There's no doubt that the US government is pushing itself into a precarious trajectory with respect to spending and debt. While there's still time to avoid disaster, it would require drastic action that isn't likely given the current political environment. Additionally, the Debt-to-GDP ratio still isn't as high as many countries have tested and are testing. Also, there probably won't be any catastrophic events as long as the economy is stable - as it currently is. Another 2008 type meltdown would probably be required to trigger any type of black swan event.
All that being said, there's still no reason to assume that gold and silver stocks will become more valuable. A catastrophic event would likely cause massive deflation throughout the world - which wouldn't help the value of precious metals at all. Additionally, you're owning these stocks in dollar denominated shares and are probably holding your ownership via a broker-dealer that's susceptible to financial collapse.
With respect to a currency being backed by real assets, the federal government already owns massive amounts of real estate throughout the country. This could easily be transferred to the Federal Reserve (and other creditors) in the event of default on US government bonds. I'm not saying that this is a reason to think the dollar is indestructible. I'm saying that it doesn't make sense to think that gold/silver will appreciate more than 10x in global purchasing power. This is not a good reason to be owning GORO.
"" More gold is not required, just a greater value per 'gold unit'. "" - Sorry, but gold is priced by supply and demand. There is no supply shortage. That proves that gold is not undervalued. You can't just increase the price of gold 1000x in order to have enough gold to back currencies. The US economy is huge. It's not rational to suggest that the federal reserve should buy enough gold to back the dollar on a 1x1 basis. A fractional basis is all you can get, and any size fraction requires that the value of the dollar be at least partially based on the faith and credit of the federal reserve. You can argue for a larger fraction, but it's completely unrealistic to argue in favor of 1x1.
"" Kyle, are you really talking about Tulip Bulbs? ""
Yeah, he was comparing the value of the dollar to the bubble prices of Tulip Bulbs that occurred hundreds of years ago. What's funny is that it's more appropriate to compare the bubble tulip prices to the bubble gold prices that occurred a fews years ago. Poor kyleskidd is all mixed up, and it's causing him to dump far too much money into GORO. At this rate, he might became a casualty statistic like amedaus.
kyleskidd, you need to understand how certain feedback systems work in basic economics. Some feedbacks are positive. This means that they tend to cause any trend to continue and/or accelerate. There are many positive feedbacks with the economy in general. When things are good, people feel comfortable making risky investments and this pushes the economy higher. When things are bad, people feel poor or are worried about being poor so economic activity slows further.
But there are also negative feedbacks. When energy prices get too high two things happen. People invest more in energy sources and the economy slows as a result of high priced energy. These things cause energy supply to rise and energy demand to fall. This causes energy prices to drop - which helps stimulate the economy back up. This is known as a negative feedback.
High precious metal prices cause a negative feedback as well. This is why gold and sliver prices can't shoot to the moon, and this is why the most recent gold/silver bubble popped.
"" Most likely that backing will be gold, if history is any guide. ""
No, no, no, no. There's isn't enough gold in the world for this to happen. kyleskidd, you don't understand anything about a currency system. A lack of currency can diminish the number of transactions that would otherwise occur - that stifles economic activity. Our economy has outgrown the amount of gold that can be stockpiled. A fractional-based system is the only thing that will work. The size of the viable fraction depends on people's confidence in the US economy since the notes are backed by the support of the US banking system. Americans can't switch away from the dollar in any meaningful way. There isn't enough of any precious metal to make enough for a ubiquitous currency. A currency that's backed by something else will quickly outgrow its backing if too many people begin using it - thus creating the same problem the dollar has.
I sympathize with your concerns about the US government's deficits and the Federal Reserve's willingness to overly expand the dollar to support the deficits - but the expansion has, thus far, largely only compensated for the deflation that would have otherwise occurred since 2008.
Again, the dollar will only crash if the US economy catastrophically crashes. If the economy catastrophically crashes, then gold won't be worth very much. It can't be eaten. It can't provide shelter. It can't provide protection from hungry hordes. It can't provide warmth. Gold's valuation could most certainly bubble up again, but you're crazy if you think the price (and the price of silver) would ever drive GORO's stock price to $1,000 per share.
"" I expect it will be conservatively $1,000+ per share. ""
If the dollar simply inflates to the point that it causes silver and gold prices to reach the levels that would be required to support a $1,000 per share price for GORO, then there won't be any tropical ultra-luxury paradises. The world will have much bigger problems.
A more realistic scenario that's catastrophic for the dollar is also catastrophic for the price of gold. During catastrophic economic times gold won't be in high demand. Nobody will be able have the luxury of caring about gold. They will be too busy finding food and fending off lawless hordes.
These notes will likely contain revised models that push profitability out until 2020. Since this delays cash flows, the notes will also likely contain lower price targets. Expect this to hurt the stock price.
