Gold Mining - For Fun and Profit

A number of years ago I found myself wandering around the swamps of Alaska, fishing pole in hand whipping water and trying to to catch a little dinner* when I came upon this native (Alaskan not Inuit) and he was panning for gold. We got to talking a bit and turns out he'd take about 3 or 4 ounces of gold out of this creek a day. OK - two things - first in those days 3 or 4 ounces of gold was worth 115 - 140 dollars (35 an ounce fixed) and second I was making that a month. Needless to say my favorite pastime became panning. And the only one who got rich off that venture was the guy who sold the pans at North Pole Alaska - a little bump in the road famous for being the "home of Santa Claus" - what a racket. One more thing - Alaskan creeks, even at the max of summer, are freezing cold and rough on the hands and gold mining even with a pan requires use of back muscles that are seldom called on for anything other than mucking stables.

Anyway - I noticed the other day that gold was back down again. In fact I ridiculed the gold bugs for being so crazy that they couldn't see that their favorite inflation fighter wasn't fighting inflation. I still hold them in the highest regard because anyone who can delude themselves so perfectly for so long has to have something really serious going on and gold isn't going to cure it - if you know what I mean.

But I do like a good investment, especially one that might make a couple of quick bucks where I don't have to have cold, rough hands and a sore back and gold might be it.

The problem with gold is two fold - one - it listens to its own drummer and two - it tries to march with the major market at the same time. That's why you get this -

Here we have GLD and the SPY and you can see GLD kind of floating around on its own until the market, as replicated by the SPY, takes a dump and then GLD follows suit.

So is it time to buy gold? No I don't think so and as you saw in the last post on pivot points neither do the pivots.

But when the market does turn up - what gold miner should you buy?

Here are a batch of the more popular miners including a couple of my personal favorites - AUY and KGC both of which I've made more than a few ounces of profit from in the past.

Can you spot why I like KGC and AUY and don't particularly care for NEM and GG? That's correct - my two favorites produce better returns and lose less overall than those other two monsters of the gold miner world. I like them nimble and quick and that's what KGC and AUY are - they are also a half to a third the price of the other two and that means I can buy two to three times more shares for the same money.

Also notice that KGC is a leader stock in this bunch. I.E. KGC goes up and you miss it - get on AUY or any of the others. KGC goes down - get ready to dump the others.

Anyway - I'll try to keep an eye on this group and when KGC turns - I'll do another post.

You will note that I didn't include Jimmy Crack Corn Pone's favorite - KRY - in this mix nor did I include the day trader favorite - DROOY. Here's what they look like on a similar chart -

KRY is on its own trajectory and DROOY, while not too bad - is just too cheap and it traded at its 52-week low yesterday, 57-cents. I don't know what happened to this stock but it is on the way to penny-ville.


*--- I was stationed for 2 years in Fairbanks Alaska and one of our favorite pastimes was fishing - and Alaska melts in the summer and it gets steamy, and thick - for all 6-weeks of it. Also buggy - but that's another story ---

Another Pivot Point Method

One of the best methods of determining entry and exit points on a trade are pivot points. Here is another way that I use pivot points to inform me of the probability of a trade's likelihood to succeed.

This is a pivot point cross method -

This is an easy enough program to write in Excel (which is one of my primary tools - because I'm not frugal - I'm cheap).

What you do is simply find a sequence of pivot points, take a 4 period average of the pivot point and a 4 period average of the closing prices (simple moving average is best in this regard) and plot them together. When the average cost crosses the average pivot you buy you have the makings of a buy-able stock.

Because I generally only need a few months of data I usually get the data set for this from the NASDAQ site. Go to their charts page for any stock and right click on the page and you will get one-year's worth of open-close data in a separate window - copy that and paste it into your Excel spread. It takes but a minute and you will have a handy set of raw data to work with.

I trust you can find the formula you need - you only need the pivot point itself and that is simply (high+low+close)/3 so that is simple enough.

Coincidentally (not) this is GLD and GLD will feature prominently in my next post. Note from the chart - GLD isn't signaling a buy just yet.

Economics? Economics?

Bull Snot! If yesterday's wacking had anything to do with inflation, recession or anything else dealing with economics then why does this chart look like all the rest?


Gold - the "safe haven" during times of trouble - right GoldBugs - tell me another story.

Personally I think the "safe haven" is Radio Shack as this chart clearly shows -


I'm going to start a "cult of Radio Shack" and its members will be known as RashBugs and I will be called "the Big Tube" - Hmmm - maybe not but look at the two charts and and try to figure it out - I can't.