Jordan sees plenty of signs that sentiment for gold has reached an extremely bearish level which typically comes at key bottoms. He also explained how he thinks gold and gold stocks will play out over the next few months.
Gold Investing and Gold Stocks News
In this podcast Dave and I talked about gold and gold stocks and their current action. Gold stocks have fallen so much that now Newmont is paying a 4% dividend!
Frank Holmes, the CEO of US Global Investors presents his outlook for 2013 at Cambridge House International's Vancouver Resource Investment Conference held in January 2013.
40 Minute interview with famed investor Jim Rogers.
The right gold stocks have the potential to go up even more than the price of gold does over the next few years.
I want to talk to you about using gold to build real wealth. Very few people end up rich and wealthy when they retire. That's because most people make two really big blunders that they never recover from. For you that means if you want to build real wealth you have to what most people don't do. You gotta be a bit of a contrarian and go against the masses.
Gold on the other hand made a major secular bear market bottom in 2001. Since that bottom it has gone up year after to new highs with three short-term one year plus pauses. After each pause gold took off like a rocket.
There are literally hundreds of them out there and you only need to use the best one. I decided that I wanted to do more than use one to buy bullion for myself, but to find one that I could build a real business relationship with too.
Today after weeks of falling gold stocks finally rallied strongly as the HUI gold stock index went up 3.95%. Ironically last week marked the biggest one week outflow of money out of gold and commodity funds ever recorded.
The price of gold has been kept down by hedge fund redemptions. These redemptions will end in a week and after that a nasty hand that has been holding the price of gold down will be lifted. As we begin this new year news is starting to trickle out demonstrating that hedge funds as a whole have had a horrid performance last year.
According to incoming data nine out of ten hedge funds failed to beat the S&P 500 last year. According to a recent report by Goldman Sachs their average return was 8% while the S&P 500 posted a 13% gain for 2012.
One of the stocks I own, SCCO, recently announced that it is going to pay a dividend of $2.75 to shareholders on record on November 7th. Of course the stock has gone up on this news and the dividend is so large that it gives the company an annual dividend rate of 28.9%. Incredible.
The company is one of the largest copper produces in the world with operations in Mexico, Peru, and Chile.
Yesterday the DOW went up about 100 points in the morning and then closed down 20 points. The S&P 500 and Nasdaq also went up in the morning and then dumped in the afternoon. The markets have been in a corrective phase for the past few weeks and action like yesterday suggests that they have not bottomed yet.
My guess is that we will see an end to this correction after a little more selling in the US markets. The bottom may come next week on a bad earnings release that causes a gap down.
Every day I get at least a half dozen emails from people asking me if I am worried about stocks. Usually they send me an article that has a reason to think a new bear market is coming. The reason might be that psychology is bullish, the market has gone up a lot so it has to drop, the economy will never recover, Elliot Wave nonsense says everything will fall, or we are in deflation. What is going on is that the person sending the email is usually simply worried and wants some reassurance.
So if you are worried all I got to say is STOP BEING SO SCARED!!!!
There are seasonal patterns to most commodities and that includes gold. You can see gold's historic seasonal pattern for the last 30 years in this chart. Now last year was different, because gold peaked around this time of year and then went into a mini-bear market consolidation phase. But in most years it has a tendency to have its best months overall from August till spring.
Take a look at this chart of gold. You can see that it broke its downtrend resistance line going back a year now just the other week. It popped up and now appears to making a normal pause, that probably will end sometime in September. It could end any moment, but usually a chart like this leads to a pause for 3-4 weeks. There is really powerful support in the 1610-1640 area, of its 150-day moving average, but I doubt it would even fall that much. More likely gold will simply trade in a 1650-1670 range and then just breakout of it.
According to recent press reports George Soros's fund management company has doubled its position in the GLD gold stock ETF to 884,000 shares and Paulson & Co. has increased its holdings by 26% to 21.8 million shares.
All of this happened in the second quarter of this year and is known to us because of filings the two had to make with the Securities and Exchange Commission.
I realize many gold stock investors are very disappointed and depressed about the action in the gold market. We have seen gold in a consolidation pattern of about $1520 to $1900 an ounce . However, the gold stocks have acted much worse. The Amex Gold Bugs Index, an index of unhedged gold stocks, has dropped from 638 to 392. This is a drop of over 40 percent and represents the second worst gold stock decline of the past 10 years. Only the 2008 crash, which saw the HUI lose over 70 percent of its value, was worse.
I just interviewed Jordan Roy-Byrne who runs the website www.thedailygold.com. They call Jordan the Trendsman.
I am long-term bullish on gold, because gold is in a secular bull market, but it's been in a correction since last Fall. In April I tried to take a position in gold stocks but got stopped out. Despite that I'm still watching gold closely and plan to get in at some point so I wanted to get Jordan's take on what is happening in the gold market.
Gold stocks are still lagging the broad market and the metal for now. We saw a nice bounce in the stock market last month that probably will continue for a few weeks at least. Gold stocks bounced too. At first they bounced hard in May, probably due to the fact that they simply had fallen so bad over the past year that they had gotten themselves to a super lower valuation with many of the major gold miners trading with PEG ratios below .50.
"Gold stocks are now as cheap as they’ve been for their entire decade-plus secular bull. This unloved and forgotten sector has seen its stock prices beaten so low that it is now a value play today, something literally unheard of in the gold-stock world."
“Over the past few weeks as the gold market advanced, the gold equities – that is, large cap gold miners – performed better than bullion,” he explains. “I watch that sort of thing to see how efficient and how well entrenched the gold rally is.”
Barrick Gold Corporation (NYSE:ABX) reversed a two-month slide last week, closing at $40.66, a 1% gain for the week. Last week’s stock performance was a much-welcomed improvement after the stock has been falling from $49.46 since late February. The stock is currently down 10% for the year. The gold producer will be announcing its first-quarter results on before the market open on 2 May.
Last Friday, Yamana Gold Inc. (NYSE:AUY) closed at $14.79, marking a 5.7% gain for the week. The gold producer, which will be announcing its first-quarter results after the market close on 1 May, has been on the rise again since bottoming out in mid-April at $10.30. While the stock is currently up 1.1% for the year, it is still far from the $17.97 achieved in late February. According to Thomson Reuters, the average price target for Yamana Gold Inc. is currently $20.91. How Yamana Gold Inc. will perform largely depends on how it copes with the strong headwinds in the industry.
I did this podcast with Dave Skarica of addictedtoprofits.net.
In it we talked about the current action in gold stocks and how so many people seemed to be too scared to buy them right now. Gold is down today and the GDX is up almost a percent as I write this. I got one stock up 3% today and almost all of the mining stocks I have recently bought are paying 2% plus dividends.
This is the time to buy but it seems no one can muster the courage to do it.
Something 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 bull market that began ten years ago is over. His reasoning - the recent FOMC minutes release proves that “the game has changed.”