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Junior Gold Stocks to Shine in 2011

Written By Brian Hicks

Posted December 31, 2010

Last Friday, I urged Wealth Daily subscribers like yourself to buy gold and silver ahead of major buying that needed to take place this week to satisfy contractual COMEX obligations before the end of the trading day today…

Gold and silver prices have remained volatile in both directions since October. But indications from the COMEX show suggest we may see a spike in these precious metals prices next week…

Contracts for gold and silver December futures that demand physical metal must be met by then. But there appears to be a significant shortfall in the actual physical metal required to meet these demands — especially in silver.

If these contractual obligations are not met by the 12/31/10 deadline, then we could see a default scenario, which would drive the metals prices even higher and cause great instability for other markets as well.

This is exactly what happened.

Significant buying of physical gold and silver to meet COMEX futures drove bullion prices much higher this week. Take a look:

dec 2010 gold big chart

dec 2010 silver big chart

While the physical bullion market is rising, junior mining shares are starting to get some attention once again.

Junior mining stocks are even more speculative — but their risk/reward tradeoff amplifies potential gains even further.

And when junior gold stocks are in favor, they can quickly return legendary gains.

There’s just one little problem…

There are over 1,000 junior mining companies listed on the TSX Venture exchange alone. And it’s very difficult to sort through all the promotions and scams to find solid junior gold stocks.

Going through all those companies was a very time-consuming and nerve-racking ordeal…

So, if you don’t have the time or patience to spend pouring over junior gold stocks, I recommend taking a look at the Market Vectors Junior Miners ETF (NYSE: GDXJ).

dec 2010 gold junior chart

The Market Vectors’ Junior Miners ETF just started trading a year ago. The ETF is composed of 56 mineral companies of small and medium capitalization.

To be eligible to be listed in the ETF, companies must have a market capitalization of greater than $150 million and a three-month average daily trading volume of at least $1 million.

Regardless of the volatility we may have to experience in the short term, it’s becoming clear that an increasing number of investors are starting to learn about owning the mining shares.

This is the kind of activity that will stabilize the junior mining share market during the tough times that lie ahead — and foster the rip-roaring bull market when the masses pile in.

Mark my words: That time is coming.

You just need to take a position that you can sleep with at night and forget about the rest.

The market is coming our way.

Good Investing,

Greg McCoach
Editor, Wealth Daily
Investment Director, Mining Speculator and Insider Alert