Gold Bubble Callers are Wrong, Again.

First off, People need to stop focusing on the PRICE of gold and start focusing on the VALUE.

Today was a great day for gold in terms of both price and value, however. Right now, the DOW is down 1 percent to 12,455 and oil is down big, 3.45 percent drop to $87.6. Gold, however, is up nearly 1 percent to $1,563.

Gold bubble callers argue that the "gold bubble" has collapsed the last few months because the PRICE has fallen from $1,900 to the current price of mid-$1500's. However, hasn't the DOW fell in price as well? Hasn't gasoline prices, the price of oil fell? We need to be looking at these figures in terms of gold and not the US dollar. That is how you find the value.

Believe it or not, the DOW:GOLD ratio is currently under 8 (7.96). When the Dow was 13,300 and gold was $1,700, the ratio was still around the same. Interesting...

Meanwhile, gold stocks have been finally showing signs of a reversal. The HUI, GDX and GDXJ have all been outperforming the metal of recent. As I've stated before, I believe that gold juniors will outperform all on the next leg up in gold. And I do think that leg up will be coming sooner rather than later.

Final point on stocks - if you go back to 2002, the HUI has outperformed the metal. Since about 2008, however, the metal has outperformed the stocks. But the HUI will outperform the metal going forward, IMO. We are starting to see that now.

There are great deals everywhere - the juniors, the explorers, the warrants, etc. It's like throwing darts.

One final word for the gold bubble callers - you were wrong in 2008, and you are wrong now.

How is gold a bubble if virtually NONE of the middle class owns it?

The housing bubble - Pizza delivery guys turned "housing experts" overnight. Zero Money down loans.

The tech bubble - Unprofitable businesses with ludicrous valuations. Everybody a speculator. Even your cab driver.

The Tulip Bulb Mania, The South Sea Bubble.... Same deal.

I just hope that people are smart enough not to listen to you.

Insider Buy Alert - Petaquilla Minerals and Magellan Minerals

Two gold junior mining stocks that I own and really like have been seeing a lot of insider buying of late.

Petaquilla Minerals have been buying back shares, while Magellan's insiders have been buying over the past 6 months.

below is the chart for Magellan minerals, with the most recent buy on May 22:

Credit: CanadianInsider.com

Here is the chart:

Source: CanadianInsider.com

And this is the chart for Petaquilla. They've been buying back a lot of shares...

Source: CanadianInsider.com

Disclosure: I am long V:MNM and V.PTQ. This is not investment advice nor am I an investment advisor. Please do your own due diligence when investing!

A Gold Stock With 10-Bagger Potential!

I recently learned of a new micro-cap gold stock that got me pretty excited. There are only a few times before when investing have I felt this sense of conviction - buying shares of Sandstorm Gold in 2010 and Endeavor Silver were two other times. I also really like the 2013 Silver Wheaton warrants as I stated in a recent video.

I frequently post at the message board of the Motley Fool website. Here's what I had to say about my new favorite gold junior, Magellan Minerals: 

Source: MagellanMinerals.com

"I'm sure you heard of the last Sandstorm deal - they cut a NSR with Magellan Minerals, on two of their projects in Brazil. Well, wouldn't you know, I did some DD on Magellan, and I am very, very intrigued!
Facts: The financing with Sandstorm Gold was for $7.5 million cash, $.5 mill in common shares (at .50 cents - the stock is currently only .20 cents).

At .20 cents, they have a market cap of about $20 million. Not considering what other cash they have in the bank (not sure to be exact but I will check), we know they have at least $7.5 million cash. Close to 40 percent of their current market cap!

*Management owns 11 percent. Both Kinross and Newmont are shareholders.

You can bet that they are going to use this cash to start getting the drills going.

Their two properties have total resource of 2.4 million ounces of gold. Brazil is a great mining jurisdiction. 

I bought yesterday at .20 cents. (I bought 10,000 shares).

The last point I'd like to make is Sandstorm's management and how they choose their deals. They only go for safe political locations, solid management teams, project upside, etc. That only gives me more confidence. 

Courtesy: Yahoo!Finance

(As you see here, shares have been beaten down pretty badly recently. However, I feel that we've either reached a bottom or are getting close. With $7.5 million in the bank and a 20 million market cap, I see little downside).

They are aiming for first production in 2015 and second mine in 2016. I of course like the potential of both of their projects. Check out the presentations on the site - http://magellanminerals.com/."

*This stock could return 1,000 percent of your money. I'm not kidding. If they can use that cash and get the drills going and update the resource at both of their projects, they could have over 4 million ounces of gold (measured, indicated and inferred). Then an updated Preliminary Economic Assessment should be in store.

*The PEA indicates a robust Internal Rate of Return ("IRR") of 34% and a Net Present Value ("NPV") of US$41M (assuming a 5% discount rate and a gold price of US$950/troy oz (oz). The project payback period is 3.7 years.*** (With gold at a more current price of $1,600, the NPV should be WAY higher - It's worth much more than the measly $41 million!).

The Coringa Deposit is a high grade deposit with roughly 560K measured and indicated and 534K inferred. If they can get constructed without too much dilution, we could see Magellan trading over $2 a share easily.

The hope is that the share price will be higher when they have to go to the market again. Since they have $7.5 mill in the bank, that won't be for a while. When they decide on constructing the mine they will most likely have to issue shares to raise capital, however, I expect the share price to be MUCH HIGHER at that point with the updated resource and drill results, and a better market (hopefully). 

My long-term (2-5 year) price target is $1-2 a share and I think we can easily get there. 

DISCLOSURE: I own shares of V.MNM. This is not investing recommendation, nor am I an investment advisor. Please do your own due diligence when investing!