Investors Should Take Advantage Of Gold's Summer Doldrums - Mickey Fulp
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(Kitco News) - Despite resilient gold and silver prices, the summer doldrums have taken a toll on precious-metals equities as the marketplace deals with unprecedented low volume; however, one analyst says that now is a great time to buy.
Mickey Fulp, creator of the Mercenary Geologist investor newsletter, noted in a telephone interview with Kitco News that spot gold, last trading around $1,262 an ounce, is up almost 10% since the start of the year. However, mining equities have seen little benefit from the rally; the TSX Venture Composite Index is relatively flat on the year.
Not only has the index been unable to attract capital but momentum in the sector is weak as trading volume has fallen to unprecedented levels. Fulp pointed out that the Venture Index’s average daily volume last month was less than 50 million shares.
“Volumes are off by 50% compared to historic norm,” he said.
He added that this trend could continue through the rest of the summer.
“For me, this market has got no hope at all until after Labor Day,” he said. “After Labor Day, seasonal factors should help gold and the miners. Until gold busts out above $1,300, there is not going be a lot of interest in the resource sector.”
However, despite his short-term outlook, Fulp said he is optimistic on the precious metal and the resource sector, and now could be the time to buy stocks at a discount.
“I think the lows seen in July will stand as the summer-doldrums lows,” he said. “Venture Exchange stocks have been beaten up so much that you can go and pick up some really good companies at relatively low valuations.”
While the headline gold prices will drive sentiment in the marketplace, Fulp said that he is looking for companies that have diversified metals projects. In particular, he said that he likes copper and zinc projects.
“I just like the long-term fundamentals of these metals. I look at copper and zinc has having strong upside potential,” he said.
While there are a lot of opportunities in today’s lackluster marketplace, Fulp warned that investors still need to show some discipline in their research. He said that important to look at the companies share structure and what kind of track record and the experience the management team has. However, he added that the first priority would be to evaluate the project itself.“You need to find a project in the right jurisdiction that has the potential to build a bigger resource, develop into a mine or get bought by a major,” he said.