Why I'm Restarting Kinross Gold

Since I am not sure what exactly the market will "hate" next week or in the weeks to come; it seems to change by the day; I want to build up 'protection' (hedging) another way, and we'll use gold. Gold is more of a sentiment indicator than anything to do with fundamentals. During this market rebound the Gold ETF (GLD) has not really fallen much - that is not a good sign. Remember, gold is the ultimate Armaggedon trade and in the past an inflation hedge (although it appears black gold has taken that mantle since last fall). So with the "all clear" signal once again launched by CNBC ("it's all priced in") it seems curious that gold is not correcting. Frankly with all the paper money being printed off (and or proposed) along with my assumption of yet another stealing of your grandchildren's future (i.e. the '2nd stimulus plan' I believe will be coming around election time) I am surprised gold is not $1200-$1400 :)

Instead of the ETF I've used Kinross Gold (KGC) in the past and it has done well for us, so I am going back to the well. Since this is a "sentiment" trade (to me) if the market strengthens this trade should fail, and vice versa. After spiking north of $25 at the height of the bailout talks (that was just this past weekend and Monday folks - even though it feels eons ago), it has now retraced below $23 and we're adding it here in the the $22.80s. If it breaks down below $21.50 (or the Gold ETF breaks down) we'll most likely be out.

In this case I won't mind if this trade does not work because it should mean other things in our portfolio are. So while this is a "long" position technically, mentally I consider it a "short"/hedge. Note - I am not a gold bug, nor a gold expert and buying a gold miner instead of the metal straight up can always be an error. But directionally this will either provide a hedge during further downside or not work if the market rebounds. So we might be out of this in a few days, a week or it might be a few months.

I debated getting into Kinross at the end of June but didn't pull the trigger (down at $21) [Jun 26: Gold. Back from the Dead?] We threw what was left of the cash we raised today, that had not been applied to index shorts into this position, and created a 2% stake in Kinross Gold.

Comments

[atotonilco]

Wouldn't buy KGC unless it was under $20.

[Steve-O]

I agree. I have been following KGC for quite some time. I say get back in when it's closer to $18.00

[CT Programmer]

I too follow KGC and have been for a while. It fluctuates so much that I think you could get it again at sub-20. You could have picked it up for that most of June. The inflation trend will definitely take gold up. It is surprising that it hasn't so far, but I think you're right about oil being a surrogate. Now that oil has pulled back and is not quite the "sure thing" that it was, gold is likely to start its gradual climb again as inflation takes center stage. The first Fed rate hike will bring out all the inflation doom-and-gloom reporting. But I don't think it will be right away. I think there may be a pullback or two before then, but the long-term for gold I think is up.

[GMiki]

I sold my KGC and bought some silver eagles. :) It's scary out there.

[nvsnowbunny]

Kinross is a steal right where it is. It will never go down below 20 again. Look at other gold companies and compare. Kinross has a ways to go before it catches up with the big boys. And if in this climate, one of the big boys comes after Kinross, humm, what a gem it will be.

[pooramerican]

I think gold is the most undervalued commodity. it should be $1200 at least. I am glad it did not break $800 in the last correction($790). I don't know much about kgc but I have been following ABX and TCK and I think both are pretty good companies with very good potential. I like NEM and ABX. NEM is very good at saving costs and ABX is making the right move by trying to acquire the energy division of cadence to lower their power bill.

[bearfund]

Gold is neither undervalued nor overvalued. It is what it is. All the value in an ounce of gold has been put there by the time you own it. Its value does not depend on anyone's promises. If you like that sort of thing, hold the physical metal and forget the rest. The only reason to buy KGC or any other miner is that you like their business - mining is like any other business in that it has its solid executors and its utter failures. But don't buy it to hedge "the market". Miners are not metal.

[CLH]

The metal gold just made a double top (Mar. and July). The stocks did not go up in July for the second top. Dollar has stopped going down. Gold does not look good.

