Large Cap Gold Stocks are up over 20% since their December lows. Does it mean that it’s too late to jump onboard? Hardly, we think a lot more upside awaits if you know where to look…
In this business the best acknowledgement you can receive is being called a good investor. Whilst it doesn’t sound like much, it insinuates a dozen herculean qualities that an investor must demonstrate in order to be ‘good’.
That would include patience, guts, a forward thinker, a risk taker, the ability to control your emotions, not to get scared into selling, not to hold too long, remembering to take profits off the table and never betting the farm on one idea, being nice to your fellow man and an all round gentleman (or woman) … ok maybe the last 2 are not needed but they do tend to come along with the package.
Take Gold Stock investing for example. Over the last 3 months Gold Stocks have oscillated between manic depressive and emerging euphoria. You would have to have been a very ‘good’ investor to withstand the test this market has thrown at you: 
Chart 1 - HUI performance over 3 months; Novagold; Golden Star; Metallica Resources (below)
When the Amex Gold Bugs Index (HUI) dropped over 15% between November and December more than a few seasoned Gold Stock investors threw in the towel.
But wait, since its December lows, the HUI has rallied over 20% and thus begs the question, is it too late to buy or in the case of those who sold at lower prices, to buy back in?
Firstly, psychology dictates that if you sold out near the December lows you would probably be looking to validate your decision by waiting for a pullback before climbing back in. The very fact that the HUI has not pulled back indicates we are definitely in a Bull Market. The Bull wants as few people climbing onboard as possible.
Secondly the fact that Gold Stocks are rallying hard whilst the rest of the market is tanking indicates that Gold Stocks are finally moving up on their fundamentals. That is, they are responding to an out of control money supply and a fearful Fed.
Thirdly, whilst the index is at new highs, the gains have mostly come from large cap miners and has yet to filter down to the smaller caps. Take 3 random miners mentioned above (we own GSS).
- Novagold – market cap $1bn - is still 41% below its level of 3 months ago
- Golden Star – market cap $945m – is near break even but still down 6% over 3 months.
- Metallica Resources – market cap $528m – is up 12% but lagging the index gain of 14.9%.
- Most exploration and junior producers are still down in the dumps.
Point is, there is definitely still time to climb onboard but the spectacular gains will most likely come from the juniors where valuations are still low.
When the first announcement of a takeover hits the junior market it will be like a match to the flame as speculation over who will be next causes rapid upward revaluations – the good investor will be buying now in anticipation of this.
More commentary and stock picks follow for subscribers…
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Greg Silberman CA(SA), CFA greg@goldandoilstocks.com I am an investor and newsletter writer specializing in Junior Mining and Energy Stocks. Please visit my website for a free trial to my newsletter. Click here: http://blog.goldandoilstocks.com
This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.
Information, charts or examples contained in this lesson are for illustration and educational purposes only. It should not be considered as advice or a recommendation to buy or sell any security or financial instrument. We do not and cannot offer investment advice. For further information please read our .
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