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Gold Stocks Are Turning Up

Friday April 13, 2012 14:17

Something funny is happening in the mining stock world.  Gold and gold stocks have been in a correction since last September and it has gone on for so long that many people are giving up on them just as it appears that this correction may be coming to an end.

Just a few days ago the well respected commentator Dennis Gartman declared on CNBC that the gold bear market that began ten years ago is over.  His reasoning - the recent FOMC minutes release proves that “the game has changed.”

He is not the only one negative on gold.  Jonathan Hoenig, who appears on FOX News as the "capitalist pig" also warned yesterday that gold would continue to fall and punish gold bugs.

But in reality this looks to me the time to be buying mining stocks and I just put my money where my mouth is by buying back into a big basket of gold stocks Wednesday morning.

And yesterday gold stocks did indeed turn up off of their recent lows.

On a short-term basis yesterday's move came after gold stocks became oversold on a daily chart and most of them time when they get in this position and move like this they at least rally for a few days, but I think this rally is going to end up being an important bottom, which would make buying now a great investment.

I it is the long-term chart that makes me think this.

Over the past ten years there have been five times in which the HUI and XAU gold stock indices have fallen below their long-term 200-day Bollinger Bands.  Each of these drops have made for fantastic buy points in the gold secular bull market.

Unless Dennis Gartman and the other bears are right then this moment in time will also mark another wonderful buy point in gold stocks - the kind that only comes around a couple of years.

Now if you are familiar with my writings and my book Strategic Stock Trading this may look to be a different way of buying stocks than I normally advocate, because I often talk about buying stocks at the end of a big consolidation phase and before a big bull run starts when the long-term 200-day Bollinger Bands get very narrow.

This is a good way to time a new bull run.

But you can also use these long-term bands as major buy points when a market falls below them to accumulate positions.  That is what I'm advocating to do with mining shares now and am still doing myself.

By Michael Swanson
For more from Mike Swanson go to his website www.wallstreetwindow.com

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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