-- Weekly Market Update for the Week Commencing 15th February 2016

Big Picture View

Here is a summary of our big picture view of the markets. Note that our short-term views may differ from our big picture view.

The BULL market in US Treasury Bonds that began in the early 1980s ended in early-2015, but there will be many years of topping action in bond prices and bottoming action in bond yields before major new trends get underway. (Last update: 29 June 2015)

The stock market, as represented by the S&P500 Index, commenced a secular BEAR market during the first quarter of 2000, where "secular bear market" is defined as a long-term downward trend in valuations (P/E ratios, etc.) and gold-denominated prices. This secular trend will bottom sometime between 2018 and 2020. (Last update: 29 June 2015)

A secular BEAR market in the US Dollar began during the final quarter of 2000 and ended in July of 2008. This secular bear market will be followed by a multi-year period of range trading. (Last update: 09 February 2009)

Gold commenced a secular bull market relative to all fiat currencies, the CRB Index, bonds and most stock market indices during 1999-2001. This secular trend will peak sometime between 2018 and 2020. (Last update: 29 June 2015)

Commodities, as represented by the CRB Index, commenced a secular BULL market in 2001 in nominal dollar terms. The first major upward leg in this bull market ended during the first half of 2008, but a long-term peak won't occur until 2018-2020. (Last update: 29 June 2015)

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Outlook Summary

4. Long-term views are determined almost completely by fundamentals and intermediate-term views are determined by a combination of fundamentals, sentiment and technicals.

Last week's posts at the TSI Blog

The US government debt held by the Fed is interest free

Gold versus silver during bull markets

Anticipating a copper turnaround

At major price bottoms, gold leads and copper follows. With gold having provided us with evidence that something more than a short-term rebound is in the works, it's time to give more thought to the possibility that a sustained up-turn in the copper market is not far away.

While gold tends to lead at major bottoms, the lead time is variable. For example, in 2001 the bottom for gold preceded the bottom for copper by about 7 months, whereas in 2008 the bottom for gold preceded the bottom for copper by 1-2 months. However, if we are right to assume that gold has bottomed then the next upside breakout in the copper price should signal the start of an intermediate-term rally.

With reference to the following chart, a daily close above $2.15 would take the copper price above lateral resistance and the top of a well-defined 9-month channel. As long as the gold market maintains its longer-term bullish posture we would therefore take a daily close above $2.15 as evidence of a sustainable turnaround in the copper market.



Caution is still warranted, because copper's current chart position looks similar to its position in late-October of last year -- just prior to the start of a 3-week plunge from $2.30 to $2.00. That being said, copper's COT situation is bullish and it was interesting that the copper price managed to hold above $2.00 during last week's financial-market 'flight from risk'. We are therefore prepared to take a tentative step back into this market via the new TSI stock selection discussed later in today's report.

Can a US recession occur without an inverted yield curve?

One of the bullish arguments on the US economy and stock market involves pointing out that a) the yield curve hasn't yet signaled a recession, and b) the historical record indicates that recessions don't happen until after the yield curve gives a warning signal. This line of argument arrives at the right conclusion for the wrong reasons.

The bullish argument being made is that every recession of the past umpteen decades has been preceded by an inverted yield curve (the 10-year T-Note yield dropping below the 2-year T-Note yield). The following chart shows that while the yield curve has 'flattened' to a significant degree it is still a long way from becoming inverted (the yield spread is still well above zero), which supposedly implies that the US economy is not yet close to entering a recession.



The problem with the argument outlined above is that it doesn't take into account the unprecedented monetary backdrop. In particular, it doesn't take into account that as long as the Fed keeps a giant foot on short-term interest rates it will be virtually impossible for the yield curve to invert, but the Fed obviously can't hold off a recession indefinitely by taking actions that undermine the economy.

The logic underpinning the bullish argument is therefore wrong, but it's still correct to say that the yield curve hasn't yet signaled a recession. The reason is that an inversion of the yield curve has NEVER been a recession signal; the genuine recession signal has always been the reversal in the curve from 'flattening' to 'steepening' after it reaches an extreme. It just so happens that under more normal monetary conditions, the reversal doesn't occur until after the yield curve becomes inverted.

This time around the reversal will almost certainly happen well before the yield curve becomes inverted, but it hasn't happened yet.

