Junior Gold Miners - set your watch to bullish continuation
Thanks for viewing,
This won't be a long one. It won't be full of analysis. My case is just this:
These small speculative, under-capitalised, marginally profitable gold miners are now extracting a commodity that has surpassed 2011 highs - and looks assured of heading much higher. So, it seems safe to conclude that these exploration and mining companies look set to head for new all-time highs as well. These are small market cap Companies so they are more volatile (also I note that they had already started down from all-time highs before gold peaked in 2011 - to the gold to GDXJ correlation isn't perfect). That also means that big institutional players cannot pile in without spiking the market (they would then have to work out how to exit as well - which wouldn't be easy) which means this market had remained depressed for now. This lag suits me fine.
A small increase in the price of a mined commodity is normally translated into a much greater percentage increase in profit margin (for profitable mines anyway - or much smaller losses I guess). So holding an equity linked to the commodity will effectively "leverage" any commodity price gains. The EW retracement (shallow) from current levels and the extension of that move to new highs are speculative, but I'm just mapping it out so that I can picture how it may broadly unfold.
Maybe you think gold is going to crash in a highly uncertain world with ballooning debt, currency devaluation, the Fed seeking to stoke inflation, and treasury yields that will set below inflation for at least the next 3 years and possibly longer. Yeah maybe, but I don't think so.
If the ETF only reaches previous highs that will mean an 220% price rise. So join me and go long on political turmoil and out of control currency printing.
I will only consider a relatively small position in any ETF and if you decide to add the underlying base metal to your portfolio - please avoid ETFs.
Protect those funds
This won't be a long one. It won't be full of analysis. My case is just this:
These small speculative, under-capitalised, marginally profitable gold miners are now extracting a commodity that has surpassed 2011 highs - and looks assured of heading much higher. So, it seems safe to conclude that these exploration and mining companies look set to head for new all-time highs as well. These are small market cap Companies so they are more volatile (also I note that they had already started down from all-time highs before gold peaked in 2011 - to the gold to GDXJ correlation isn't perfect). That also means that big institutional players cannot pile in without spiking the market (they would then have to work out how to exit as well - which wouldn't be easy) which means this market had remained depressed for now. This lag suits me fine.
A small increase in the price of a mined commodity is normally translated into a much greater percentage increase in profit margin (for profitable mines anyway - or much smaller losses I guess). So holding an equity linked to the commodity will effectively "leverage" any commodity price gains. The EW retracement (shallow) from current levels and the extension of that move to new highs are speculative, but I'm just mapping it out so that I can picture how it may broadly unfold.
Maybe you think gold is going to crash in a highly uncertain world with ballooning debt, currency devaluation, the Fed seeking to stoke inflation, and treasury yields that will set below inflation for at least the next 3 years and possibly longer. Yeah maybe, but I don't think so.
If the ETF only reaches previous highs that will mean an 220% price rise. So join me and go long on political turmoil and out of control currency printing.
I will only consider a relatively small position in any ETF and if you decide to add the underlying base metal to your portfolio - please avoid ETFs.
Protect those funds
Comment:
Added some again today.