Jordan Roy-Byrne warns that judging by past events gold is likely to be a bit wobbly in the wake of the correction over the last few days. Thus we have seen gold fall from a high of $2067 to a low point of $1885-ish, a recovery back over $2000 and now we are wobbling around $1990 per ounce. But in the greater scheme of things, given that we have risen from around $1560 per ounce this year, these wobbles don’t add up to much. My Montana log-cabin stands firm. So in the context of a c. 27% rise this year, although gold is wobbling the wobbles are insignificant in my view. Gold shares, on the other hand, have been far wobblier...
GDX (AMEX - GDX), the ETF of gold-producing majors, started the year at under $30, topped out at $45 and slipped back to $39 and has recovered to $42.6. GDXJ, its “junior” counterpart (which is not so junior as its tenth largest holding would still make the FTSE100) started the year at around $42, topped out at $65 before falling back to $55 and now stands at $60.5. Gold shares are rather more volatile. Whilst this correction plays out, it is well worth watching gold shares that you want to pick up as there will be bargains to be had. In that context, my purchase last week of Malcolm Burne’s Golden Prospect Precious Metals (GPM) leaves me feeling extremely clever: having spotted a hefty fall I piled in at 57.2p and the shares are now 68.6p. It is almost tempting to cash in on a very quick profit, but in my view the rules of the game are currently to buy on dips and just hold. So hold I will. The same applies to my unit trust holdings of BlackRock Gold & General and Junior Gold – the latter of which is also nicely exposed to silver. Indeed, if the correction throws up a chance to increase my holding in Junior Gold I will surely take it, for it is at the junior end of the market where we will see the biggest gainers as the gold bull-market plays out. But, as per previous warnings, Junior Gold is ultra-sensitive to the gold market, massively outperforming when times are good and the opposite when times are bad.
I am still keeping an eye on fully-listed Centamin (CEY) as its shares are still hanging around the £2 mark and a small slippage below that point would see me reach for the buying boots. In the meantime I can look forward to the 6 US cent dividend next month, which works out at around 4.5p per share…..yum-yum. My other formal tip, AIM-listed Ariana Resources (AAU) has also been wobbling – having slipped below 5p briefly (sadly I missed my chance) they are now up at 5.55p. My intention is to offload a few more above 6p, and with Q1 numbers due any day as well as further news on the corporate deal with Ozaltin involving $30 million and a special dividend there is plenty to look forward to. Any wobble below 5p should certainly be bought in my view, but as my own holding will again be far too big at 6p I will be offloading around 10% at that point. Ariana is a great company, but hard experience has taught me that you certainly can have too much of a good thing on the AIM Casino.
As for GDX and GDXJ, the upside potentially on offer with GDXJ means a bit more slippage will see me reaching for my buying boots here too. Its record high is at $82, the high point reached during the last gold bull-market and $82 is also Jordan Roy-Byrne’s measured upside based on his technical (and historical) analysis. At c. $60 the upside is very tempting. At $55 the attraction would be irresistible. In short, these corrections - which will come and go during the bull cycle - should be seen as buying opportunities, either to get in on a share you might have missed, to increase exposure to your favourite plays or to pick up bargains as I seem to have done with Golden Prospect (at least so far!). But it is important to have a war chest ready and waiting, as these corrections are not always as predictable as the one just gone. So stick to your targets: take a bit of profit on the way up – then you’ll be selling when the world is buying (so getting a good price) and topping up the war-chest so you can buy when everyone is panic-selling. And while central banks keep on rolling those printing presses and governments continue to harvest the magic money tree, we can keep on playing this game for a good while yet.
Filed under: gold, Reach4Entertainment, Amanda Bates, Xtract Resources, Immedia Group, Fulham Shore
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