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It has been
just one month since I stated on King World
News that the gold mining stocks had begun
a new bull market. The XAU Index of mining stocks closed that day at a
new record high of 206.79. It closed yesterday at 220.17, up 6.5% over
this period.
That is a
tremendous gain in such a short period of time. But do not let that
spectacular performance keep you from buying and accumulating my recommended mining stocks.
They remain good value, as is clear from the following chart that measures
the XAU Index in terms of gold.
What the
above chart is saying is that:
1) The last sell signal in the mining stocks was given in early 1997, which
coincides with the huge bubble surrounding Bre-X.
Since then, the mining stocks have been closer to the buying area, and not
even near the selling area. This means that the best strategy over this
period is the one I have been recommending, namely, pursuing the ongoing
accumulation of mining stocks because you are buying stocks that are
undervalued.
2) Gold has
outperformed the XAU Index this decade, which is another way of saying that
the mining stocks were in a bear market. Their bear market began with
the collapse of Bre-X and ended with the collapse
of Lehman Brothers. The mining stocks suffered badly in the liquidity
squeeze arising in the aftermath of the Lehman collapse, and we saw a classic
selling climax. The mining stocks were driven to a low level never
before experienced.
3) Since
the 2008 selling climax, the XAU Index has been climbing. But
importantly, as the above chart illustrates, the XAU Index is still well
within the buying area. Therefore, the gold mining stocks are still
cheap, and so are the silver stocks, some of which are included in the XAU
Index.
I therefore
continue to recommend the ongoing accumulation of mining stocks because you
are buying stocks that are undervalued. Those values will eventually be
realized and rewarded with higher prices as the precious metals make new
highs, which in turn will continue to draw more money into the sector.
The bull
market in mining stocks is barely one month old. I expect the XAU Index
will be moving higher for three to five more years.
James Turk
Free Gold Money
Report
Article originally published by the Free
Gold Money Report.
James Turk is the
founder of the Free Gold Money Report and of GoldMoney.com. He is also the
co-author of The Coming Collapse of the Dollar (www.dollarcollapse.com).. Copyright
© by James Turk. All rights
reserved.
Copyright © 2008. All rights reserved.
Edited by James Turk
This material is prepared for general circulation and may not have
regard to the particular circumstances or needs of any specific person who
reads it. The information contained in this report has been compiled from
sources believed to be reliable, but no representations or warranty, express
or implied, is made as to its accuracy, completeness or correctness. All
opinions and estimates contained in this report reflect the writer's
judgement as of the date of this report, are subject to change without notice
and are provided in good faith but without legal responsibility.
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