November 6, 2006
Yes, I know that I’ve been silent about gold’s bottom but that’s because I don’t think we’ve reached it yet. I’ve merely just been very patiently waiting for the consolidation phase to run its course, but that doesn’t mean I haven’t been taking some strategic actions. So I’ll break my silence to let you know my thoughts.
Yes, I realize that it seems that gold has bottomed as it has been steadily rising for the past couple of weeks. Still, certain indicators I track seem to point to the fact that we will see one last major correction before the true gold bull finally starts its run. Of course I may be wrong, and for those of you that have been following my newsletters and blog, you know that I’ve been advocating buying gold and gold stocks on dips in price for at least five months now. Even with the increases over the past couple of weeks that have produced multiple days of 5% and 10% gains with certain gold stocks, there are still many gold stocks that are selling at bargain prices now.
If you have bought on dips over the past five months as I have, then I would consider taking some profits off the table now. Normally I wouldn’t advocate this practice because of gold’s volatile behavior and the risk of missing a huge surge to the upside. Many times people sell out too early only to miss out on substantially higher upside gains or worse, they sell out on a steep 35% drop at a loss only to miss a very steep 150% leg up afterwards. But I’m more of a hold through the dips investor once I think the bull leg has truly begun.
My thinking is that here, we may still be in the last phases of the consolidation phase. Here in the consolidation phase, I play the dips and peaks more. Buy on dips, sell on peaks (of course). Then when the bull leg starts, I’m in and I hold on through the dips. Again, I could be wrong about the very short-term. Long term, I’m extremely confident I’m correct about gold’s prospects.
Interestingly enough, global warming is providing some potentially very lucrative opportunities for companies that explore for gold . I’ll be writing more about how the destructive effects of global warming is presenting investment opportunities later in the week, but here is just one change to consider now.
The Arctic north’s precambrian bedrock contains extremely rich veins of minerals and ores, including diamonds, gold, silver, platinum, tungsten and uranium. These vast reserves of minerals have been previously inaccessible for decades, but thanks to global warming and the melting of the Arctic ice cap, they are becoming increasingly accessible. And increasing accessibility may mean that these vast reserves of minerals will soon become “economically mineable”.
I expect the fight to secure mining permits in the Arctic to be fierce, and for the winners of this fight to see some hefty increases in their share price if indeed the Arctic cap keeps melting. Until next time, happy investing.
