Important Update: Precious Metal Market
As I have said in one of my previous posts, you should always heed the words from the smart people. One of the very smart people Boy Hoye that I follow has come out quite bullish on gold right at the end of the year 2006. I advise you to read his full article here.
Here is some excerpts from his article:
….This study concludes that the real price has set a cyclical bottom in anticipation of a lengthy new bull market. Within this, gold stocks should outperform the bullion price as the exploration sector becomes the equivalent of the junior tech stocks in the mid-1990s….
I contacted their firm once. Subscription to their reports will cost upward of some $1000, and if you are multi-millionaire or managing tens or hundreds of millions, they will charge more based on your portfolio size. It’s very very expensive, and they have all the right to keep their name as “Institutional Investors”. Truly suitable for big investors.
I’ve read ALL of their free articles on their site. Consider the latest article on gold as a great gift from them. If you have time, you should read all of those other articles too. They provide such great insights into investing. Their May 11, 2006 article called the top in gold/silver about 3 weeks in advance. It was an excellent piece of work. I wish I was reading the articles back then. Please note that I did mention that he does not seem to believe in the energy and commodity super-cycle. It makes me kind of wary, but no one can be right all the time nor forever.
So how to play in this gold market? Bob did say that exploration stocks are the way to go. But they are the MOST volatile and illiquid of all also. I have an article on how to invest in precious metals. In short, you could buy GDX which tracks HUI index or BGEIX which tracks XAU, or any other PM funds (not the one by Vanguard VGPMX which has sufficient amount of energy-related stuffs). I would also suggest UNWPX, but it seems to have higher cash than usual closing Sep 06. By the way, don’t be alarmed by the big drop of these precious metal mutual funds at the end of year 2006. In recent years, these PM funds have been paying close to 10% or more in short-term, long term capital gains, and/or dividends at the end of calendar year. Lots of actions going on obviously.
Please do your own due diligence before investing. Read a lot more from other websites before you do any investing. And don’t be greedy. Diversify. PM can swing by some 50+% from peak to bottom. You don’t want to get burned.
As for myself, I am always “conservative”. I won’t be scooping up much at all without some pullback, since I’ve got a handful of PM stocks already.
As of now, I move my neutral/slightly bearish outlook on gold to neutral/slightly bullish stance. I’m still a little worried about a potential top in stock coinciding with a short-term bottom in PM in the upcoming months.