Gold got whacked today and finished at $US 820/oz, its lowest point of the year. I actually think know this is a good thing for small-cap gold stocks. Why? Gold’s move above $1,000 was largely based on a US economic catastrophe caused by one or a combination of the following:
- Banking Failures
- Real Estate Crash
- Inflation
- Stock Market Crash
- The Village People Reuniting (Would Have Taken Markets Back To 1978 Levels…aaaaaah!)
Any one of these events would have been good for gold prices but terrible for stocks of junior gold companies. After all, if the market is crashing south of the border, would you be buying blue-chip stocks, let alone juniors? The answer is no.
Thus, $1,500 gold and a crushed stock market is in very few people’s best interest. If you need any further proof of this, just take a look at the carnage in the junior metals sector over the past 6 months. Sky-high commodity prices were simply no match against the threat of a possible market collapse.
On the other hand, today’s drop in gold was based on renewed confidence in the US markets over the past several days. The US still has a boatload of problems to deal with and any one of them could still turn ugly – but for now people are feeling as if the US can navigate the rough seas without sinking.
CONCLUSION:
At the end of the day, investors in gold/silver/copper and other precious metal stocks are better off with prices at $750/$14.50/$3.50 and a stable US stock market. This provides the markets with the best of both worlds – economic commodity prices and panic free stock markets.
Spread the word…happy days are coming back to the junior metals markets.
Regards,
George