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Position Yourself For Fall Fireworks

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Investors are all too familiar with the KABOOM in precious metals prices in the fall of 2011 and the echo that’s still reverberating. Three years later Jeb Handwerger, founder ofGoldStockTrades.com, believes it could be the broad market’s turn—and soon. In this interview with The Gold Report, Handwerger explains why it’s important to position yourself for some fall fireworks and suggests some stocks with booming fundamentals.

The Gold Report: On June 11, onGoldStockTrades.com you wrote, “Some of my charts are showing a potential reversal in the precious metals.” What are those charts telling you in late July?

Jeb Handwerger: In early June it appeared that the junior miners—tracked by the Market Vectors Junior Gold Miners ETF (GDXJ), which I use as a proxy for the junior gold miners—was making an inverse head-and-shoulders pattern between $34 and $35. Then the junior miners had a very strong rally in June, with an intraday high of $46. Now we’re forming what I believe is a potential crossing of the 50-day and the 200-day moving averages—a golden cross. This could signal the final turn from a secular bear market to the beginning of an uptrend.

TGR: Is gold close to a golden cross?

JH: Yes, it did in early July and I believe it will hold. Gold is now trading below both the three-year and five-year moving average. That’s very rare. The last time we saw the gold price move below the long-term moving averages was in the 1999–2001 bear market. If you can get gold at a discount, then it’s a great opportunity. The greatest opportunity may be the Philadelphia Gold and Silver Index (XAU), an index of 16 gold miners.

The miners are usually closely correlated to gold, but are much more volatile. For instance, in the 2008–2009 correction we saw the Philadelphia Gold and Silver Index decline from 200 to below 80—more than a 50% decline—even though gold only corrected from $1,000 per ounce ($1,000/oz) to $700/oz.

Now we’re seeing higher lows in the $1,200/oz range and the Philadelphia Gold and Silver Index is trading around $100. If gold moves up even $50 or $100/oz, the miners and the index could have much larger percentage gains, so the leverage opportunity is really in the miners. The miners outperformed gold by a wide margin from 2000–2008.

TGR: Should investors buy the ETF or the miners?

(…)Click here to continue reading the original ETFDailyNews.com article: Position Yourself For Fall Fireworks [Newmont Mining Corp, Market Vectors Junior Gold Miners ETF]
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Source: http://etfdailynews.com/2014/08/11/position-yourself-for-fall-fireworks/


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