The Stock Market

The US

The US stock market rebounded quite strongly on Friday, but not strongly enough to avoid a weekly close below the August-2015 low. From our perspective, this eliminates the small amount of remaining doubt that a bear market is in progress.

At the same time, the fact that the rebound from last Thursday's low began from slightly below the 20th January low opens up the possibility that a successful test of the January low has just taken place and that a multi-week 'corrective' rally has begun. If this is the case, that is, if a multi-week price bottom was put in place last Thursday, then there should be significant follow-through to the upside over the coming few trading days.



This week's significant US economic events [Notes: 1) The most important events (to the markets) are shown in bold. 2) A list of global economic events can be found HERE]

Gold and the Dollar

Gold

Gold and Confidence

A point we've made many times in TSI commentaries over the years is that the major trends in gold's relative value have nothing to do with what most people think of as "inflation" (a rising CPI). They are, instead, driven by shifts in how the financial establishment (the central bank plus the commercial banks) is perceived and by shifts in the perception of economic growth prospects. In more general terms, they are driven by shifts in confidence. There are times when a substantial decline in confidence is related to rising inflation expectations, but in developed economies there are more times when it isn't. And even when it is, it's not really the decline or the expected decline in the purchasing power of money that results in a greater desire to own gold; it's the belief* that 'the authorities' (the stewards of the monetary system) are losing control.

The happenings of the past two months constitute an excellent example. Inflation expectations were low when gold began to turn upward in December and if anything are even lower now, but over the past few weeks we had a very fast rally in the real gold price. It should be clear to any knowledgeable observer that the rally had absolutely nothing to do with fear of "CPI inflation". Rather, there is little doubt that it was driven by the combination of fear that the economically-destructive insanity known as Negative Interest-Rate Policy (NIRP) will spread to the US and fear of banking collapse in Europe.

Everything that the world's most important central banks are doing is based on logical conclusions drawn from false premises. The false premise upon which interest-rate suppression is based is that economic growth is caused by borrowing and spending. The reality is that saving is the foundation of sustainable economic growth. By pursuing policies that punish saving and reward borrowing, central banks set the scene for slower economic progress.

Progress-hindering monetary policy is not something new. It has been the order of the day for a very long time, but it has never before been taken to such extremes. Moreover, senior central bankers are making it crystal clear that they are not close to being done -- that they are ready and willing to continue along the current path if the relentless beatings fail to lift morale -- even though it is becoming more obvious by the day that the unconventional monetary policies of the past several years have hurt far more than helped.

The upshot is that today's central bankers are completely stupid, where stupid is defined as having an unwitting tendency towards self destruction*. Unfortunately, due to their immense power these men and women are taking entire economies along for the ride. The gradual dawning that this is happening is why gold is becoming more popular.

    *Central banks and governments never had genuine control, but there has been widespread BELIEF over the past several years in the abilities of central banks to create stronger economies.

    **The Doug Casey definition.

Gold and Silver COTs

The following COT charts are compliments of www.sharelynx.com.

There was a significant increase in the speculative net-long position in gold futures during the 5-day period ending 9th February (the date of the latest COT information), but the increase was not large relative to the price gain. This tells us that the rise in the gold price to the high-$1100s was driven as much by the physical market as by the futures market. We'll have to wait until the end of this week to find out if the subsequent rise to the mid-$1200s was also supported by the physical market.

As at 9th February gold's COT situation was no longer bullish, but it hadn't yet turned bearish.



It's a different story in the silver market. As illustrated by the following chart, at 9th February the speculative net-long position in silver futures had almost reached the level that typically occurred near short-term price tops over the past two years.

That is, silver's COT situation is now bearish.



A predictable hike in the margins on gold futures

A margin increase on COMEX gold futures was announced last Friday.

When the margins on gold futures are increased following a sharp rise in the gold price the usual suspects invariably scream "manipulation!", but it is no such thing. Margin changes are a function of price volatility, not price direction. For example, when the gold price fell sharply in April of 2013 the margins on gold futures were increased, and when the gold price extended its sharp decline in June of 2013 the margins were increased again. Strangely, the perpetual complainers about gold price manipulation did not claim that the margin increases that occurred in response to downside volatility in 2013 were an attempt to manipulate the price upward.

Even after Friday's increase, the margins on COMEX gold futures are near the bottom of their 5-year ranges. Therefore, it's reasonable to expect that additional margin increases will happen if the price volatility remains high.

