are you ready to rumble?, page-69

"There is one reason why one should perhaps refrain from getting too bearish - and that is the sentiment backdrop accompanying this recent activity. Closed end funds holding gold and silver bullion continue to trade at either tiny premiums to NAV (net asset value) or even discounts to their NAV - a historically very rare condition as can be seen below.

In addition, the cumulative cash flow ratio of the Rydex precious metals fund continues to plunge to multi-year lows. Evidently the public has become extremely bearish on gold equities. To some extent this bearish sentiment is of course a function of prices, but should prices begin to turn up again, it suggests that there will be a large pool of currently sidelined buyers that could drive prices higher.

This does not tell us anything about the near term performance of the sector, but we would note that the profit margins of gold miners are recently rising strongly and the fundamental backdrop - negative real interest rates and a slowing economy - is very conducive to further profit margin improvements."




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