Bill Cara

Is this a good time to buy Precious Metal stocks?

All the major banks have forecast much higher prices for Precious Metals over the next 15 months at least.

Until three days ago, the same banks were forecasting US Dollar weakness. In fact, I started to compile a list of quotes from the bank analysts who were so uniformly committing to a lower Dollar. But then, the narrative changed about a second (or third) wave of coronavirus infections hitting Europe, which was likely to weaken the economies and currency there.

Tonight the Canadian Prime Minister will follow up with the same pitch the Brits heard in the past several hours from their Prime Minister. These are people who are not caught up in US politics, Theirs is a job of protecting their own people.

Given that another coronavirus wave is likely to hit North America soon, the recent talk that the virus-fighting spending bill might evaporate is highly unlikely. As soon as this particular bill returns to the headlines, almost assuredly the USD will weaken.

In any event, these narratives are short-lived. What is a sustainable macroeconomic picture is the Fed policy of 3-5 years of almost nil Fed rates and the rapidly growing debt and deficit of the US govt.

In other words, the present volatility in Precious Metal prices is short-term and that over the next two years there will be a very substantial increase in prices of the Gold and Silver Miner (GSM) stocks.

I speak of buying into weakness as my primary investment rule, but there is further discussion needed. I would not buy into a long-term Bear trend. In a long-term Bull trend, however, I buy the dips caused by short-term traders who sell on negative narratives. That is what I mean by buying into weakness.

This tactic requires patience because short-term Bear phases often do not reverse quickly, and the prices can fall lower than anticipated. But, if an investor is not trying to satisfy ego by buying a stock at the absolute cycle bottom, they are in a good place mentally by thinking of the process as one of ‘painting the bottom’ of the cycle.

Yes, trading is a tactic. Investing is a strategy. It’s why I call myself an investor and not a trader even though I use trading tactics. My interest in wealth management is long-term based on price drivers that relate to macroeconomics, and the strength and weakness of currencies and commodity prices, and, in a normal market environment, of interest rates.

I believe that today is a good time to buy Precious Metal stocks. So too will tomorrow and the days and weeks after that. Put on your trading hat and when you see low priced offers, take them. Let the sellers hit your bids because in 3-6-9-12-15 months from now, you will be happy you did.