Current Market Situation

The gold market has a short-term problem that has nothing to do with Friday's small increase in futures margins. The problem actually has two parts. The first part is that after last Thursday's trading session gold's daily RSI (refer to the bottom section of the following chart) was as high as it was at the August-2011 peak.



Another way to see the extent to which the gold market was short-term 'overbought' at last week's peak is to view the position of the price relative to a moving-average (MA) envelope. The following daily chart shows that the US$ gold price came close to the top of its 50/15 MA envelope (a 15% envelope around the 50-day MA) last week. The last two times it was this high relative to the envelope were near the major top in Q3-2011 and near a multi-month top in late-2009.



Our point is that on a short-term basis, at last week's high the US$ gold price was almost as stretched to the upside as it ever gets.

The other part of gold's short-term problem is that the factors that have been driving the gold price skyward are also now very extended. For example, the remarkable speed of gold's recent ascent was probably due to the gold market catching up with the extreme relative weakness in bank stocks since early this year. As discussed in many previous TSI commentaries and as illustrated by the following chart, gold is strongly influenced by the SPX/BKX ratio.

With the BKX now very 'oversold' relative to the SPX, some corrective activity is likely in the near future.



The bottom line is that gold's short-term risk/reward is no longer bullish, although an additional upside blow-off could happen over the days ahead. If it does, it will increase the short-term danger.

On a more positive note, last week's surge provided evidence that a long-term reversal has taken place. We are referring to gold's decisive weekly close above its 100-week MA (see chart below), which differentiates the current rally from the counter-trend rebounds of 2013-2015.



Gold Stocks

The HUI broke above resistance at 140 during the week before last, which means that it did more than we thought it would do at such an early stage of the gold-mining recovery. It then pulled back to test this former resistance (now support) on Wednesday before extending its advance into the end of the week. Friday's strength was actually a little surprising, given that it happened in parallel with a small decline in the gold price and a rebound in the broad stock market.



Since bottoming on the 19th of January, the HUI has risen on 15 of 18 trading days. Of greater significance, it has gained about 60% during this 18-trading-day period. It therefore goes without saying -- but we'll say it anyway -- that the HUI is now very 'overbought' on a short-term basis.

The HUI was also very 'overbought' on Monday of last week and all we got was a pullback lasting about 1.5 days. It's certainly possible that something similar will happen this week, with a pullback lasting only 1-2 days and being followed by a surge to another new high for the move. However, the higher it goes in the immediate-term, the bigger the decline will be once a multi-week top is put in place.

As is the case with gold bullion, at the same time as the HUI's short-term reward/risk equation has become skewed towards risk, its intermediate-term outlook has become more definitively bullish. The reason is that the current rally has just differentiated itself from the counter-trend rebounds of the past few years by achieving a weekly close above the 80-week MA (see chart below). The weekly close above the 80-week MA indicates the potential for an extension to as high as the 200-week MA (the black line on the following chart) before this year is over.



Is there a plausible alternative to a new bull market?

While the evidence suggests that a long-term upward reversal has happened, the answer to the above question is yes -- at this stage there is still another realistic possibility.

The plausible alternative to the new-bull-market scenario is that gold-related investments are benefiting from a short, 1998-style crisis. The following two sets of charts illustrate this possibility.

The first set of charts shows the performances of the HUI, the SPX and the Yen during the second half of 1998. Notice that steep declines in the HUI and the SPX bottomed together at the end of August-1998, after which there was a choppy rebound in the SPX and a rapid advance in the HUI. Notice, as well, that during late-September and early-October there was a decline in the SPX to test its August low in parallel with another surge in the HUI. During the 5-6 week period when the SPX was rebounding and then dropping to test its low, the HUI gained 70%. As it turned out, this was a bear-market rebound. Lastly, notice the dramatic rise in the Yen during the 2-week period when the SPX dropped back to test its August-1998 low.



The next set of charts shows the performances over the past few months by the same markets. Notice the similarities between the period within the box drawn on the following set of charts and the period in the box drawn on the above set of charts.



One of the important differences between 1998 and the current situation is that the entire 1998 decline in the US stock market was over in less than three months. It was clearly a correction within an on-going bull market, whereas the recent SPX weakness is an extension of a decline that began about 9 months ago and shows every indication of being part of a bear market.

