The Potential for Gold Stocks in 2013-2014

Valuations are currently at levels commensurate with those of late 2008 and late 2000. By the way, those were the two best times to buy in the last 12 years. Also, we want you to notice how valuations increased substantially (about 100%) from those levels within six months.....

There are two drivers of stock prices: valuation and earnings. Valuations are very much driven by investor sentiment while earnings are driven by revenue and margins. In recent months we’ve devoted some time to the three phases of a bull market. These are the stealth phase, wall of worry phase and participation or bubble phase. Earnings rise in each stage while valuations only increase in the first and last phase. The average gold producer has made no net progress in five or six years because the average valuation has declined considerably. Going forward, this means opportunity.

Valuations are currently at levels commensurate with those of late 2008 and late 2000. By the way, those were the two best times to buy in the last 12 years. Also, we want you to notice how valuations increased substantially (about 100%) from those levels within six months.

If Gold is able to break above $1625 and confirm its bottom then it would be on an eventual track for a rebound back to $1900. If a cup and handle type of pattern develops, it would project to $2250/oz. In the past we’ve noted $2,300 as a strong Fibonacci target.


...By Jordan Roy-Byrne