``The power of accurate observation is commonly called cynicism by those who have not got it.” - George Bernard Shaw
The only representative of sound money is no less than a genuine gold standard, something despised by most bankers and politicians, because they inhibit manipulation or inflation or the debasing of currencies to suit the whims of a selected few.
Figure 4: stockcharts.com: Pat in the back chart for gold?
While it may be too premature to declare triumph, the gold chart in Figure 3 appears to be a “pat-in-the-back” chart analysis as presented in my October 23 to 27th edition (see Excess Liquidity: Finding a Home in Assets Despite A Looming Slowdown) following its reverse-head and shoulder breakout, see Figure 4.
We should note that gold’s recent rise has been possibly due to the following factors: one, the end of the political season, two, banked by seasonal strength and three, a bullish technical picture.
A break above the $640 level reinforces my belief that gold will challenge its May 12th high of $730 either at the end of the year or by early next quarter. In addition, the risk presented by the potential political conflicts in the trade and financial arena as presented above has added positive sentiment to gold’s advance.
Figure 5: Silver Breaking Out in Tandem with Gold
There are those who have argued that Gold’s rise must be supported by its sibling metal to confirm both their advances (ala Dow Theory).
The recent advances in Gold have likewise buttressed a major breakout move by silver now primed to test its May high of $15.21, see Figure 5. If this Gold-Silver correlation is accurate then we could expect both metals to advance further and confirm each other’s moves.
To put you in a rightful perspective; It is also important to note that both gold and silver have been advancing even PRIOR TO the recent breakout which appears to have been aggravated and NOT CAUSED by China’s diversification chatter. Any furtherance of such diversification threats which translates to actual actions (selling) would definitely enhance the price value positions of the said precious metals’.
By and large, we have noted of the rotational activities in the Phisix. Because sentiments dictate on the subject of pricing “value”, which have been obviously on the positive end, I inferred...or presupposed in my October 16 to 20 edition, (see Lagging Mines: Not For Long I Suppose), that mines would find its way to the limelight following its lagged performance.
I guess, it could be another “pat-in-the back” if my projections hold. The Mining Index delivered their marvelous overture last week up 14.88% as its underlying precious metal products broke out of consolidation ranges to reinforce their long term trends.
Figure 6: Another Pat-in-the- back chart of Mining Doing A Catchup?
In figure 6, the lagging mines (orange) have initiated its advance with oomph (!), in the shadows of the hefty moves of its peers: Banking (red), Property (candlestick), Services (Green) and Holdings (violet).
Considering that its peers have broken mostly from their May highs to establish new highs in the present cycle, then one can deduce that the Phimin index could likewise do the same rendition. To reach its May 12th high of 6,283 translates to a gain of about 24% from the present levels. And that should be a conservative estimate if based on the similar patterns made by its contemporaries.
My outlook in the mines is as PROXY to actual precious metal holdings, since my thoughts of gold and silver are as genuine money/alternative currency, rather than simply commodity issues.
I am not in the camp of the “production=revenues=profits=higher share prices” because since I’ve been writing about the mining industry in 2003, when no one was looking, I have come to understand that the fate of the micro-themed outlook DEPENDS on the whereabouts of the MACRO based commodity cycle.
The micro theme has come about only WHEN the Mines have made a significant upside headway. In short, those espousing the micro theme will be surprised when the macro cycle turns upside down, their investments to will also reverse...since what has bolstered their bullish rationalities for the mines have been based on the rearview mirror syndrome (projecting the recent past linearly to the future).
Well for the moment, I join the ranks of the micro-theme bulls, as the cycle remains favorable for the “rejuvenated” industry.
And one last thought, it must be remembered that except for one profitable mine ALL other mines require massive financing to either rehabilitate or operate on their existing fields (brownfields) or undergo exploration to expand reserves (greenfields). This, in my view, is the principal reason WHY the Supreme Court ratified the Mining Act of 1995, to allow foreigners to provide capital and share their expertise to tap our greenfields with its multiplier economic effects to the upliftment of the country.
As such, one can EXPECT to have a spate of JOINT VENTURE and FINANCING deals, Mergers and Acquisitions, IPOs, or backdoor listing of mining issues in general because the cycle remains favorable for the mines. You do not need analysts, like me, or anyone else to tell you of these, simply because this is what to expect coming from decades long of underinvestment underpinned by a favorable cycle! You are simply witnessing a transitional shift from the past to the present cycle.
As an example, remember, during the last decade we saw mining companies being converted to either holding companies or technology companies. Today, we are seeing signs of the reverse; non-mining companies being converted into mining companies! All these are symptomatic of the growing acceptance by the investing public of the renascence of the mining industry.
However, one last very important reminder, All bull markets end in a MANIA. 
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