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Why I Own Gold but Not Gold Stocks

By Dr. Steve Sjuggerud
Tuesday, August 29, 2017

Last week, I held an urgent webinar event to talk about how you could potentially make 100% gains in the next 12 months during the "Melt Up."
The Melt Up ideas I've been presenting are certainly high-risk – but they have the potential for big returns.
When I finished my presentation, I answered listeners' questions live on-air.
While most of the questions pertained to the Melt Up, one listener asked a question about gold.
"Steve, how can you own gold, but not gold stocks?" the listener asked.
It's a good question. The answer is simple... But I don't think most people want to hear it (or they don't want to believe it).
Here's what you need to know...
Most people believe that gold stocks are a leveraged way to play gold. If gold prices go up, people think that speculative gold stocks should go up a lot more.
This is often true, but not always...
Sometimes, even when gold goes up, speculative gold stocks don't do what you expect them to do. Sometimes, gold stocks actually DON'T soar more than gold itself.
We're seeing that right now.
Gold itself has gone up a lot this year. But gold stocks have not held up their part of the bargain. Instead of dramatically outperforming gold this year, speculative gold stocks have dramatically underperformed the price of gold.
Gold has soared about 13% – from about $1,150 to about $1,300. But speculative gold stocks – as measured by the VanEck Vectors Junior Gold Miners Fund (GDXJ) – are roughly flat this year. Take a look at this one-year chart...

As you can see, in the first half of this chart, gold and speculative gold stocks tracked each other's performance – down in the second half of 2016, then up in the beginning of 2017.
Then they diverged...
Now, gold is sitting at a new high for this year. And GDXJ is basically flat for the year.
Said another way, gold is in a solid uptrend. We can't say the same for GDXJ... yet.
I summed it up in the August 10 DailyWealth:
It's hard to make a compelling case that we're in the start of an uptrend... If you are determined to make a trade in gold stocks, I can suggest a low-risk, high-return trade for you to put on today...
Let me be straight with you... I am not bold enough to take this setup – yet. But it's getting pretty darn close. It's a "good" setup in gold stocks... not great, but good...
If you're bold enough... and IF you are willing to follow your exit strategy, you could do pretty darn well on this trade.

So yes, I own gold. But no, I do not own gold stocks.
I'm getting closer... But I'm not there yet.
Good investing,

Further Reading:

Gold isn't the only area of the market soaring of late. Yesterday, Steve explained why another group of stocks is up big in 2017. "The crazy part is, I believe my Melt Up theme still has plenty of upside," he writes. "We could be just getting started." Read more here: Our Entire Portfolio Is Up 42% This Year. Here's Why...
Earlier this month, Brett Eversole discussed another "safe" asset. But unlike gold, he believes this asset could fall 15% or more this year. Get the full story here.

Market Notes


Today's chart looks at a big winner in the mobile-phone boom...
Regular readers know one of our favorite ways to profit from any secular trend is through "picks and shovels." These companies provide the tools, products, and services that fuel long-term trends. You can see this concept succeeding today with mobile-service broadcaster American Tower (AMT).
The company owns and leases real estate all over the world that telecom giants AT&T and Verizon use for wireless infrastructure (like cellphone towers). While AT&T and Verizon fight over market share, American Tower profits from both companies – along with many other carriers around the globe.
As you can see in the chart below, business is steadily growing for American Tower. Over the past five years, its share price has more than doubled... And last week, they set a new all-time high. By 2020, some studies estimate nearly 2.9 billion folks will have a smartphone – about 24% more than today. And that means we'll need a lot more cellphone towers...

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