Bottom for the Gold stocks?……it has been already made for many of them!

I am not trying to be simplistic here, but I cannot understand why the vast majority of investors are not seeing this continuing weakness in gold as nothing less than an exceptional (and infrequent) opportunity to invest in gold mining stocks at fire sale prices. I had written an article over twenty years ago for a New York based investment newsletter in which I pointed out that about 90% of all investors seem to lose money when they invest in gold mining stocks. Why? It is the same pattern all the time; when Gold mining stocks are selling at or near multi-year price lows, the investing public does not participate by accumulating the shares of the beaten down stocks. Yet, when the stocks are rallying up and too often making tops, the public rushes in. That story never changes.

Too many investors commit the ultimate sin-they wait for the major brokerage houses to guide them in at the right time. That will never happen, brokerages are totally incapable of offering accurate and timely advice for gold mining stocks.

Many mining shares that represent real asset values have declined by 70% to 90% or more since 2011. Yet, some of the mining stocks have already made their price bottoms and are up 50% and more. Today, some advisors are telling clients to wait for that final decline which will be the buying opportunity of the century. We disagree with that approach, to assume that investors in any size will be able to be right there as buyers at the price bottoms of many stocks and load up with the shares at the “fire sale” prices is imprudent.

TAKE NOTE OF THIS: Look at the long term price charts of many Gold mining stocks. You will see that after the long declines in their prices, many of them go back up in price to seven times, nine times and more times their prices at their bottoms. It happens all the time. Do your homework, its well worth it.

If you wonder as to exactly who is buying the mining stocks over the last eighteen or so months it should come as no surprise that the mining companies own officers and directors have been among the heavy buyers. The Canadian mining stocks are one of the few sectors with buying levels far above the selling levels.

What we cannot overlook is what we have been saying for the last year, a bull market in gold stocks needs a bear market in the major industrial stock market such as the S&P500 and Dow Industrials. If not a bear market, we need at least a weaker stock market for the industrial stocks.

We also want to mention that Gold bullion is selling below the cost of production for many companies. That suggests that a lot of gold is finding its way to the market while the companies are losing money producing it. That cannot continue. That leads to less supply later on and is reflected in the low prices for many gold stocks.

Our analysis suggests that when the price of the gold bullion moves above the $1350 level, much more interest and buying volume will ensue. We are not certain of that or anything else, but our cyclical, technical and fundamental research does suggest that the final bottom in the gold stocks is being completed.