We have continued to warn that a 'final capitulation' casts its dark shadow over this tiny sector of the market and tried to trade this view accordingly. This has been extremely difficult as the rallies have been short lived as any traction they had soon petered out with gold, silver and the producers heading south.
This year started brightly as did 2014 and was accompanied with many saying that the bottom was in and it was now safe to go back into the water and acquire some of these undervalued mining stocks, as they were cheaper than they had been for some time. They were right, however, being cheaper does not mean that they are as cheap as they can be or are going to become.
A number of theories have been put forward such as gold cannot fall below a certain price because the miners cant mine it for anything less than that. If that were so then the word bankruptcy would never have been coined.
Another reason given for owning gold is that it has outperformed most currencies other than the US dollar and so it has proved itself as a store of wealth. Well if it hasn’t outperformed the dollar then the dollar is the place to be and not gold – why settle for second best?
Look at gold today trading at $1161/oz, back to where it was trading in 2010. The last couple of years has been nothing short of 'death by a thousand cuts' for those bold enough to stay long.
The miners as represented by the Gold Bugs Index, the HUI currently stands at 157, where it stood in 2008 and 2004. Had you bought in 2004 and stayed long, through thick and thin, you would have made precisely nothing. The HUI peaked at about 630 so there have been opportunities to trade the rally, but a buy and hold strategy has been a disaster for this sector of the market.
Other than a hand full of short trades that we have closed profitably we have been restricted considerably by the spectre of that illusive 'final capitulation' that hangs over us all. This has led us to place our funds in US Dollars as a safe haven and they have outperformed gold in 2013 and 2014 and so far in 2015.
Over this period gold has lost 32% of its value and the dollar has gained 22%, so our pile of cash has increased our buying power considerably in readiness for us to hit the acquisition trail with some gusto, when the time comes.
We are overweight in cash at the moment with 70% of our funds residing in dollars, 15% are in long positions and the remaining15% is in short positions. Not overly exciting but a position that we are comfortable with and will retain for now.
As we have said on a number of occasions; this bear phase is not over yet so we are in no hurry to invest in a falling market. In fact there are stocks out there that could lose another 50% of their value before this carnage finally exhausts itself.
In terms of timing we have laid out our strategy for our subscribers so that they are aware of just when we think we will hit the bottom, u-turn and implement our buying programme.
In the mean time we continue to research and analyze a number of mining companies and other investment vehicles in order to keep our short list up to date and actionable for when the opportunities present themselves.
If you would like to join us in this venture then we would be delighted to have you on board for what is going to be an exciting although at times 'white knuckle' ride
The following is a gentle reminder of some of the previous points that we have made regarding the 'Stock Trader' service:
We issue a trading signal to you via email as soon as we open or close a trade.
We ask that you go gently with every trade and only risk what you can afford to lose. We will usually allocate about 5% to 10% of our funds to each trade.
The fee for this service is US$199.00 per year; there is no 6 month subscription as we want you to stick with us for 12 months, which will allow us the time to prove our worth to you.
We are not financial advisers and do not give financial advice, only access to what we do in terms of trading.
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Is the bottom really in? Could there be a final capitulation just ahead of us? Have you plenty of cash to take advantage of the coming bargain prices?
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