As the summer comes to an end, investors return to their offices and trading volumes tend to pick up after Labor Day. I expect that many are realizing the markets have considerably changed since May. Global equity markets are all off led by the price decline in the S&P500 which has broken its four year uptrend forming a technically bearish death cross. The name of the game right now is capital preservation and plunge protection. Look for rallies in equities to be short lived.
The Fed is expected to raise interest rates for the first time in many years on September 17th. However, there is growing uncertainty that will not occur especially due to the recent equity market volatility. Many other major economies such as China are announcing stimulus plans to prevent a recession. As the global stock markets rolls over on fear of a US Rate increase, it could boost the value in the beaten down precious metals and commodities as they may be seen as a safe haven to protect against a plunge and preserve capital.
Here are ten reasons why I believe precious metals, commodities and especially junior miners may be the best place to be over the next 3-5 years. The bottoming process for the juniors after a seven year decline may be ending in the next few months as they once again come back into favor for the following ten reasons.
1)Junior Miners are now even more cheaper than they were in the late nineties when gold was below $275 an ounce. This might be a once in a lifetime buying opportunity that may not last for much longer. The safest havens during periods of deleveraging are the assets already trading near liquidation levels.
2)The stock market and US treasury market is extremely overvalued and has been going straight up for more than four years boosted artificially by quantitative easing and government stimulus. The odds for a bear market have been extreme for many months. Do not be surprised of a 30-50% possible decline as the momentum traders are automatically stopped out.
3)Many of the momentum and high frequency traders left precious metals and chased stocks higher over the past few years since 2011. That trend as evidenced by the Dow-Gold Ratio may be changing. As soon as that upward trend in equities was broken we saw a massive shakeout.
4)The bear market in commodities really began during the US credit crisis and has lasted close to seven years. This is one of the longer declines in terms of length duration. Over the years there has been a drastic reduction in mineral exploration and development due to investors chasing the latest fads in social media and biotech. This could create a major shortage of mineral supplies going forward over the next decade.
5)Precious metals and commodities provide diversification to stocks and bonds. One must have a portfolio of hard asset investments but they must be chosen wisely. One must be a good stock picker and investigate the management team that it has the best interest of shareholders in mind.
6)Investors may be nervous of credit risk and want tangible assets in the form of precious metals and commodities. The prices of hard assets unlike so many equities can't disappear. Rising interest rates and a slowing economy could actually boost commodities as it did in the 1970's.
7)The majority of investors are usually wrong and for the first time that I can ever remember there is a net short position on gold. Just like a few months ago I said don't be surprised to see huge moves to the downside on US bonds and equities, I also expect huge moves on the upside for gold. It may be extreme but I feel the headlines could change from "Record Down Day for The Dow" to "Largest Percentage Daily Increase in Gold Price" as investors once again seek out safe havens.
8)Mining stocks are trading at historically discounted valuation and generational lows. This could be one of the best contrarian opportunities of a lifetime especially for younger investors who have not yet positioned their portfolios to the sector. Look at the recent moves by Soros, Icahn and Drunkenmiller to increase exposure to commodities.
9)Quantitative easing should continue across the Globe to prevent deflation. It may not be successful. The Banks can print but they can't make more commodities out of thin air.
10)The commodities relationship to stocks and financial assets is negatively correlated meaning they can go up when other assets deflate.
Top Stocks To Watch
1) Since July 21, 2015 when we featured the article on Nevada lithium developers Western Lithium (WLC.TO), Pure Energy (PE.V or HMGLF) and Dajin (DJI.V or DJIFF) more attention has come into this sector as Tesla (TSLA) CEO Elon Musk hinted to the mainstream media that Tesla is carefully looking at lithium miners in Nevada.
I have been researching and buying lithium developers in Nevada for years. Western Lithium was one of the top performers in 2014 on the entire OTCQX®, could Pure Energy and Dajin be the top performers in 2015? Remember, the markets are volatile so don't get greedy when making doubles or triples in this market to lock in partial profits to be redeployed on pullbacks.
2)Equitas Resources (EQT.V) is beginning drilling up on the Garland Property near Voisey's Bay in Labrador and has almost doubled since I first highlighted it in late July. Its closing in on a new 6 month high as investors are excited by the interest the company is generating for this drilling program. Its trading excellent volume and getting a lot of financial interest which is rare for an early stage explorer. See this latest interview with Equitas (EQT.V) CEO Kyler Hardy by clicking here...
3)Pershing Gold (PGLC) announced the completion of a NI43-101 technical report on their Relief Canyon Deposit with results through early 2015. Since May of 2015 they have been drilling with four rigs on site and are planning to complete 100 drill holes. This drilling could expand the deposit. Its important to remember that they have some significant shareholder support led by billionaire Dr. Phil Frost. Pershing recently uplisted to the NASDAQ Market. See my interview with Pershing Gold (PGLC) CEO Steve Alfers by clicking here...
4)Corvus Gold (KOR.TO or CORVF) recently announced that Resource Capital Fund (RCF) put in a $2 million CAD investment which will allow Corvus to increase exploration efforts at North Bullfrog in Nevada. RCF joins Toqueville, Anglogold and Van Eck as large shareholders. This is a huge vote of confidence on the project in a challenging market which may testify to what I have believed for a long time that Corvus is onto what could be a whole new gold district in Nevada. See my recent interview with Corvus Gold CEO Jeff Pontius by clicking here...
5)Carlisle Gold (CGJ.TO or CGJCF) has just announced that Alamos Gold (AGI) CFO Jamie Porter has joined the Board. Alamos acquired Aurico in a major deal and with it the joint venture with Carlisle. This joint venture will work towards a feasibility study on the Lynn Lake Gold Camp which may be one of the highest grade and most advanced open pit projects in Manitoba. I would not be surprised to see a takeout of Carlisle within the next 12 months. See my interview with Carlisle Gold (CGJ.TO or CGJCF) CEO Abraham Drost by clicking here...
Disclosure: I own PE.V, DJI.V, EQT.V, KOR.TO and CGJ.TO. They are all website sponsors. Please be aware of my conflict of interest as I may benefit if the price of these equities rise. Please do your own due diligence.
Sign up for my free newsletter by clicking here…
Order premium service by clicking here…
Please see my disclaimer and full list of sponsor companies by clicking here…
To send feedback or to contact me click here…
Tell your friends! Please forward this article to a friend or share the link on Facebook, Twitter or Linkedin.
For informational purposes only. This is not investment advice. May contain forward looking statements.