If an equity bear-market is underway then it's very likely that new bull markets in gold and gold-mining have begun. However, the 1998 comparison could still work in the short-term. That is, short-term extremes in the HUI, the SPX and the Yen might have occurred last week or could soon occur.

The Currency Market

The Dollar Index closed below support at 96.5 last week. This suggests that the short-term decline will extend to the bottom of the 12-month range in the low-90s.

The Dollar Index is also now slightly 'oversold', so even if a drop to the low-90s is on the cards it would not be surprising to see an intervening 1-2 week consolidation.



Note that a counter-trend rebound would probably take the Dollar Index back to former support (now resistance) at 96.5-97.0, but should not result in a weekly close above 97.5. In other words, a weekly close above 97.5 would mark last week's downside breakout as false.

Updates on Stock Selections

Notes: 1) To review the complete list of current TSI stock selections, logon at http://www.speculative-investor.com/new/market_logon.asp and then click on "Stock Selections" in the menu. When at the Stock Selections page, click on a stock's symbol to bring-up an archive of our comments on the stock in question. 2) The Small Stock Watch List is located at http://www.speculative-investor.com/new/smallstockwatch.html

Company news/developments for the week ending Friday 12th February 2016:

[Note: AISC = All-In Sustaining Cost, FS = Feasibility Study, FY = Financial Year, IRR = Internal Rate of Return, MD&A = Management Discussion and Analysis, M&I = Measured and Indicated, NAV = Net Asset Value, NPV(X%) = Net Present Value using a discount rate of X%, P&P = Proven and Probable, PEA = Preliminary Economic Assessment, PFS = Pre-Feasibility Study]

  *Clifton Star Resources (CFO.V) published its reports for the quarter ending 31st December 2015. The financial statements included with these reports confirmed that the company has net cash of about C$12.5M (C$0.26/share), which is about $500K less than it had at the end of the preceding two quarters and is well above its current stock price. CFO remains cash rich and asset poor.

The stock is likely to be 'dead money' until there is some corporate activity. Some corporate activity could happen within the next few months, because it would make sense for another small gold-mining company to buy CFO in an all-stock deal just to get hold of CFO's cash.

We wrote the above last Friday. A few hours later it was announced that CFO had agreed to be bought by First Mining Finance (FF.V) in an all-stock deal (one FF share for each CFO share). The deal initially valued CFO at C$0.425 (FF's closing price on Thursday 11th Feb) and currently values CFO at C$0.39/share (FF's closing price on Friday 12th Feb). CFO ended the week at C$0.37, which is up about 100% on the day and a slight discount to the value of FF's bid.

Make no mistake that although the press release put out by FF sounds enthusiastic about the mining projects that it will be getting with this takeover, the sole reason for the takeover is to get CFO's cash. In effect, FF is buying CFO in lieu of doing an equity financing.

Despite Friday's doubling, the current CFO price is still a long way below the price at which the stock entered the TSI List many years ago. However, all things considered we are pleased to be able to exit at a significant premium to cash value. CFO has therefore been removed from the TSI List and a large loss recorded.

Note that we are currently not interested in owning FF shares.

  *Endeavour Mining (EDV.TO) had a good week, or at least its shareholders did. Thanks to a very sharp rise in the gold price, the stock managed to break above long-term resistance at C$10 and traded at its highest level in more than 2.5 years.

We continue to be bullish on the intermediate-term prospects for EDV's stock price, but it is important to keep in mind the risks associated with the region in which EDV operates. The risks of operating in West Africa are summarised in the article linked HERE.

EDV's advantage over companies such as Asanko Gold (AKG), Golden Star Resources (GSS), Merrex Gold (MXI.V), Roxgold (ROG.V), True Gold Mining (TGM.V) and Teranga Gold (TGZ.TO) is that its operations are spread over four West African countries. This means that a crisis in any one or even any two West African countries is not going to jeopardise EDV's survival. In other words, with EDV the country risk has been lessened by diversification. However, the country risk is still significant and will periodically shift to centre-stage.

  *Energy Fuels (EFR.TO) provided an update on the status of work at its Nichols Ranch in-situ recovery (ISR) uranium project in Wyoming. Significant progress is being made, but the stock market probably won't care as long as the uranium price continues to flat-line in the mid-$30s.

