Gold stocks are out of sorts currently…but looked primed to rumble down the line.
Let me tell you…when gold stocks run, they can really fly.
Let me give you two examples from my services last year.
It was September 2023. The ASX, at that time, was in the grip of a nasty and difficult downtrend.
That began in about August and, in hindsight, would go on to November.
Trades were slim pickings.
However, the algo behind my service Small Cap Systems was picking up strong momentum in a small gold stock called Spartan Resources (ASX:SPR).
The stock was trading for about 32 cents.
Now this is where it got interesting…
It’s one thing to detect momentum in a stock. It’s another to know a bit about its fundamentals.
For me, it takes a mixture of both to embrace the risk of the share market.
I didn’t know a lot about Spartan…but a buddy of mine is a mining analyst.
He told me the project was genuine and showing promising results. In other words, he could see upside.
That was enough for me. I pulled the trigger on the trade.
By mid-November Spartan was up 40%.
Let me tell you…
There is nothing more fun than a stock going up 40% in such a short amount of time…ESPECIALLY when the wider market is going down.
Gold stocks always have this latent potential.
That’s because they tee off different drivers to regular shares hostage to the business cycle.
One is, of course, the gold price. That’s been strong for quite some time in US dollars.
And in Aussie dollars, it’s a barnstorming price.
Of course, not all gold stocks will perform like this. They carry high risk and are extremely volatile.
However…
Gold stocks also bring in development or exploration upside
Take Spartan…
It’s not producing gold yet. The gold price is good for sentiment but it doesn’t put a dollar of revenue in their account yet.
Spartan is a “restart” story that is being enhanced with more exploration results.
The market is chasing it on the assumption that they can keep adding reserves and resources.
They could be sitting on an even bigger gold mine than they have now!
Now, I’m not telling you to buy Spartan (we took our win that November). But you might like to follow it.
Here’s another story from my files…
Back in late 2022 I recommended a gold stock called Bellevue Gold [ASX:BGL] as part of a report called ‘Squandermania’.
What is Sqaundermania?
It’s the state of the Western economies these days…which are totally reliant on more government spending and debt to stay viable.
My readers got a hard and fast win on BGL too. This one was a ripper. Check it out…
Source: Fat Tail
I mention that Squandermania report for another reason.
Subscribers who took my advice banked their win on BGL early last year.
That doesn’t mean the opportunity in gold stocks is over.
Nothing, fundamentally, has changed about the world that I sketched on that report.
The US government deficit is skyrocketing still. China is weakening.
If Trump wins the next election, we can expect US deficits to go into hyperdrive because he’s a populist…and a gibbering idiot.
I expect gold to reach new heights as the debasement of the monetary system goes ever on.
Now…I can’t guarantee gold stocks will react like the two examples I’ve given you.
I’m not a gold bug, either. I don’t trade and invest in gold all the time. I ride them selectively…and not always successfully.
It’s a risky and difficult sector to get right.
But when it works?
By jeez, it’s fun.
My suggestion? Decide if gold investing is for you…and start watching the sector.