Baltimore — (TFN): It’s not an award I would want. First Putin, then Obama, now Bernanke. Big Ben is not joining the best of company with his “Person of the year” award. If history is an indication, the Fed boss’ approval rating will be significantly lower in the next twelve months.

As if being the master of the secret domain known as the Federal Reserve isn’t a hard enough job to handle, Time goes and slaps Bernanke on the cover and tells us the award is due not because of where Bernanke got us today, but because of where we have not ventured.

In other words, it’s like giving out a Nobel Prize to a guy with big plans for humanity, never mind the fact the goal of world peace is further away than ever before and Iran proved today it is just a step away from nuking Israel.

I am not sure what Time’s policy is on awarding this title posthumously, but it may be something worth investigating. After all, the true ramifications of letting one, unelected politically motivated man in charge of a great nation’s monetary future isn’t a near-sighted event. It could be a while to we learn Bernanke’s true merit.

Who knows, this time next year, China’s president, Hu Jintao, could be gracing the glossy’s cover as we hail his decision to extend our debt obligations for just a couple more years while we get things back on track.

I am not saying Bernanke didn’t do a decent job. I’m saying we should wait before sending him any praise. Last I checked, one out of every ten of my fellow Americans was in the unemployment line and currency risk is rising across the globe.

But that can’t have anything to do with free money flowing from the Fed, can it?

*** By now, you’ve got to know my thoughts on gold… sell the stuff. I was all about the precious metal this time last year, but that was a different situation and time. Now, you can’t turn on the radio, TV or open the newspaper without hearing some pitchman’s take on the stuff.

Remember the contrarian motto: when everybody else wants in, you want out.

For those of you that are viewers of late-night cable news parodies, I am a huge fan of Comedy Central’s Colbert Report. When trends get out of control, his dry humor has a way of bringing things back to Earth.

That’s why when Colbert talked about the sudden rush to the gold markets this week, I knew we were in trouble.

Here’s what I told TFN readers this morning:

“Finally an up day for gold. After sliding for nearly two weeks, the precious metal is moving far enough into positive territory today to bother noting it.

“Did Glen Beck up his marketing? Did Rush bring on a few more listeners? Or is this yet another example of the Colbert bump?

“Does it even matter? Nope, when gold is getting this much attention, the only thing that matters is how quickly you dump your position.

“Gold is supposed to be the safest investment around. Just as real estate investors love to say, there is only so much of the stuff. Unfortunately, we all know how well the real estate folks are doing these days.

“Back in the day when gold actually backed the nation’s debt and played an integral role in the monetary system, a horde of gold made sense. But today, when it’s only value comes from the fact we say its valuable, gold’s no different than a fiat currency.

“If the economy collapses like so many gold bugs are sure is about to happen, wouldn’t you rather have something of tangible value? Colbert is right. Sheep are the way to go. Better yet, follow the natives and take advantage of a buffalo’s ability to provide food and shelter.

“While I’m pushing the argument over the top, many investors are using similar logic in their bullish pursuit of gold. It has created a micro-bubble that is ready to burst.

“That is not good news for the investors that have piled into the junior gold miner sector.”

Keep reading to learn why.

*** I cannot believe this is not getting more press. If you think a handful of bank failures dealt a blow to your portfolio, wait until you see what happens when a few heavy-hitting governments begin to drop.

The good-old-boy network is alive and well on Wall Street. Just about every major financial firm has some vested interest in its “competition.” But it is nothing like the international scene where friendships and rivalries date back centuries and nuclear weapons are used as bargaining tools.

Less than a month ago, Dubai started the default-scare trend. Since then, we’ve heard from Greece, Austria and Spain. Earlier this week, Mexico made the list when Standard and Poor’s cut our southern neighbor’s credit rating.

This is not good news. It proves that, although the dollar looks weak, it’s stronger than its competition. In all things financial, value is relative.

Over the next few weeks, the dollar is going to strengthen, the Dow will drop and gold bugs will wonder what all the hoopla was about.

With most investors working on polishing their year-end portfolio, now is a good time to get in position to take advantage of the upcoming action. Come January 1, it’s a whole new game.

This week it was announced that their Madagascan assets are being taken over at $4 a share – for which you’ll get cash – while their other Southern African assets are being rolled into a new company, for which you’ll get a share.

