Monday, August 22, 2011

Gold's overbought and Gold Stocks are undervalued

Although I wish I had been holding more gold etf's (PHYS and GTU, not the GLD scam) in the last couple of months, I am still scraping along and beating the market by 6%.  Probably nothing to brag about considering how crappy the market is these days (Dow, S&P, and NAZ), but I'm still beating it.  Down about 3% this year, but I am coming on strong lately.

I have to believe that the play here is to invest in the miners right now rather than gold.  Although I do have my favorite juniors that I am playing (by the way EAS.V, BYV.V, and SSP.V are very oversold right now, and are looking good Billy Ray!), I am sticking with GDX, GDXJ, and SIL lately.  By buying these it helps keep the transaction costs down in the trading accounts.

GDXJ and SIL probably hold more upside potential than GDX, but also carry more risk.  Here's some charts on the oversold juniors I mentioned above.

EAS.V - Positive Divergence on MACD - New low has not resulted in a lower MACD.  Typically this signals a change of direction.

BYV.V - This stock has filled that massive gap from June and is ready to start rallying again.  Miner is next to a large deposit, and will hopefully get a buyout offer at some point.  They just keep drilling and finding more gold.

SSP.V - Looks like a triple bottom to me.  MACD looking to cross to the upside very soon.

Once again, if you are looking to get back into the PM's, I'd be a buyer of silver stocks or gold stocks at this point.  The ratios suggest that these hold a better entry point than gold or silver at this point.

A few other quick thoughts.  Has anyone noticed what the dollar has not done during this market meltdown? It has not rallied like it did in 2008.  In 2008, treasuries and the dollar were the safe havens.  This time, it's been treasuries and gold.  Silver to a lesser extent, but it looks like silver may be making a move back towards the $50 high in the next week to 2 weeks. 

I mean with the Euro soon to be going down the drain, the dollar can't even rally in a market crisis?  That can't be good for the dollar.  Hoping gold and silver stocks won't crash like in 2008, but you need to watch closely and take profits when they present themselves.

First goal - beating the market in 2011. So far so good.
Second goal - positive return.  Working on it, and hope to be there soon.
Third goal - Don't lose capital in massive downdrafts.  Good so far, but be vigilant.

Until the next time...

Fiat Doubter


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