Saturday, June 21, 2014

Gold juniors breaking out


Gold Juniors breaking out to the upside on heavy volume

Last week was huge for gold and silver along with the gold mining stocks. After the recent CPI report that showed a .4% increase in consumer price inflation the Fed met last week. They basically said that although the tapering of bond buying would continue they would continue with a low interest rate policy for the foreseeable future. I think that is leading people to believe that the Fed will be behind the curve on raising rates and that inflation may surprise to the upside. That has been my thesis for several years. If you print enough money you will eventually get price inflation. 


We have enjoyed the asset price inflation in the stock and bond market for several years but it seems that all the liquidity is now moving into goods inflation. I have said many times in the past that it amazes me that people talk of a weak global economy and yet oil prices are over $100 per barrel (oh by the way it appears oil has broken out to the upside also.)





I think that the three year bear market in gold and gold mining stocks is over. I do no think that they go straight up from here. Nevertheless every time we have had a long bear market in gold mining stocks the eventual follow on bull market results in gains in the hundreds if not thousands of percent. This is what a contrarian does, sells what everyone loves and buys what everyone hates. Everyone loves the broad stockmarket and bond market right now. Everyone hates gold and gold stocks. The gold stocks have just given a signal that the bear market is more than likely over. I like companies like the following:





I will add these stocks to the speculative portfolio. The gold juniors have had a 30% run over the last month or so. A pullback would provide an opportunity to establish new positions or add to existing positions.

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