In this update...
- Premium Sample
Editorial: The Truth on Gold Stocks vs. Gold
In this article we look at the relationship between the equities and the metals. In studying the history of this relationship we are able to conclude two things. First, the large miners consistently underperform Gold and in secular bull markets! Second, if you want leverage you have to be a stock-picker and find the best companies. With regards to that point, these stocks will strongly outperform when the sector is in a cyclical bull market. There is plenty more in the editorial!
Tiho Brkan: Precious Metals at Decision Point
Numerous charts from Tiho in that post.
We concluded our editorial by commenting on the short-term:
I believe the near-term outlook is pretty good and most stocks have a chance to outperform the metals into the spring. The caveat is we need to see a final breakdown first. GDX, the HUI and my junior index above are all consolidating which could precede a breakdown and the final low. Over the past 10 sessions, GDX has been locked into a range of $41.50 to $43.00. A downside break, in your humble author’s opinion could lead to the final bottom which we wrote about last week. Continue to be patient and continue to have your favorite stocks in mind.
We noted this possibility in our 12-page premium update, #293 which also includes an updated report on a company that we think is quite overlooked. The company owns a world-class deposit which could be put into production sometime in 2015. At the moment there are no unforeseen permitting obstacles. If the metals move into breakout mode in the next twelve months then this company could see a rapid appreciation in its share price. We are currently up 23% on the position and hope to add to it as the market bottoms.
In this update we also updated our comments on our list of 7 rules for investing/speculating in this sector and we also came up with a new list of 5 rules for managing our model portfolio. I looked at the mistakes we've made and failures we've had and came up with rules that can minimize losses. One rule is to automatically sell something that becomes a 20% loss. You never want to take more than a 20% loss. You can always re-initiate the position and try again later. None of my biggest winners ever started out with a 20% loss. Part of another rule is to never increase an already losing position. You may love something at $2.00, but proper money management says you shouldn't double down if it falls to $1.50.
In addition to those 5 rules we also updated our buy targets on our list of favored stocks.
In our previous update, #292, we debunked the idea of a head and shoulders topping pattern in the HUI or GDX. The gold stocks fit NONE of the parameters for a typical H&SH topping pattern. In fact, I may send the analysis out as part of the next free update. If you want to see examples of real H&SH topping patterns than look at the US$ index from 2001-2002, The Yen from 2011-2012, the S&P 500 from 2007-2008 and homebuilder stocks from 2005-2006. All of those charts have very similar parameters while the HUI/GDX, as we said, have none.
With the market potentially putting in another important bottom in the next week or two, this is a great time to get off the fence and subscribe. We appreciate our subscribers as their support allows us to keep doing what we love to do.
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Wishing you good health and profits,
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