Kal Kotecha PhD
It’s happening—the price of gold is starting to finally make big gains and recently broke the US$1300/ounce threshold. Optimism is growing that we are done away with the bear market—we probably are. But there are cautions, as I indicated in my previous articles “we are not there yet.” What does this colloquial statement mean in terms of you profiting? Flash back to late 2009. Gold was ascending in price similar to how it has been the past few months. The real rise in both gold and gold related stocks as a whole started in early 2010. The entire sector went parabolic and precious metals investors were making money, hand over fist. The individuals who invested in these precious metal companies in 2009 were the ones who were elated. The investors who bought during the hype of 2010 and early 2011 are probably now sitting with these shares in their account waiting for the ‘breakeven point’. We are all guilty of buying high and selling low as we get caught up in the hype.
The key is to see if the precious metal sector in general is one that can sustain a long-term rally or is it just a short-term phenomenon? I believe that we are in the beginning innings of a secular bull market in the precious metals sector, and the individuals who strategically position themselves now will be the ones who will be handsomely rewarded when the mania stage arrives.
How will you know when the mania stage arrived and it is time to sell the junior mining stocks you have purchased? Simply put—when everyone including your grandmother who knows nothing about gold starts talking about buying gold and gold shares. I remember being a young child in the late 1970’s/early 1980’s when gold went parabolic and reached new highs of over $800/ounce which in inflation terms would equate to about $2400/ounce today. My dad who knew nothing about gold said, “my coworkers think gold is going to break $1000/ounce and make its rise to $2000/ounce” – at the tender age of 10, that was my first taste of the oscillating gold market.
As many of us did, I got caught up in the tech rally of 1995; the problem was that I bought too late and lost money. I learned a heavy lesson and was ready for the precious metals boom of 2010. History has a way of repeating itself from music to art to fashion — also with the stock market. I am positioning myself and my portfolio to benefit from the rising price and value of junior mining stocks.
Don’t be fooled by gold’s rise as “we are not there yet” but I believe soon the patient precious investors will be royally rewarded.
Kal Kotecha PhD
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