$BPGDM: Is this The Bottom For Gold Stocks For And Gold Mining Stocks
Wed, Apr 10, 2013
Its Best Time To Buy Gold Mining Stocks
The last few weeks have not been kind to gold mining stock investors. The price of gold shed more than $80 in about a week. The fall sent gold mining stocks tumbling about 10% on average. And the latest downswing was just more of the same as it capped off a two years long slide.
It was ugly but not surprising for Contrarian Insights readers. We’ve watched gold consistently rise each year for more than 10 years straight. A painful correction was overdue.
That’s the bad news for those still invested in gold. The good news is that last week may have been the final bottom in the current gold correction.
You see, the most important factor that drives any stock or market sector is sentiment. Gold is no different.
We liken these up and down cycles to the trust investors have with a stock or stock market sector. When a stock or sector is rising, investors trust it to continue to rise. But when a stock or sector takes a downturn, that trust is quickly shattered. The trust is easily broke and it takes a long time to regain that trust.
That’s why we say stocks go up stairs and down elevators and why we don’t call bottoms and buy into downtrends.
That describes exactly what’s happening in Gold And Gold Stocks Right Now. The trust investors had in gold and gold stocks has been building for a decade. That trust has evaporated in a little over a year’s time.
Nowhere is this trend more pronounced than the sentiment surrounding gold stocks.
The Gold Miners Bullish Percent Index ($BPGDM) tracks the sentiment of investors in gold mining stocks.
The chart below shows gold stock investor sentiment is hitting new lows:
As you can see, investor sentiment in gold mining stocks has hit its lowest point in two years.
This is significant because it shows there aren’t many “hot money” traders and investors looking at gold anymore. They’ve moved on.
It also shows sentiment is at an extreme low point. Now that doesn’t mean gold stocks can go down further. They can. But there’s a lot less risk and more capital appreciation potential when they were hitting new highs just a couple years ago.
So is now the bottom in gold and gold stocks?
Frankly, only time will tell. Nobody really knows. But we do know a few things from investing successfully over the years which we can apply to investing in gold stocks right now.
As contrarian investors know, the lowest-risk/highest-reward times to buy any asset are when no one wants it. Right now no one wants gold stocks.
Executive Editor, Contrarian Insights
The Group of Big Investors in United States.
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