I decided to share with you below the one chart I did make. With most bearish on mining stocks, I constructed this chart below to put things in perspective. Most investors always call for a crash to happen after a crash already happened. We saw this happen with stocks in 2008 and 2009. After this historic market crash, most investors and probably 99% of bloggers were calling for another market crash all through 2009, 2010, 2011, and 2012. Now that they have been proved wrong for years, they are calling for a crash in 2013. It really is laughable.
So let’s look at mining stocks. Seems many money managers are bearish on them. Not only are they bearish, but they are probably bearish at one of the worst times. During the great gold stock meltdown of 2008, the gold/XAU ratio spiked over 10. This was a historic time to buy gold stocks for pennies on the dollar. Gold stocks were hated and soon after rose hundreds of percentage points.
Today the gold/XAU ratio is again over 10. The chart below points this out:
I have constructed a future chart pattern of what mining stocks could do in the future. This shaded part of this chart is pure speculation, but it shows you how mining stocks could perform if the gold/XAU ratio falls and the price of gold continues to rise. A four fold rise in gold stocks is not out of the question within the next few years.
I do not know if this happens for sure or how high gold stocks rise, but my bets are on higher gold stock prices. We have had a really nice correction and there is now a margin of safety in gold stocks. Gold stocks could also fall, but over the next few years, I’m betting on higher prices. What stocks do within three months or even next year is beyond me. And again, don’t forget physical bullion. If you don’t have the time and inclination to investigate companies, buying bullion is probably a better bet for you.
Remember, the only way to make money in markets is to be a long term investor. Stick to your thesis, take a position, and hold for years. Trading in and out will do you no good.