I found this article to be a good summarization of what happened today in the gold and silver markets. Today was definitely a good start to what I described yesterday.
While mainstream news sources continue the war against gold and gold-related investments, three of the world’s top performing hedge fund managers have been busy at work building speculative gold positions during the first quarter.
George Soros, John Paulson, and Steve Cohen, who in aggregate control over $60 billion dollars, have been aggressively buying the most speculative vehicles associated with gold: call options on gold mining stocks.
Starting out with, George Soros, billionaire financier and chairman ofSoros Fund Manangement LLC, was the target of bearish gold commentary this week issued by Bloomberg. While Bloomberg journalists correctly reported that he’s been cutting his stake in gold, what they failed to mention (which was articulated here on May 16th), was how he reallocated the proceeds.
Today’s Sprott’s Thoughts relate comments made by Sprott USA Chairman Rick Rule in the May 2013 issue of Bonner & Partner’s Family Office Strategic Review (www.bonnerfamilyoffice.com).
“Natural resource speculators know that past uranium bull markets offered some ’explosive’ (pun intended) upside. I have been fortunate enough to experience two uranium bull markets: the 1970s bull market, which saw a tenfold increase in the uranium price and a hundredfold increase in some uranium equities, and the bull market of the last decade, which saw a repeat of the earlier performance. If past is prologue, the stage may be set for a third uranium bull run.
“Conditions have changed so completely since the 1970s that a thorough examination of that market teaches us little that is relevant today. But one thing about the 1970s bull market is instructive -the market collapse was partially caused by two catastrophic plant failures: at Chernobyl and Three Mile Island.
The bull market of the 2000s, he says, gives fodder to the case for higher uranium, because the bear market that preceded it is similar to conditions we experience today:
“An examination of the last uranium bull market is more instructive, particularly because many readers were participants. This great bull market had its origins (as almost all natural resource bull markets do) in the preceding bear market. In that 20-year-long bear market, the nominal (non inflation adjusted) spot uranium price declined from over $30 per pound in 1980 to $8 per pound in 2001. The costs of producing uranium began to exceed the spot price for many miners.
“By the turn of the millennium, the stage was set for a dramatic rebound. Uranium producers had total production costs exceeding $20 per pound. They sold their product on spot markets for $8 – losing $12 per pound on sales. There was little incentive to increase or maintain production.
“Of course, these low prices were beneficial to power generators and power users. So uranium’s utility to consumers was high. As a consequence of this extraordinary utility, declining US demand was more than offset by increased demand elsewhere – particularly from France, Japan, South Korea and Taiwan.