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« Randgold Resources Limited: Buy! | Main | Kinross Gold Options: Bought! »
Sunday
Jun152008

A review of the short-term plan

Review the plan 16 June 2008
As you are aware our strategy on the way up was to take some profits off the table as various precious metals stocks became overbought. By adopting this strategy we have managed to lock in some profits and also to generate some ‘opportunity cash’, which we can now deploy at cheaper entry prices.

For those of you who have opted for a buy and hold strategy you should do very well in the long term as this bull market continues to develop. We have always advocated keeping a core position in precious metals as this sector of the market does have the ability to take us by surprise in terms of sudden rallies and equally sudden sell offs. The downside as we see it to the buy and hold strategy is that we cannot take advantage of the buying opportunities that are now available. Another point that springs to mind is that you only have one shot at getting it right in terms of your exit strategy. If you have calculated a figure at which you will exit the market and the figure was too low then you could already be out. If your figure is too high and gold and silver just don't reach that figure before the next bear returns then will you come all the back again. As always it’s your hard earned cash and your responsibility to select a strategy that is a winner for you.

Back to our plan, having generated some cash for reinvestment our intention is to seek out oversold quality producers and purchase them before the end of August. This is pretty much what we did last year when we were 100% invested before the fall rally began. So, as we see it we have about eight weeks to deploy our funds. Our purchases will be gradual and varied as stocks, which are now close to our buying criteria become bargains. It’s impossible to hit the exact bottom but we do see the next two months as being an opportunistic period for those of you wishing to make acquisitions.

For the fund managers who read our newsletter and who have the added benefit or curse of having to deploy funds every month in order to comply with the terms and conditions of the funds modus operandi, now is the time to strike. We say this because we understand just how difficult it is to deploy large amounts of cash into a small market sector. To profit from the resumption of this rally in gold and silver we would suggest that a daily buying programme is implemented covering your favourite stocks. Over an eight to ten week period you will be surprised how much stock you can accumulate. Some of the stocks in this sector have market capitalisations in the billions so its not good enough to tell us that you are so big that you cannot participate, you owe it to the people who have placed their trust in you to make the effort and do the right thing.

So we must continue with our research and analysis in an attempt to top up our portfolio and at the same the time we will be on the lookout for the occasional short-term trading opportunity just to keep you on your toes.

Our congratulations and best wishes go to the New Zealand’s All Blacks as they beat the Brits handsomely in Auckland last night and we had to take the associated 'stick' that goes with getting beat.

Have a good one.

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Reader Comments (2)

My friend thinks that "US$ may be in the beginning stages of a rebound."

Do you see that at all?

I personally want to believe the gold bug who thinks that gold will hit $1,200 this year.

Regardless, like you, I am accumulating gold stocks which are close to support level.

Sue

June 16, 2008 | Unregistered CommenterSue

Sue,

Any bounce in the USD is nothing more than a dead cat in our opinion. The longer term trend is still very much down, and it will take significant (think 1980s) interest rates to reverse this trend. Gold is still capable of moving upwards independent of interest rate rises and even a strengthening dollar, especially when "the herd" stampedes into gold in the final mania stage of the bull market.

We do not see the Fed making such interest rate rises. They may make minor raises, but gold will rise in spite of them, as it has done previously in this bull market, when Bernanke raised 0.25 point each month for two years, from 2004 to 2006.

So we do see a possible "rebound" in the USD, but it is nothing more than a rebound, and the greenback will come falling back, this time further, pushing gold over $1200 this year.

Hold onto those gold stocks!

June 17, 2008 | Unregistered CommenterGold Prices

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