Peter J. Cooper’s Weblog

The doyenne of gold traders Jim Sinclair has hinted on his website that there is a big consolidator at work among the junior gold exploration companies. He seems to know a lot more than he is letting on, so let us speculate at little.

The gold price ratio to the share prices of junior stocks is its lowest in history, pointing to historic undervaluation levels in this sector. This is clearly an anomaly, and you have to ask why has it arisen? These things do not happen by themselves in markets.

One rationale would suggest that organized shorting of junior stocks has driven prices to amazing lows at a time when the gold price is above its previous record set in 1980.

Having created the ‘bargain basement’ in juniors a ‘consolidator’ can now snap up the shares at very low prices, and benefit from a very rapid re-pricing to a level more in line with the record gold price.

Knowing the oligopoly and manipulation that goes on in tightly held commodity markets – not least directed by the central banks for reasons of public policy – it is surely not beyond the bounds of reason to think the juniors are the victim of another conspiracy.

One thing is perfectly certain buying at such historic lows in a bull market is not an opportunity that comes along very often. And if this ‘consolidator’ has almost done with its work then the time to stock up on junior exploration stocks is now.

There are long lists of them available on specialist research sites such as www.golddrivers.com or gold bug news sites like www.goldseek.com. My own view is that with a very little patience things are going to get very hot in this precious metals sub-sector before long.

If you buy at these levels before the ‘consolidator’ shows its hand then there are some fantastic share prices gains to be made. This will be back to dot-com land where the early buyers made 1000% plus.