On the otherhand my prediction about juniors initially outperforming "Brave Dog" South African, HUI type names has not been borne out. I'm sure not complaining about my gains mind you, but in all fairness, the smaller cap TGL has only performed about in line with the XAU:
finance.yahoo.com^TGL&d=t
Why, and what does it mean going forward?
1. IMO this is more about where the stocks trade (US vs. Canada)and capitalization than fundamentals. This first leg up has caught people by surprise, and most gold investors haven't had much opportunity for homework. Money flows to familiar, easy to buy names ,and of course many if not most intelligent gold investors (if they are bulls) know to avoid hedgers.
Message 15409050
2. I'm making absolutely no apologies about my predictive skills, You could have done much worse than to listen to me. However, the "catalyst" to really ignite the incredibly undervalued junior sector hasn't happened yet. That catalyst is a buyout, that will knock people's socks off. It was an "event timing" issue, as I felt we would have had one by now. I don't feel we will have to wait long and now feel there will be not one, but a series of them throughout the summer.
3, This rally won't be straight up, but will in the end surprise on the upside. I do think we could have a brief sharp "conditioning decline" that will serve to make all the gold bulls get that familiar "pit in the stomach" feeling we are so used to with this market. Go with it.
Conclusion: Those who have bet on liquidity over fundamentals have been rewarded with a good degree of outperformance so far. Some may contemplate taking profits in more liquid stocks. I don't disagree, and as I've posted here, actually did so early on names like GLG and MDG. I don't however sense that waiting for a significant dip in the TGL will payoff, as the PM stock shift is at hand. This sector is just getting started. |
