent arrival of India into the commercial fuel market have created a notable increase in demand.''

About 440 reactors contribute 16 percent of the world's electricity currently, according to the World Nuclear Association. At the end of November, 28 plants were under construction with a further 62 ordered or planned. India, which runs 16 reactors, is building another seven, and targeting nuclear capacity of 40,000 megawatts by 2020.

Merrill is forecasting global supplies, estimated at 164.8 million pounds this year, to rise 4 million pounds during the next two years. Increased demand in Russia will limit exports while rising costs and planning delays are likely to slow output from smaller projects worldwide.

Still, Kazakhstan has the potential to ``flood the market'' if it meets its 2010 output goal of 39 million pounds, Merrill said. The nation produced about 10 million pounds in 2005, and Merrill's forecasts assume that will climb to 26 million by 2010.

XX My thoughts: Kazakhstan has ambitious plans, but anyone who thinks those mines will come online without trouble or delays has another thing coming. In the meantime, demand is only going to ramp up. I expect uranium, currently trading around $63 per pound, to see $110 before it sees $50.

By the way, I'm going to stop selling my uranium report, "The Golden Age of Uranium," at the end of the year. It's time for the first update. I sure hope you already own a copy.

Meanwhile, are you in Red-Hot Resources yet? If not, click HERE, or call 1-800-291-8545 and we’ll hook you up IMMEDIATELY.


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Is OPEC Turning Away from the Dollar?

There was an interesting story in Sunday's Financial Times...

Oil producers shun dollar

Oil producing countries have reduced their exposure to the dollar to the lowest level in two years and shifted oil income into euros, yen and sterling, according to new data from the Bank for International Settlements.
The revelation in the latest BIS quarterly review, published on Monday, confirms market speculation about a move out of dollars and could put new pressure on the ailing US currency.
Russia and the members of the Organisation of the Petroleum Exporting Countries, the oil cartel, cut their dollar holdings from 67 per cent in the first quarter to 65 per cent in the second.
Meanwhile, they increased their holdings of euros from 20 to 22 per cent, the BIS said. The speed of the shift may help to explain the weakness of the dollar, which recently fell to a 20-month low against the euro and a 14-year low against sterling.

XX My take: While this is worrisome, the big fear is that China will start to shift its massive foreign reserves out of the dollar. Indeed that's what the Chinese threatened to do on Thanksgiving, and China slowed purchases of Treasuries in the last two years even as its foreign exchange reserves surpassed $1 trillion, the largest in the world.

So how do we explain the rally the dollar is experiencing now? Well, the dollar suffered a major breakdown in November. Sentiment turned very bearish. It's only natural that we see some kind of short-term bounce under those conditions, and I think that's what we're seeing now, helped along by kind words from US Treasury Secretary Hank Paulson.

Kind words will only get you so far, though, as Al Capone famously once said. If historical trends hold true, the November sell-off will be followed by another, deeper sell-off toward the end of the year. Now, these things aren't written in stone -- it might be pushed out until January if Paulson has enough tricks up his sleeve. But it would be a good time to be long gold and silver when it comes.

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Jim Kunstler this morning...

I often disagree with the author of The Long Emergency, but he is eminently quotable. Here he is this morning:

Casual observers like myself have described the US economy as being in a hideous state of unbalance. On the one hand, we have the aforementioned Wall Street smoothies raking in unbelievable bonus fortunes, while the rest of the nation sinks into home equity quicksand wearing lead-lined suits manufactured in ARM mortgage reset hell. The afflicted house owners can't even sell their houses because the market is glutted with houses just like theirs, now worth less than the mortgages owed on them and, guess what, the supply of Greater Fools has finally dried up.

If you want to read more about the mortgage crisis in this country, check out my coworker Mike Larson's blog at Interest Rate Roundup.


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Saturday, December 09, 2006

Science Saturday: Tis The Season to Prepare (for Next Hurricane Season)...

