Saturday, April 6, 2013
Could this be the bottom in mining stocks? Mining executives think so...
Last week, we showed you a five-year chart of the Market Vectors Gold Miners Fund (GDX). Gold stocks peaked in September 2011 (around the same time gold hit its all-time high of more than $1,900 an ounce). They've been in a grinding bear market since then.
Throughout this downturn, many financial pundits – including several of us here at Stansberry & Associates – noted how cheap gold stocks were relative to the price of the underlying metal. Still, gold stocks continued their decline as selling begat more selling.
As we noted before, almost every day, a friend or subscriber contacts us about gold stocks, asking when they're going to bottom.
It looks like mining industry insiders think we're close...
According to industry research firm INK Research, there are currently seven precious-metals stocks on the Toronto Stock Exchange with insider buying for every one with selling.
That ratio has nearly doubled since mid-January...
"That is the type of insider buying we saw in the broad market during the height of the great financial crisis in late 2008 and early 2009," Ted Dixon, CEO of INK Research, told Canadian newspaper The Globe and Mail. "A similar situation now seems to be in place among gold and silver miners."
As you can see from the chart above, late 2008 and early 2009 was an incredible time to buy gold stocks.
We know how poorly gold stocks have performed recently... The GDX dropped another 10% from March 27 to April 3.
But we're still bullish. Porter and Jeff Clark in particular are calling for a rally.
Jeff is buying based on technical signals. (Several of his "buy signals" are going off.) And Porter likes gold stocks based on fundamental analysis. As he wrote in the latest issue of his Investment Advisory...
Compared with the value of their gold production, gold stocks, as a whole, are as cheap today as they were at the bottom of the gold-stock market during the crisis of 2008.
Back then, we recommended buying a basket of gold-mining stocks (NYSE: GDX) to take advantage of this very unusual situation... That recommendation doubled speculators' money in about a year. (We eventually closed the position in May 2011 for a 91% gain.)
This may not be the exact bottom... It's a fool's errand to attempt to call tops and bottoms in stocks. But it's a good time to start buying gold stocks – or start adding to your portfolio if you already own some.
We know it's difficult to think of buying gold stocks today, considering their gut-wrenching fall. But times of extreme pessimism are exactly when you should be buying.
Such extreme situations usually do not last for long. With both fundamental and technical conditions supporting recent heavy insider buying, it looks like a significant bottom in precious metals mining shares may be forming now.
When you're looking to buy gold stocks, you should be reading John Doody. Longtime readers may remember us talking about John. He is the best gold-stock analyst we know.
He's made a fortune for himself using his proprietary techniques. And he's produced huge returns for his readers. From 2000 through the end of 2012, John's method for investing in gold stocks has returned 1,239%... crushing the gains from the S&P 500 (13%), gold (515%), and an index of gold stocks (222%).
John is currently offering Gold Stock Analyst at a generous discount. If you're ready to start profiting from one of the most beaten-down sectors in the market today, we recommend you learn more by clicking here.
Date Range:3/28/2013 to 4/4/2013
Date Range:3/28/2013 to 4/4/2013