How to Succeed When Others Fail: Take Advantage of QE310 min read

For the full interactive edition, please CLICK HERE

There are so many reasons to own gold and silver stocks right now.

With many of the gold and silver mining stocks suffering lately, there has been no better time to invest.

I have been saying this aggressively for the last few weeks and this past Friday, the bull signals came roaring.

Gold futures rallied almost 4% Friday, scoring their largest single-session increase since August. India, one of the top world buyers of gold, saw gold prices cross an all time high of Rs 30,000 per 10 gram level – showing us yet another example of gold’s purchasing power against worldwide weakening currencies.

According to the latest report from the U.S. Mint, sales of both gold and silver bullion coins rebounded strongly during May.

I suspect that gold is now back in a strong uptrend and we’ll soon see gold back above $1650, then $1700 very shortly. The May nonfarm payroll report came at less than half of what most economists expected, showing a shockingly weak 69,000 new jobs created. The Chicago purchasing managers index also missed expectations dramatically dropping to 52.7 last month; expectations were an increase from 56.2 to 56.8.

This, along with continued worldwide economic stumbles, sent global stocks falling. Asian stock indexes all closed lower and European indexes tumbled hard, with Germany’s DAX plunging 3.35 percent to end the week.

The S&P 500 ended below its 200-day moving average for the first time in 2012 falling more than 2%, while the Dow fell to negative territory for the year with a near 275-point dive.

A couple of weeks back in my Letter, “What I am About to Buy” I said the downside for stocks was apparent and strongly stated that when the other sectors begin to fail, investors will hurl themselves at the precious metals sector. If you missed that Letter, I strongly suggest you read it by Clicking Here.

Why? Because I made a strong point that while the stock market had more room to climb (which it did), it would eventually tumble (which it has). I also made a strong point that it was time to pick up shares of precious metals stocks as that happened. If you followed the Letter, not only would you have protected yourself from the drop in the overall market, but you could have reaped the near term rewards of the gains in gold and silver stocks.

I emphasize these points not to tell you that I was right, when so many others were wrong. I emphasize these points because there’s still much more room for profit in the gold and silver space, while dangers lie ahead for the other sectors.

The stock market could bounce from Friday’s low, but that won’t signal a clear. The real short term bottom would only be found if indeed another round of QE is announced, or the Greek mess is resolved. And I stress that it would be a near term bottom.

Where Others Fail The other sectors are now failing (why anyone would buy Facebook at its IPO price is beyond me.*) and its apparent that additional stimulus is needed to not only sustain a recovery, but to keep the economies of the world from crumbling.

(*The billion dollar fund managers who invested in Facebook at such a high price are either plain stupid, or they were lied to by a conglomerate of bigger players. Or they just don’t care because its not their money…)

As a result worldwide precious metals stocks climbed dramatically as smart investors left the failing sectors for precious metals stocks (see What I am About to Buy).

Barrick Gold surged over 7 percent, Goldcorp over 8 percent, Newmont Mining over 6% percent, and Agnico-Eagle Mines over 9 percent. The Market Vectors Gold Miners index (GDX) climbed 6.4% while the Market Vectors Junior Gold index (GDXJ) climbed nearly 7%. MAG Silver (TSX: MAG) (NYSE.A: MVG), one of my top silver picks, also climbed over 10% on the American side of trading. This all happened in one day.

Still Cheap Even still, shares of many precious metals stocks remain cheap.

The last time shares were this cheap, they rallied well over 250%.

With the markets clearly oversold, the upward momentum from any new buying will send these stocks rocketing much higher. Friday already showed us the violent nature of upswings in these oversold stocks. While gold and silver both rose 4 and 3% respectively, shares of many miners and explorers rose nearly 10%.

Is it time for the precious metals stocks to catch up with the price of precious metals?

An Oversold Market

When gold moves up, gold stocks generally move up right alongside. That’s been the historic mentality. It was like that in 2009 and 2010.

But last year we saw a significant discord between the two.

While gold prices continued to climb in 2011 gaining over 10%, gold stocks did the exact opposite falling more than 10%. The trend continued this year, except the gap between the two has widened to near historic highs.

That means the upside potential for gold shares clearly outweighs the downside risk.

A Major Turn of Events

Gold stocks are finally starting to outperform the metal itself. The GDX, which I have encouraged readers to look at, is up 15% in the past two weeks, even as gold spot prices have gained only 2.5% (see What I am About to Buy, section: It’s Time to Rationalize.)

This is an important signal.

The buying within the sector is occurring on large volume, indicating major investors are beginning to enter the oversold sector with major support.

This is in sharp contrast to the overall stock market which has been climbing this year with little volume and support (I explained this in a past letter.) That means if the stock market falls, it will fall fast. In contrast, if gold shares move up on high volume, it will move up fast and sustain itself.

QE3 to the Rescue?

The potential announcement of QE3 is a very misunderstood stock market trigger. Traders expect QE to give the markets a boost, but in reality it just gives investors a short term trading opportunity.

With the recent release of poor economic data in the US and continued European financial disasters, the thought of QE3 is becoming more prominent.

But before you go and invest in other sectors based on this prediction, ask yourself if the last QE really put the world economies in a better place? Are we sustaining any type of real growth? Are the economies of the world in a better position?

