What is up with Gold? Markets continue their stimulus drug induced rally but gold is starting to rollover. The dollar is relatively flat so that argument is not valid. I still like gold as long as it stays above $1000. Even if it drops it is a buy considering gold is in a secular bull market.
While I still am holding on to my gold position (10% of total portfolio) I am much more interested in the junior miners. These stocks are still down 60-80% off their 2006-2007 highs. In the next few days I am going to present a list of these companies that I am looking at. Just a preview though--I only like project generator companies rather than the pure explorers. The business model is much more efficient and economical. The business model is pretty simple. You come up with a theory about where you think there is a potential gold deposit. Next you do some preliminary analysis and take the idea to another company and Joint Venture (JV) the project so that you still have a 30-40% stake in venture while the other company has to spend money to earn into the venture. This is a great deal for the prospect generator. The other company spends millions drilling and developing feasibility studies. This model allows you the shareholder to benefit if the JV hits a big deposit and spreads the risk. Another benefit is the reduced dilution you suffer which is a serious problem with junior miners and explorers. The major gains during this bull market in gold are going to be made in these juniors.
Black Swan Insights
While I still am holding on to my gold position (10% of total portfolio) I am much more interested in the junior miners. These stocks are still down 60-80% off their 2006-2007 highs. In the next few days I am going to present a list of these companies that I am looking at. Just a preview though--I only like project generator companies rather than the pure explorers. The business model is much more efficient and economical. The business model is pretty simple. You come up with a theory about where you think there is a potential gold deposit. Next you do some preliminary analysis and take the idea to another company and Joint Venture (JV) the project so that you still have a 30-40% stake in venture while the other company has to spend money to earn into the venture. This is a great deal for the prospect generator. The other company spends millions drilling and developing feasibility studies. This model allows you the shareholder to benefit if the JV hits a big deposit and spreads the risk. Another benefit is the reduced dilution you suffer which is a serious problem with junior miners and explorers. The major gains during this bull market in gold are going to be made in these juniors.
Black Swan Insights
Gold is very golden.
ReplyDelete