Colorado State University Forecasters Predict Active Hurricane Season In 2007

This year, everyone famously got the level of hurricane activity wrong, except for the Colorado State led by William Gray. After the shell-shock of 2004-2005, I was one of the guys thinking he had holes in his head. Now, after 2006's sleeper of a hurricane season (thanks, el Nino!) Colorado State says 2007 should got back to a big, bad wolf hurricane season. You know: Huffing and puffing and blowing the house down.

They expect three storms that are "intense or major hurricanes."

The good news is it won't be quite as bad as 2004-2005, according to Gray. He says it would be statistically unlikely that two years in the near-future hurricane seasons would have the number of U.S. landfalling major hurricanes seen in 2004 and 2005.

We shall see. I have my new hurricane shutters upstairs (I can lock up the upstairs of my house in about 10 minutes -- the shutters downstairs are heavy steel and need to be bolted on). Come next August, I'll buy new batteries for the flashlights and mini-TV, and I'll be as ready as I'll ever be.

The big risk for us here in Palm Beach County, Florida -- unless you live right on the water, and I don't -- is that the 140-mile-long, 45-foot high dike holding back Lake Okeechobee could crumble. It doesn't meet modern dam standards, and scientists warn it might not survive another hurricane.

One group that is really taking global warming and its potential affect on hurricanes seriously is the insurance industry, as The Washington Post reports. You can also read another interesting story on it HERE.

Unfortunately the insurance industry, which has $3 trillion in annual revenues (three times the size of the oil industry), is using global warming as a reason/excuse to jack up rates.

As a result, the LA Times reports:
The companies that provide Americans with their homeowners and auto insurance made a record $44.8-billion profit last year even after accounting for the claims of policyholders wiped out by Hurricane Katrina and the other big storms of 2005, according to the firms' filings with state regulators.

The insurance industry calls these windfall profits -- up 18.7% in one year -- a "fluke." Ha-ha-ha. I need that kind of fluke.

This tends to make everyone suspicious of the insurance industry's motives. Are they just feigning concern about global warming to raise rates and give the boot to policy holders at risk?

I believe the insurance industry is genuinely concerned. But it would help if they were a little more concerned about their customers not being able to meet their insurance bills. My father in Sarasota, Florida has decided to go without insurance after his insurance rates TRIPLED. My mother calls my father "mule-headed." Well, they has an apartment in Maine they can live in if they have to. Many Americans don't have that luxury.

Meanwhile, ice in the Arctic and Antarctic is continuing to melt faster and faster. Half of the world's population lives along the coasts, so while I don't know your particular circumstances, there's a fifty-fifty chance you'll be affected in the next few decades. And once the frozen methane hydrates locked in permafrost and frozen sea bottoms starts to melt -- the most concentrated greenhouse gas around -- well, let's hope it doesn't come to that. The last time it happened, jellyfish ruled the Earth.

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What Are They Trying to Hide?

EPA Scrubbing Library Website to Make Reports Unavailable
Agency Sells $40,000 Worth of Furniture and Equipment for $350

In defiance of Congressional requests to immediately halt closures of library collections, the U.S. Environmental Protection Agency is purging records from its library websites, making them unavailable to both agency scientists and outside researchers, according to documents released today by Public Employees for Environmental Responsibility (PEER). At the same time, EPA is taking steps to prevent the re-opening of its shuttered libraries, including the hurried auctioning off of expensive bookcases, cabinets, microfiche readers and other equipment for less than a penny on the dollar.


Last month without notice to its scientists or the public, EPA abruptly closed the OPPTS Library, the agency's only specialized research repository on health effects and properties of toxic chemicals and pesticides. The web purge follows reports that library staffers were ordered to destroy its holdings by throwing collections into recycling bins.

Read the rest by CLICKING HERE.

XX My comment: Really, there are time when I think Washington DC has just gone insane. What could the EPA possibly be trying to hide through this action? It seems to be something related to toxic chemicals and/or pesticides. We could speculate from here to Doomsday ... it's all in trash heap now.

What does this have to do with natural resources or commodities? Well, they're selling $40,000 worth of office furniture and equipment in lots for $350. I need new office furniture. Heck, I need to get me some o' that!


