It’s official: The bull market in gold stocks has returned
From Matt Badiali in Badiali’s Daily Resource Update:
This one time in the Yukon…
Back in 2010, I flew up into the Yukon wilderness to see a gold mining project. When you visit a remote mining project, you are at the mercy of the management team. You see what it wants you to see, and you wait when it wants you to wait.
We came in from the field early for lunch, so I had time to walk around. I wandered down by the nearby stream. I could hear a sloshing, so I followed the sound. I came around a bend and saw a guy with a five-gallon bucket and a gold pan.
He was the company’s young geologist whom I’d seen earlier doing menial tasks. Now he was panning sand for gold. And he was finding it.
He showed me the grains of gold in his pan… I was seized, instantly, by gold fever. I wanted my own pan and a pile of sand for myself.
How cool was this? He had a five-gallon bucket of sand laden with gold. I was jealous. I’d never had a job like his where I could spend all day working on a gold project, then spend my off time panning for my own gold.
That’s tremendously cool, however, I realized that far too many investors use this same approach when they invest in gold.
Investors want that “I just found gold” feeling. They are searching for the quick score… the get-rich-quick ideal. That’s why many investors gravitate toward resource stocks.
I think we’re hard-wired to enjoy this kind of thing.
I certainly like this kind of investing. I don’t mean taking huge risks for nearly impossible rewards. I mean investing with smart folks applying their expertise to create wealth… through biotech, mining, oil exploration. It’s all great.
The problem with resource investing is that it’s highly cyclical. When the trend is going against you – like it did from February 2011 to February 2014 – you had to stay away. It was tough. Many of us had “gold fever” and got back in too early… myself included.
However, we can finally get back in now. The trend is with us. We can finally indulge that “get-rich-quick” feeling.
The TSX Venture Index (TSX V), the home to more than 1,000 junior mining stocks, is now officially in a bull market. It broke above its 120-day moving average (120-DMA) in early February. This is a simple indicator of a bull market.
The last time the value of the TSX V broke out above its 120-DMA at this level was back in 2009… just before the index doubled in just over a year.
Today, we’re at the start of a new bull market in my favorite sector. The last time we saw a bull market in this group, you could have bought the index and made 200%.
If you love speculating in junior mining stocks – those companies that can tack on a zero to your investment – you are in luck…
Welcome back to the juniors. It’s time to invest.
More on gold stocks: