Gold bugs finally have some reason to rejoice, after a long and painful two years. Precious metals are breaking out in powerful fashion, with gold up $200 or 16% and silver up $5.50 or 30% since bottoming on June 26th. These explosive moves have been generated with a series of higher highs and higher lows, suggesting that we have seen the bottom of the prolonged correction. After a restful slumber, the gold bull appears to be fully energized and off to the races once again.
Gold and silver have de-coupled from the dollar and are generating these huge gains despite a rising dollar and relatively low price inflation. They are also moving higher in lockstep with the overall stock market, rather than acting as a risk-off trade. If the FED does not taper as expected in September, we could see an acceleration of the recent gains in the precious metals market. While it seems I am in the minority, I do not expect any significant tapering in 2013 and believe market participants have incorrectly priced this assumption into commodity prices. If there is no tapering or only minor tapering announced next month, look for a revaluation of gold and silver prices much higher.
Those investing in mining stocks have enjoyed leveraged gains to the moves of the underlying metals. While gold is up roughly 16% in the past two months, the Market Vectors Gold Miners ETF (GDX) is up 27% and the Junior Gold Miners ETF (GDXJ) is up a whopping 45%!
Similarly, while silver has advanced 30%, the Global X Silver Miners ETF (SIL) is up 43%. Most investors would be ecstatic to realize these types of gains in a year, yet mining stocks have generated them in just two months. This return to leveraged gains for mining stocks is a bullish sign for investors, but the HUI-Gold index is still showing that mining stocks remain severely undervalued relative to the metals.
Precious metals investors that have stuck through the correction are finally seeing their patience rewarded and those with the courage to buy the dip are racking up huge profits. If you are not among them, don’t despair. The rebound in precious metals is just getting started and a return to previous highs is likely to result in a doubling or better for most mining stocks from current levels. In other words, the fireworks are just getting started.
The Gold Stock Bull model portfolio has also enjoyed a strong bounce in the past two months. We currently hold six positions in mining stocks or royalty companies. The average gain in these six stocks over the past two months is 51%, or roughly double the gain of the Gold Miners ETF (GDX). These gains are not coming via high risk micro-cap stocks, but with best-in-breed companies that have significant cash flow or are nearing production.
Our top gainer has seen its share price DOUBLE in the past sixty days alone. This silver miner has been beaten up in the press, heavily shorted by speculators and is a favorite target for amateur blogger hit pieces. Yet, they are generating significant cash flow, have a P/E of 20 and are on track to TRIPLE production within the next year. There aren’t many companies with this type of profitability and growth profile wrapped up into a single package. While the doubling in share price in the past two months has been impressive, I think it has the potential to double again by year end as production ramps up and they prove that the kinks have been worked out at their latest project.
In addition to our mining positions, we also hold a natural food stock that is up 51% YTD, an energy company that is up 14% since January and a technology stock that is up 55% since April. If you want to view all of these stocks, including fundamental and technical analysis behind our decision to add them to the portfolio, click here to become a premium member for just $39!
Newsletter writers are notorious for pointing out their high-flying winners and hiding their losing trades. It might be a successful marketing approach, but I can’t stand this type of dishonesty. So, I won’t leave out the fact that our latest two energy plays have recently given back gains to fall into the red. And while our mining stocks are up an average of 50% in the past two months, a few of them still represent losses from our entry points. I don’t expect this to be the case for long, but we have a bit farther to go before some of these positions return to the green.
In addition to the model portfolio positions, we also publish a monthly watch list in the newsletter that has another 25 stocks that we believe are undervalued and have the potential to generate huge gains in the coming months. Many of these stocks are also up 50% or more in the past two months, including one company that has advanced 243% from its low point after reporting record gold production at their project in Canada’s Timmins Gold Camp.
The Gold Stock Bull portfolio has generated incredible gains for subscribers since its inception in 2006 and we have consistently outpaced the gains in the major gold mining ETFs. While it has undoubtedly been a rough year, we have a long-term view and remain convinced that the GSB portfolio is stacked with the best-in-breed mining and streaming stocks that will outpace their peers by a wide margin during this next upleg in precious metals.
If you would like to view all of the stocks in the GSB portfolio and receive the Gold Stock Bull newsletter (Road Less Traveled Contrarian Report), click here to become a premium member and gain instant access.
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