Gold stocks ready for a major rally

The one truth about stocks is the harder they fall, the harder they rally. Precious metal stocks have been savagely beaten down over the past few months. Now of course is the time for anybody with cash and imagination to buy.

Consider this appraisal from Resourcestockguide.com:

“While a couple of major bear markets showed slightly greater losses than what we have today, the decline in the 2008 bear market occurred in the shortest span of time ever, making it into a crash of largest proportions and without any precedents over the past 80 years.

For the past few weeks, it has felt as if the bear market in precious metal stocks cannot get any worse. But it has gotten worse, worse and much worse. It has been as if the precious metals mining and exploration companies are all going out of business imminently.

Yes, it would be foolish to say that it cannot get worse from here. But both math and history are on our side. It is now very probable that a sharp multi-week rebound of at least 50% to 100% is near. The bigger question is how long will it take the $XAU and the juniors to climb back to its 2007/2008 highs. The $XAU would have to rise by 220%, while many juniors would have to rise 500%, 1000% or more.

From the above historical observations we can conclude that major gold indices such as the $XAU, $HUI, BGMI and others can recover to their prior highs very quickly, sometimes even in less than a year. We can expect this today as well especially if gold begins to climb higher.

However, most juniors (which now number in thousands) will never see their prior peaks of glory. Many of them will go out of business, others will be acquired, others will merge. The entire junior stock landscape is going to be redesigned. But high quality, cash rich junior producers and explorers which sit of good deposits will undoubtedly have a bright future.”

Who saw it?

I can only concur but how come almost nobody saw this coming? Actually I do know one gold bug sat in Perth who held off buying the stocks for this reason and is about to become even richer as a consequence.

What else should be bought in the rally that just has to follow such a massive global stock sell-off? I think its the energy and inflation complex, including commodity currencies like the Canadian and Australian dollar, uranium stocks, oil shares and physical silver as well as silver stocks. The latter have phenomenal upside potential and little downside as gold takes off.

Last week a huge consignment of physical gold changed hands for $1,075 – which shows just what a nonsense the futures price has made of the spot market. Once the hedge funds have finished dumping commodities the only way for the gold price is up. But then readers can justly say that I have been saying that for a bit too long. Of course, investment calls are like pulling a brick on a piece of elastic and eventually come right and hit you in the face.

Even US residential real estate is starting to look attractive, albeit in distressed sales. Asia ex-Japan ought to be a good regional buy at these super depressed levels. Getting out of an overbought US dollar might also make sense fairly soon, perhaps very soon.
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