Before I turn to the title topic, I wanted to mention that one our portfolio holdings, Chaparral Gold, is being acquired for $66 million in an all cash deal. The price represents about a 20% premium to yesterday’s closing price. Chaparral is a Nevada-based junior exploration company which potentially has several million ozs of gold. I bring this up because one of my research report ideas is actually up 12% since this latest attack on gold started in mid-July and since the time I posted the report at the end of August. I plan on redeploying some of gains from Chaparral into more of this stock today. The stock is getting hit today in this general equities melt-down and I think it’s a great time to start, or add to, a position. You can access the report by clicking on Mining Stock Reports or on this logo:
My friend, colleague and technical analyst extraordinaire Nick of DenaliGuide’s Summitdrew my attention to an incredible correlation between the credit rating downgrade of the U.S. Government’s Treasury debt and the renewed war on gold. He actually sourced the idea from the Wealth Watchman blog and I find it to be an extraordinary insight.
The Egan-Jones ratings agency, which I have found to always have been the most authentic and credible – and the only one that has not sold out to Wall Street –downgraded the U.S. from AAA to AA+ on July 18, 2011. The price of gold was roughly $1570 and it abruptly ran up close to $100 by August 6, 2011, which is when S&Pdowngraded the U.S. from AAA to AA+. Moody’s, of course being owned by Warren Buffet and who is of one the Government’s puppeteers and infinitely unethical and corrupt, has never downgraded the U.S. debt rating. After the S&P downgrade, gold quickly spiked up and over $1900 and the fate of the U.S. dollar was in question. This graph below shows the time sequence of events (click to enlarge):
In less than 3 weeks after the S&P downgrade, after gold’s initial spike to $1900, the Government’s renewed war on gold began. The reason for this is that, in the face of trillions being printed by the Fed and trillion dollar deficits being incurred by the Government, gold was about to take out $2,000. This was a milestone that would have likely triggered a flood of capital into both physical gold in this country and into the futures. A move like this would have destroyed the credibility of the U.S. dollar as the world’s reserve currency. It further would reflect the actual truth regarding the collapsing economic/financial condition of the United States.