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Friday, December 08, 2006

Two Global Warming Stories

Exxon Spends Millions to Cast Doubt on Warming

The world's largest energy company is still spending hundreds of thousands of dollars to fund European organisations that seek to cast doubt on the scientific consensus on global warming and undermine support for legislation to curb emission of greenhouse gases.

XX My comment -- such lovely people.

Rising sea level big concern along S.C.

The rising ocean is "going to shave off a ton of landscape along the coast," which could drown marshes that act as buffers for storm surge, raising the likelihood of major flooding when the next hurricane hits, said Jim Morris, marine studies professor at the University of South Carolina and director of its Belle W. Baruch Institute for Marine and Coastal Sciences.

XX My comment -- Part of my concern about global warming and rising sea levels is pure selfishness -- I live near the Florida coast -- the flat, low part that will flood as sea levels rise. But part of it is I want to have a planet to leave our children.


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Mixed Bag on Precious Metals Today

Gold ended the day down $6, 3% foir the week and near a three-week low. Ouch.

This despite some positive news on gold that was making the rounds.

Merrill Lynch raised its gold forecast -- not by much, mind you, but the big boys are always too cautious. Merrill puts gold at an average $650 an ounce in 2008, up from its previous target of $600.

"The link between gold and the US dollar "appears to have re-emerged," Merrill said. But that link wasn't in our favor today, eh?

However, on the downside, Merrill cut its rating on the global metals, mining and minerals sector to "neutral". Well, they're usually late to the game on that one, too.

See you at $700 gold!

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Commodities and Islam

We've been hearing more about this -- commodities (and other trading) deals structured to follow Islamic law. For example, Citigroup created an Islamic Currency Swap.

Funny thing is they use metal to get around the ban on paying interest. If you hold an investment instrument for a certain period of time, the bank gives you metal to sell. That's a trading profit -- not interest.

One metal that can't be used is gold, but gold is money in Islam. But steel, copper, whatever.

Read the whole story by CLICKING HERE.


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Egg All Over My Face

What an ugly reversal day we’re seeing in gold, and the US dollar has rallied back from the precipice, all thanks to U.S. Treasury Secretary Henry Paulson. At least, that’s what the talking heads on CNBC are saying –Paulson was able to smooth things over and talk up the dollar, describing Friday’s nonfarm payrolls as “very, very good news.”

Really? That’s why he’s going to China to beg the Chinese to let their currency (the yuan/renminbi) appreciate against the greenback. Oh, that old saying I quoted this morning: “The market can remain irrational much longer than you can remain solvent,” is coming back to haunt me.

Oil and natural gas are down as well! Apparently everyone in Nigeria got a unicorn and lollipop, and OPEC is a bunch of toothless old walruses. Or so today’s action would have you believe.

Energy stocks are off their earlier highs. Gold stocks got shellacked. Silver stocks have lost their luster. Well, you know what they say: Tomorrow is another day. We’ll see how long sweet-talking Paulson can work his magic.

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I May Have Made The Right Bets for (Partly) Wrong Reasons

Okay, so here’s what happened ...

132,000 were added to the payrolls … way more than the 100,000 estimated.

But that’s lower than the expectations ADP had set with its report earlier this week. Some traders were expecting 170,000 or so new jobs.

Manufacturing and construction jobs were decimated. All the growth came in the service sector.

And last week’s job growth was cut to 79,000 from an initial estimate of 92,000. Which makes traders think this one will be revised down as well, because it simply isn’t reflecting the slowing in GDP growth.

But at the same time, many people are saying “Goldilocks Scenario.” “This is what a soft landing looks like,” is what I heard on CNBC. So the bottom line is it challenges the growing view that a recession is coming – and that is VERY GOOD for commodities.

Oil and natural gas are both up today, helped along by more unrest in Nigeria and the OPEC meeting next week. But gold is up, too. Why would that be? After all, the higher jobs number means the Fed is less likely to cut rates, which keeps the US dollar stronger, right?

