The Outlook for Precious Metals Mining Stocks
Source: Gold World, Greg McCoach (6/23/09)
". . .the next big wave for the precious metals and junior mining stocks will soon be on its way!"
For now, we are just bobbing up and down with the gently rolling swells and positioning ourselves for the next big wave. The wave action is very volatile and can change very quickly just as our commodity and junior resource stocks have recently shown. But one thing is clear in my mind, the next big set of waves are on their way!
The market is building a foundation for the next major wave higher in both the precious metals and junior mining stocks. Things may remain quiet with the junior sector for the balance of the summer, but I believe we are seeing the spot prices solidify because the fundamentals for this super bull market are not only alive and well but getting better by the week. Just look at the facts. . .
The U.S. dollar is in a major bear market, the U.S. Government debt levels are completely unsustainable, and the geopolitical front looks tenuous at best.
On top of that, demand for gold is very strong. It's being sought as a monetary asset, and as more central banks of the world add gold to their reserves. This trend will continue to grow.
Identifiable investment demand for gold was up almost 250% during the first quarter of this year, compared to the first quarter of 2008.
Meanwhile, gold supply is not increasing but looks very stagnant. Mining companies cut exploration and development budgets as a result of the global recession, which has now put them behind the supply/demand curve. And it always takes a long time to bring new supply to the market.
Overall, gold mine production was only up 3% in the first quarter of 2009 compared to the same period last year. And demand is expected to outstrip supply for at least another five years, probably longer. These factors will push gold up for years to come.
We continue to bob in the swells looking for value and exercise patience knowing that the next big wave for the precious metals and junior mining stocks will soon be on its way!