Is It Time to Buy Gold Stocks?

Sell the tech stocks. Buy the gold miners.

This simple formula is our moneymaking advice for this year.

Not that we have any new insight into technology…nor any way of knowing what is ahead for gold or the companies that dig it out of the ground. Not at all. Our advice is based on ignorance, not knowledge. Not knowing what is ahead, we revert to an old rule: Buy low. Sell high.

What’s high? Open any newspaper to its financial pages and you will have your answer. Amazon. LinkedIn. Twitter. Zillow. Nest. Facebook. Google. Choose almost any internet-related company and you will find a good short sale candidate. Amazon traded at a P/E over 1,000 the last time we looked. LinkedIn was around 800.

As for most of the internet companies, there is no need to look. You will find plenty of P but no E to divide into it. Most of these companies do not make money; they lose it. Will they survive the year without crashing?

We don’t know, but beware a bear market. When the market turns south, the companies that led it up will lead it down. Those that rose the highest will sink the lowest. Take a look at a chart of the S&P. You will see what appears to be a ‘double top’. Does this mean the entire market – with the techs leading the way – is ready to take a dive? Maybe.

Last year, companies that mined the World Wide Web soared…but those that got their hands dirty slumped badly. Gold went down about 30%…some gold stocks were cut in half.

As might have been expected, this produced an anticipation of further losses. Almost every account published at the end of the year told us that gold was destined to go down further.

Little hope of glitter for gold in 2014‘, said the Financial Times on December 28th.

Rebound unlikely…‘ continued the report.

Gold bulls lose faith in metal’s reputation as a store of value‘, opined Gregory Meyer on January 4.

Very, very few analysts are bullish gold…‘ said Michael McGlone, US director at ETF holdings.

The deck is pretty much stacked against gold next year‘, added Michael Klapwijk, from Precious Metals Insights in Hong Kong. He predicted an average price of $1,170 for 2014. Then, the metal traded at $1,200. Now, it trades around the $1,240 mark.

So far this year, gold has defied the pundits. So have the mining stocks. After putting in ‘double bottoms’ last year, both gold and gold miners seem to be moving up.

If anyone knows what 2014 will bring he does not work here at the The Markets and Money. Instead, we – poor, ignorant humans – must stick to the basic principles of sound investing. When something is very expensive, we sell it. When it is very cheap, we buy it – that is all ye know on earth, and all ye need to know.

Regards,

Bill Bonner
for Markets and Money

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Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities.

Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and MoneyDice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill's daily reckonings from more than a decade: 1999-2010. 

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10 Comments on "Is It Time to Buy Gold Stocks?"

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Lachlan
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I bought some small cap gold stocks seeing they were beaten down by many multiples over a very long period of years. Also some mid-large miners. Since then they have been hammered far lower. I did not sell since that was not the plan from the beginning. Buy low, sell lower? No. So I wait now to see what the future holds however…the upside potential appears dramatic to say the least.

Lachlan
Guest

I bought some small cap gold stocks seeing they were beaten down by many multiples over a very long period of years. Also some mid-large miners. Since then they have been hammered far lower. I did not sell since that was not the plan from the beginning. Buy low, sell lower? No. So I wait now to see what the future holds however…the upside potential appears dramatic to say the least.

Sandy
Guest

Part of the Gold problem is that one of the biggest buyers of gold – India – has clamped heavy import duties on gold imports into India. This happened sometime early-to mid last year to preserve forex and to contain the problematic current account deficit, thus discouraging wholesome purchase of the yellow metal

The rumor goes the picture is going to change and duties will be relieved about mid-year 2014. Till then it is anybody’s guess if gold prices will move higher at least from this perspective

Sandy
Guest

Part of the Gold problem is that one of the biggest buyers of gold – India – has clamped heavy import duties on gold imports into India. This happened sometime early-to mid last year to preserve forex and to contain the problematic current account deficit, thus discouraging wholesome purchase of the yellow metal

The rumor goes the picture is going to change and duties will be relieved about mid-year 2014. Till then it is anybody’s guess if gold prices will move higher at least from this perspective

Warren
Guest

Well, I don’t have any gold miners in my portfolio currently, but I have been adding exchange-traded gold funds and physical gold.

What are the advantages of buying gold miners over exchange-traded funds and physical gold?

Warren
Guest

Well, I don’t have any gold miners in my portfolio currently, but I have been adding exchange-traded gold funds and physical gold.

What are the advantages of buying gold miners over exchange-traded funds and physical gold?

Lachlan
Guest

Warren: higher risk and far higher upside. I call them “my gambles”.

Lachlan
Guest

Warren: higher risk and far higher upside. I call them “my gambles”.

Lachlan
Guest

That was not financial advice, just my opinion…ie. I’m not responsible though if you lose your shirt ;)

Lachlan
Guest

That was not financial advice, just my opinion…ie. I’m not responsible though if you lose your shirt ;)

wpDiscuz
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