Nope! It’s all about expectations. Traders are telling the Fed: “We don’t believe this jobs number, and we don’t believe you when you say you’re going to keep raising rates.” That puts pressure on the dollar on the one hand – because it’s becoming clear in an ugly sort of way that one of the main things propping up the dollar has been the fact that the Fed pays higher interest rates than the European Central Bank -- and without rate hikes, inflation may rear its ugly head again (though it looks pretty darned comatose right now).

So, to cut to the quick: I expected a disappointing jobs number, which would boost precious metals prices. The number came in higher than the consensus expectations, but not as high as the ADP # predicted earlier in the week. Gold is up (for now) and the dollar is down.

Of course, that could all change by the end of the day, but for right now, it looks like I made the right bets for the wrong (or half-wrong, anyway) reasons. Good news is, I don’t care. RCS stocks are on fire lately! Two of them made SOARING gains yesterday.

And in Red-Hot Resources (the trading service, not this blog), we have a nat gas driller and a silver stock. The day’s not over yet -- this fickle market could turn against me and slap me down hard -- but this looks like a good time to be in both.

Are you in Red-Hot Resources yet? If not, click HERE, or call 1-800-291-8545 and we’ll hook you up IMMEDIATELY.

Not everyone is having a good day. A friend of mine – a better trader than I am – has been pretty bearish on commodities lately. Even though we disagree, I listen to him a lot. He’s a very sharp guy – we just don't see eye to eye on how commodities are going.

He shorted COPPER back in late November. Do you know how that worked out? Look at this chart he sent me this morning …

OUCH! Nothing hurts worse than being right, but being right at the WRONG TIME. After he got stopped out, copper tanked. It’s still tanking, on worries about rising inventories in China. My friend anticipated those rising inventories … too early for the market, as it turns out.

As the saying goes: “The market can remain irrational longer than you can remain solvent.”

Let that be a warning to us all. I’d rather make the right bets for the wrong reasons than be brilliant and make smart bets at the wrong time.

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Thursday, December 07, 2006

A Harvest of Profits for 2007

A Dow Jones/Marketwatch reporter asked me about my opinion on corn for 2007. Here's what I told her:

Corn/ethanol may be one of the hot commodities to watch. That’s because of the twin demands on corn – both for ethanol and to feed an increasingly hungry world.

And it’s not just ethanol use here in the US. China is now the third-largest ethanol fuel producer after Brazil and the United States. Production of fuel ethanol and corn alcohol consumed 8.9 million tons of corn in China last year, accounting for 44.5% of industrial consumption of corn.

Wait, it gets better! China is planning to increase the use of ethanol fuel from 20% of fuel consumption to more than half by 2010 with ethanol consumption reaching 3.25 million tons per year. Can China actually do that? Probably not, especially with its gasoline use soaring. But it’s going to make a serious attempt, and that will strain the global corn supply.

Already, right now, we’re seeing limited exports by China and Argentina and the possibility of a ban on Indian corn exports.

China is very significant. As recently as 2003, it produced 19% of the world’s corn exports. Now, it is real danger of becoming a net corn importer in the next few years. China's corn exports stood at 2.27 million tons in the first three quarters of the year, down 68.3% compared to last year, according to statistics recently released by
China’s Ministry of Agriculture. Meanwhile, imports hit 59,000 tons. That’s 43 times more corn than was imported last year at this time.

India, meanwhile, will probably consume more corn in 2007 than it grows. And increased droughts in the US will probably hurt the corn crop. All in all, I’d say 2007 will be a bullish year for corn.

But you know what I think will have an even better year? Uranium! Heck, there was a 42 million pound shortfall this year, America’s Navajo tribe, which is sitting on the Saudi Arabia of uranium, is refusing to negotiate mining rights, and Cameco’s aptly-named Cigar Lake Mine is flooded and won’t come online as planned in 2008. You want to bet on one commodity in 2007? Make it uranium.

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2 Uranium Stories

I don't want uranium to feel left out...

