Thursday, May 14, 2009

For GT Blog May 14, 2009

Hello fellow bloggers and stock market participants.

Just to be clear – I am not a gold bug – I simply believe there are times to own gold stocks and there are times to ignore them. Do you not grow weary of the talking heads on business television telling you that gold is a hedge or safety net to insure against a meltdown of our modern economy?

Too bad that theory failed, during the great financial crisis of late 2008 the gold complex also collapsed. The Gold Bugs index (the HUI) lost two thirds of its value in twelve weeks. It is best to enjoy the gold complex for what it is – an opportunity from time to time to improve your equity returns.

Gold bugs should be avoided and you should know how to spot them.

They usually drive a 25-year old Volvo (green is a favourite). They have dandruff and love Vancouver penny stocks. They can be confrontational and they frighten small children. They wear brown socks with black shoes and never tip.

Now I set my emotions aside and look at the gold complex for what it is, an asset class that seems to be in the early stages of a new intermediate cycle advance.

I see that Iamgold Corporation (IMG-T) and Red Back Mining Inc. (RBI-T) just posted new 52-week highs and peers like Alamos and Aurizon (to name a few) are just below their 52-week highs. A sign of strength and don’t ask me why - I just want to participate. We will know why latter as the advance matures

Our chart below is the relative comparison of bullion and a gold index (all US$) – note the strong relative and the new cycle bottom.


canuck2004 said...

I think it's a little early for buying gold or gold stocks... but long term a good place to be, along with Real Return Bonds.

investingonautopilot said...

I love your description of gold bugs. Anyone who takes a market position based on an opinion that cannot be shaken is biased to that opinion and will ignore all evidence to the contrary. Better to save your opinion and just try to stay ìn sync` with the market. After all, it is the market that will decide whether or not you make money. In a beauty contest, someone might think the 7th contestant is gorgeous, I might think it is the 4th one but if the judges are going to select number 9, that is where you had better have placed your bet. Brown socks or no socks.