Thoughts on Gold
So what's my simple advice for people interested in gold right now? Lower your expectations; if you have investments that are performing poorly get rid of them; find companies that are priced very cheaply right now and invest in them. I know the trend is down, and now is the time to do your research and find those stocks that are getting close to or have become seller dwellers.
A couple decades back, when demand for extracted metals was very low, mining companies struggled greatly. There was a surplus problem back then that we don't have in today's market as regions of the globe continue to industrialize and modernize themselves. Let's take copper is an example. It was trading at one of its lowest prices ever back in the 1990s with a surplus. Today even though copper is trading at a very low price the same surplus does not exist! Demand for the metal increases yet we have a constraint upon supply as demand goes up for things like cell phones, tablets, refrigerators and cars. Gold's sell-off in mid April was attributed to large sell-offs by ETFs because a couple short signals triggered at some New York brokerage firm.
So has Gold stabilized? Ironically, some brokerage firms had incredibly good short positions before calling out a short sale and became extremely profitable because of them. Without going right out and saying that there is a conspiracy out there to lower the price of gold, it seems if something like this is profitable once there is no reason it couldn't happen again this year. I'm not saying it will, I am just speculating about possibilities.
Mining Stock Opportunity!
For those of you who are interested in mining stocks, especially junior mining stocks, look for companies that may have an asset that they are getting ready to bring into production. Maybe they will bring it themselves, or they might be bought out by another company that will do it. This is the type of company one should look for because there is a higher probability of achieving double or even triple investment returns when things are brought into production.
Because the mining sector is so depressed, the potential for profit in the future is incredible! Looking for the right company to invest in is the key here. Companies need to have cash; if they don't then they have to raise cash just to survive and this is not good in this type of economy. These types of companies have basically no value and raising cash right now is not an easy project. An investor needs to find a company that is doing something in the ground, physically working to build value for the company. There are many companies out there that are on hold and not doing anything but burning through cash as they try to conserve. They may be paying salaries but not doing much else. So not only do they need cash but they also need to have projects under way.
- Pay attention to alliances, large companies that are investing in small junior mining firms.
- The major companies believe the junior company will spend wisely as it explores.
- Look at the management team, interact with it and find out more about its potential.
Be cautious on the size of stated resources and capital expenditures, one can easily come up short on resource size and the latter can be higher than expected too!
This could be an incredible investment time for mining stocks. But it cannot come without investors' due diligence. There are many companies that are undervalued right now, but there still are a lot of companies that are overvalued so investors really need to be selective. Look for companies that are low price as comparison to their asset values-this is a good starting place and if it looks like the company has some projects getting started it may be a good time to load up on the company. Investors-- be prudent; be cautious; do your homework. There are quite a few opportunities out there to see enormous gains over the next 12 to 24 months, but they are not hanging off the flagpole waving their arms so that you can find them. You have to do your research. The opportunities are there-- do your research!