Gold is on a monster run already in 2016, programs nearly 20%, while the rest of the market remains mired deep in the red.
Don’t worry: You haven’t missed it. In fact, this is just the first inning of a monster bull market for gold mining stocks. And it’s going to allow you to buy gold 50% off from its current price and you could make 100% to 200% over the next 12 months.
And just so you understand what a phenomenal opportunity this is… these gains can happen even if gold’s price stays flat or even goes down a bit.
The easiest way to understand the opportunity is to focus on what happened to gold mining stocks over the last three months.
You see, from mid-October to early January mining stocks dropped by 30%. When you see stocks go down by this much, you would think their businesses were being wiped out.
Here’s the thing… in the last three months, gold miners were making money. Gobs of it.
How do we know this? We know this because most gold companies are done reporting their fourth-quarter results. We can see what was happening inside their businesses as their stocks were plummeting.
If you look at the elite – the blue-chip gold mining stocks – companies such as Newmont Mining, Barrick Gold and Goldcorp, you’ll see that they were making an average of $215 for every ounce of gold they were digging out from their mines in the last three months of 2015.
Their total costs of mining an ounce of gold was just $836, while gold was selling for at least $1,051 during that time frame. As long as gold was trading above their costs, the mining companies were raking in profits.
And now… things are even better. Gold is now up more than 17% since the start of the year, trading near $1,250 an ounce. These companies are now making a profit of $414 an ounce.
The Disconnect on Wall Street
Why did gold miner shares crash at the end of 2015? Fear. Pure panic that you often see at the end of the worst bear markets.
Panicking investors sold their mining shares as if these companies were on the cusp of bankruptcy. That’s even though these companies were making money. Big money.
Bottom line: The selling in gold mining shares was driven by pure emotion – in other words, panic selling. People watched gold prices tumble, panicked and unloaded their shares of mining stocks out of fear rather than due to any logic or reason.
From 25 years of investing, I can tell you that the best time to invest is after a panic.
Panic wipes out the dumb money or the so-called weak hands. Now, the smart money is scooping up gold mining stocks with both fists. That’s why, even though gold mining stocks are rallying right now, they are still crazy cheap.
Mining stocks are currently at price levels that match when the yellow metal was trading at under $600. Gold mining shares are at 12-year lows.
