Thoughts On Gold And Mining Stocks

by Olivier on March 1, 2009

You might have noticed a few things this week. I labeled $CDNX the Canadian Venture Index chart as ‘technically dead’ and during the week I restated my preference for the big cap royalty companies alongside with bullion. This is not rocket science. GDX which is a proxy for senior mining stocks and the HUI are far away from their respective all time highs. That’s not the case with bullion and the royalty stocks RGLD and FNV.TO. The message is clear. People are avoiding risk at all cost. The less risky something was perceived the better it performed.

Make no mistake. Most venture listed stocks will go to zero. They either don’t have the goods or management plain and simply sucks. That said it doesn’t mean it is not worth trying to find a few select ones that will greatly outperform bullion and the above mentioned royalty stocks. You simply need to know what kind of risk you are exposed to. The exploration stocks are supposed to catch up once the going gets good. A rising tide raises all ships they say. I am not so sure. Most will have gone under before the tide comes and some won’t get lifted.

All I am saying is that a buy and hold approach with risky exploration stocks is a dangerous proposition. You need to be extremely disciplined and you need to know thy self very well.

One quote in my quotes section goes like that:

‘Experienced traders control risk, inexperienced traders chase gains.’ Alan Farley

Make sure you heed that advice.

Enjoy the rest of your weekend.

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