The gold market has been in no hurry to do anything lately, which is fully expected at this stage of the calendar, observes gold mining specialist Brien Lundin, editor of Gold Newsletter.
The big issues remain in play: growing signs of an economic slowdown, potentially a looming recession, the trade war and the Fed’s return to quantitative easing — and the “temporary” repo funding schemes and what they signify.
My view is that once the market truly appreciates that this is not a temporary program and is in fact a return to massive QE, the price of gold will soar. And that’s going to happen in the new year. In the meantime, gold remains in the tug-of-war between the buyers and sellers.
More from Brien Lundin: The Bull Case for Gold and a Look at SSR Mining
Any significant sell-off brings physical buyers into the market in size. And any price advance brings the sellers, confident in gold’s seasonality, in to stymie the rally.
So, once again, I expect gold (and silver) to trade sideways to down going into roughly mid-December, with the beginnings of a rally showing in the latter half of the month; this would coincide with the tax-loss selling decline in the junior mining stocks that is also typical for this time of year.
Add both factors up, and it spells an outstanding buying opportunity for those who have the cash and courage to play it.
I’ve made a habit in recent years of recommending a “mini-portfolio” of resource-rich juniors to take advantage of this market phenomenon.
It’s not unusual to see these kinds of companies — those with large, identified gold and silver resources — double or triple from December lows to early year highs as gold mounts a strong advance in the new year.
While this doesn’t always happen, a strategy like this has the added advantage of less risk, since the share prices are already near annual lows.
While this doesn’t always happen, a strategy like this has the added advantage of less risk, since the share prices are already near annual lows. So what companies do I like for this year’s New Year Rally?
Let’s go with Bluestone Resources (Vancouver: BSR); First Mining Gold (Toronto: FF), GoldMining Inc. (Vancouver: GOLD), Northern Dynasty (Toronto: NDM), Pure Gold Mining (Vancouver: PGM), Revival Gold (Vancouver: RVG), Sabina Gold & Silver (Toronto: SBB) and Silvercorp Metals (Toronto: SVM).
The names in that group are all long-standing recommendations that fit our specifications of large gold and silver resources that give them outstanding leverage to positive moves in the metals.
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