In my publication, "Gold Stock Adviser," I have been very conservative.
Despite gold’s recent huge run and my long term bullish outlook on gold, we have been awaiting a pullback.
Many will see this recent 25 percent pullback in the price of many gold stocks as a recent surprise.
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Not the readers of our publication.
A few months ago, I pointed out that gold stocks saw pullbacks of 20 percent or more two to three times a year on average.
You must understand that while the potential for gains in gold stocks are great, they are also very volatile — much more volatile than the rest of the market.
However, if you are patient, wait for these pullbacks and for the price of the stocks to come down and buy on weakness — you can make money in the gold market.
I think we are now nearing the end of this gold correction.
The price of gold itself did not break down with the stocks in January.
There seems to be huge support for gold in the $1070 range.
This could be an important nonconfirmation.
Such a nonconfirmation occurred in the spring of 2005, when in May 2005, the stocks broke down but the metal did not confirm.
The gold stocks soared by nearly 150 percent in the year that followed.
In addition, when pricing the gold stocks compared to the metal, you will find that they are also trading at the cheapest levels since April 2009, after which the HUI Index (an index of gold stocks) rallied more than 50 percent in the eight months that followed.
All indicators are pointing to us being at, or near, a bottom for gold stocks.
As gold stocks are more volatile than other asset classes, the next move upward could be explosive, to say the least.
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