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The spanner in the works of this theory is that gold has only gone up recently because the markets are in the poo and it is seen as a safe haven. The gold juniors haven't gone up because the market has tanked.
When the market starts recovering:
- a lot of money will move out of gold and back into stocks and gold price will go down.
- recovery of other commodities pushes us the Aussie dollar and gold price falls even further in $A terms
- junior (and senior) gold stocks miss out on much of the gains because gold price falls.
I expect there to be good gains from these prices - maybe 2-fold on some juniors, but nothing like the gains in the copper companies like ABY currently trading on unbelievably low PEs which will soar once markets recover and copper price rises greatly. Many of these quality small/mid-caps will manage gains of many hundreds of percent.
Oil could do well too. When the market recovers oil prices will trend back towards $150 again. Some juniors are trading at about 10-20% of fair value at oil prices of $80/barrel and some might make 10-20 fold gains over the next few years with recovery in the markets and oil prices. TAP, BPT, SAE, TAP, AWE, SEA and the magnificent CVN are my favoured ones.
I hold gold stocks too, but I think the future is guarded based on my reasoning above.
