Short term caution advised on metals and miners; DRD update.

In this post I started covering DRD, a South African gold miner.  I didn't give all the details of why I like it, only the chart with some break out trends.  In fact, the chart is mainly what matters to me because stocks that don't pay dividends are worthless IMO.  This is why I like DRD. Their goal is to pay dividends.  Problem is, their operations were not as efficient in terms of gold extraction as they would like and, of course, the gold price has been on a decline for the last ~18 months despite record money printing around the world.  I just think gold got ahead of itself I and was clear in my views about it at that time.   But long term, forget it.  Gold is money and nothing else is.  I won't have anything in my retirement account except gold and silver coins.  They will always have their buying power and that is all money is supposed to do.  Any attempt to make money from money without doing any productive economic work is gambling.  All of the effort I put in to charts, research and blogging is NOT productive economic work.  It is my entertainment.  It is gambling and I do it with small money.  My retirement is secure in my physical bullion holdings and that will be true even if gold goes back down to $800 and silver goes back down to $5 because in that case gasoline will have deflated to $1.50 along with milk and bread.

Again, I digress.  While I DO like DRD longer term, I have been on record several times in these pages warning of one more move down for metals and miners.  The small guys like TRX and DRD will get hurt the worst in terms of share prices.  DRD is currently going for about $4 per share and the sideways movement of late looks like a 4th wave/reverse flag to me.  A break below the blue line suggests a short term trip down to $1-$2.  Say $1.50.  That is where it would have done a 5th wave throw under on the large multiyear ending diagonal.  If we also see a large volume spike in miners and metals going into that, ALL THE BETTER.  Capitulation selling screams at me BUY BUY BUY.  And if you are able to collect some of these shares at $1.50 then I think you are looking at a 10-20 bagger in the next 10 years.  $5000 on this bet could return $100k.  Yes, I'm serious.  All you have to do is look at the longer term chart.  This used to trade at $60 folks.

Trigger:

• If the shares break below the blue line, hang back and wait for the 5th of 5th to play out.  It cannot be longer than the existing small 3rd wave that has already finished because the first was longer than the 3rd.  So the 5th cannot also be longer than the 3rd because the 3rd cannot be the shortest.  So that puts an invisible floor under the shares.
• If the shares break back above $4.44 (there's that number again), then the bearish count is off and the bottom is likely in.

I am hoping for a trip down to $1.50.  I will be waiting there like a crocodile in the river, waiting for the herd to make that crossing.

By the way, I just read the transcript from DRD's recent quarterly results and it looks like they have finished putting in their new state of the art mill.  The goal is to grind the ore up into very fine particles (something like 30 microns) so that all of the gold is exposed.  This is supposed to have a significant positive impact on the amount of gold recovered per tonne of ore processed.  This has been an expensive capital investment and because of the falling gold price the market has been in a wait an see mode on these shares.  Their goal is to pay out 30% of profits as a dividend.  When DRD starts paying dividends again, the market will flock to these shares because they will again have real value.

All it will take is one more good swoon for the metals and DRD will enter the river...