1-Gold representation as a percentage of total assets held by large institutions and by various investment funds remains quite low. That could change as we feel that they will soon have to invest in gold and gold mining stocks. As you are aware, it is not easy to purchase gold bullion for many institutions and have it delivered and stored safely. You may want to ask the Germans about that subject and how much of their requested gold they have received! We believe we will soon see more institutions investing in the gold mining stocks in order to participate in a bull market in gold. That method will be their proxy for gold investments.

2-Necessary for a strong bull market in gold and gold mining stocks? Our analysis suggests that at the same time, we have to see a bear market in the large industrial stock market such as the Dow Jones Industrials and the S&P 500.

3-Large buyers of gold bullion are not emotional but well informed and attempt to time the market using fundamental supply and demand analysis as well as technical and cyclical analysis. The large buyers want to buy at the lowest prices possible for the bullion.Too often, the investing public and some hedge funds can be far too emotional and engage in chasing and pushing the gold stocks up. Patient accumulation is a key ingredient to successful investing in mining stocks.

4-Technical Analysis! We want to see the gold bullion price move up in a slow solid pattern, we do not want “spike” type moves which indicates emotional buying. Slow prudent buying is the key. The angle of ascent of the price chart is so important.

5-Is the price of gold manipulated? Yes, you bet it is. It is difficult for bonds to sustain interest rates at 1% to 3% if the gold market is in a bull phase. Above all, the large brokerage houses DO NOT want to see a bull market in gold as it brings with it a bear market or at best a very lethargic market in industrial stocks. A bear market in large industrial stocks has a severely negative impact on brokerage house profitability.

6-In the summer of 2013, I suggested here that gold bullion was making a bottom since it was selling under the cost of production for many gold mining companies; that has an enormous impact on the supply of gold. We are in a supply and demand business! That “cost of production” is a very important ingredient in a bottom. If we look at chart, we could see gold move down to the $900 range but it would not last long as any available gold bullion would be quickly bought probably the Chinese. Moreover, the move down would be in our opinion a “paper sale” ruse to create an image of gold weakness.

7-The major American brokerage houses do not have a history of timely advice for the gold and gold mining stocks. Look elsewhere for advice.

8- Are Gold stocks cheap? In our opinion, many are right now and many actually bottomed during the past two years. True to form, buy recommendations will come after most already have had moves up on average of over 40%. That will never change. Thank you, Bob Pellerin, K.C Grainger