Boy, Was I Wrong About Gold

Gold prices have risen 1% for every trading day of February, touching a one-year high last week of over $1,250 an ounce.

But I wrote to you on Monday saying that I thought gold prices were too high.

Gold had started the week up over 6% higher in a six-day run. I was sure profit taking would force the yellow metal once again below $1,150 an ounce before it moved any higher.

But oh boy, was I wrong…

On Thursday, gold shot up 5% as financial uncertainty, a weakening dollar, and shaky equity markets prompted investors to seek a hedge with bullion — it was the largest daily gain in gold since 2009.

But even though I pulled the reins on gold a little too early last week, I’ve been writing to you for several weeks now telling you that gold (and other commodities) are headed higher.

Back in November, I wrote to you about two of my favorite gold stocks for 2016. They were Goldcorp (NYSE: GG) and Royal Gold (NASDAQ: RGLD). Both have seen decent profit returns since then, up about 30% and 20%, respectively.

Other gold stocks we’ve talked about, like Kinross Gold (NYSE: KGC), have seen gains of at least 60%.

Similarly, two silver stocks that I mentioned as my favorites for 2016 — First Majestic Silver (NYSE: AG) and Avino Silver & Gold Mines (NYSE: ASM) — are also both up over 30%.

So I don’t mind being wrong last week. You can’t kiss all the girls anyway.

But from here I’m still hesitant to say “buy gold now.” I wouldn’t want to buy the yellow metal right now after it’s up 10% in 10 days. I would want to wait for a pullback.

Nevertheless, my mid- to long-term outlook on gold remains bullish. The mainstream financial media is now talking about negative interest rates… the equity markets are under serious pressure… investment demand for gold remains strong… central banks are buying… gold supplies are falling across the board…

It’s 2008 all over again.

From where we stand now, I expect to see gold prices at $1,500 in the summer. But we won’t just be targeting a 20% gain from here. We’re going to make those triple- and quadruple-digit gains the same way we did last time…

Small- to mid-cap gold stocks.

I mean, there’s no reason to reinvent the wheel, right? We absolutely killed it with junior mineral stocks between 2008 and 2011. And we’re going to do it again.

I’ve already got you started with Avino Silver & Gold Mines (NYSE: ASM). Here’s what I said about ASM back in December:

Avino is a smaller, little-known silver-focused mining and exploration firm with projects in Mexico and Canada. The company’s flagship project is the Avino Property, which currently has 35.5 million ounces of measured, indicated, and inferred silver resources, plus another 18.7 million silver-equivalent resources for a total of over 54.2 million ounces of silver-equivalent resources.

Through the first three quarters of the year, the main Avino mine produced nearly 800,000 silver-equivalent ounces. And while 800,000 silver-equivalent ounces isn’t a game-changing amount of material, the Avino Mine has good potential to increase production.

With a decently sized resource, increasing production, very low production costs, and a customer ready to buy its products, ASM looks like a great little stock to own to leverage rising silver prices.

A few weeks ago, Avino reported its 2015 production results showing a 116% increase in silver-equivalent production. That included:

• A silver production increase of 68%
• A gold production increase of 37%
• A copper production increase of 1,453%

Avino is just one of many small-cap silver and gold companies that I expect to do very well over the next several months as precious metal prices rise — although, as I mentioned earlier, I would want to wait for a pullback in precious metal prices before heavy investment.

Going forward, I will continue bringing you new precious metal plays here in Energy and Capital. We’ve already got a good start. Now, it’s time to really start making money.

Good Investing,

Luke Burgess
Energy and Capital