Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Look at These Big Capital Gains in Gold and Silver Stocks

Monday, September 24th, 2012
By for Profit Confidential

Big Capital Gains in Gold and Silver StocksGold and silver prices are going up, and it’s a great time to be back in the precious metals sector. Gold and silver stocks corrected significantly, along with spot prices this year, and a lot of value developed among the best stocks in the sector. Both gold and silver prices were due for a correction; gold more so than silver.

Gold and silver stocks corrected significantly more than the percentage change in spot prices and then, like magic, the entire sector turned around on a dime, due to the market’s hope for a third round of quantitative easing (QE3). And while the global economic reality is beginning to set into the minds of investors, the fundamentals for both gold and silver continue to be excellent.

No matter what happens to the U.S. economy in 2013, the U.S. dollar is very likely to be under continued pressure because of all the fiscal headwinds. While no policymaker will admit it, a weaker U.S. dollar is exactly what the Federal Reserve wants, in the hope of stimulating exports and keeping liquidity high. And, as we all know, a weaker U.S. dollar compared to other benchmark currencies is a boon to gold and silver prices. The U.S. dollar outlook is the biggest near-term catalyst for higher precious metal prices. There are so many other fundamental factors that favor $2,000 gold and $40.00 silver, and Wall Street is starting to jump on the bandwagon.

We just had a great new entry point for new positions in gold and silver stocks this past summer; countless good mining companies hit 52-week lows, as the entire group was virtually abandoned by institutional investors. (See “Gold Stocks Becoming a Great Value in This Market.”) The stock chart below illustrates the sharp turnaround:

Silver Wheaton Corporation Chart

Chart courtesy of www.StockCharts.com

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The recent price reversal in gold and silver stocks is a good reminder that resource stocks are an attractive group for traders, and you really can buy low and sell high if you get the timing right. Below is the stock chart of IAMGOLD Corporation (NYSE/IAG), a gold company that recently experienced a 50% capital gain since July, based on the market’s new positive sentiment:

IAMGOLD Corp. Chart

Chart courtesy of www.StockCharts.com

Today’s stock market has an underlying strength to it, and there’s a different tone in the marketplace. Investors are buying stocks at this time based on renewed hope for the future. Hope that QE3 will somehow work; hope that things won’t get worse; and hope that corporations can squeeze out some earnings growth. When this party ends, I believe gold and silver will stand-alone with strong price resilience. Gold and silver prices are going up.

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Mitchell Clark - Equity Markets Specialist, Financial AdvisorMitchell Clark, B. Comm. is a Senior Editor at Lombardi Financial specializing in large- and micro-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Income for Life and Micro-Cap Reporter. Mitchell, who has been with Lombardi Financial for 17 years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. Add Mitchell Clark to your Google+ circles