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Gold Stocks Are Turning Up

Commodities / Gold & Silver Stocks Apr 13, 2012 - 12:41 PM GMT

By: Michael_Swanson

Commodities Best Financial Markets Analysis ArticleSomething funny is happening in the mining stock world.  Gold and gold stocks have been in a correction since last September and it has gone on for so long that many people are giving up on them just as it appears that this correction may be coming to an end.

Just a few days ago the well respected commentator Dennis Gartman declared on CNBC that the gold bear market that began ten years ago is over.  His reasoning - the recent FOMC minutes release proves that “the game has changed.”


He is not the only one negative on gold.  Jonathan Hoenig, who appears on FOX News as the "capitalist pig" also warned yesterday that gold would continue to fall and punish gold bugs.

But in reality this looks to me the time to be buying mining stocks and I just put my money where my mouth is by buying back into a big basket of gold stocks Wednesday morning. 

And yesterday gold stocks did indeed turn up off of their recent lows.

On a short-term basis yesterday's move came after gold stocks became oversold on a daily chart and most of them time when they get in this position and move like this they at least rally for a few days, but I think this rally is going to end up being an important bottom, which would make buying now a great investment.

I it is the long-term chart that makes me think this.

Over the past ten years there have been five times in which the HUI and XAU gold stock indices have fallen below their long-term 200-day Bollinger Bands.  Each of these drops have made for fantastic buy points in the gold secular bull market.

Unless Dennis Gartman and the other bears are right then this moment in time will also mark another wonderful buy point in gold stocks - the kind that only comes around a couple of years.

Now if you are familiar with my writings and my book Strategic Stock Trading this may look to be a different way of buying stocks than I normally advocate, because I often talk about buying stocks at the end of a big consolidation phase and before a big bull run starts when the long-term 200-day Bollinger Bands get very narrow.

This is a good way to time a new bull run. 

But you can also use these long-term bands as major buy points when a market falls below them to accumulate positions.  That is what I'm advocating to do with mining shares now and am still doing myself. 

To get future updates from me about the price of gold and actionable investment ideas subscribe to my free newsletter at

http://www.wallstreetwindow.com/newslettersubscribeforfree.htm

By Michael Swanson

WallStreetWindow.com

Mike Swanson is the founder and chief editor of WallStreetWindow. He began investing and trading in 1997 and achieved a return in excess of 800% from 1997 to 2001. In 2002 he won second place in the 2002 Robbins Trading Contest and ran a hedge fund from 2003 to 2006 that generated a return of over 78% for its investors during that time frame. In 2005 out of 3,621 hedge funds tracked by HedgeFund.Net only 35 other funds had a better return that year. Mike holds a Masters Degree in history from the University of Virginia and has a knowledge of the history and political economy of the United States and the world financial markets. Besides writing about financial matters he is also working on a history of the state of Virginia. To subscribe to his free stock market newsletter click here .

Copyright © 2012 Michael Swanson - All Rights Reserved.

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