Three months ago, I made an odd recommendation for a resource stock advisor…

I told you not to buy oil stocks… and I told you not to buy conventional mining stocks.

We heard from more than a few confused subscribers… Shouldn’t a resource stock advisor recommend resource stocks?

Not if they’ve spent the past few years soaring… and not if the global economy is stumbling… and not when there’s something better to buy instead (which you can buy now).

[ad#Google Adsense 336×280-IA]For much of 2009 and 2010, oil stocks and “conventional” mining stocks – like those digging up copper and iron ore – enjoyed huge moves higher. They were rallying from the deeply depressed conditions of the credit crisis.

After big rallies like this, the resource trader needs to consider selling his stake or “tightening” his trailing stops to lock in profits. That’s what S&A Resource Report readers did with our mega winner Northern Dynasty (NAK). This company owns a majority stake in a “trophy” gold and copper deposit in Alaska. We bought Northern Dynasty in March 2009, after shares had been crushed… and closed it out in March 2011 for a 322% gain.

That’s simply how you make money in resources. You buy during bad times (amidst rampant pessimism) and sell during good times (amidst rampant optimism). That’s been the right move this summer…

Since my June essay, Freeport McMoRan, the world’s largest publicly traded copper miner, is down 18%. And even mighty oil company ExxonMobil is down 14% during the same time…

Instead of oil and base-metal stocks, I was more interested in cheap gold stocks. Here’s what I wrote:

I think it’s unlikely gold itself will correct much in the coming months. It’s enjoying incredible buying support from the world’s central banks (who want to avoid holding too many weak dollars and euros), big institutional investors, and individuals around the world who want to own “real money.”

That’s why, when it comes to the resource sector, I encourage you to lean toward gold and silver stocks… These stocks are cheap… and gold is in a tremendous uptrend. This makes this sector one of the best risk/reward bets in the resource market today.

This advice is working as well. Regular DailyWealth readers will remember one of my favorite gold companies is Royal Gold (RGLD). Here’s Royal Gold’s chart over that same period:

As you can see, Royal Gold is soaring. Shares are up 33% since my essay.

In short, gold stocks, which tend to benefit from economic distress, are rising, while stocks that deal in “economically sensitive” assets like copper and oil are suffering.

My current thinking here is to keep doing what’s working. Stick with the trend. Most resource stocks rise and fall according to global economic growth. Right now, it’s sputtering… and in danger of completely stalling.

That’s why I encourage you to keep the bulk of your resource portfolio in gold and silver stocks.

Good investing,

— Matt Badiali

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Source:  Daily Wealth