  *Evolution Mining (EVN.AX) reached our valuation-based intermediate-term upside target of around A$2.00 last week. It is reasonable to maintain significant exposure, because EVN is the type of stock that will probably command a substantial valuation premium in the future. However, if, like us, you have a large position in this stock, then it would be prudent to now make a partial exit.

  *Ramelius Resources (RMS.AX) advised that its pre-tax profit for the six months to 31 December 2015 is estimated to be A$28.7M. Assuming a tax rate of 30%, this implies an after-tax 6-month profit of A$20.1M.

Annualising the 6-month profit and dividing the result by the total share count of 470M gives us an earnings-per-share estimate of A$0.086 for the current financial year. If we then assume that the company is worth 5-10 times its current annual earnings, we arrive at a back-of-the-envelope valuation range of A$0.43-A$0.86.

Given that RMS's profitability currently depends on adding high-grade ore from small satellite deposits to the ore obtained from its Mt Magnet mine, we think it makes sense to use the lower end of the aforementioned valuation range. However, if we became confident that the company was going to at least maintain its current level of production for several more years then we would use a higher earnings multiple.

RMS also advised that it has forward sold an additional 60,000 ounces of gold at a flat forward price of A$1,600 per ounce. It has now locked-in the selling price on about 50% of its expected production over the coming two years.

It is smart for a gold producer to hedge part of its future production, provided that a) the hedges are put in place when the gold price is near the top of its 12-month range, and b) the hedges lock-in the price on no more than 50% of one year's production. RMS has done a good job of managing its hedge book over the past 1-2 years and the latest forward sales were done at a reasonable price, but by locking-in the price on 50% of the next 2 years of production the company has gone too far.

When the stock moved up to near our valuation last week we took profits on half of the RMS shares in our account (the RMS cost price shown in the TSI List is A$0.39, but due to averaging down the average cost price of the RMS shares in our account is much lower). Due to the significant increase in its hedge book and the lack of clarity on how the company is going to maintain its profitability beyond the next year or two, our current plan is to exit the remainder of our shares and to remove the stock from the TSI List if the stock price rises to around A$0.50 within the next two months. However, this plan is subject to change as new information becomes available.

New TSI stock selection: Ivanhoe Mines (TSX: IVN). Shares: 779M. Recent price: C$0.62

IVN owns majority stakes in three large undeveloped industrial-metals deposits in Africa. The time is ripe to begin averaging into an intermediate-term position in this stock.

Here is an outline of the IVN story:

1) The Balance Sheet

Due to the sale of 49.5% of its Kamoa copper project to China's Zijin Mining last December, we estimate that IVN currently has US$324M of cash with a further US$206M of cash to be paid by Zijin in installments over the coming 15 months. Also, we estimate the company's working capital to be at least C$0.90/share. Long-term debt is only US$26M, or less than C$0.05/share, so net working capital is at least C$0.85/share.

2) The Management

The executive chairman is Robert Friedland, one of the all-time great mining promoters. Friedland will ensure that IVN has the attention of the investing community during the next industrial-metals bull market.

3) The Mining Assets

a) 50% of the Kamoa copper project in the Democratic Republic of the Congo (DRC).

With a gargantuan Indicated resource comprising 43.5 BILLION pounds of copper at an average grade of 2.67%, Kamoa is the world's largest undeveloped high-grade copper discovery. That's why Zijin was prepared to pay US$412M for half the project.

According to a PEA completed in Nov-2013, it would cost US$1.4B to develop Kamoa into a mine with annual copper production of 611M pounds. Assuming a copper price of US$3.00/pound, the after-tax NPV(8%) and IRR would be $2.5B and 15.2%, respectively.

The PEA suggests that Kamoa would be viable at $3/pound, but would not be viable at the current copper price. However, the PEA will soon be superseded by a PFS that will be based on more up-to-date prices.

b) 68% of the Kipushi zinc project in the DRC.

Late last month IVN reported that the M&I resource for the Kipushi project's "Big Zinc Zone" contained 10.2M tonnes with a phenomenal average grade of 34.9% zinc, for 7.8 BILLION pounds of zinc.

IVN is in the process of preparing a PEA for Kipushi.

c) 64% of the Platreef PGM (platinum group metals) project in South Africa (SA)

The Platreef project contains 15.5M ounces of PGM-plus-gold reserves, although it is no longer appropriate to refer to these ounces as reserves given that the term "reserve" implies economically viable. A PFS completed in January-2015 showed that the project would be marginal at platinum and palladium prices that are more than 60% above current market prices, so the project is not remotely close to being economic at current prices.

