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What the World's Best Commodity Investor Is Buying Right Now

By Frank Curzio, editor, Phase 1 Investor
Friday, July 22, 2011

Gold stocks were a hated asset a few months ago.
 
I'm sure most investors don't remember. After all, the price of gold just touched $1,600 an ounce this week – an all-time high. Most gold stocks have also had a heck of run in July.
 
But back in a two-week stretch from April through May, the picture was different. Gold stocks were in a violent downtrend.
 
 
The pullback in gold stocks was unusual. After all, the price of gold barely budged. Yet, gold stocks corrected more than 12%.
 
My colleague Jeff Clark used this disconnect to buy gold stocks in his Short Report newsletter. Jeff argued that as long as gold prices remained near record levels, it was just a matter of time before gold stocks snapped back.
 
He was right. This month, the large-cap gold index is up 12%, outpacing gold's gains.
 
 
With gold prices touching new highs and gold stocks bouncing back, should investors take profits?
 
I asked legendary commodity investor Jim Rogers this question on this week's S&A Investor Podcast. That's our radio-like show, where I interview the market's top hedge-fund managers, economists, and stock analysts. (You can listen to the full interview for free by clicking here.)
 
Jim and I talked about the dollar (he is long as a short-term trade right now), how he invests in commodities, and the recent move higher in gold prices.
 
Jim said he hasn't sold any of his gold. In fact, he just added to his position last week.
 
Jim believes the fundamentals behind gold remain compelling... Demand from China and India is surging. Due to our reckless spending habits, the dollar will be worth nothing more than confetti. Plus, there is little supply of the metal.
 
Conventional wisdom tells us we should buy assets low and sell high. But Jim Rogers, the smartest person in the room, continues to buy gold with the price up 100% in two years.
 
If Jim's right and gold prices push higher, margins for gold producers will soar. The cash cost for most major companies to produce an ounce of gold is less than $500. Just imagine the earnings these companies will report if gold prices push past $2,000 an ounce.
 
I would think twice about selling your gold stocks on this short-term rally. In fact, it may be a good idea to add to your gold positions right now.
 
Good investing,
 
Frank Curzio




Further Reading:

Earlier this month, Jeff Clark's favorite gold stock signal triggered a buy. Since then, gold stocks are up 11% in just three weeks. Get the details on his signal here: Why Gold Stocks Are Ready for a Big Rally.
 
Over at our sister site DailyWealth, Steve Sjuggerud has written plenty about the precious metal recently, including his thoughts on gold, gold stocks, and gold coins. Get the full story here: Right Now Is the Best Time to Buy Gold Since 2008.

In The Daily Crux
Market Notes
S&P 500 is back within 2% of a new three-year high.
 
Oil and gas stocks Range Resources, Linn Energy, Carbo Ceramics, and Atwood Oceanics hit multi-year highs.
 
Aerospace parts-makers Goodrich, BE Aerospace, and Hexcel break out to fresh two-year highs.
 
Apparel stores break out... new highs for Abercrombie, Nordstrom, Express, and Chico's FAS.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1325.84 -0.1% +22.4%
Oil (USO) 38.72 +0.8% +13.2%
Gold (GLD) 154.83 -0.8% +33.7%
Silver (SLV) 38.31 -2.1% +121.3%
U.S. Dollar 75.20 -0.2% -9.2%
Euro 1.42 +0.4% +10.3%
Volatility (^VIX) 17.56 -8.0% -31.5%
Gold Stocks (^HUI) 571.62 -0.4% +29.7%
10-Year Yield 3.01 +2.7% +4.2%

World ETFs
Symbol Price
Change
52-Wk
S. Korea (EWY) 66.64 +0.6% +41.6%
Taiwan (EWT) 15.42 +1.7% +30.6%
Canada (EWC) 32.59 +1.1% +29.3%
S. Africa (EZA) 71.35 +1.8% +29.2%
USA (SPY) 134.49 +1.4% +28.1%
Israel (ISL) 17.68 +1.4% +27.6%
Singapore (EWS) 14.21 +2.2% +25.4%
Russia (TRF) 21.69 +2.1% +23.1%
Japan (EWJ) 10.86 +0.8% +19.0%
Lat.America (ILF) 50.40 +1.5% +15.6%
India (IFN) 30.19 +0.0% +8.4%
China (FXI) 42.18 +0.6% +7.6%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service (OIH) 159.21 +1.5% +54.8%
Internet (HHH) 78.42 -0.2% +53.5%
Basic Mat (IYM) 81.22 +1.4% +44.6%
Retail (PMR) 21.52 -0.5% +37.1%
Consumer Svcs (IYC) 73.94 +0.9% +34.8%
Media (PBS) 15.31 +1.8% +34.2%
Real Estate (IYR) 62.55 +0.6% +34.2%
Industrials (IYJ) 70.05 +1.3% +33.6%
Big Tech (QQQQ) 58.99 +0.7% +33.2%
Biotech (PBE) 22.66 +2.1% +32.7%
Transportation (IYT) 97.83 +1.6% +32.4%
Telecom (IYZ) 24.51 +1.0% +30.0%
Health Care (IYH) 74.38 +1.6% +29.9%
Water (PHO) 19.85 +1.3% +29.8%
Big Pharma (PPH) 71.84 +1.8% +25.9%
Software (PSJ) 26.10 -0.2% +25.1%
Semis (PSI) 16.06 +1.3% +24.6%
Defense (PPA) 20.13 +1.8% +23.4%
Construction (PKB) 13.25 +0.9% +22.6%
Utilities (XLU) 34.03 +1.5% +18.5%
Insurance (PIC) 16.33 +1.6% +15.3%
Financials (IYF) 56.57 +2.0% +13.7%
Nanotech (PXN) 8.81 +0.7% +4.6%
Alt. Energy (PBW) 8.70 +1.3% -1.7%

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