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Gold Stocks or Gold ETF - How to Find the Next Winner-

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Gold Stocks or Gold ETF - How to Find the Next Winner- Powered By Docstoc
					Presented by Daniel Toriola
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Gold Stocks or Gold ETF - How to Find the Next Winner? By Chris Vermeulen

Gold Stocks - A contrarian view on where the next Gold Stock winners will emerge. Searching for the Golden Goose? For years we have been speaking and writing about the massive bind the Fed now finds itself in. With price inflation rising – read as food and energy skyrocketing -- and little hope for nominal interest rate increases – read as housing too weak for higher rates – negative Real Interest Rates (nominal rates less inflation) looks set to persist for some time. Now why is that important? Firstly, not only do negative real interest rates make holding non-income producing assets such as Gold attractive, but an environment where inflation is allowed to have its way and economic growth is sick (stagflation), is tantamount to the perfect storm for Gold Stocks and other Precious Metals! So what do you do? You load up on assets leveraged to the price of Gold – namely Gold stocks. Wrong! As Old Gold Bulls we have seen this situation before. A low growth high inflationary environment is poisonous for equities – Gold stocks included. And whilst the storm persist in the equity markets it will either drag gold stocks lower or prevent them from fully expressing themselves to the upside! That’s why we encourage investors to have a portion of their portfolio exposed directly to the metal either through ETFs, Futures or Physical. Hunting Elephants There is no doubt that an equity risk premium has weighed heavily on Precious Metal equities and that stabilization in equity markets would certainly benefit such stocks. But that’s old news.

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What we consider interesting and downright fascinating is the nature of Gold Equities investors should be focusing on over the next year. Conventional wisdom is that the juniors are where the investment gems lie. We don’t disagree – entirely. Over the longer term (3-5 years) the fundamentals certainly favour late stage explorers and emerging producers, but an overlooked market dynamic causes us to lean rather towards their larger cousins. As we have alluded to above, Gold Stocks and other Precious Metal equities are equities and more often than not subjected to the same forces as the general equity market. One such force is the veritable WALL of passive indexed money. By some accounts amounting to several TRILLIONS of Dollars. And what’s the passive indexed money saying? Firstly it’s saying that the long period of outperformance by small caps versus large caps bottomed in 2006 and the trend has since been towards large caps. Secondly... The trend in large caps from value to growth also looks to have bottomed around late 2006. We define growth as earnings growth of +15% p.a. and/or PEG ratio of around 1.5. These trends resonated well with us as large cap Gold producers beat out small cap miners over the last year leaving many a gold stock speculator highly frustrated. Where to find such Elephants that will benefit from these trends? We would begin by looking at components of the Gold Stocks ETF (GDX) or the Amex Gold Bugs Index (HUI). Gold stocks and more commentary follow soon... Chris Vermeulen is a trader and newsletter writer specializing in the price of gold stocks, gold ETF, oil stocks, oil etf, silver stocks, Junior Mining and Energy Stocks listed in the US, Canada and Australia. Please visit my website for more information. http://www.TheGoldAndOilGuy.com

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Presented by Daniel Toriola
Gold ETF Trading For Beginners By Chris Vermeulen

Gold etf trading for beginners and taking advantage of the gold market using the GLD exchange traded fund to generate consistent profits in any market condition. As I mentioned before, the past 5 months have been very frustrating for most traders as we are stuck in this sideways price action. I also noted that August to December is generally the stronger months for gold. Although gold has been under selling pressure during the last 4 weeks I think there is light at the end of the tunnel. It’s usually the darkest before dawn, but there are some hurtles for gold to over come before we are in the clear which I explain below. 1 – The Gold Mining Stocks Index An 10 year chart with a cup and handle pattern complete with a breakout. Gold mining stocks have continued to collapse below their support level. This does not mean gold is going to follow but it is a red flag which needs to be noted for future long entry points. Gold mining stocks in general are seen as volatile and high risk types of investments so I understand why investors are unloading their positions to lock in profits. Gold mining stocks are pushed below long term support level. 2 – Gold Stocks Index An 8yr chart of the price action of gold stocks and you can see that they are currently testing long term support levels. If this monthly bar closes below this trend line then long term investors should be sitting in cash until we have a new opportunity to enter long or short. The HUI generally makes the move before the price of gold so I follow the HUI in all time frames. The HUI is testing long term support. 3 – Performance Chart (Gold Stocks vs Price of Gold) The past 2 years, from 2006 to present gold stocks have slowly been underperforming the price of gold. This is generally not a good thing to see if we want higher prices for gold. But the good news is that gold stocks appear to be reaching levels at which new rallies have started. Gold stocks under performing the price of gold but near support. 4 – Daily HUI Chart I follow the HUI like a hawk as it fine tunes my entry and exit point for trading GLD, DGP and DZZ funds. Last month the HUI made a lower high and a lower low which is a red flag. While I don’t predict prices I am thinking these lower prices for gold stocks are just panic sellers over extending a sell off. I would really like to see an August rally kick into place. The HUI makes a lower high and lower low on the daily chart. 5 – GLD Gold ETF Trading Signals For Beginners While gold stocks have been selling down, gold has so far been able to hold some ground. As you can see in the chart below the last three months gold has made higher highs, and higher lows. Currently gold is testing Major Support at the 200 EMA. Gold ETF GLD at long term support still holding its

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Presented by Daniel Toriola
ground. Conclusion: My analysis of gold above explains that gold stocks and indexes are oversold and are at major support levels. Thus an August rally is not out of the picture and we could have some favorable setups in the near future. I would prefer higher prices, but in the end movement is movement and we can profit in either direction evenly. GLD gold etf trading for me is the most accurate trading vehicle I have come across. I have been using my proven trading model which avoids the price gaps and keeps risk under 3% for each trade. GLD makes it simple to profit from the markets using a proven trading model for trading long and short term gold setups in all market conditions (bull, bear, and sideways). My focus for short term trading is simple. Wait for a breakout which satisfies my trading model, enter the trade and then exit 50% of position on the first sign of weakness. Exit second half on a trend line break. etf trading for beginners is low risk I provide GLD ETF signals which generate 2-5% profit within 2-10 days unless prices continue to run then we lock in a much larger profit. I generally have 10-20 trades per year with gold. Chris Vermeulen is Founder of the popular trading site http://www.TheGoldAndOilGuy.com . There he shares his highly successful, low-risk trading method. For 6 years Chris has been a leader in teaching others to skillfully trade in gold, oil, and silver in both bull and bear markets.

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