Gold and silver prices are flying high and the market still looks extremely bullish.
But the junior mining stock market is lagging behind the action to the physical metals at the moment.
The aggressive moves in gold and silver prices are due to an enormous amount of physical buying worldwide by investors who are using the precious metals as a flight to safety.
Gold and silver are profiting from their status as a safe haven, and are likely to remain in strong in the near term as doubts persist over the debt crisis in Europe.
Economically speaking, the world is experiencing the effects of deflation right now. Governments around the world have abused the power of their fiat currencies over the last several decades.
But now, these government-created bubbles have been pierced and are losing life-sustaining air.
Historically, gold and silver have always performed very well during times of inflation and extremely well during periods of hyper-inflation.
However, gold is also known to hold its own during times of deflation, while silver does not.
To see the moves in both gold and silver as of late is wildly bullish for both metals as we anticipate coming hyper-inflation in fiat currencies around the world.
The reason for this is that deflation ravages the amount of taxes city, county, state, and federal governments collect. So governments around the world must reflate and print more of their currencies to avoid this.
This kind of activity is absolutely guaranteed by failing governments as they make one more last ditch effort to save their economies.
The problem, however, is that the amount of monies that will need to be created will cause hyper-inflation like our generation has never seen.
This is where the ultimate consequences for decades of abuse of a fiat currency system finally catch up.
The effects of deflation will ravage the world economy until the bubbles have been sufficiently reduced.
Then, and only then, will the world be ripe for the hyper-inflations that must certainly come.
This will when our precious metals holdings and our junior mining shares will explode in price.
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The next junior mining stock bull market
The fight to safety to gold and silver is underway and will continue to gain momentum.
Precious metals are moving up against all currencies worldwide. Eventually, this activity will translate to our junior mining stocks as well.
For now, junior mining stocks are stuck in the summer doldrums. It’s likely that they will remain there until we see a larger group of investors buying in the junior market as part of their overall portfolio strategy.
From past experience, this can happen very quickly — and is one of the reasons why you need to stay invested with your core junior positions.
I realize that it is important to have some cash on hand to take advantage of great buying opportunities if they present themselves, but for most investors who are already fully invested in the mining shares, you are probably better off just gutting it out until our market recovers and takes off.
Right now, fear is causing investors to move towards the physical metal instead of the junior mining stocks.
The junior market does well when greed kicks in and investors want to own a chance at big returns.
Fear and greed have always run markets, but it’s fear that has the upper hand at the moment.
Despite the summer doldrums, junior mining companies that can make a discovery of merit will be great performers.
We have many companies who have aggressive drill programs scheduled throughout the summer which provides us with plenty of opportunities to prosper as results begin to come in.
Otherwise, we are probably waiting for the fall season to see a recovery in junior mining stocks.
Good Investing,
Greg McCoach
Investment Director, Mining Speculator and Insider Alert
Editor, Wealth Daily
P.S. My colleague Luke Burgess has just published a new report on the precious metal that pays out $12,890 for every car made around the world. And with the worldwide automobile market exploding, this rarely-invested-in metal is coiled for huge price gains. Learn the secrets to this rare precious metal in Luke’s most recent report.
