Readers of this blog know that I have been bullish on gold for some time. Even in recent weeks, with central banks dumping bullion and most commentators calling for a broad retreat in commodity prices, what has surprised me most is how little gold prices have actually dropped.
The weekly chart shows that the yellow dog has put in a series of higher lows since late 2006. Like Bill Cara and James Sinclair, I believe that gold is headed for a retest of 2006 highs.
If so, junior mining shares should profit handsomely. Like natural gas five years ago, the precious metal majors can replace and grow reserves more cheaply by acquiring junior mining companies than by virgin exploration. That doesn't mean that I expect all of my gold holdings to be acquired. Rather, the prospect that they might be acquired should provide a higher upside as bullion prices increase relative to the majors. Mid-tier mining companies also are likely acquisition targets.
Since I don't know which junior mining company will become Wall Street's next darling, I spread my gold positions across several junior and mid-tier companies. I like each for different reasons, but the list is by no means intended to be comprehensive. There are plenty of good mining companies out there.Source : biz.yahoo.com
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