Kazakh and Russian officials on Thursday inaugurated a joint venture that will mine uranium to make fuel for Russian-designed nuclear reactors, Kazakhstan's national atomic company said.
The Zarechnoye mine in southern Kazakhstan contains 19,000 tons of uranium and is expected to produce 1,000 tons of uranium annually by 2009, KazAtomProm said.
XX My take -- Russia is already building an Empire of Energy, one based on oil and natural gas. If it makes serious inroads into Kazakhstan, a former Soviet Republic with 30% of the world's proven uranium reserves, Russia will be one step closer to winning the Global War for Natural Resources. That's the struggle that I believe will define the 21st Century.

Australia will sell uranium to China starting next year under an export deal approved yesterday by a parliamentary committee that ensured international safeguards would be met.
Australia, which holds 40 per cent of the world's recoverable uranium, reached agreement in April to begin exporting uranium to China, a move that should double annual revenue from exports of the nuclear fuel to US$1 billion.

XX My take -- With China's nuclear power capacity posed to increase by about 900% over the next couple decades, this is potentially huge for Australian uranium stocks.

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News I'm Reading Today

1)Gold recovers after two-week lows, awaits U.S. data

Gold steadied on Thursday after falling to its lowest in two weeks and platinum recovered from a five-week low, but the metals remained vulnerable because of a volatile dollar.

2) Buyers In India Resume Purchases (sorry, this one is Bloomberg News -- not on the web yet)

Dec. 7 (Bloomberg) -- Gold may rise for in London, snapping a two-day decline, as manufacturers in India, the biggest buyer, resume purchases after prices dropped to a two-week low.
India's gold demand of 164.8 metric tons in the third quarter was 16 percent higher than a year earlier, while global demand was 2 percent lower, figures from the producer-funded World Gold Council show. The metal has dropped 3 percent from a three-month high of $649.95 on Dec. 1.

3) Australian Employment Rises More Than Expected, Stoking Inflation Concern

Australian employment rose more than three times as much as expected in November, worsening a worker shortage that threatens to drive up wages and inflation. The currency climbed as traders bet interest rates may be increased.

4) Leveraged to the hilt: Juniors give investors jitters

It is a measure of how twitchy many investors have grown about debt-heavy energy sector juniors that when Bear Ridge Resources Ltd. recently unveiled what may turn out to be its biggest gas find ever, its shares tanked.
In all, 27 of the juniors had net debt of at least twice their annualized cash flow, up from 25 at the end of the second quarter and from 17 at the end of the first -- although Mr. Knapp said the increase had more to do with lower cash flow than higher debt.

5) Red-hot market for nickel
Prices for the base metal have more than doubled this year because of rising demand from Chinese manufacturers. Inventories, meantime, have sunk to a record low amid delays in starting new mining projects. That trend will likely continue, strategists said.
“As demand increases, projects aren't coming up nearly as quickly as we would like,” said Bart Melek, senior economist at BMO Capital Markets. “There will be stress on supply as demand is high.”

6) Bullish Forecast for (Australian) Shares in '07
THE high-flying resources sector and a world awash with savings will underpin an Australian share market gain of up to 14 per cent in 2007, according to AMP Capital chief economist and head of strategy Shane Oliver.
About the only market to perform better will be Asian equities outside Japan, a term that covers China, Hong Kong, Taiwan, South Korea and Singapore.

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They May Be Biased But DAMN, They're Bullish...

Business Week has an interesting story on the outlook on gold from leaders in the mining industry...

Buoyed by high prices, demand from Asia and a weak U.S. dollar, the gold industry has flourished since prices bottomed out in 2000 and probably is only halfway through the current boom, a leading industry official said Wednesday.

"Overall, our market is strong and will remain strong for some time to come," said Ronald Stewart, senior vice president for exploration for Canada-based Kinross Gold Corp., the eighth-largest gold producing company in the world.

Some other factoids from this incredibly bullish article (mostly attributed to Stewart)...

