Down Days

Gold off $32, silver down $0.34...

Gold and silver stocks falling.

Yikes!

What happened to the rally?

In the early days of a rally there is always the question of whether the rally is real and sustainable. Is it a rally or is it a "blip"?

While Gold $3000 | Silver $60 takes as its premise that there is a rally underway, I might have got the exact timing wrong. Which does not, in fact, matter.

Whether we are at the beginning of a precious metals rally or whether that rally is a few months off, the fact is that gold and silver are going to be re-rated in the relatively near future. Buying into the junior explorers and developers at the current relatively low prices simply prepares an investor for that re-rating. The precise timing might be interesting at the margins, but the core premise of the book - that extraordinary returns will be achieved by early investment in gold and silver juniors - is unchanged.

If you look at the 15 year gold price above you'll see that on the way up there were plenty of down days. For traders those are opportunities, for those of us who are not in and out of the market every fifteen minutes, down days are noise.

In fact, it is reasonable to ask if the rally has actually begun to be reflected in the junior market at all. The TSX-V is something of an indicator for the juniors and it is still lying on the bottom:

Historically, once a precious metals rally is underway, the TSX-V shakes itself off and heads upwards. But it usually takes a while for the metals rally to translate into advancing share prices for junior explorers and developers.

Of course, individual companies may beat the market because of discoveries, news, marketing and increased investor awareness. Paying attention to the companies which are getting attention is worthwhile. However, trying to time the market on a day to day basis is not likely to be worth the effort. Saving $0.02 on a $0.15 share looks important but, if that share goes to $1.00 the important thing will be owning it in the first place.