The Usual Suspects: The usual sparks could ignite interest in gold stocks: a company announcing a large gold discovery… a sudden or unexpected surge in inflation… the gold price soaring 20% overnight due to some world-changing event… the public recognizing the potential in gold stocks and not just gold. Or how about a well-known investor or analyst outside the gold industry announcing he’s buying gold stocks? Could you imagine the impact on our tiny sector if, say, Warren Buffett declared he was adding gold companies to his portfolio? (He’s not exactly pro-gold, but you get the idea.)
I’m not saying any of these things will come to pass or are imminent. There are certainly other potential catalysts, too. My point is that sooner or later investors will be drawn – or perhaps even forced – into buying gold stocks.
The investment implications here are twofold. First, if I’m right, then the strategy should be to buy when shares are relatively cheap and hold for the duration of the bull market. You may think we’d suffer “opportunity loss” if we have to wait too long, but that could be a dangerous game; you could buy after they take off and miss out on some of the easier gains. Further, I don’t know of another sector that is both cheap and imminently poised to break out. The second implication is that corrections wouldn’t be a time to get out, but a time to consider getting in.
The ultimate prognosis, in my opinion, is that gold stocks are headed much higher. Sooner or later a catalyst will ignite interest in our sector, and the rush will be on. Now is the time to build positions in the stocks you want to own.
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