There are a few takeaways here. First, when you compare the gold stocks to 5 equity bull markets from the past (including the 1960-1980 bull in gold stocks), you’ll see that the current bull market is well on track even though the gold stocks have remained in a wall of worry stage. Judging from history (the previous bull markets), we should see the gold stocks make a move towards a breakout and new highs by spring of 2013.
Also, peaks in deflationary fears (and bonds is the best market to account for that) coincide with important bottoms in precious metals. The last several major peaks in T-bonds has sprung the precious metals complex to new heights. (In our recent global update we noted our upside targets for Bonds, the US$ and our downside target for the Euro).
First Majestic has taken advantage of market conditions to add another producing mine to its pipeline. We will interview FM’s CEO, Keith Neumeyer in the near future so he can discuss the acquisition. His preliminary thoughts were given in this interview. The company was one of the big winners in the late 2008-early 2011 cyclical bull market. In fact, it was my personal biggest winner as well as the biggest winner in our service. Though the company is much larger now, it continues to position itself for substantial growth. In a bull market, growth is paramount.
Huldra Silver has raised about half of what it intends to raise. The company is on its way to production and will be cashed up. Obviously, a decline in Silver prices affects them, but because they are a low-cost producer, they wouldn’t be as adversely affected as producers with overall costs in the $15-$20/oz range. Note that Huldra is one of the few silver stocks yet to trade below its December low.
Gold & Silver …
The price action of Gold remains bearish but with sentiment contrarian bullish, there is a risk if you play the short side. Various support levels and other factors are discussed in the most recent update.
Silver has been weaker than Gold. It did close at a new daily and weekly low but that was invalidated by some sudden strength. The price action is negative but sentiment is very favorable for contrarian bulls. Targets are discussed in the most recent premium update.
Over the weekend we produced Global Update #15 which covers economic data, commodities, emerging markets, bonds and currencies. One key point to take away is that until Bonds and the US$ peak, precious metals will have a tough time attracting more longs. Now, this doesn’t mean the sector will break to new lows. For example, in the past, gold equities have often bottomed 1-2 months ahead of peaks in Bonds.
In last nights update we discussed how breadth indicators will help confirm or deny the bottom in the shares. In some ways, that will be slightly more important than the price action. We also provided downside targets for HUI, GDX, GDXJ, SIL and our silver stock index.
Consider a subscription to our premium newsletter. We soon will intensify coverage on our favorite exploration, producer and development companies. The cyclical bear market is nearing an end and we believe we have identified the companies poised for big rebounds (when the sector bottoms) and poised for significant gains in 2013-2014.
Wishing you health and profits,
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