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The No. 1 Reason to Hold Your Gold Stocks NowBy Brian Hunt, editor in chief, Stansberry & AssociatesFriday, July 29, 2011 More and more people are waking up to gold's role as a "real money" anti-paper currency asset... and the metal has climbed 70% in the past two years.
But the market hasn't had the same attraction for the companies that produce that gold. As measured by the big gold stock fund GDX, gold stocks have returned just 48% in the same time.
This spring, the "divergence" between gold and gold stocks grew especially wide. Gold stocks plunged and, as Jeff noted, dropped into "oversold" territory.
Right now, they're rebounding from those conditions, which is enough reason to trade gold stocks here. But today, I'll give you another reason: Even after climbing 10% from their June lows, they're still near-record-cheap relative to gold. Take a look...
 The top line on this chart tracks an index of precious metals stocks. The bottom line measures the "spread" between gold prices and precious metals stock prices. The lower the line goes, the cheaper precious metals stocks are relative to gold.
Two days ago, precious metals stocks saw their cheapest level since May 2009. Back then, gold stocks jumped 20% in six months. We saw similar levels of cheapness in February 2010. Since then, GDX is up 32%.
As Jeff noted, gold stocks are still climbing off their short-term oversold state. If you bought them in advance of this rebound (like we told you to do here), consider holding on for more gains. Gold stocks have the trend on their side... and they're still cheap.
Regards,
Brian Hunt
Further Reading:
One of Steve Sjuggerud's favorite gold stocks is set to run much higher over the next couple years... "Hundreds of percent returns are possible between now and the end of 2013 if gold moves up a bit," he says. And "if gold does nothing, you could still double your money." Get the details here: Triple-Digit Returns Likely in Two Years with Golden Paychecks.
Read more on the gold stock rally here...
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Silver is the best-performing commodity in the past month... up 18%.
Gold miners still look like a bargain... mining index GDX is down about 6% this year, while gold is up 13%.
Investor "fear" nears four-month high... VIX surges more than 30% in July.
Select oil and gas stocks break out to three-month highs... including Anadarko, Cameron, and Superior Energy Services.
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