By Jack Sparrow
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Though adopting a strong bearish posture as of late, we have remained long on gold and silver names. (Our original position in Market Vectors Junior Gold Miners ETF (GDXJ), for example, was established on Oct. 25. Having booked partial profits, we have maintained exposure since then.)
As of this writing, gold stocks look attractive on both a relative and absolute basis (with our top silver names, Silver Wheaton Corp. (SLW) and Silver Standard Resources Inc. (SSRI), holding their own as well). Gold stocks at this point have something of a ‘triple whammy’ in their favor:
- Gold’s long-established “safe haven” profile in times of fiscal crisis
- Lingering concerns of a ‘global fiat debasement’ scenario
- An established strong earnings trend for gold miner names
On top of that, add attractive technicals and notable PM strength relative to industrial commodities.
If GDXJ in particular can break out above $40 per share, we would consider it a substantial pyramiding opportunity with tightly defined reward to risk (as a breakout reversal would immediately negate the move).
Disclosure: As active traders, authors may have positions long or short in any securities mentioned. Full disclaimer can be found here.