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Trading the Fluctuations in the Precious Metal Stocks

As should come as news to no one, over the past ten years precious metals have been in a secular bull market, one which still has strong fundamentals going forward. Most secular bull markets last around twenty years and this bull market in commodities will be no different. What makes gold different than most other commodities is that gold is money, a store of value, a financial safe haven and the currency of last resort. History has shown us over and over again that gold will shine its brightest when monetary policies fail and fiat currencies become devalued. This time will be no different.

History never repeats itself exactly but it rhymes like a rap song. If we look back at the 1930s bull market for gold, we were in a period of deflation. Back then gold was fixed to the dollar, a peg which was probably too low at the time and as a result the central bankers couldn't print their way out of it. During the 1970s we had stagflation, a period of time with increasing inflationary pressures and low economic growth. Once Nixon closed the gold window, it went from $35 to $850 in less than ten years and silver did just as well going from under $2 to about $50. The 1970s bull market had a great run and a lot of money was made with the gold mining companies and juniors, but it was mostly a North American bull market.

So what can we expect in this young ten year bull market which could be different than the previous bull markets in gold? Well, in the 30s we had deflation and the 70s brought about a nasty bout of stagflation, so what could we get this time around? Since the bankers already had to deal with deflation and stagflation with very little success and they vowed never to go down that road again, I guess that leaves us with inflation. With the amount of currency units being printed or typed into existence, one can only expect to have inflation going forward and the central bankers surely haven't disappointed us so far.

Monetary Base 1917-2009

With all central bankers printing money around the world, this bull market in gold will definitely be different than the previous two bull markets. It will be much bigger because of competition from central bankers all around the world, as well as the participation from institutional and public investors.

In the investing world, we always hear the saying "no bull market goes up in a straight line", so why should this one be any different. Every secular bull market has significant corrections along the way, but the key to success is being able to stay on top of the bull for the whole ride and making sure you don't get bucked off, as most bulls will try and throw you out of your position. The key to being successful in this gold bull market is to own as much physical as you can and only buy on weakness. Because if you don't, others will step up and buy the physical when the price becomes cheap enough, the same goes for the mining companies and gold juniors.


At TDV Golden Trader our strategy for staying invested in this bull market is very simple. The first part of our strategy is to hold a core position in the physical bullion for safety, security and profit and a few key select mining companies and gold juniors, and then hold this core position for the full duration of the bull market. With extensive research, we like to buy the undiscovered junior gold companies at the early stages with strong management teams and great projects. Whenever possible, we provide unique opportunities to subscribers for investing in IPOs, Private Placements and Warrants in the mining industry. This is when the "Big Money" gets invested and that's when we want to be buying our shares. We then use our special trading strategy for maximizing profits like the institutional investors do while minimizing the risks.

The second part to our investment strategy is to have a trading approach to part of our investments. The market will always provide us opportunities to buy on weakness and sell into strength, especially when a definite trend can be established. Whether the trend is up, down or sideways, there is always a good trading opportunity somewhere, especially when markets go from one extreme to another - a state of affairs that has occurred often in the last few years. This is what we look for and love to trade.

Using fundamental and technical analysis, we identify swing trading opportunities for subscribers in positions we hold anywhere from a week to a couple of months. We also look for trading opportunities based on company specific news, chart patterns, technical breakouts and money flows. Our trading positions are mostly based in the commodities space, however at times we also trade financials, technology, indexes, ETFs and occasionally we use options.

As we mentioned, no bull market goes up in a straight line and this gold market will provide us many trading opportunities in the years ahead - this has been my specialty for the last decade. Looking at the ten year chart of the HUI below, we can clearly see that the miners are still in an uptrend. With this volatile sideways choppy action we have seen over the past year, it has kept many investors nervous or sitting on the sidelines, but this has been ideal for traders with a short term focus.

HUI Gold Bugs Index

Golden Trader members are updated on the new trading ranges being created with this volatility and how to best take advantage of them through short term investments in the various trading tools we follow. The next few months will be very interesting to say the least, as there is a potential for a break down below support, but this breakdown has not been confirmed yet and the mining companies could still trend sideways within the 500-600 range. Our subscribers are provided with regular updates on shorter term charts and trading strategies using technical analysis within a larger fundamental framework, while looking at macro events which may affect our trading decisions.

When taking profit from our trading strategy, we always suggest buying additional physical precious metals or adding to the core holding in quality gold mining companies and juniors. Diversification is also a key part of our strategy, so taking profits and trading paper wealth for real hard assets is always suggested.


Here at the Golden Trader we not only like to profit but we like to learn and have fun along the way. For that reason, a big part of my writing over the coming months and years will also be to educate on all the ins-and-outs of trading the precious metals stocks... We'll help you to understand the markets from the very basics, on opening a brokerage account, to some of the more advanced theories and concepts I've learned over more than a decade of trading these stocks.

We hope you'll hang on to the rest of this bull market with us and find ways to trade for profit along the way.


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