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« Gold Mining Stocks in The Dog Box for Now | Main | Gold Prices Down As Fed's Powell Stays The Course On Economy Interest Rate Outlook »

2018: Your Last, Best Buying Opportunity

From this point forward, there may never be a better time in our lives to invest in the gold mining sector. That sounds extreme but hear me out.

My research has uncovered some amazing facts that show that the 2016 bottom in the gold mining sector has much in common with the bottom in the stock market in 1942.

1942 was literally the worst time for the stock market. It was trading at the same level as in 1901, 41 years earlier. Its rolling 5-year return was the second worst of all time, while its 10-year return nearly the worst of all time. And the market had just endured a 5-year long bear market.

Over the next 14 years the S&P 500 gained nearly 7-fold with only a single bear market of only 30%. The stock market's total return over that period, including dividends was nearly 14-fold!

In early 2016, the Barron's Gold Mining Index was trading at the same level as 42 years earlier. Its rolling 5-year and 10-year returns were the worst in nearly 95 years! The gold mining sector had just endured a nearly 5-year long bear market, its worst bear market ever.

Sound familiar?

Sir John Templeton, perhaps the greatest investor of all time said to buy when conditions are the worst. That was true for the stock market in 1942 and also true for gold mining companies in January 2016. Gold Miners rebounded 150% while Junior Gold companies surged 200%.

However, markets (and especially precious metals markets) do not rise every month or quarter. There can be periods of sharp gains but then periods of correction and consolidation.

Since the summer of 2016, the gold stocks have corrected and consolidated for a total of 17 months.

Let me explain why this could be your last best buying opportunity.

The gold stocks are following a pattern that several markets followed after mega bear markets. We define a mega market as a bear market that lasts at least nearly 3 years and declines over 80% in price.

We found that a mega-bear market is typically followed by a sharp but not long-lasting rebound.

The market then corrects and consolidates for a long period of time which typically dwarfs the time of the initial rebound.

But eventually the recovery resumes and the market surges higher.

Here is how the gold stocks currently compare to three of the most infamous “mega-bear” markets.


 gold struggles as dollar gains strength...

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