* Since 1800, the industry's average boom and bust cycles have averaged about 10 years -- the last downward trend lasting 14 years from 1986-2000.
* From 2000-06, there have been almost $40 billion in consolidation transactions involving gold alone, he said. This year, it's close to $16 billion.
* The industry is spending $7.1 billion a year on exploration, up from about $2.6 billion a few years ago. About half of that exploration is for gold, 30 percent for copper and other base metals and about 20 percent for other minerals, such as diamonds and uranium.
* Inflation is taking its bite with overall costs up about 25 percent, including a 25 percent increase in the price of steel and energy costs about 40 percent higher.
* China has only 1.5 percent of its reserves in gold bullion, compared with most of Europe which has about 15 percent in gold reserves.If China were to raise its gold reserves to the 15 percent level, it would have to purchase 8,000 tons of gold.

To read the whole thing, CLICK HERE.

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Winning A Beauty Contest in a Leper Colony

Yesterday was rough for commodities, as the ADP jobs report fed an overdue dollar rally. Here's what I had to say about the ADP jobs report in a commentary I sent out to the Secret Order of Jurojin...

The dollar bounced like it had springs on its shoes. First, it headed higher on the coat-tails of better-than-expected ISM numbers from yesterday. But the dollar really got its wings thanks to the ADP jobs report. ADP processes about one-in-six private sector paychecks in America, so when it says 158,000 new jobs were created last month -- the largest gain since June – economists and traders sat up and took notice.

So were we wrong on our bearish dollar/bullish gold outlook? Maybe, but not likely. Sure the dollar bounced, but it was way oversold – a reflexive bounce had to happen sooner or later, because nothing travels in a straight line, including currencies. Looking at the charts, this bounce is coming without a technical leg to stand on. And as for fundamentals, well, this is where it gets interesting …

The ADP report is considered by some to be the best single predictor of the government's nonfarm payroll report, but that’s like winning a beauty contest at a leper colony. There are no good predictors of the nonfarm payroll report. And hoo-boy, has the ADP been wrong before.

In June, the ADP forecast private-sector gains of 368,000, while the government report showed just 107,000 new jobs created in the private sector and 27,000 government jobs. Since then, the ADP has been off by an average of 48,000 from the government figures. The much-maligned consensus of economists has been off by an average of 46,000.

What the ADP number does is put a lot of bullishness in the market for both the dollar and Friday’s employment numbers. The market is expecting growth in non-farm payrolls on Friday of 100,000. If those numbers aren’t very good, the dollar could be headed for its next meltdown.

Meanwhile, the Chinese are making noise about shifting funds from Treasuries … The Middle Eastern oil sheiks would rather invest in Asia … and the Fed’s no-rate-cut boat is coming up against the rocky reality of a housing meltdown.

That's what I said yesterday. To clarify: Yes, the US dollar could bounce higher. It was WAY oversold. But the fundamentals for the US dollar are longer-term bearish. So, if the bounce continues for awhile, what will we do? Well, in Red-Hot Asian Tigers and Red-Hot Canadian Small-Caps, we have an eye on the longer term. Most of those positions are in the black anyway, and a correction will just give us a chance to pick up some more shares on the cheap. And have you seen the move in that oil stock I added to Red-Hot Canadian Small-Caps on Tuesday? I've just been waiting for confirmation from tracking (they had computer problems) but WHOO-HOO! That thing is taking off like a rocket.

Now, the jobs number could come in very good on Friday and make me look like an idiot. But again, in the longer-term picture, that won't matter. We can take a few lumps on precious metals and add more when the dollar's rally runs out of steam, which it likely will sooner rather than later. Meanwhile, there are other sectors that will do very well regardless of the dollar's ups or downs, and I'll look more closely at those. The longer-term trend for commodities is up, the longer-term trend for the dollar is down, we'd be fools to ignore that for either RCS or RHAT.

Red-Hot Resources is another story -- in that publication, we play short-term trends in US stocks that are sensitive to natural resources (and by definition, since those resources are priced in dollars, sensitive to the US dollar). So, even though I added a bullish silver position yesterday, you can bet JR and I are looking at this dollar bounce very closely to see if we think it has more legs, and if the bounce is playable.

By the way, if you're wondering what the Secret Order of Jurojin is, it's a non-Weiss publication that I'm involved with (because, as I'm sure you realize, I don't have enough to do, LOL). My partners are some international finance types. My good friend Martin Weiss is not involved with it, nor is it part of Weiss Research. Are we clear on that? Good.

