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Gold and Silver Juniors: Extreme Value Moment
Contributed Opinion

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The GDXJ rebalancing is shaking out speculators and opening the sector up to new blood, opines Tom Beck, founder of Portfolio Wealth Global.

Amex Gold Bugs Index and bear market cycles since 1995

Focus on the 2004 to late 2005 period. Much like today, after a strong move out of a historic bottom, two full years (2004-2006) were mostly dominated by fierce sell-offs, and many investors lost confidence.

The key to remember about those who buy out of the fear of missing out is that they don't spend time researching the fundamentals of their holdings. If they did, then price action wouldn't disgust them and emotionally cripple them as much as it does.

This is how immature most market participants are. The table below shows the average holding period for a NYSE stock.

Average holding period for NYSE stock

This means that if you can own equities for longer than 211 days, you have a competitive advantage.

With small-cap stocks, it's a whole different approach. The main prerequisite is to engrain in your mind this truism from Jim Rogers: It is utterly useless and impossible to time the market perfectly. Instead, be patient, and when you see an anomaly in pricing, grab on to it, even if it takes months to return to normal, because that's where fortunes have been made time and time again.

In contrast with NYSE companies, the strategy with mining stocks is to buy at extreme value moments and sell when the market becomes saturated with latecomers.

XAU/Gold ratio

This is how early we are.

Latecomers are three to five years into the future and probably won't have the guts to own gold stocks until every CNBC talking head says it's the best time to diversify that they have ever seen. The price will probably be over $2,000 per ounce by then.

I've been running comparisons for days between the GDXJ components that have been liquidated and have found some specific companies that were so loved by the fund managers that they attempted to avoid selling them until the last minute.

The gold price action is, in effect, repeating the 74-76 cool-off, where most holders were tested for conviction before the eventual surge took some gold juniors into the stratosphere.

GDXJ/GDX ratio vs. gold price

When the gold price goes sideways or moderately up, investors want to own the safe companies, but as gold prices rise substantially, they turn to the juniors, like in 2016.

Your role is to get ahead of this trend and sit tight while market conditions turn.

The company that has compelling upside potential right now is U.S. Gold Corp. (USAU:NASDAQ).

The Keystone project is a very underexplored, Tertiary (34.1+/-0.7 Ma), complex intrusive-centered, domed, permissive carbonates, lower-plate window in the heart of Nevada gold country.

Modern-day, systematic, model-driven exploration has never been conducted on the property.

The area possesses strong, widespread gold and pathfinder geochemistry, especially arsenic and zinc, in the soil and rock samples indicate a very large potential epithermal gold system is present. Historical drilling in the area has produced high grade and thick intercepts of gold.

Research this company now.

Tom Beck is founder of Portfolio Wealth Global. Known as one of the first millennial millionaires in the United States, Beck is a relentless idea machine. After retiring two years ago at age 33, he's officially come out of retirement to head up Portfolio Wealth Global. He brings a vision of setting a new record for millionaires with his seven-year plan to accelerate any subscribers' net worth who will commit to the income lifestyle. Beck delivers new ideas on the marketplace that were once only available to the rich. Traveling the world, he's invested in over a dozen countries, including real estate.

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1) Tom Beck: I, or members of my immediate household or family, own shares of the following companies referred to in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies referred to in this article: None. U.S. Gold Corp. has a marketing agreement with Wealth Research Group. My company has a financial relationship with the following companies referred to in this article: U.S. Gold Corp. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in this article are sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of U.S. Gold Corp., a company mentioned in this article.

Charts and images courtesy of the author

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