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Penny
mining shares are poised for incredible gains in the next 12 - 18 months. But
before we discuss the details we believe it is necessary to lay a foundation
with a brief discussion of the U.S. Dollar and gold.
Seems
the world is fixated on the U.S. Dollar and many see it going substantially
higher. In our opinion, the charts do not support that conclusion and we see
the dollar having topped out and now heading lower.
A
declining U.S. Dollar normally gives gold a strong under tone and therefore,
we see gold now moving up to retest the highs reached in November 2009 of
around $1220. This retest will be shorted lived and gold, we believe, will
surge to highs of well over $2000 within 12 months.
This
monster move in gold will take the junior mining shares substantially higher
as well. The missing factor is mass psychology. Remember back in 2006 when
gold was hitting $725 the shares were on fire with monster gains being
achieved. With gold over $1100 there still has been very little excitement in
the mining shares even though some solid gains are being made. We see
positive mass psychology moving back into the juniors with the potential for
outrageous gains in the entire sector.
Also
in looking at the bigger picture and viewing gold priced in Euros, things
look even better for gold as it is hitting new highs right now giving us a preview
of the action of gold in U.S. Dollars.
The
chart below in gold looks as though we have bottomed and are now hitting
higher.
The
chart on the U.S. Dollar looks to us as though we have topped out in the 80
to 81 range.
We
really like this chart on the Venture Exchange Composite Index which we view
as a proxy for the juniors. The last year has been a nice and steady rise
with the 50 day moving average pointing the direction. Even with the recent
correction phase in gold and the juniors the 50 day moving average has stayed
in an up trend indicating to us, great underlying strength.
Penny
Mining Shares
Having
provided you with a brief background above, let's talk about the penny
stocks.
I'm
sure many of you have invested in some of these penny shares at some time in
your life. We see different definitions of a 'penny stock'. Some think a
penny stock is one that sells for less than $5. Some say $4 and others say
$1.00 or less. For our purposes, we like to keep it simple and say and stock
selling for less than $1.00. In the mining sector, there are probably more
than 1,000 companies with shares selling for less than $1.00.
The
attraction to the penny mining shares is the monster possible gains in the
correct investment environment. These penny shares can go up 500% to a 1,000%
in the blink of an eye. Yes, there is a high risk associated with this sector
but the risk is managed by allocating only a small portion of your investment
dollars to this sector.
If we
are correct in the potential gains in gold we believe this will translate
into a very positive environment for these junior mining shares, the warrants
trading on these juniors and penny shares in general.
The
Chairman of two major mining companies recently said that he sees a mania
phase coming with its epicenter in Asia, China and India specifically.
The
question for each of you is:
- Are you
already in the game? If so, great, just be patient.
- If not, are
you preparing to enter 'the game' and buy a basket of these undervalued
junior mining or energy shares or the long-term warrants or LEAPS
trading on them?
- Are you
going to wait until prices rise substantially and start to peak before
entering 'the game'?
Yes,
most investors will wait and wait and wait and then buy
near the top and then complain that they couldn't make any money and they
will blame the markets, the penny stocks and everyone in the business before
taking responsibility for their own poor judgment and timing.
We
are being given the rare possibility of a once-in-a-lifetime-opportunity, what
will you do with it?
Dudley Baker
PreciousMetalsWarrants
Dudley Baker is the
owner/editor of Precious Metals Warrants, a market data service which
provides you with the details on all mining & energy companies with
warrants trading on the U. S. and Canadian Exchanges.
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