For those taking close interest today (November 27, 2012) there was an interesting move in gold prices as the below chart shows. A 'V' shaped bounce of some $35.00 or so just before the close must have given a few gold bulls a real scare. Gold dropped briefly below $1720.00, so we can only imagine that someone has made a rather fortuitous purchase at this level.
However, if this sudden drop had occurred a few minutes later, then we would have had a dramatic closing price for today's trading session in New York. Granted, we would only need to wait 30 minutes or so before trading re-commenced, when we assume that a more normal price level would have been achieved. On the other hand, trading could well have flat-lined through the Asian session and on into London as traders tried to figure out just what was going on. It would have been a question of what do they know that we don't know, causing a short term standstill in activity as investors would not want to be caught on the wrong side of this trade.
So, the white knuckle ride continues and volatility is the order of the day which will continue to shake out the weaker hands, which in turn presents investors with another buying opportunity before this bull gains some traction and gold prices head north with some gusto.
This rally in gold and silver prices is coming, and we expect to witness a serious upward charge over the next few weeks and months, so make sure that you have positioned yourself accordingly. Going forward, we will continue to acquire both physical gold and silver, as we are of the firm belief that holding these two metals is a very good investment.
As for the mining stocks, this sector has yet to perform relative to the risk involved, so our stock purchasing program is on hold and has been for some time. In order to shoulder the myriad of risks inherent in the mining sector, we require a return above and beyond that of gold and silver, which is not available to us at the moment. We are constantly monitoring this situation, and once we detect that the tide has turned in favor of the producers, we will look to add to our current holdings. If this sector is as oversold as many think it is, then the turnaround can't be far away.
As options traders we would also look at the possible opportunities to implement options trading strategies on those stocks which are likely to outperform the Gold Bugs Index, the HUI. This would be an attempt to obtain a triple leveraged play, whereby the underlying asset moves higher, the stock moves higher on a ratio of say 4:1 in percentage terms and the associated options hit the ceiling. This type of trade appeals to those of a more cavalier nature, but should not be ruled out as a conservative approach to options trading can give your embattled portfolio a shot in the arm. This is not for the faint-hearted though, but then again, neither is the mining sector in general.
Your investment plan should be firm by now; it's a good time to make those acquisitions that best fit with your own unique objectives, targets, cash flow, personality, aversion to risk, etc. We are all different, so one plan does not fit all. Be brave and execute yours in your own time, ignoring the white noise emanating from the mainstream herd.
Those who choose to hold the folding stuff will find that their wealth deteriorates as every whirl of the printing presses debases their hard earned cash, so what are you waiting for? In our very humble opinion, it's a case of act now or pay later.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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