Important Gold Points, our random thoughts and points,

1-Gold representation as a percentage of total assets held by large institutions and by various investment funds is still quite low. That could change as we feel that they will soon have to invest in gold and gold mining stocks. As you are aware, it is not easy to purchase gold bullion, have it delivered and stored safely; you may want to ask the Germans about that subject! The bottom line is that we will soon see more investment institutions investing in the gold mining stocks so that they can participate in a bull market in gold. That method will be their proxy for gold investments.

2-Required! yes required…For a strong bull market in gold and gold mining stocks, our analysis(and others too)suggests that at the same time, we would have to see a bear market in the large industrial stock market such as the Dow Jones Industrials and the S&P 500.

 3-Large buyers of gold bullion are not emotional but rather well informed and attempt to time the market using fundamental supply and demand analysis as well as technical and cyclical analysis. Too often, the investing public and some hedge funds can be far too emotional and engage in chasing and pushing the gold stocks up. Patient accumulation is a key ingredient to successful investing in mining stocks.

4-Technical Analysis! We like to see the gold price move up in a slow solid pattern, we do not want “spike” type moves which indicates emotional buying. Slow prudent buying is the key. The angle of ascent of the chart is so important.

5-Is the price of gold manipulated? Yes, you bet it is. It is difficult for bonds to sustain interest rates at 3% if the gold market is in a bull phase. And keep in mind that the large brokerage houses DO NOT want to see a bull market in gold as it brings with it a bear market or at best a very lethargic market in industrial stocks. A bear market in large industrial stocks has a severely negative impact on brokerage house profitability. Hey, they may need another bailout!

6-Last summer 2013, I suggested here that gold bullion was making a bottom since it was selling under the cost of production for many gold mining companies; that has an enormous impact on the supply of gold. We are in a pure supply and demand business! That “cost of production” is a very important ingredient in a bottom.

7-In keeping with their tradition of usually offering pitifully poor investment advice, the major American brokerage houses will continue to impart the worst advice possible for the gold and gold mining stocks. They have a superb track record for doing just that. That will never change.

8- Are Gold stocks cheap? In our opinion, many are right now. True to form, the recommendations will come after most already have had moves up on average of over 40%. Thank you and what do you think?

Written by: K.C. Grainger and Bob Pellerin

 

Get our latest book!