Gold stocks are providing a rare opportunity that doesn’t happen very often in markets. Basically what is going on right now is a liquidation, where losses have become unbearable for many different investors in the sector and they are just dumping everything they have. This has been exacerbated by a couple of different unique factors including: 1) tax loss selling for funds ending by October 31 2) a major rally in the U.S. dollar and 3) a long term bear market in the precious metals that is in the “give up” phase for the bulls. This toxic mix has spelled disaster over the last week or so for precious metals bulls.
Volume on the downside is off the charts which provides a key clue that we are in a capitulation. I tweeted a link earlier in the week about a top German newsletter writer who admitted recently dumping all his gold stocks. This guy apparently is around 25 year old, which leads me to believe this is probably his first major wipe-out in the investment world. So you’re seeing real life evidence of emotional capitulation and mass dumping of gold and gold stocks.
As long as you’re not overly leveraged though, this is an awesome opportunity. The “pros” don’t get themselves into this type of precarious position very often, but when they do you can basically just pick their pockets at incredible prices. If you have a long term outlook, whenever gold and silver re-enter a bull market again, which WILL happen at some point, then the gains from here will be awesome.
I’ve been looking for an end to the gold bear market all year, and even though it hasn’t quite happened yet we’ve already had 2 great opportunities to buy gold stocks in the past year. In late 2013 and early 2014 I picked up a bunch of gold stocks myself as everyone was panicking at made some great gains on some positions, including triple digit gains as gold stocks had a big rally early in the year. You had to do some trading to make money in gold stocks this year, but even if you didn’t and have just bought and held, you have another stellar opportunity here to get a great entry point.
You just don’t get an opportunity like this very often because as I said, it’s rare for a market to be in a liquidation phase. I think this will eventually cement the final end to this gold bear market, and provide either the basis for a V-bounce and the birth of a new gold bull phase or a basing phase followed by a bull phase.