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Did Gold Stocks Just Bottom?

By Dr. Steve Sjuggerud
Thursday, July 23, 2015

"Perhaps today was capitulation in the gold market," a CEO of a gold-mining company told me in an e-mail Monday evening...
Gold-exploration stocks had just lost 14% of their value in two days – based on the gold-exploration stocks fund, the Global X Gold Explorers Fund (GLDX). This CEO thought it could be the bottom in gold-exploration companies.
"It's hard to believe the current valuation of gold stocks," he said. "I never thought I would ever see our stock back at these levels. I could not resist and purchased some shares today."
He was a bit early in his optimism... As I write, gold-exploration companies are down since he bought earlier in the week.
But I agree that it sure felt like "capitulation" – panicked selling that often creates a bottom...
Gold stocks are now down 87% in the past four years (as measured by GLDX). Meanwhile, stocks, in general, are up 72% (as measured by the S&P 500 Index) in the same time frame.
Take a look:

This is what a bottom in an asset often looks and feels like. The problem is, calling a bottom right is tough...
There is a much smarter way to invest in blown-out assets...
Here's what I told my paid subscribers in my True Wealth letter last week – before the big bust in these stocks:
Smaller mining stocks are definitely CHEAP and HATED today. But like gold, we don't have an uptrend yet – so we don't have our green light to buy.
Prices are cheap, but they could continue to get cheaper. We don't want to try to "catch a falling knife."
Don't worry, we won't miss it. There will be plenty of upside potential when we do get in.

It was the right call.
You might get the headlines and the glory for calling the bottom. But in the long run, it's difficult to make money doing that...
Gold-mining stocks are incredibly cheap today. And we will be buyers soon. But we want to wait until after gold stocks hit the bottom before putting money to work. That means we're waiting for now.
Good investing,

Further Reading:

"If you're going to invest in natural resources, don't invest in a commodity sector in the middle of a 'boom' stage," Brian Weepie writes. "Instead, only invest in commodity sectors that have recently been in 'bust' mode." And to reduce your risk, Brian says to wait for a sector to bottom and then begin moving higher. Get all the details on how to avoid epic collapses in the resource sector right here.
Before you invest one dime in natural resources, this classic interview with master resource investor Rick Rule is a must-read. In it, he reveals everything you need to know to master the resource market's cyclicality. If you catch one of these big cycles at the wrong time, you can lose a fortune. But if you catch one early, you may never have to work again...

Market Notes


Today's chart shows that there's still money to be made off the aging Baby Boomer generation...
Regular readers know our colleague Doc Eifrig has written many times that more elderly people means more money will be spent on health care. Government programs like "Obamacare" are boosting U.S. demand for drugs. And thanks to this increased spending, shares of pharmacy stores have soared...
Take leading drugstores CVS Health (CVS) and Walgreens (WBA), for example. Most Americans can find at least one CVS or Walgreens location in their neighborhood. Both companies have played a huge role in the health care boom. And as you can see below, both companies have thrived over the last few years as more and more prescriptions continue to get filled.
Shares of CVS and WBA are up 140%-plus over the last three years... and recently struck new all-time highs. As the U.S. population continues to grow, the health care and drug businesses should continue to boom.

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