By Dudley Baker
Precious Metals Warrants
We suspect that many precious metals investors are saying, “We don’t want to play anymore!” and our reply is, “You want to quit right now, right at the bottom of this cycle? You must be crazy — crazy with a capital C!” True, this is a very challenging market environment for resource shares, but we know what the ultimate outcome will be: higher share prices. The only question is “when” and our opinion is that we are very close in time (within days or a week or two at most) of being able to say that the lows are behind us. Let me explain.
Unfortunately, most resource investors, especially those new to this sector, are greatly disillusioned, have little staying power and are just scared to death. Who can blame them? They have spent all of their psychological capital and the theme of the day for them is, “How low can they go?”
Sure, we understand why investors are upset watching their portfolio go down, virtually day after day, but this current depressed environment is the seed for making investors wealthy. The buying opportunities are everywhere. As the expression goes, to make money you need to ‘buy low and sell high’.
We believe we are near enough to a bottom that if you have some remaining cash you should be putting it to work very soon. No one is going to ring a bell and call you and tell you the bottom is in place, you must make that decision for yourself. In our opinion, now is the time to suck it up, put on your big boys pants, keep your positions, and ride this out. To quit now would be the worst possible thing to do. The day will come when we look back on this time as being one of the best buying opportunities for the entire bull market and yes, we are still in a bull market.
What always follows a consolidation? A Rally!
Investors actually should be grateful for this buying opportunity and take full advantage of this current depression situation. Get some good advice, subscribe to some good services and make some good decisions. A few months from now you will be a happy camper, smiling, laughing and making money once again. It is just a matter of timing.
I always like to share a few charts with readers as to where we are in the big picture. The first chart below is a long term chart of gold from the beginning of this bull market back in 2001 followed by a chart for the HUI (Gold Bugs Index) and a chart of the performance of the Canadian Venture Exchange.
Gold Pricing Since 2001
As we write this piece early on Thursday morning, gold is plunging, down also $20 to $1,634.
You can see from the chart the 65 Week MA is at $1,621. We are there and history shows us this has provided great support for the entire bull market.
The HUI Trend Since 2001
The above chart on the HUI reflects that this morning we are heading back down and actually retesting the lows of last week. The 400 range should provide us with great support. Looking at this chart it is easy to see the challenges for investors in resource shares. It is difficult — perhaps impossible — to see a long term trend which bodes more for a trading market than a buy and hold.
The S&P/TSX Venture Exchange Performance Since 2001
The chart above is representative of most of the juniors and exploration companies and is a picture of another nightmare for long term investors. To us, it looks like the Venture is holding up better at this point as we are nearing the bottom.
Conclusion
The above charts show that gold and its associated stocks are still in a long-term uptrend and currently searching for a bottom before the next big up move.
In closing, this is not the time to quit. As we said earlier in the article:
“In our opinion, now is the time to suck it up, put on your big boys pants, keep your positions, and ride this out. To quit now would be the worst possible thing to do. The day will come when we look back on this time as being one of the best buying opportunities for the entire bull market. This is THE time to be loading up on quality positions.”