Gold Miners Update (October 06, 2015)


The markets have been rallying as of late, and many stocks have been able to enjoy basking in the GREEN. As it pertains to gold mining stocks, they have also been surging, which comes as somewhat of a surprise given their recent history of dismal performance.

But if I’ve learned anything with this sector, it’s this — Do not chase these stocks. Gold mining stocks tend to pingpong back and forth… especially when you least expect it.

Right now, I realize that it can be very tempting to try and latch on before the ship “sets sail away”. But if we use history as a guide, realistically speaking, there will still be some more buying opportunities in the near future. Gold and silver mining stocks have been unable to pull away successfully thus far in recent years (there have been plenty of similar rallies in the past), and they don’t appear destined to do so anytime soon.

Buying a small batch here and there is probably a good strategy (if you insist on getting in), but my own preference is to ONLY buy in on significant down days… With commodities in general, my strategy is to only dollar cost average (DCA) down, never up. With that said, I will confess that I do load up with conviction on those NASTY double digit RED days (e.g. AG, PAAS, AUY, EGO, IAG, etc.).

Recently, I had dinner with a good buddy who reads this blog and he was most intrigued about what I was calling a “deep discount” value play in an otherwise overpriced stock market. He was looking to buy (quite eager, in fact), but I made sure to share this important point with him, which I’ll also share with readers now — Don’t let your emotions get the best of you. Greed and fear do some strange things to people and they greatly impact our ability to properly function and rationalize… Unless you are merely looking to trade these stocks to make a quick buck, the long-term strategy will most likely take a few years to play out… So, you gotta be patient…

Patience will indeed be rewarded, but I’ve reconciled that in the interim, it’s probably most prudent to just sit back and do nothing during times of uncertainty… Don’t chase the market, but instead let the deals come to you. I’ve observed far too many other investors/speculators getting burned chasing commodities on the way up (at or near all-time highs)… In fact, earlier this year, I made the very same mistake of chasing after stocks and paying a premium along the way

Gold and silver are no different than oil, copper, zinc, aluminum, etc… You only want to get in at the bottom of a commodities cycle, buying in as low as you possibly can.

When it comes to extremely volatile stocks, there are no risk-free trades, but you can minimize your downside considerably by buying as close to the bottom as possible (at or near 52 week/all-time lows).

Speaking of all-time lows, Rubicon Minerals (RBY/RMX.TO) is just about the only mining stock laying an egg right now, while just about everyone else in the sector is enjoying the recent rally… The Rubicon management team has shown its incompetence, making costly mistakes time after time again, and right now the stock (and shareholders) are paying a severe price for it. There’s a lot of risk with this speculative play right now, but if the new CEO can right the ship (it should be in the realm of high probability if the Phoenix gold deposit is indeed as world-class as the company claims), there could be a lot of potential upside with this stock. I haven’t written this company off quite just yet, as I’m always on the lookout for tremendous opportunities (40% haircuts tend to make any opportunity that much more “tremendous”). But I’ll be holding out until after the SRK reconcillation report comes out before making any additional moves.

What about the other stocks seemingly pulling away from the pack? I’ll just let them keep running, but should they lose their sense of direction and decide to return back home again, it’s at that time I will add to my positions.


Have a great day and thanks for reading!

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4 years ago

I wanted to let you know I think your gold miner reccomendations are spot on. These companies are some of the most beaten down hated companies in the world. Even gold bugs do not invest in mining companies. The HUI cont to hold 100 which is really promising so far. I think the idea to pick some of the most beaten down companies in sector will work out well assuming they don’t go out of business. I really like Yamana when the gold bull resumes. In silver sector first majestic seems like a good bet. Another company I like is… Read more »