The big gold stock rally that started in August is finally taking a break…
Last summer, the benchmark gold stock index, the HUI, was locked in long sideways trading pattern in the 450 area.
Then, gold made a big $200-per-ounce move that lasted till December.
This move helped hand the HUI a 28% gain in just a few months. Many smaller gold stocks climbed more than 100% during this move.
But as you can see, this move has turned from up to down. Take a look at the past 18 months of trading here:
The HUI has lost 16% since December 6, thanks to the weakness in gold… and has reached its lowest low in three months.
The long-term gold stock bull has to ask himself if this is a buying opportunity. Let’s see what the values say here…[ad#Google Adsense]One of the first essays I wrote in 2011 discussed how cheap big gold miners looked based on a 2011 earnings estimate, using $1,400 gold. At that price, the big gold miners were going to make a lot of money… and they were selling super cheap.
But what happens if gold heads back to $1,200 and stays there? Are these stock worth owning?
Well, if you lower the gold price, they all get more expensive. But take a look at Goldcorp. Even if gold falls another $150 per ounce, it’s still a great deal.
The short-term trend is still down, so I don’t suggest buying these stocks just yet. But I’m a long-term bull on gold. Once the trend stabilizes, I’ll be looking for bargains like Goldcorp.
— Matt Badiali[ad#jack p.s.]
Source: The Growth Stock Wire