Nothing has changed since the last QE, except the world’s strongest and biggest countries are now in more debt with a massively expanded monetary base. So will QE make the world a better

place and send stocks climbing to new highs? I doubt it.

But there is one thing I know QE3 will do.

Take Advantage of QE3

It will do exactly what previous QE’s have already done: Increase the monetary base causing monetary debasement, increase worldwide debt levels, and achieve little to no growth. It will dig us into a bigger financial hole that we’ll never climb out of. All of this means one thing is for certain: The purchasing power of gold against the dollar will rise.

The ongoing simultaneous collapse of the banking systems and economies of the Eurozone is the most obvious trigger for the next phase of the financial crisis. That’s why the G8 nations have already pledged more money to prevent further disaster. It won’t work.

As confidence in paper money evaporates, expect gold to soar as investors rush into the only currency that governments cannot debase: Gold.

I stress that this opportunity to invest in undervalued gold mining stocks is a rare occurrence in a gold bull market which should not be overlooked.

Until next week,

Ivan Lo

Equedia Weekly

Equedia Logo

Questions?

Call Us Toll Free: 1-888-EQUEDIA (378-3342)

Disclosure: I am long gold and silver through ETF’s and bullion, as well as long both major and junior gold and silver companies.I am also biased towards MAG Silver because they are an advertiser and I own shares. You can do the math. Our reputation is built upon the companies we feature. That is why we invest in every company we feature in our Equedia Reports, including MAG Silver. It’s your money to invest and we don’t share in your profits or your losses, so please take responsibility for doing your own due diligence. Remember, past performance is not indicative of future performance. Just because many of the companies in our previous Equedia Reports have done well, doesn’t mean they all will. Furthermore, MAG Silver and its management has no control over our editorial content and any opinions expressed are those of our own.

Disclaimer and Disclosure

Equedia.com & Equedia Network Corporation bears no liability for losses and/or damages arising from the use of this newsletter or any third party content provided herein. Equedia.com is an online financial newsletter owned by Equedia Network Corporation. We are focused on researching small-cap and large-cap public companies. Our past performance does not guarantee future results. Information in this report has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. This material is not an offer to sell or a solicitation of an offer to buy any securities or commodities.

Furthermore, to keep our reports and newsletters FREE, from time to time we may publish paid advertisements from third parties and sponsored companies. We are also compensated to perform research on specific companies and often act as consultants to many of the companies mentioned in this letter and on our website at equedia.com. We also make direct investments into many of these companies and own shares and/or options in them. Companies do pay us to advertise on our website and we often distribute our reports on featured companies. While we are never paid to write a rosy and positive report on any company, we do market our reports using the advertising fees paid for by our featured companies.

This process allows us to continue publishing high-quality investment ideas at no cost to you whatsoever. Our revenue is generated by sponsor companies and we grow our readership by using the advertising fees we charge to distribute our reports. This helps both Equedia and our client companies gain exposure and allows us to provide you with our research at no cost.

Therefore, information should not be construed as unbiased. Each contract varies in duration, services performed and compensation received.

If you ever have any questions or concerns about our business or publications, we encourage you to contact us at the email or phone number below. Equedia.com is not responsible for any claims made by any of the mentioned companies or third party content providers. You should independently investigate and fully understand all risks before investing. We are not a registered broker-dealer or financial advisor. Before investing in any securities, you should consult with your financial advisor and a registered broker-dealer. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report OR ON Equedia.com will be the full responsibility of the person authorizing such transaction.

Please view our privacy policy and disclaimer to view our full disclosure at http://equedia.com/cms.php/terms. Our views and opinions regarding the companies within Equedia.com are our own views and are based on information that we have received, which we assumed to be reliable. We do not guarantee that any of the companies will perform as we expect, and any comparisons we have made to other companies may not be valid or come into effect. Equedia.com is paid editorial fees for its writing and the dissemination of material and the companies featured do not have to meet any specific financial criteria. The companies represented by Equedia.com are typically development-stage companies that pose a much higher risk to investors. When investing in speculative stocks of this nature, it is possible to lose your entire investment over time. Statements included in this newsletter may contain forward looking statements, including the Company’s intentions, forecasts, plans or other matters that haven’t yet occurred. Such statements involve a number of risks and uncertainties. Further information on potential factors that may affect, delay or prevent such forward looking statements from coming to fruition can be found in their specific Financial reports. Equedia Network Corporation., owner of Equedia.com has been paid $5833.33 plus HST per month for 6 months which totals $35,000 plus hst of media coverage on MAG Silver Corp. plus any additional expenses we may incur as a result of additional distribution. MAG Silver Corp. has paid for this service. Equedia.com may purchase shares of MAG Silver without notice and intend to sell every share we purchase for our own profit. We may sell shares in MAG Silver Corp without notice to our subscribers.

Equedia Network Corporation is also a distributor (and not a publisher) of content supplied by third parties and Subscribers. Accordingly, Equedia Network Corporation has no more editorial control over such content than does a public library, bookstore, or newsstand. Any opinions, advice, statements, services, offers, or other information or content expressed or made available by third parties, including information providers, Subscribers or any other user of the Equedia Network Corporation Network of Sites, are those of the respective author(s) or distributor(s) and not of Equedia Network Corporation. Neither Equedia Network Corporation nor any third-party provider of information guarantees the accuracy, completeness, or usefulness of any content, nor its merchantability or fitness for any particular purpose.