Best of the Week
Most Popular
1.SNP Offers Labour Deadly Death Embrace Alliance, Holding England to Ransom, Destroy UK From Within - Nadeem_Walayat
2.Gold And Silver – Most Widely Used Currency In Western World? Stupidity - Michael_Noonan
3.Election Forecast 2015 - Coalition Economic Recovery vs Labour Collapse - Nadeem_Walayat
4.Election Forecast 2015 - Debates Boost Labour Into Opinion Polls Seats Lead - Nadeem_Walayat
5.Why are Interest Rates So Low? Ben Bernanke, Confused as Ever, Starts His Own Blog to Prove It - Mike_Shedlock
6.Leaders Debate Election 2015 - Natalie Bennett Green Party Convincing Anti-Austerity More Debt Argument - Nadeem_Walayat
7.Labour Economic Collapse vs Coalition Recovery - UK Election Forecast 2015 - Video - Nadeem_Walayat
8.China’s Stock Market Mania; How High can Red-chips Fly? - Gary_Dorsch
9.Gold and Misery, Strange Bedfellows - 31st Mar 15 - Dan_Norcini
10.Ed Miliband Debate Election 2015 Analysis - Labour Spending, Debt and Economic Collapse - Nadeem_Walayat
Last 5 days
An Easy Way to Profit From the Two Biggest Trends in the Stock Market - 19th Apr 15
No Scripture Is Divine, Authentic and Beyond the Creation of the Human Brain - 19th Apr 15
Inflation, Central Banks, and Business Cycles - 18th Apr 15
Stock Market Correction May be Nearing End - 18th Apr 15
UK Housing Crisis, Immigration, Population Growth, Election Forecast 2015 - Video - 18th Apr 15
Q1 Corporate Earnings Risky for Stocks - 17th Apr 15
US Stock Market Getting Scarier by the Day - 17th Apr 15
Stock Market Watershed Day - 17th Apr 15
Gold Price Has “Hallmarks Of Market That Is Bottoming” - 17th Apr 15
Chinese Stock Market - Men Go Mad in Herds - 17th Apr 15
Two Stocks Offering Investors High Yields and Profits - 17th Apr 15
Gold Price Has “Hallmarks Of Market That Is Bottoming” - 17th Apr 15
Chinese Stock Market - Men Go Mad in Herds - 17th Apr 15
Two Stocks Offering Investors High Yields and Profits - 17th Apr 15
King Dollar Hurting Stock Market Corporate Earnings! - 17th Apr 15
Production Declines Hide Bigger Crude Oil Storage Issues - 17th Apr 15
Top Three Takeaways From Today’s OPEC Crude Oil Report… and How You Can Profit - 17th Apr 15
How to Profit from Australia's Healthiest Biotech Stocks - 17th Apr 15
What Is Really Driving Gold Price? - 17th Apr 15
Will Ever More Boomers Selling Retirement Assets Change Investment Prices For Decades? - 16th Apr 15
Won't Be Contagion with 'Grexit' Greece Euro-zone Exit - 16th Apr 15
Sharp Decline in USD/CAD and Its Consequences - 16th Apr 15
Blackstone is like Apple, Google, Hermes, Boeing - 16th Apr 15
The Most Dangerous Financial Headline I've Seen Since the 2008 Crisis - 16th Apr 15
Is Legal Tax Avoidance Extinct in the UK? - 16th Apr 15
Why Russia Will Send More Troops to Central Asia - 16th Apr 15
More Thoughts on the Current Crude Oil Market - 16th Apr 15
U.S. Treasury Secretary Warns Greek Exit Will Cause Enormous Disruption and Hardship - 16th Apr 15
The Hottest New Place to Find Stock Dividend Income in Q2/2015 - 15th Apr 15
How to Escape the Pensions Squeeze - 15th Apr 15
Water Crisis Game Changing Water Revolution - 15th Apr 15
The Drying of California - Corporate Farms Control of Water - 15th Apr 15
OPEC Going Broke, Dumping U.S. Dollars. Is That Good Or Bad? - 15th Apr 15
OPEC Just Confirmed It’s Losing the Oil War - 15th Apr 15
Four Uranium Companies Poised to Profit from the Growth of Nuclear Power - 15th Apr 15
Stock Investing Tread Softly… and Carry a Big Risk-Management Calculator - 15th Apr 15
Crude Oil Price Technical Outlook - 15th Apr 15
Important Bitcoin Price Action - 15th Apr 15
UK House Prices, Immigration, Population Growth and Election Forecast 2015 - 15th Apr 15
Peter Schiff on U.S. Dollars, Drachmas and Debt - Video - 14th Apr 15
The Ultimate Middle East Dilemma: Time For Us To Stop Intervening? - 14th Apr 15
Greece Debt Default and Drachma By End of April? - 14th Apr 15
Coming to Terms With the American Empire - 14th Apr 15
The Ball is in the Stock Market Bulls Court - 14th Apr 15
Tech Stocks Bubble: Different this time? - 14th Apr 15
Stock Market Sixth Sense - 14th Apr 15
Separating Gold and Silver Stocks Saints from the Sinners - 14th Apr 15
Conservatives Bribe Labour Voters by Extending Right to Buy to Housing Association Tenants - 14th Apr 15
Stacking Silver = Simple Solution - 13th Apr 15
Why Markets Ignored Weaker Payrolls - 13th Apr 15
Tory Attack on Ed Milliband Backfires as Labour Takes Opinion Polls Lead - 13th Apr 15
A "Digitalized" Stock Profit Play Mr. Spock Would Love - 13th Apr 15
New Credit Crunch Underway: Can Recession Be Far Behind? - 13th Apr 15
Western Interest in Gold Continues to Decline - 13th Apr 15
Stock Markets Breaking Out Worldwide - Buy the Dips Ride the Trend - 13th Apr 15
Silver Price set up to get Whacked Again - 13th Apr 15
Gold Price Dome Cap, Fall Below $1000 Likely - 13th Apr 15
Stock Market Accumulation or Distribution - 13th Apr 15
BLS Economic Propaganda, Truth – The Cure for Cognitive Dissonance - 12th Apr 15
A Case for Monetary Independence - 12th Apr 15
Drought and the Failure of Big Government in California - 12th Apr 15
Stocks Bull Market Continues - 11th Apr 15
Why the American Consumer Will Never Be Back - 11th Apr 15
End Of Islam, Hinduism And Christianity And Rise Of The Age Of Humanism, Spirituality And The Universal God - Sanadhana Dharma - 11th Apr 15
Gold And Silver Nothing Of Substance Going On. Fiat “Dollar” Controlling? - 11th Apr 15
The Most Dangerous Financial Headline I’ve Seen Since 2008 - 11th Apr 15
Alibaba Pggybank Investment Will Make You a Millionaire - 11th Apr 15
Ghosts In The Machine - Population Growth vs Food Production - 11th Apr 15
Gold-Futures Short Covering Rally - 11th Apr 15
Is Bitcoin Price Going down Some More? - 11th Apr 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Historic Bubble

