Investors are still skeptical about gold. Wouldn't it be logic gold and gold mining shares would go down after the strong rise at the beginning of the year? If you still believe gold mining shares are going to kill the markets, you are crazy, aren'you? The short answer is: NO!
Investors are still scared, scared of losing their gains, not scared of missing out a new bull market. And that's good news. Despair only exists at the bottom of a bear market.
The biggest problem for investors in gold mining shares
But at the same time, this is the biggest problem for gold investors. investing in gold and gold mining shares isn't easy, it never was and it never will be. People are truly hurt. Prices of gold, silver and mining shares kept falling and falling. It never seemed to stop. Loss after loss after loss meant people got despaired. They want out, want to get rid of the pain.
And THAT, dear investors, is the one thing you shouldn't be at this moment.
Today, you have to be strong, you have to be convinced this is the trade of the decade. This is the rally of a generation. This is IT!
When the HUI-index was depressed during the financial crisis, a tremendous rally followed. In 2008 the HUI index rose from 150 point to 640 in 2011, a 326% rise!
But this is nothing compared to the last time gold and silver mining shares were depressed like today.Between 2001 and 2007 the HUI rose 1.400%! That's what you get when you believe, when you are strong, when you are convinced you are doing what needs to be done.
We are at the beginning of a new – secular – bull market
This will be a bull market you'll only witness once or twice in your life. If you think about selling today, you will regret it for the rest of your life. That's what bull markets do, they always make you doubt, they always shake out the weak hands.
While the rally has made shares expensive by traditional valuation metrics such as future earnings, they are still 19 percent cheaper than at the same point last year based on the value of their gold reserves. The enterprise value is about 90 times their gold reserves, down from 111 a year ago. Think what happens if their gold reserves rise because the price of gold is at $1.300 or even $1.500.