[gigem77]

The dollar has failed to make even a dead cat bounce. Now the Congress is going to give FNM/FRE a huge bailout. The dollar is toast. Gold made a double bottom in May and June. Now it's rising and will hit at least 1100 this year. KGC, ABX and GG are all good choices for playing this move.

[Mongoose]

Very good picks, maybe throw in AUY. the big boys will shake out the weak holders in the next month and then watch the fireworks. Bonds and the dollar are fragile here. Good mining

[notsosmart]

man-what a mix of opinions.i dont think anybody knows anything.might as well play craps in vegas.its quicker & somebody brings you a drink.

[bowman711]

From Casey's Daily Resource (caseyresearch.com/disp...)

"The Commitment of Traders report issue on Friday for positions held at the close of trading on Tuesday are as follows: Gold...the tech funds increased their net long position in the Non-Commercial category by 13,181 contracts. Opposite them, were the bullion banks...the '8 or less' traders...in the Commercial category. They increased their net short position by 17,917 contracts. The difference between these two numbers is the increase in the net long position by the small traders in the Nonreportable Positions category...so you can see that the bullion banks were going short against everyone who went long. Silver: There wasn't as much activity as I expected (was it all reported?). The tech funds went net long 1,147 contracts and the bullion banks went net short 2,595 contracts...once again the difference being the increase in net long positions of the small traders in the Nonreportable category."

Can gold go anyplace when every long contract is matched by a naked short?

[jock]

nvsnwl writes: "Kinross is a steal right where it is. It will never go down below 20 again."

Even Hank Paulson can't know that!

[notsosmart]

h.paulson could not care less exept for his own agenda & those of his cronies.

[swaps]

You guys are a little late. I got into Kinross at $11 and am now up 98%but let's not talk about the falling knives I tried to grab since the first of this year.

I take it the poster owns 2% of Kinross, and does not mean he has 2% of his money in Kinross, which would not be a strong hedge.

Kinross is 9% of my holdings, which has about 20 positions.
I also have AAUK, which has not fared as well, though my shares mostly go back a few years, and Gold Corp., which just issued an annual report that notes several of the veins they are currently working are of lesser quality. GG hasn't kept pace with KGC,

Gold isn't going to crater anytime soon because Bush, Wall Street, The Fed and the moral compass lacking credit merchants are inthe process of totally destroying the dollar.

It is time for us to exchange some of our fiat dollars and shares for some glitter metal we can use for barter.

Dan



Dan

[leh]

Funny how CNBC and the Fast Money crowd have ignored gold's recent run back to 950, as well as the miners' big 40% advance over the past month. There is some evidence serious money is taking long positions here in gold in the form of SEPT GLD calls. KGC has shown very high relative strength in its sector and IMO should be a core holding. I personally think the charts look very positive for the miners to resume their longstanding bull trend into the fall, and would guess KGC is going to 32-34 based on previous seasonal moves.

[User 30121]

Interesting article and some VERY interesting posts! Of course, there are exceptions (CLH). What a putz! If gold hits 1100 Tuesday, CLH will post "watch gold go down tomorrow". Reading CLH posts is like listening to Obama left wing loonies spewing venom about the Bush administration. No common ground, no facts to back up outlandish claims, just venom.

To leh: Those financial mouthpieces (CNBC, et al) WILL be touting gold and silver soon, very soon. And WHEN they do, its time for us to SELL! Remember that, won't you! I know GMiki and bearfund know this....

[nvsnowbunny]

UGH!!! Kinross sits at $18.81 right now, down over 9%. What a bummer. So I was wrong, not afraid to admit it. I still say that KGC is a good stock to hold, it will bounce back. I started buying when it was at $6, and I am holding, long term pays off in the end. No way I would bail out now. You either have staying power or you don't, this market is not for the weak at heart. When all else fails, housing etc, gold is a good investment, long term. Hang in there guys.