The Acquisition of Gold Mining Stocks is a Question of Timing

Commodities / Gold & Silver Stocks May 02, 2012 - 07:36 AM GMT

By: Bob_Kirtley

Commodities

Best Financial Markets Analysis ArticleIn an attempt to maximize the profits on our investments we consider that the timing of any purchase of precious metals mining stocks to be of paramount importance. To that end we have not increased our exposure to this sector since our last purchase, which was in February 2011 and on reflection we are pleased with our decision to keep our powder dry until the opportunity presents itself whereby we bag a jolly good bargain.




One of the hardest things to do as an investor is to sit on your hands when it appears that everyone around you is actively engaged on the acquisition trail as they add the latest 'hot stock' to their portfolio. The mantra of buy the juniors, buy the mid caps, buy the large caps, has been trumpeted loud and clear over the last year or so, with the result that many investors have indeed caught the following knife. There are exceptions to the rule and those who are exceptional stock pickers may have secured profitable trades, however, as the HUI, the Gold Bugs Index clearly indicates, its been a poorly performing market sector for the last eighteen months or so.

There are however, many positive observations that can be identified in this sector, such the increases in earnings, the much lower P/E ratios, the cash piles that are starting to mount in the miners coffers, etc. The lower stock prices are too much to resist for some investors as what is on offer represents a bargain when compared to the situation in years gone by. But that comparison does not mean that it is bargain today, it only means that we have a cheaper entry point. In discussions with our various colleagues across the globe, we are given sound and valid reasons for buying gold, which we wholeheartedly agree with. However, those reasons do not automatically apply to gold stocks. They are two very different investment vehicles, the latter being subject to a multitude of downside risks, for which there needs to be a premium in terms of returns, in order to make them attractive to us as investors. Of late the stocks have failed to keep up let alone offer any sort of leverage to gold prices and so, rightly and wrongly we remained patient and were not tempted to buy.

Now, the time to buy could well be coming closer but we would ask you to bear in mind that the advent of the ETF's has rendered trading in gold easy and simple to do. At the click of a button you can be in and out of trade in the same day if you so require. An ETF has its own inherent risks, however it does remove the risk of political uncertainty, poorly managed companies, construction delays, rising labour costs, rising energy costs, etc, that are prevalent in the mining industry.

Another consideration is the possibility of a banking crises, similar to that of 2008. We are all aware of the massive amount of money creation that was required to provide liquidity for what were effectively bankrupt enterprises, towns, states and countries. Well not a lot has changed on that front other than we gained some time in order to try and re-group and we all know that isn’t going too well at the moment. The point being is that should we get a major default, a too big to bail default, then the financial markets will experience the 'mother of all' sell offs as everyone and his dog scramble to liquidate their positions. If such a catastrophe comes our way do you think that gold mining stocks will be spared, not a snow ball in hells chance of that happening. So, with our arms tightly folded we continue to refuse to be drawn into the 'buy now while stocks last' environment and we will wait as patiently as we can for a major correction to deliver rock bottom buying prices for us to take advantage of.

As many of our peers are recommending an accumulate now strategy we would ask that you read as widely as possible in order to gain as much knowledge as you can about this tiny and rather volatile sector. As you can appreciate it is difficult for us to take this contrarious stand at the moment, but it is our hard earned cash that is on the line and so we must trade according to our own research and beliefs.

For the record we do continue to hold onto our core position of mining stocks, our physical gold and our previous premise that the use of options offers leverage were mining does not, is paying off handsomely.

As a retail investor you are unique, its your money and your call to make and so we wish you every success in the implementation of your investment strategy.

Finally a quick look at the chart of the HUI which is not a pretty sight, as we can see the 50dma has crossed over the 200dma in a downward direction, sometimes known as the cross of death and on this occasion has proved to be bad news for the gold mining sector. The overall trading range had stood between the '500' level and the '600' level, but unfortunately this appears to have failed as the HUI closed below 450 yesterday. The formation of a double top has also been a negative for the HUI as it has trended lower with short rallies failing to gain any traction.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. Winners of the GoldDrivers Stock Picking Competition 200

DISCLAIMER : Gold Prices makes no guarantee or warranty on the accuracy or completeness of the data provided on this site. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This website represents our views and nothing more than that. Always consult your registered advisor to assist you with your investments. We accept no liability for any loss arising from the use of the data contained on this website. We may or may not hold a position in these securities at any given time and reserve the right to buy and sell as we think fit.

Bob Kirtley Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014