In this update...

Last week we noted how gold stocks begin their rebounds. In our editorial we show the similarities with how this market makes its final low and how the recovery evolves. HUI 210 is our downside target. It aligns perfectly in Fibonacci terms with the 2011 high and 2012 low. In addition it marks a 67% downturn which is exactly what the BGMI did from 1974-1976 before surging nearly nearly 7-fold in just 4 years.

Though we were anticipating a big rebound, we didn't put on any new positions because we felt it would take a few more weeks for the market to begin its recovery. We did get stopped out of more positions though.

Over the past 3.5 years, GDX is down 46%, GDXJ is down 57%, Gold is up 17%, Silver is up 16% and the S&P is up 42%. The Model Portfolio is up 53%. The S&P has crushed precious metals and the gold stocks over the past 3.5 years, yet we've outperformed the S&P using gold stocks. There are three keys: stock picking, using an automatic sell stop and having a minimum of 20% cash at all times in your portfolio. We've made mistakes by not following our own rules. In other words, pick the right stocks and cut your losses quickly (especially with non-core positions).

Below is a chart of the HUI using 220 as a starting point. We combined the 1976, 2000 and 2008 rebounds into one and the result is below. The chart shows the HUI could rebound 50% in 4 months or 81% in 7 months. After that the HUI would go sideways for a while.          
                                      

 

It's true of any market that the biggest gains come immediately following major bottoms. Remember stocks in spring 2009? Sure, bottom fishing can be dangerous but not if you define your risk and manage your portfolio properly. And not if the market is very close to historical extremes. As the gold stocks have declined further it has created more fear even though they are closer to the bottom. The simplest thing to do is, if you are a long-term holder, make sure you have viable companies that will turnaround immediately with the market and probably lead the market higher. (We can help with that).  

We struggled in early 2011 selling Silver too soon. We also didn't do so well in spring 2012. But after the rebound the portfolio was inches from an all-time high at year end 2012. Whether the rebound starts at HUI 210 or 200 or in a week or three weeks, I'm reasonably confident that by early 2014 the portfolio will have reached another new high. Just look at the current news. Its making me feel more and more comfortable that precious metals will be back in vogue sooner rather than later. And I love the fact that we've decoupled (in the long-term) from the S&P 500. That is going to be a great thing on the long run.   

The huge money is made by following long-term trends and getting on board at opportune times. For the gold and silver stocks, we are on the cusp of those times. Consider a subscription as you'll get our 46-page report on US equities, emerging markets, commodities and bonds, our 21-page report on our top 5 growth oriented producers, a report on our favorite explorers & developers (which will be updated soon) and much more. 

Wishing you good health and profits,

-Jordan

Disclaimer: Sponsor Companies are paid sponsor companies of TheDailyGold.com website and this free newsletter. Do not construe sponsorship with a recommendation. The author of this newsletter is not a registered investment advisor. This newsletter is intended for informational and educational purposes only and should not be considered personalized and individualized investment advice. Investment in the precious metals sector contains significant risks. You should consult with an investment advisor and due your own due diligence. This email may contain certain forward looking statements which are subject to risks, uncertainties and a multitude of factors that can cause results and outcomes to differ materially from those discussed herein.