The Secret Order is about the futures market. And all the horror stories you've heard about risk in the futures market are potentially true. So unless you've got big brass ones, definitely don't click


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Wednesday, December 06, 2006

I'll Be on Bloomberg TV at 1:30

I'm appearing on Bloomberg TV's "Marketline" with Ellen Braitman and Sandra Smith at 1:30 pm. First, it was pitched as me giving my opinions on three stocks. Then they asked me for some stock ideas. Then they asked me for recent reports. I sent them my uranium report ... the gold report is getting a little old, and will receive its last update soon.

Well, let's hope it works out for the best. Otherwise it will be the longest 15 minutes of my life.
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Tuesday, December 05, 2006

Sounds Like Uranium Market Is Getting Tighter!

I found this on

According to TradeTech’s monthly edition of Nuclear Market Review (NMR), for the month ending November 30th, “Most sellers adopted a ‘wait and see” approach, choosing to offer only small quantities (of U3O8) in anticipation of future price increases.” Transaction volume for November was significantly lower. Several deals were made for U3O8 equivalent for less than 50,000 pounds.

NMR editor Treva Klingbiel wrote, “Extremely tight near-term uranium supply is exerting pressure on all segments of the uranium market, including the loan market.” TradeTech’s Loan Rate for November 30 is 7.50 percent per annum. She pointed out, “Lenders continue to seek much higher loan rates, particularly for loans extending beyond a few months.”

Read the rest here:

Naturally, I would think this would make the picks in my Golden Age of Uranium report potentially even hotter! They could move a lot higher, faster, than most people think possible. Do you own this report yet? Maybe you should!


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US ISM Growth May Present Opportunity in Metals

The latest ISM # out this morning is bullish for the economy. The Institute for Supply Management's index of non- manufacturing businesses rose to 58.9 last month. That’s the highest since May, from 57.1 in October. Readings above 50 indicate expansion in industries that account for almost 90 percent of the economy.

You can read all about it by

This is finally giving the US dollar some legs and sending precious metals lower. However, this is a counter-trend move if I ever saw one.

Traders are buying the dollar and selling gold because they think this ISM # gives the Fed more reason (or excuse) to raise interest rates.

This euphoria could last through Friday, when we get the nonfarm payrolls and consumer sentiment for December (see an economic calendar here: I don’t have a crystal ball, but I expect those numbers to disappoint. Here’s why…

1) The ISM # is up because consumer spending rose last month. And that was mainly due to lower gasoline prices (which coincidentally or not, bottomed on election day).
2) Gasoline prices are slowly rising, and home prices are falling. I’d expect that to filter into consumer sentiment for December. Likewise, while consumers have been spending this holiday season, it hasn’t been spectacular. Therefore, there’s no big reason for employers to rush to add to payrolls.

Still, while we make educated guesses, never forget that the economics game is really a glorified crapshoot.

Anyway, if my hunches do play out, the dollar will slump lower again on Friday, and gold and silver will head higher. Naturally, if I see good opportunities to add positions before Friday, subscribers to Red-Hot Canadian Small-Caps, Red-Hot Asian Tigers and Red-Hot Resources will be the first to hear about it.

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Monday, December 04, 2006

Monday is Chart Day -- Gold ETFs

I picked up a chart over on that I thought I would share. it shows the rise in the price of gold along with the rise in gold held by various gold ETFs around the world.

We can see a couple of things here. The GLD gold ETF is responsible for the lion's share of the investment gold buying. Also, despite gold's short-term pullback, gold ETF investors didn't dump their gold shares. They seem to be more long-term investors. Finally, the amount of gold held by gold ETFs has flattened out, showing that gold ETF investors are becoming more cautious.

Looking forward, India recently passed laws that should kick-start precious metal mutual funds (and perhaps ETFs, though I don't know enough about Indian law to be sure on that). And I'm really, really wondering what will happen when the US finally gets a uranium ETF. And you know how I feel about uranium.

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