The Bonanza ProjectThere have been a lot of articles written recently about an immediate major bottom in gold and silver, strong hidden buying interest by unnamed entities and outrageous future price projections. All provide a false flag of future hope without foundation.
Hope vs Hype
A current fascination is the head and shoulders pattern in gold which is far from complete. One can be assured, that since everyone has noted this pattern, a potential positive resolution is still some distance away.
Cheerleader predictions about moon shots or turnarounds without supporting evidence should be regarded as mere speculation. Hoping, wishing and praying are not viable investment options.
Fundamental vs Technical
Based on fundamentals we are all familiar with, the bull market in gold and silver is not over. If it were over, someone, somewhere, somehow reinvented the economic wheel of true value and I missed the memo. However, current technical results do not presently match the fundamental basis.
- Gold has been in a declining phase for the last 8 months. Silver 11 months.
- The USD continues in a strong uptrend with no clear signs of topping action.
- XAU/Gold ratio's performance is pathetic.
Hope Based on Performance
On a more immediate level, we need definitive proof the bull market continues. No positive trend change will occur without the daily time frame turning first. In that regard and as a first step...
- Gold needs to exceed and hold 1680
- Silver needs to exceed and hold 32.50
- XAU needs to regain 172 minimum in a real big hurry. That event must occur very soon or the projection is XAU 146.
The Bonanza Project - Vaults of Value
While we wait for the bull market to continue, there is one area of undervaluation and low risk that requires immediate investigation. This can be clearly visualized in the XAU/Gold ratio, enterprise value or net asset valuation metrics.
In general, many include gold and silver producers as well as juniors that have…
- Solid management with a history of success
- Large underlying assets (2-5 mil oz in measured, indicated and inferred categories),
- Significant cash with a low burn rate
- Fewer shares outstanding than most of its peers
- Properties that are located in safe jurisdictions with good infrastructure
- Production/exploration plans that offer a proper risk/reward ratio and increased shareholder value
A Brief History of Undervaluation
At the beginning of the current bull market in 2000, gold and silver stocks were clearly undervalued. From late 2008, another undervalued and profitable event also occurred.
Today, we have a similar situation, conditions and pricing where very undervalued gold and silver stocks with significant defined "vaults of value" are largely ignored and forgotten. I expect that, beginning within the next few weeks up to 3 years, these good values will again be recognized and begin their rise from the deep to significant price levels.
Bonanza Project Strategic Math
The purpose of the Bonanza Project is to locate these important "vaults of values" and take advantage of the low valuations. The process is both an art and science. It is not some off the wall pipe dream or pie in the sky idea but a program based on mathematical undervaluation, a historical precedent and a reasonable chance for success. The concept is based purely on fundamental values, a low-risk, high-reward basis and a longer term speculative play, using excess cash only.
In addition to meeting undervaluation criteria, project math should include a preeminent focus and goal to obtain a stock price that subsequently provides at least a 100% gain over time. That should not be that difficult given the current low valuations.
When the 100% gain occurs, 50% is then sold for a complete return of initial risk capital and the rest rides for free. At that point, further monitoring of that stock is minimal while waiting for the much larger ultimate values envisioned by the stock's fundamental value.
Hope must be based on solid fundamentals and valuation history together with price performance, not on hype, speculation or fantasy.
Based on fundamentals we are all familiar with, the bull market in gold and silver is not over. However, there is a significant undervaluation in gold and silver stocks that provides an important low risk opportunity requiring immediate and further investigation for those with vision. Clearly, it's time to get involved.
Disclaimer: This opinion piece was created solely for informational, educational and entertainment purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Market Pendulum is not an investment advisor. Market Pendulum accepts no liability whatsoever for any actions taken as a result of reading this opinion piece or from the dissemination of any information from the website. The information contained in this opinion or on our website is obtained from sources believed to be reliable but is not guaranteed. Readers should not regard the Market Pendulum website, its opinions or its contents as a substitute for the exercise of their own judgment and due diligence.
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