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3 Picks for Gold's Rebound
07/04/2011 7:30 am EST
Typically, gold in particular and precious metals in general don't perform well in June, which means you have a chance to buy gold stocks at very good prices, writes Curtis Hesler of Professional Timing Service.
My work is pointing to 2012 as being the year when the stock market bear catches its second wind and heads toward the lower end of the bear-market range. That should ultimately end up being somewhere near 6,000 or lower in the Dow Industrials.
The best investment strategy is to look at the rise in the popular averages from their March 2009 post-crash lows as a gift.
The Rydex chart shows that such rallies during secular bear trends are not unusual, but they are not bull markets either. They are opportunities to get back in line with the Dow/gold ratio and out of financial assets. You need to act accordingly.
Keep your focus on tangibles-specifically, precious metals and energy. If you have holdings that are not advantaged by higher commodity prices, get defensive. June is not typically a friendly month for gold and silver, so further consolidation is likely before the next sustained up leg begins.
Gold still has very solid support at $1,400. I would be surprised to see it fall back that far, even in a quick shock sell-off. There are too many big buyers out there. There is a better likelihood of seeing the $1,460 level.
If you missed the chance to buy during weakness in May, keep your orders in. Gabelli Gold and Natural Resources (GGN), while not a pure gold play, does have a nice yield at 9.14%, which they produce by hedging their portfolio by selling options.
The hedging activity holds back your capital gain potential, but the income is nice in a world of low yields. Do not pay over $18; if you would like a stink bid, you might try for some at $17.05. [The shares were trading at $17.80 just before the close on Friday-Editor.]
Central Gold Trust (GTU) is performing well in line with the price of bullion, as it should. It dropped to its buy price last month.
Going forward, I would raise the buy price just a bit, to $55. I think there is a good chance to pick up some there if gold moves back to the $1,460 level. [Shares were just over $56 at press time-Editor.]
Goldcorp (GG) is languishing a bit lately and feels a little like Royal Gold did to me last February. Their earnings are great, reserves as well as production are growing, and you should continue to accumulate under $50. A stink bid at $48 looks doable. [Shares were just about $47 at this writing-Editor.]
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