"" One project in place....ZERO projects on the horizon. ""
I think this speaks volumes. Instead of making plans to develop their own property, GORO is making cash investments into other mining companies. They must believe that these other mining companies have better resources and/or can mine more economically than they can.
"" you don't know that ""
That's correct. I really shouldn't have made it a definitive statement. That was irresponsible on my part. I should have stated that I think they will be out of gold to be economically mined in 5-10 years.
"" you really have no good reason to assume it ""
I shouldn't have definitively made the statement I did, but I most certainly have reasons to assume it.
"" I'd be more worried that they'd all fall asleep and never wake up than that they'd run out of areas to mine. ""
There are plenty of areas to mine. The problem is that the economics aren't impressive on any of them. They might be able to recoup their investment mining a different area, but I doubt they can support their current market cap.
"" just making that totally unsupported statement is not helpful. ""
You're right. I'm sorry.
His statement today is going to force every sell-side analyst to redo their models in order to push profits back until 2020. It's not going to be good when those analyst reports start hitting the tape.
I think kyleskidd was hoping that we weren't checking this board anymore and was trying to rewrite history.
Who knows, maybe he's on some old message board for Enron now claiming that the bear case against Enron revolved around personal attack and accusations without much to back it up.
"" This is exactly the kind of sentiment I'd expect to see at a bottom. "" - This exact sentiment existed when GORO was trading at $30 per share.
I didn't say that GORO was a "worse" company when compared to other miners. I said that GORO is still overvalued. I challenged your bogus claim that the bear case against GORO was only based on personal attacks and accusations. I challenged your claim that the price of gold will drive increased production. I told you that you shouldn't be accumulating at these prices. I told you that there were much better ways to take a bet on gold and silver.
But you're now neck deep in GORO, so you want others to buy GORO to help you out. You don't want people buying other miners or physical metal. The price of silver and gold will need to surge quite high in order for GORO to grow into its current valuation - given the realities of their production and grade.
"" guaranteeing massive gains in next 2-5 years time ""
What type of guarantee is being provided?
"" once all the money-printing and currency devaluations worldwide finally come home to roost. ""
An end to monetary easings will actually end the arguments for gold and sliver that have been used over the past 6 years. Are you suddenly inventing a new argument?
Worldwide fiscal policies are terrible and have a deflationary effect. The easing has merely countered these deflationary forces. This is why we haven't experienced massive inflation, and this is why gold/silver prices have plummeted from their bubble levels.
"" Gold prices have been manipulated by Central Banks for the past few years ""
Nope. Speculative buying is a much greater force on gold prices than any measures taken by the central banks of the world. There was quite a bit of buying up until a couple of years ago, but there wan't much consumption. Prices weren't being held down artificially. If prices had been artificially low, then we would have seen jewelry and electronic manufacturers complaining about shortages. There were no such shortages. Physical gold was easy to get at spot prices as long as the seller was given enough time to make a delivery. In the few cases where speculators decided to take a physically deliver, the sellers were forced to take extra time to make the delivery - but the delivery was most certainly made.
"" GORO is a must-have at these rock-bottom prices. ""
GORO isn't at rock bottom. It's still overvalued. There's no way a $188 million valuation is justified for this company. A wildly overvalued stock isn't cheap just because it significantly declines.
"" I will admit I did not do much due diligence when I opened my initial position ""
We tried to warn you about this, but you refused to listen.
"" it was obvious the bear case revolved around personal attacks and accusations of impropriety without much to back it up ""
Are you delusional? The bear case had everything to do with highlighting the fact that the company misled the market about serious issues that had nothing at all to do with commodity prices. They misled the market about production, grade, cash flow, listings, form of dividend payments, etc.
"" The price of gold and silver will drive production increases as their deposits become more economical and higher profits allow for greater investments and explorations. ""
So, you agree that they can't achieve higher production numbers without greater investment and exploration. What makes you think that the cash spent on these items will allow them to generate scaled returns?
This company is still overvalued. You shouldn't be accumulating at these prices even if you believe that silver prices will rebound someday. There are much better bets to make on silver (and certainly gold) than GORO.
Hope isn't an investment strategy.
"" So I continued building a position, and I still see no reason to stop accumulating ""
In a way, I'm happy to hear that you never stopped accumulating. You've been fairly warned from the beginning, so I don't have any sympathy for you.
kylekidd, what makes you think it will be multiples higher in 5 years? What do you think is going to happen in order to cause that? Do you think they will increase production at their current mine, or are you expecting a huge rise in silver prices? If it's a production increase, then what do you think is going to drive the increase? Do you think they're going to build a new mine on a prolific area, or do you think the grades in their current mine are going to reverse their current trend by suddenly improving?
Didn't keepshorting predict a $15 silver price (and a catastrophic scenario of $9)? I think I remember Amedaus making fun of him for these predictions over and over and over again.