We follow precious metals very closely, for more than a decade, but always remain unbiased. Once precious metals are on the move we want to be among the first ones to acquire positions (which is what we did on Friday in our Momentum Investing portfolio). At this very point in time we see the oldest gold mining index (arguably most ‘genuine’ of them all) testing a secular breakout point. Another way to think of it: this is a decisive point, a make or break level on the long term chart.
Gold miners have a track record of delivering huge profits … and giant losses.
Because there is a lot of emotion in the gold space. Many investors are emotionally tied to the values of gold, which is understandable. Gold has historically been about realy money, about trust and associated values. In a time where central policy makers play with interest rates and other monetary tools it is understandable that many desire to go back to the times of real money.
That’s the fundamental story though.
The investing story is different. Because there should never be any emotion associated with any investment.
Precious metals miners are volatile. Those who get the trend right can realize huge profits provided they are able to sell at the right time. Profit taking sounds like an easy thing to do, but when your P/L statement show 50% or even 100% in green … well, good luck separating emotions from the investment.
That said, we see that the gold mining space is now testing a giant breakout level. After a breakout attempt earlier in May this HUI index came back down to test the 275 level which we consider the breakout point.
If gold miners succeed in staying above 275 points for 3 consecutive weeks we know for sure that 375 points and next 500 points are underway.
In our Momentum Investing service we focus extensively on precious metals. Curently we hold one precious metals stock, since last Friday, with a very promising setup. We might look to rotate profits into a smaller precious metals miner with even more upside potential further down the road.