Investors in mining equities are finally being rewarded for their patience and fortitude. The Gold Miners (GDX) ETF is making a challenge to all time highs at the $64 area after basing for close to a year between the $52.50 low and $64 high. What is the cause of this impressive move in gold, silver and the miners?
The unemployment numbers continue to show that the economy has produced not that many jobs. The Fed will be forced to implement accommodative measures through the reinstitution of quantitative easing. Investors are now factoring in a QE3 by whatever guise necessary.
The unemployment rate is already high. Elections are looming. The politicians in Washington will do whatever they must if they want to have a chance at being reelected. Bernanke in his statements assured us that he has a number of arrows in his quiver.
Another Ben with the name Franklin famously wrote, “The only thing that is certain is death and taxes.” Bringing this aphorism up to date one could add economic stimulation and inflation to his observation.
Gold Stock Trades continually annunciates the mission statement of our service. Stocks are very carefully selected as candidates that may experience major gains which far exceed the negative interest rates given by your friendly neighborhood bank. The miners (GDX) have vindicated our motus operandi. They are on the move...upward and onward! Excelsior!
Wealth in the earth assets are similar in ways to other crops.
As Solomon advised, “There is a time to sow and there is a time to reap.” Recent developments may serve as our vindication. Despite the cavils of the naysayers in early October who recommended cash and treasuries GST repeatedly counseled, “Stay the course and hold fast to the wheel in precious metals and natural resources!” In fact on 9-27-11 our gold timing indicator went from a hold to an aggressive buy.
When gold and silver declined, we bought and advised patience and fortitude despite the large presence of naysayers calling for a major deflation bringing down precious metals and commodities. We are well aware that the natural resource arena that we have entered is capable both of astonishing rewards and gut wrenching descents. One must take the opportunity to fight the herd at those extreme levels of emotion.
Many investors misconstrue the very nature of The Bourses. The casino must do whatever it can to send most people home as losers. There can only be a minority of winners in order for The House to make a profit.
Stocks in general are not the get rich quick game. It is instead the age old story of the transfer of wealth from the guys who take the bus home to those that go home in limousines. The ascent upwards is more often gradual than meteoric.
Along the way in the upward progress of our precious metal selections there will be times as Winston Churchill often stated, “...this is one of those days of the Black Dog.” It is important for our readers to understand the game.
Markets will do whatever they must to shake the weak leaves off the strong tree. Jesse Livermore wrote, “Throughout all my years of investing I've found that the big money was never made in the buying or the selling. The big money was made in the waiting.” Ergo we select, then wait for the fruits to grow in time.
Many of the “experts” came on the table to sell their precious metals and mining stocks so they can enter the so called safe havens of treasuries and cash in late September, early October. We stated firmly that it was sowing time, not selling time. The weak summer-autumn season was rapidly coming to a conclusion and the fourth quarter has generally been very strong for the industrial commodities we follow such as copper, molybdenum, rare earths, lithium and uranium as well as precious metals such as gold and silver. Additional monetary easing should act as a catalyst for these sectors as well as increasing tensions in the Middle East especially Iran. The fourth quarter comeback in gold, silver and the miners to close September’s downside gaps has been a surprise to many.
In late April and September, mining stocks attempted to break into new highs on low volume and failed. Mining equities and natural resource stocks began their consolidations breaking long term trendlines and moving into a major area of support at $52.50 a key line in the sand. Precious metal investors ran to the underlying bullion and long term treasuries as a means of a safe haven and aversion to any market risk.
We believes capital will begin flowing back in from treasuries and cash into first precious metal miners and critical wealth in the earth assets as economic stimulus is reintroduced into the market. As Omar Khayyam wrote centuries ago, “Come, grow along with me, the best is yet to be.” Look for temporary pullbacks and sell offs as opportunities in the long upward ascent of precious metals. Stay tuned to my free service for flash bulletins.
Check out this recent interview below with Peter Dougherty, President & CEO of Argonaut Gold(AR.TO), one of the few gold miners significantly outperforming their peers in 2011 and hitting new 52 week highs. It should be noted that the current management team at Argonaut previously served at Meridian Gold which was sold to Yamana for $3.5 billion dollars.