Folks, an unprecedented opportunity is upon us as it pertains to investing in gold penny stocks. Focusing on buying penny stocks for different gold mining companies is a very good idea right now. I felt a real need to write this because it’s something I’ve been doing for a while now, but wasn’t fully comfortable writing about it because I didn’t want people to get the wrong idea about how and why I pick penny stocks, and I didn’t want to come across with a seemingly inconsistent message. In other words, picking penny stocks in a particular sector based on the general economic state of affairs seemed like it had too much of a “fundamentalist” tilt to it, and as all of you know, I am technical analysis trader to the core—I will always believe that the price chart of a stock tells you basically everything you need to know. But there are times when the “signs of the times” are so blaringly obvious to you that you would be a fool to ignore an opportunity that’s staring you right in the face. I feel strongly this way about the gold market in particular—as all of us know, gold has been marching higher and higher for at least a decade now, and as of this writing it has breached the $1,800/oz level, even though the chart has been looking a little sketchy on the overbought side for the near-term. But here’s the deal: The fragile state of our economy is undeniable. The U.S. is well down the road to financial ruin, due to the idiotic monetary policies of current and former Fed chairmen, Bernanke and Greenspan respectively, both of whom believe that every financial problem of a nation can be solved by printing more money. What people don’t understand is that when you print more money and inject more money into circulation, it devalues the purchasing power of the money that’s already in circulation. This, then, causes prices to “rise”, but actually prices are not rising at all—the purchasing power of the Dollar is decreasing. This is what’s happening with gold. Gold has been money for thousands of years, long before there ever was a Dollar, or ANY paper currency for that matter. An ounce of gold now is the same as an ounce of gold was back in 2,500 B.C. The only difference is what type of currency instrument gold is being denominated in, and in our case in the U.S., gold is denominated in Dollars. Well, since the U.S. Dollar is being trashed by the Fed, its purchasing power is eroding, so therefore it requires more Dollars to purchase an ounce of gold than it did 10 years ago. Gold is basically the Dollar Index, but in an inverse fashion—it’s not so much that gold is going up, it’s that the Dollar is going down.
I said all that to say this: Due to the unbelievably horrible economic climate we’re living in worldwide, people are going to begin to pile into gold more & more, because it’s one of the VERY few “safe haven” investments that can preserve your purchasing power over the long haul. Right now the general public is still somewhat under-informed about the importance of having some exposure to gold in your portfolio, but soon, as currencies all around the world begin to fail due to sovereign debt issues, devaluation games that different countries are playing, and so forth, gold is going to be seen as “sound money” again, and when that moment dawns on the market, you will see a mania in gold that will be written about in the history books. At that point, large funds and other major players will begin piling into gold like never before, and there’s just not enough gold being produced or readily available for sale in this world to satisfy the demand that’s going to be coming down the pipe. At that point, most smart money will turn to the next best thing, the gold mining shares. And again, because gold mining companies are a relatively small space in the investment sphere, the amount of money that will flood into this small space will drive the shares of practically all mining companies higher—it’s a case of the rising tide raising all ships. True, not all stocks are created equal, and there’s bound to be some “duds” in the mix no matter what you’re investing in, but in my mind, the opportunity that’s being presented here is a lot like the tech bubble days of the late 90’s. So in my mind, money will flow into the gold penny stocks as well, because when the actual mania hits, greed and fear (the two main drivers of ALL stock market activity) will be at an all-time high, and people will want to snatch up shares of ANY company that has ANYTHING to do with mining gold, exploring for gold, etc., whether or not the fundamentals even make sense. And to the astute chartist that is already on the lookout for stocks under accumulation and so forth, here’s your chance to whip out your trading tools (screeners, etc.) and find gold penny stocks with good-looking charts, and snap them up as quick as you can, as much as you can. If I’m wrong about the coming gold mania, and it never actually comes, you can still bet that if you bought a penny stock with a chart that shows solid accumulation on relatively quiet volume, you may see some fireworks anyway just due to the technical strength of the chart. But as I see it right now, buying gold penny stocks is a VERY good idea, because in my mind this coming mania that I’m speaking of is as good as done.
0 comments:
Post a Comment