4) The Valuation

At current metal prices the Platreef project only has a small amount of option value. IVN's stake in the Kamoa project is probably worth a few hundred million dollars based only on Zijin's purchase price, but we'll know more once the PFS gets published. IVN's stake in the Kipushi project could be very valuable, but there is currently no engineering study and associated cost/economics analysis to go on.

Despite the unknowns, we can be confident that the current valuation represents an attractive entry because the share price is C$0.62 and the company has net working capital of at least C$0.85/share. This means that the stock market is presently valuing the above-mentioned assets at less than zero.

5) The Risks

By far the biggest risk is that the company's two most valuable mineral deposits are located in the DRC. If the DRC were to become immersed in a civil war or experience a large-scale Ebola outbreak, either or both of which could happen within the next three years, then IVN's assets in the country would lose all or most of their value.

The country risk would be a deal-breaker for us if IVN were trading at C$1.50/share, but it isn't a major concern with the stock trading 27% below its net working capital.

6) The Price Action

IVN's stock price hit an all-time low of C$0.53 in January. It then rebounded to a high of C$0.73 in late-January on the back of the Kipushi resource announcement, some promoting by Friedland and a write-up in Brent Cook's Exploration Insights newsletter (which is what drew our attention to the stock), but the enthusiasm was short-lived. Due to a market-wide increase in risk aversion the stock price returned to the vicinity of its all-time low last week before rebounding by 10% on Friday.



New trading position in the Natural Gas Equity ETF (FCG). Recent price: US$3.52

Preliminary evidence emerged last week that the broad stock market and the oil market have made short-term price bottoms. If so, FCG stands a good chance of rallying over the next few weeks. A short-term trading position in FCG has therefore returned to the TSI List.



List of candidates for new buying

From within the ranks of TSI stock selections the best candidates for new buying at this time, listed in alphabetical order, are:

1) AAU in the low-US$0.60s (last Friday's closing price: US$0.68)

2) COPX (the Global X Copper Miners ETF) (last Friday's closing price: US$10.34)

3) FCG (last Friday's closing price: US$3.52)

4) IVN.TO (last Friday's closing price: C$0.62)

Note that the above list is limited to five stocks. It will sometimes contain less than five, but it will never contain more than five regardless of how many stocks are attractively priced for new buying.

Comments on Kinross Gold (KGC) 2015 results and 2016 guidance

KGC isn't a member of the TSI Stocks List. However, we mentioned several times in TSI commentaries over the past year that it offered by far the best value within the realm of 1M-oz/year gold producers and we have periodically traded it via call options.

After the close of trading last Wednesday KGC published its results for 2015 and its production guidance for 2016. This information hasn't changed our view that KGC offers the best value within the ranks of senior gold stocks, although there were some yellow flags buried in the details. Also, the bulk of the short-term upside potential has been removed by the large rise in the stock price over the past two weeks.



The first yellow flag was the cost performance in 2015. The per-ounce cash cost was about 3% lower in 2015 than in 2014 and the AISC was about the same in 2015 as it was in 2014. These numbers look fine until you take into account the huge decline in the average oil price from 2014 to 2015 and the substantial cost benefit that KGC should have received due to large declines in the Russian Ruble, the Canadian Dollar and other currencies relative to the US$. This suggests to us that KGC's operations became less efficient in 2015, with the decline in efficiency masked by cheaper oil and weaker local currencies.

The second yellow flag was 2016 production guidance of 2.7M-2.9M ounces. The company produced 2.6M ounces in 2015, so at first glance the 2016 forecast looks good. However, early this year KGC completed an acquisition that will add about 400K ounces/year to its production, so excluding the effect of the recent acquisition the 2016 guidance indicates a production decline of 100K-300K ounces in 2016 compared to 2015.

The third yellow flag was a $127M increase in KGC's net debt position (long-term debt minus working capital) over the course of 2015, excluding the effects of acquisitions. We hasten to point out, though, that even after paying $610M for new assets early this year, KGC's balance sheet is in reasonable shape.

It goes without saying (given the price action) that in the midst of last week's optimism about the prospects of anything gold-related, these yellow flags didn't matter.

Chart Sources

Charts appearing in today's commentary are courtesy of:

http://stockcharts.com/index.html
http://research.stlouisfed.org/