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Bitcoin Crash Creates Golden Opportunity

David Bartosiak

I’ve been wrong about my timing of the silver and gold trade twice now. Once to my followers in Momentum Trader and another time in a much more public way, on Bloomberg the end of last year. My fundamental investment thesis surrounding gold hasn’t been wrong just my timing. And now, with gold prices bouncing off $1,200 and last week’s Bitcoin debacle I’m taking another stab at it.

The Bitcoin debacle I’m referring to is last week’s decision by the SEC to reject the Winklevoss Twins’ proposal for a Bitcoin ETF. An ETF would have helped to legitimize the cryptocurrency and expose it to an entire new market of potential investors. The SEC’s decision was based on the unregulated nature of the Bitcoin market itself. With no way of overseeing the underlying investment, there was no way the SEC could give it a stamp of approval.

You could argue that Bitcoin and gold are both alternatives to global fiat currencies. Neither has a central bank which governs them nor do they pay interest. They are both a store of value and can be held anonymously. Gold and silver have a tendency to track with each other so I’m including it when I look for stock ideas.

Of course there’s one giant difference between the two. Gold has been a historic store of value for ages and something you can physically possess. Bitcoin is a digital currency that was created from nothing a few years ago. There is still a huge amount of skepticism surrounding Bitcoin and other cryptocurrencies. A rash of high profile hacks, essentially digital bank robberies, have loomed like a cloud over Bitcoin for years. This ETF would have been something like a Bitcoin coming out party.

However, that was not the case and Bitcoin’s value plunged in Friday trading. Nearly simultaneous there was a huge rally in gold prices with the metal bouncing from just under $1,200 an ounce, an obvious psychological support level. Gold still does have an inverse relationship with yields. As interest rates rise you tend to see pressure on gold prices. We all know the Fed is going to hike rates next week. That is a huge negative on gold pricing. But if the metal can rally even in the face of that hike, then there could be overpowering fundamentals at play.

One way to play a potential continuation of silver and gold’s move higher is to look at the silver and gold miners. A lot of these companies got lean and mean in order to survive the plummet in prices and have emerged with much stronger balance sheets. They have found ways to minimize their acquisition costs and streamline their mining process. I’ve put together a list here of gold stocks that are Zacks Rank #1 (Strong Buy) and Zacks Rank #2 (Buy) stocks for you to investigate a little further.

Alamos Gold (AGI)

Alamos Gold Inc., together with its subsidiaries, engages in the acquisition, exploration, development, and extraction of gold deposits in North America. It also explores for silver and precious metals. The company holds interests in the Young-Davidson mine, which includes contiguous mineral leases and claims totaling 11,000 acres located in Northern Ontario, Canada; the Mulatos mine located within the Salamandra Concessions in the Sierra Madre Occidental mountain range in the east-central portion of the State of Sonora, Mexico; and the El Chanate mine that comprises 22 mineral concessions covering 4,618 hectares situated in the State of Sonora, Mexico. It also holds interests in a portfolio of development stage projects in Mexico, Turkey, Canada, and the United States.

Avino Silver (ASM)

Avino Silver & Gold Mines Ltd. engages in the production and sale of silver, gold, and copper bulk concentrates; and the exploration, evaluation, and acquisition of mineral properties. The company owns 42 mineral claims and leases 4 mineral claims in the state of Durango, Mexico. It also holds 100% interests in the Bralorne mine located in the Lillooet mining division, British Columbia, Canada; and the Eagle property located in the Mayo mining division of Yukon, Canada.

Fortuna Silver (FSM)

Fortuna Silver Mines Inc. engages in the exploration, extraction, and processing of mineral properties in Latin America. The company explores for silver, gold, lead, and zinc deposits. It holds interests in the Caylloma mine located in the Arequipa Department in southern Peru; and the San Jose mine located in the State of Oaxaca in southern Mexico. 

Great Panther Silver (GPL)

Great Panther Silver Limited, a silver mining and exploration company, engages in the mining of mineral properties in Mexico. It explores for silver, gold, lead, and zinc. The company holds interests in the Topia Mine and Guanajuato Mine Complex properties. It also holds mineral property interests in the exploration stage, such as the El Horcon and Santa Rosa projects located in Mexico, and Coricancha Mine Complex located in the Central Andes of Peru.

Bottom Line

I think Bitcoin blowing up here could benefit gold and silver over the short run. That being said, a great way to play the rise in these metals could be to look at the silver and gold miners. This is a short list to start researching the best one to buy.

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Great Panther Silver Limited (GPL): Free Stock Analysis Report
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Alamos Gold Inc. (AGI): Free Stock Analysis Report
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