Last week's Maven Letter had two portfolio suggestions. I recommended buying a gold explorer that just got drills turning on a never-before-drilled target that offers all kinds of prospective evidence. Then I suggested selling a small miner that has outperformed expectations and its peers, but where signs of changing momentum meant it was time to take our 300% gains and move on.
The editorial, included below, looked at the fear that pushed gold up through US$1,300 per oz. and the reasons why gold will likely fall back again before resuming its rally.
I hope you had a good Monday!
Rising on Fear (from Nov 2nd, 2016)
Gold just broke back up through US$1,300 per oz. The metal’s strength over the last few days shows gold doing its usual duty: acting as a safe haven.
And the needs for safety are many:
Those are some of the reasons to seek safety. The US election is another and the list goes on.
In this moment, it is easy to want to believe the gold rally of the last two weeks is the start of the next leg up, and I will admit that breaking up through US$1,300 per oz. is significant. However, do not underestimate the impact of the December Fed meeting.
Today we got further evidence that Janet Yellen will raise in December: in its November statement, the Federal Open Market Committee focused on job gains, rising household spending, and the idea that the economy is going to just keep chugging along. “The Committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress towards its objectives.”
In other words: we couldn’t hike this close to the election (and nobody expected us to anyway) but we damn well will in December. Consider yourselves warned.
Gold will decline going into that meeting. Two weeks ago I said most gold corrections following a sharp gain are W shaped. The current lift is looking like the ascent to the middle peak. Another slide into the December rate meeting would take us down to the second low.
And then we will be good to go.
The W is playing out. I have several stocks to recommend before the gold market really goes again. Right now election uncertainty is driving scared investors into gold. That’s helping in the moment, but the fundamentals don’t care whether Donald or Hilary wins. Gold is set to go either way.
In her letter, Resource Maven explains what she is buying and selling, and why. Maven has bought into several of the markets best - performing stocks well ahead of the curve. She regularly identifies exciting new exploration opportunities and manages the inherent risk by selling some into speculative gains. And the mine builder and operator stocks that form the basis of the portfolio give strong, ongoing leverage to the rising prices of gold and silver. She has your precious metal bases covered.
This note is to thank you SO MUCH for all great work that you do. I know I pay for my subscription but honestly feel you give incredible value!
In particular I’m very happy with your recommendation on Troilus which I wouldn’t have known about had you not recommended purchase.
"Gwen - I just analyzed our returns for the past month. We had a 36.7% return on our portfolio in one month! Thank you so much for your excellent, thoughtful and timely guidance. 12 of the 18 stocks in my portfolio were recommended by you. 4 were recommended by other MIF letter writers and 1 each by Eric Sprott and Rick Rule. Yes it was a good month for precious metals - Gold was up $50 and Silver $3.90 - but “our" portfolio performance more than doubled the 16% of the GDXJ"