By Robert Fitzwilson of The Portola Group

August 14 (King World News) - “Price & Value In The Gold, Silver and Mining Shares Markets”

If someone offered you $10 for your car, you would most likely be insulted at such a ridiculously low price.  The obvious reason is that the value of the car is many thousands of dollars greater than the offer.  Let’s assume, however, that it was the only price being bid for your car.  In today’s world of instant financial journalism and the Internet, word would spread that the price of cars had plummeted to $10.

Holders of loans against cars that had been financed would panic....

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“Pressure would be brought to bear by their financial backers and shareholders to raise new capital to reinforce their now dramatically impaired balance sheet as all of the cars held as collateral has now precipitously dropped in value.

While this is a fanciful story, it highlights the difference between price and value.  Most investors base their decisions on price.  Successful investors base their decisions on value.  In the above scenario, the John Templetons of the world would have scooped up all of the cars, contracts and shares of the companies involved in that sector of the economy.  With time on their side, great fortunes would be made as others panicked.

The situation is analogous to what has happened in the precious metals and gold/silver mining companies.  An artificially low price induced price-based investors to dump their metals and shares literally throwing fortunes out the window.

We continue to hear that investors are waiting for confirmation that the “bear market” in gold, silver and mining shares is over.  They wait for a higher price to signal that there is value.  They do so at their financial peril.  Experience told us that June 27th was the bottom for the precious metals and mining sectors.  When you see panic sells and waterfall declines on large volume, it signifies a bottom regardless of the market sector.  We saw that in the late morning on that day.

Since then, the HUI has climbed about 23%.  Several of the mining shares have risen as much as 75% since then.  The bottom was in yet many people await further confirmation.  This is how you avoid making a large fortune in our view.  The value in these sectors is tremendous.  Savvy investors see it.  Mining executives see it.  Production is being withheld for sale as the companies know that the prices in recent months are artificial and ridiculously low.

The signs are all there for an objective mind to see.  Among those signs are the technical factors discussed above, but also the backwardation in the gold market, the depletion of the depositories, the bankers going from heavily short to heavily long,  and the desperate attempts by India to dissuade their citizens from buying gold.

It is an historic stampede to own gold and silver.  The miners are now the largest depositories of the remaining ounces on the planet.  Waiting for “the moment” to acquire the metals and miners is a serious financial mistake.  You have an explosive combination of huge demand and diminishing availability despite production ramps from several of the well-run companies.  You could not wish for a better combination of factors.  Prices will be much, much higher.  Who knows if the actual metals will even be available at that point?

Gresham’s Law says that bad money drives out the good.  We are seeing history made in front of our eyes at this very moment.  Delaying purchases of the metals and the miners will cause investors to miss out on the biggest chance for profit remaining in this era.”

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