Buying gold mining stocks
When you consider to buy gold mining stocks the most important question will be when. Just like regular stocks gold mining stocks are also subject to bull- and bear markets. In their price movement they follow the price of gold closely. Since 1942 the gold price has had 7 bear markets and 7 bull markets.
The last 2 bear markets were between 1996 and 2000 and from 2011 until 2016. The last 2 bull markets were from 2008 until 2011 and from 2016 up to now. Yes, you might doubt this, but the gold price today is moving in a bull market. There is a huge difference in the way bull markets proceed for gold mining stocks compared to regular stocks.
A bull market in gold starts with a slight recovery of the gold price level and from then on it moves sideways. This sideway move may last between 1 up to 4 years as history shows. After that momentum kicks in. A rapid increase in the gold price follows which may last 1 to 3 years. In this last phase the price of gold may double or quadruple.
Gold mining stocks will rise 3 times (large gold miners) up to 20 times (speculative smaller gold miners) harder than the gold price itself. During a bull market the share prices of gold miners may offer huge returns depending on the rise of the gold price and the company structure of the gold miner.
So a gold mining stock may see its worth go up like a rocket within a few years. That is how things turned out since the end of World War 2. As you know results from the past are no guarantee for the future. But I do not see why things would be different this time.
What is important though is exiting at the right moment. Whenever the bull market is over it is followed by a steep bear market. When to buy gold mining stocks? Well, right now!
The current bull market started in January 2016. In the first half of 2016 we saw a considerable rise which was followed by a sideways movement in 2017 and a slight decline within the sideways movement channel in 2018. At the end of 2018 the price of gold is still higher than in January 2016. But it is on the lowest level since January 2016.
The same goes for gold mining stocks. Since January 2016 share prices were not lower than right now. So this would be the perfect entry point for gold mining stocks.
The 7 gold mining stocks that I selected. See the hedge against the gold price. Click here