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The Big Yawn

Written by Greg McCoach
Posted October 23, 2006 at 8:00AM

DENVER, CO -- Our mining stocks this past month have been mostly a "big yawn." The seasonal surge in the metals that we usually see going into the fall appears to be on hold.

 

 

The reasons for this may have something to do with the elections and the incumbent politicians who would like to stay elected. (They can't have things looking bad as voters go to the polls!) I guess we will have to wait and see what happens after the elections to get confirmation on whether that was true or not.

 

For now though, let's stick with the facts. And the facts are that the metals have suffered because of lower oil prices, a bit of dollar strength and some very strange gold trading on the part of European Central Banks. This has kept a lid on the gold price even though many other factors point to higher prices.

 

This activity all looks to be short-term in nature and my take is that we will be moving higher after the U.S. elections. I was hoping to see gold move to a new high (above US$726) before the end of the year, but that may be delayed until first quarter of 2007.

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All of the long-term factors that point to higher gold prices remain firmly intact. This can be seen from a technical viewpoint on the chart below which shows the 200 and 300 day moving average of gold going back to 2000 when this bull market in gold first got started. Even with the ongoing painful corrections we have had to endure, gold is still holding above the 300-day moving average. From a technical standpoint this is very bullish.

 

 


One thing to keep in mind as we go into the last two months of the year is tax loss selling season. With the profits that were made earlier in the year, investors will be looking to offset those gains with any losing positions before the end of the year. This is always a good time to prune the portfolio on companies whose stories have just not panned out.

 

Managing a junior mining stock portfolio requires constant pruning and adjustment to be successful. Look over your portfolio now and start selling losing positions before the crowd does in late November, early December.

 

This time of year also brings opportunities to buy good companies whose share prices have suffered with the recent correction and get hit with some tax loss selling. This can be a great time to get a screaming deal.

 

If you are looking to buy the bargains, be very selective, sticking with the proven winners that will quickly rebound when the market starts its next leg higher. There are many good companies out there that are undervalued at this point. Tax loss selling may, in the next month or so, provide some exceptional buys.


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