When To Exit Gold Mining Stocks? Look To Dr. Copper

Here's a response to the

www.investorvillage.com Precious Metals Stock Picking Year-To-Date Results

post that I got from someone I respect:

"TIME TO EXIT... I remember being part of a board where everyone's picks were up 100, 200, 400% on the year, and everyone's picks had another double or three left in them...where every hot junior miner with a prospect was going to be a "sure thing" double. 

 

It was a great time...to be selling, and locking away the bubble gains. 

 

This time its different? "

He's referring to the fantastic run we had in base metal mining stocks in the first half of 2007. I was there, became a rich man and went back to middle-class by not exiting at the right time.

Here's a pair of my unedited responses:

First Response: "'This time its different?'

 

No, its probably the same scenario, but there's no telling where the top is. I'm going to use TA to get me out in time this time. 

 

Last time I held even after the commodities turned. That won't happen again. But, just as Nickel went from $6 to $14 it kept on going to $22. So, gold could easily keep cruising for quite some time. There's no fever like gold fever.

 

The best of the gold miners have the same valuations as breakwater [zinc miner that seemed really undervalue and then tripled], etc. at the start. As long as the price of gold holds up they are undervalued."

Here's The Second Response: "Also looking to Dr. Copper

Here's another thought on timing the gold stock exit.

 

Copper right now is operating as a monetary metal. This is crazy, but it keeps going up (along with gold) even though the LME warehouses are brimming and you get these stories of Chinese pig farmers warehousing it in their barns as a speculation. People are obviously warehousing copper as a safe-haven and/or inflation/currency hedge.

 

Just about every copper miner in the world can print money at $3.20 copper. Its going to be a lot easier to crank up the supply of copper than it is to crank up the supply of gold, so I suspect copper will run out of momentum and turn down before gold does. When copper turns down it will be time to look very closely at gold."

So, what signals do you expect you'll use to determine when to exit the gold stock trade? I'm serious. How will you know when the jig is up? Things can't go "crazy good" like we've seen over that last month  forever.

MontyHigh, www.worldofwallstreet.us

Comments

[JC]

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