If you bought, and I hope some of you did, you can treat yourself to a new frock…

Pan African’s story shows the enormous possibilities that lie in the junior mining sector, even in this bear market. But the takeover, which came from Asia Thai Mining, has wider implications, which I’ll come to in a moment. You can’t argue with a quick profit, but, given the breadth and depth of Pan African’s assets, I think Asia Thai have got themselves a bargain.

Another exciting opportunity – for the whole mining sector

Meanwhile, Jinshan (CA:JIN), another junior mining company I have been recommending (and which I own shares in myself), has had some exciting news, which also has enormous wider ramifications.

Jinshan is a Canada-listed gold producer in China. After several years of exploration and development, its mine finally went into production last summer. By the end of this year it should be producing at a rate of just over 100,000 ounces a year at a cash cost of between $350 and $400 per ounce. It’s a very nice little junior mining story, thank you very much.

Then last week it was announced that China’s largest state-owned gold mining company, the imaginatively-named China Gold, had bought a 42% position in the company.

Why have the Chinese done this? And what is the significance for Jinshan?

Firstly, it gives Jinshan access to a great deal of money – the same money, ultimately, that made the 12% purchase of Rio and now is building a stake in BP – and Jinshan will be making serious acquisitions. Previously these would have been limited by Jinshan’s $450m market cap. Not anymore. Deals can be done for cash now, meaning less dilution for shareholders, and for much larger companies than would previously have been possible.

If any such acquisition happens – and I hear they want to have made one by autumn – surely a listing in Hong Kong will be on the agenda, which will significantly raise the company’s profile.

Are the Chinese trying to create a new reserve currency?

The Chinese, on the other hand, want access to Jinshan (for that, read Canadian) mining expertise. China is the largest gold producer in the world. The country has hundreds of mines, but, astonishingly, Jinshan’s modest 100,000-150,000 ounce producer is one of the biggest.

In other words, despite being the world’s largest producer, China’s mines are underexplored and underdeveloped. Jinshan president Jay Chmelauskas reckons they could be operating at as little as 10% of their potential. Jinshan head of exploration, Keith Patterson, feels that China has as much exploration opportunity as anywhere. This is a man who not so long ago went out into Argentina with a pick and a notepad and helped make the Navidad discovery, now regarded as the biggest undeveloped silver deposit in the world.

China is a great sponge. The Chinese will hoping that they can learn from Jinshan. They will be refining, if you’ll forgive the pun, their gold mining expertise. For Jinshan it means they will gain access to many of China’s existing gold mines and no doubt acquire some of the better ones.

This is yet more evidence, if you needed it, of China’s unquenched thirst for resources. But Jinshan is a gold miner. Why would the Chinese want gold? Do the Chinese govt all want new earrings? What could possibly interest the Chinese about gold mining?

Richard Russell, the veteran US newsletter writer, observed a few weeks back that China is the largest gold producer in the world and the largest holder of dollars. As the dollar implodes, could it be, he suggested, that the Chinese have designs on global reserve currency status? If so, they will have the dollars and the gold to back it. This Jinshan deal might be further evidence of Chinese monetary aspiration.Can you imagine our glorious Labour government doing anything similar?

The good times are ahead for junior miners

The deal also has ramifications for the junior mining sector. Admittedly, the Chinese are buying a stake in a Chinese gold mine. But all the same, Jinshan is – or was – a junior. This is a first, and it could open the floodgates. Don’t forget the Asian takeover of Pan African. It’s possible that we are seeing the early stages of a wave of cash-rich Asian takovers of undervalued junior miners. The junior mining sector is coming alive, my friends – enjoy the ride.

You are not going to see the fireworks you saw with Pan African. But Jinshan is in a nice steady uptrend. It is now making the transition from junior to significant player, and I would expect to see the stock some 50% higher within 12 months, possibly more. I recommended it as a buy below $2.50 and I maintain that recommendation. If you’re impatient or you think it won’t make it back down to $2.50, you may want to start accumulating here. I’ll leave that to you. But if you believe in gold and you believe in China, you should own some Jinshan.

Source: http://www.moneyweek.com/file/45537/why-you-should-buy-this-chinese-gold-miner.html