The standoff between Ukrainians who want European-style democracy and a government that is aligned with Russia erupted Tuesday in an explosion of violence that has since left over 100 dead and could reignite an East-West confrontation thought long buried.

There is a lack of awareness on the part of the protesters that by permitting themselves to be manipulated by Washington, they are pushing the world toward a dangerous war.

This has been an overlooked catalyst in the gold price rising in the past few weeks. Not so much due to fighting between two factions in Ukraine, but because those factions are each backed on opposing sides by the United States and Russia, two nuclear and economic powers. For Western Europe and the U.S., Ukraine’s importance is geopolitical location/bases and energy pipelines. Leaked tapes suggest that the U.S. was plotting a coup.

While we are always seeking capital appreciation here at Gold Stock Bull, this price driver comes with some serious baggage. Hopefully nuclear deterrence remains a potent enough force to limit further escalation. At some point, the U.S. government’s expansion of empire to Russia’s borders will generate will be too much for Putin to let slide with oratory response alone. Let’s hope cooler heads prevail.

ukraine proxy

I believe in owing physical precious metals in your possession first and foremost. However, geographic diversification of assets and the leverage that can be found in quality mining stocks, are very attractive once your physical position has been established. In fact, mining stocks are more undervalued relative to gold and silver than at any point since the bull market began in 2001. They have started strong outperformance of the metals recently, but have a long way to go still to return to previous ratios for the HUI/Gold.

HUI vs Gold

Diversified ETFs such as GDX, GDXJ or SIL are great options. For a fund that stores allocated and audited physical bullion, CEF is a great option. Here at Gold Stock Bull, we aim to outperform these funds, no matter the direction of the gold market. In 2010 when mining stocks were hot and the GDX was up 34%, the GSB model portfolio was up 59%. Similarly, when the GDX was down over 50% in 2013, the GSB model portfolio was only off by 12%. I believe 2014 is going to be a breakout year for select mining stocks and royalty/streaming companies. Whether you sign up for the Gold Stock Bull subscription (newsletter, portfolio, trade alerts) or just diversify into ETF funds, I wish you the best of luck and believe we will be sitting on some powerful gains by year end.

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