Good time to buy gold stocks ?

December 1st, 2008 | investing

I have been very bearish on the overall equity market since 2006 (yes, too early as usual). But I have begun to reconsider my bearish stance after seeing both the magnitude of this decline and the unprecedented levels of “quantitative easing” (a.k.a. money printing) by the Fed.

Right now the biggest worry for bears like me is that the government will overdo the printing (just like in 2001) - and let the inflation monster loose.

Since all asset classes have been subject to rampant speculation and margin calls, it was no surprise that Gold has declined sharply with the rest of the market so far.

However - since the last few weeks I started noticing gold showing strength vs the overall market.

Today Jeff Miller’s system also flagged the Gold Miners ETF (GDX) as the only buy in their universe.

The only new buy in our ETF universe is the Market Vectors Gold Miners ETF, (GDX). The concentration is pretty good, with 34 total companies and the top five representing about 37% of the total. Canadian companies make up 65% of the group. There is little correlation to the S&P 500, and a beta relative to gold bullion of 1.57.

We also featured GDX last July, but the sector has been difficult to forecast.

A Dash of Insight: ETF Update: A New Look at Gold.

I’m currently researching the pros and cons of holding GDX vs GLD over a 3-5 year period, and I’ll write more about this when my thinking clarifies.

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Good time to buy gold stocks ?

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