What should I do

[davidslane]

I don't believe in the uranium story anymore.

There's tons of nat gas around and the world economy will be so slow the next 5 years thus energy stocks will be out of favor.


I indeed switched from part uranium and part gold/silver to all gold/silver last October as I didn't like the prospects for energy in a slowing economy. (Actually, I kept a few uranium stocks like Denison and sold those in May --- the annual high point for uranium stocks --- like selling DNN at $2.25 US in May). My gold/silver plays have far exceeded anything I followed in uranium since last October.


I also don't like these no name, micro-cap Dines non-producing exploration companies which are little more than public shell companies. They're too manipulated and have no assets backing them up most times. I wouldn't touch a single uranium company right now especially those small ones, or anything related to Sheldon and that Pinetree/Mega/Dines insider connection thing.


As for gold/silver, again, I want producers (even small ones will do).
The majors will lead the start of the next big rally and the juniors will rocket up near the end of the rally.


Gold (mid - large): AEM, AUY, GG
Gold (juniors): MFN, NGD, NXG, XRA, XAU.TO

Silver (mid - large): SLW
Silver (juniors): PAAS, SSRI


There's also tons of micro-caps here too, but with financing so hard to get, I want producers with cash and revenue generation.


Do your own research and be comfortable with what you decide.

[jjj000]

david... dare I ask what scenario you think is bad for gold and silver?? 

I assume you are discounting any effect that Fed raising interest rates would have on the USD?  As well, are you assuming that any effect of other currencies being intentionally devalued will be minor?  That may cause gold to spike against other currencies, but not against the USD.

Also... not sure about focusing on gold mining stocks either.  If you go back to the '07 market crash... the mining stocks outperformed the plummeting index overall-- but only for a brief 6 months, from around October 07 to March 08.  After that they got sold off along with everything else, and much faster.  So a profitable swing trade there, but absolutely not a buy and hold all your eggs in that one basket...

Stagflation is the only thing I think that pushes up gold significantly from here.  Inflation is going to be bad for mining companies' profits, and real deflation (not the current unwinding of bubble-driven prices) would hold up the dollar against gold.

Or something like that... I don't know.  Good luck to you either way

[davidslane]

The only scenario I can come up with that is bad for gold would be growing, robust economies which can hold their own with higher interest rates and tighter money controls.

This is impossible in my opinion.

The second rates start to rise significantly (especially in the US, Japan and Europe), those economies collapse.


We're talking 5 to 10 years before world economies can stand on their own without stimulus and that means 5 to 10 years ahead good for gold.


Gold and silver mining stocks are another story.
If the market crashes, so too will these stocks as they did last year.

But my feeling is that the damage will be more shallow and more short lived than last time.
Gold mining stocks were some of the best equity plays during the 1930's.


The best play would be to buy and hold a base of gold and silver mining stocks and then to swing trade around that base by buying on dips and selling on rallies.
In this way, you'll always have a base position if gold spikes to $5,000 one day when you're not expecting.

A US dollar rally would be bad for gold and gold/silver mining stocks, but I don't think any US dollar rally will be that strong or long.


If gold follows recent patterns, it will rise 50% over the next 5 months into February and then collapse much of that gain before cosolidating for 18 months.
And gold/silver mining stocks should see huge gains in this period before themselves tanking and consolidating. That would be the obvious swing trade. But patterns change.


As for why gold/silver mining stocks vs. gold/silver bullion. The same reason we all chose uranium miners over uranium futures. Leverage. While gold may go up 150% or even 300%, gold/silver miners can go up 1,000% to 10,000%. For unhedged gold/silver miners, their main costs are labor and energy (both of which should be constrained), which means any increase in the price of the underlying commodity goes straight to the top line as profit meaning astronomical profits ahead for these companies ahead.

[sunseeker]

Hi DSL

It’s always good to hear from you. It’s even better when we're singing from the same hymn sheet. I have enough funds in that area, but if the market takes a plunge taking the producers down then I’ll use some of the cash I have on the sidelines and maybe sell some physical to put into them.

ATB 

[jjj000]

david... I follow you now.

I agree about what's bad for gold, but disagree about it not being possible.  The idea that the US economy would need to be able to "stand on its own" to support growth implies that there need be solid fundamentals driving it.  But we don't work that way - we work off bubbles driven by psychological "growth".  Tech, real estate, commodity, etc.  All we need is the next bubble to spur our next 5 year phase of growth.  Is it healthy and real growth?  No, not by any means, but neither was real estate or the tech boom.  Are we never ever going to have another bubble again b/c of more strict financial oversight?  Umm... doubtful that will stop the next one.

And about gold stocks - pull up a chart compare GDX to other industry indices - IYR (real estate), IYF (Financial), IYT (transport), IYW (tech), etc.  You should see that during the period of USDollar decline//market recovery (march '09- now) many of these averages outperformed the mining stocks by a good margin.

Of course, as you noted, there were better swing trading opportunities in the gold stocks... but most investors don't want to deal with having to go in and out every 60 days.

If, however, you pull that chart back to Nov '08 where mining stocks made their low... GDX did outperform all those averages.  But that's only because it was sold off harder than those averages, and faster.  You would have to pick the exact bottom there to capitalize.

So I still don't know if I am on board with focusing solely on gold stocks, particularly if you are open to swing trading.  I think if you are going to play with equities there are many other options for swing trades - transports, casinos, coffee, steel, banks, cons. discretionary, etc - many 5 and 10 baggers or more in there to be had.  Heck your own Microvision stock pick would have done better than any gold mining stock

Of course that takes a heck of a lot more time and research than just picking one sector, so I can understand if that is your motivation for sticking with mining stocks.

I just want to illustrate the other options out there for other people reading this who don't know the mining stocks and seasonal trends, or have as much experience with mining stocks as you do.

david, you are prepared to take advantage of all the positives and negatives I bring up b/c you've been through a battle or two already.  Many others simply are not and will get caught in the same traps many of us did 2 years ago.  Those people might be better off with some reduced volatility, or at least some (yes, I'm gonna say it)... diversification...