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Geithner Inadvertently Signals Gold Going Much
Higher, What to Buy Now |
By Andrew Mickey,
Q1 Publishing
The Obama administration dispatched high-level members
back onto the Sunday morning talk show circuit following a few bits of
positive economic news.
On Thursday, it was announced
GDP is back on the climb. That was followed with the claim one million
jobs were created or saved due to stimulus spending. And that’s right on
pace to meet the goal (imagine that?). So the best marketers don’t want to
let an opportunity to take credit for the free exchange of goods and
services between individuals.
But on NBC’s Meet the
Press, Treasury Secretary Geithner may have inadvertently signaled the
gold bull market has a long way to run. In the interview, Geithner said,
“[The recent positive economic news] shows that -- when you act with force
-- you can stabilize a crisis like this.”
Force…Force is good!?!
Cranking up the printing
press, nationalizing major industries, and increasing taxes (healthcare,
cap and trade, VAT, and whatever else happens after 2010 elections) will,
in the long run, go a long way to preventing a genuine recovery.
But this is part of the
process. It’s training the monetary managers to make terrible mistakes,
yet not realize they were mistakes. They’re learning the wrong lessons.
And when the next downturn comes, whatever the catalyst, they’ll respond
with even more “force.”
And it will be that move that
pushes gold to much higher levels. In the interim, anticipation of that
eventuality will help keep gold prices propped up.
That’s why now, with the
markets showing their greatest weakness in months, gold stocks getting hit
10% to 30% across the board is a great time to continue getting in place
for the next “forceful” response. Here are the two best spots to start
putting your dollars to work in gold.
Exploration is Back
One of the hardest hit
sectors during the credit crunch were the gold exploration companies.
Their cash-draining business models were left for dead as the gold price
fell, institutional investors saved cash to meet redemptions, and hedge
funds deleveraged.
That was over a year ago
though and a lot has changed. Gold is setting new highs and money is
flowing back into the exploration market. More importantly though, there
have been some major discoveries in the past few months which will bring
even more speculators back into the market.
The biggest discovery of them
all has been Ventana Gold (TSX:VEN). It’s a Colombian gold explorer
which has leapt from discovery to development in a few short months.
Since we said Ventana was
“the next bonanza discovery” and that it “struck gold – lots of gold!” in
our
free gold stock report a little more than six months ago, its shares
have climbed more than 700%. And the company now counts mining
entrepreneur Ross Beatty and Brazil’s richest man, Eike Batiste, among its
shareholders. Both now own more than 10% of outstanding Ventana shares.
It has gone from unknown
penny stock with a small cash position and an aggressive exploration
program to a bona fide discovery with a market cap of more than $800
million which just closed a $40 million financing deal.
This is the type of discovery
and massive gain (Ventana went from 20 cents per share to $10 per share in
about a year) which sparks the greed necessary to help keep the money
flowing into gold exploration stocks.
Of course, a lot of things
have to come together before gold exploration really gets going. The
combination of high gold prices, a rising stock market (increasing risk
appetite), and a couple of major new gold discoveries have made it much
more enticing though. Right now, there are still a lot of small
exploration companies trading for less than $20 per ounce of gold in the
ground and they were fetching as much as $50 per ounce of gold in the
ground two years ago.
It’s not just the
high-risk/high-reward gold exploration stock sector getting some
attention; junior gold stocks are still in the relatively early stages of
recovery too and offer exceptional value.
Junior Gold Stocks: 60%
Undervalued
The other gold sector which
just got a lot more attractive in the past week has been junior gold
stocks.
A quick look at the McEwen
Junior Gold Index shows it all. The index tracks junior gold stocks that
are actively traded (minimum $50,000 average daily trading volume) and
have minimum market caps of $50 million.
Since November 2007 when the
index was hitting all-time highs, gold prices have climbed 30% and the
junior gold index is down 60%.
That’s just half the story
though. Their outlook gets even brighter when you look at the big gold
stocks. The Philly Gold/Silver Index (XAU), which tracks the major gold
and silver miners, is down only 15% from its November 2007 highs.
This is a really simple one.
Gold is up 30%, major gold stocks are down 15%, and junior gold stocks are
down 60%. Which one would you like to buy now?
If you like gold, you have to
love the juniors.
The Trend is Still Up
Those are the best two
opportunities in gold right now and this is as good a time as ever to
start reloading on gold stocks.
You can practically see the
confidence of administration and Federal Reserve officials growing by the
day. They are now trained and will know exactly what to do next
time. Regretfully, that move will likely be what propels gold prices to
the next level.
It’s no wonder that while the
government claiming “success” and “back from the brink” talk abounds, some
of the world’s best investors are loading up on gold and gold stocks.
Hedge fund manager John Paulson has led the headlines, but the ranks of
newly minted “gold bugs” now includes top-performing investment managers
Steve Leuthold, and many others.
They see what’s coming and I
hope you do to. Now, you just have to maximize the opportunity.
Editor’s Note:
Gold is back on the rise and there’s never been a better time to get
involved. In his latest update, Andrew reveals the 5 best gold investments
to buy now. Early readers have had the chance to earn total gains of
1646% while gold prices rose a mere 13%.
Now, we’re looking at a
situation which could deliver even more. Learn more about how to get your
complimentary copy by
following this link.
Good investing,
Andrew Mickey
Chief Investment Strategist, Q1
Publishing
