Jeb Handwerger: ISIS, Hamas, Russia/Ukraine to Spark Off Rally in Commodities – 8/24/14
This week, returning guest Jeb Handwerger, editor of Gold Stock Trades, came on the show to talk about current world events and the potential ‘black swan’ events, which could spark off a rally in commodities. This was a very interesting conversation, given the seriousness of the situation in Eastern Europe, as well as the situation in the Middle East.
When asked what the current geopolitical landscape spells for commodities, Jeb says that all the uncertainty in the world right now is fuel for the precious metals and the energy sectors. Looking back on history, Jeb claims that the invasion of Iraq in 2003 proved to be a huge boost for the junior resource companies and precious metals.
Jeb points out that everyone that is in the natural resource sector, are fortunate, because they can take advantage of all of the uncertainty in the world right now.
Some of the charts of the junior miners are showing an inverse ‘head and shoulders pattern’, equal to a bottoming pattern, and Jeb believes we are at a potential turning point for the junior mining equities. This could signal a final turn from a secular bear market that has lasted since 2011, to beginning of an uptrend which could last 4 to 7 years.
Historically, mining equities pull back in the summer months. However, Collin Kettell points out that trading screens are beginning to turn green already. Jeb says that in 2014 alone, we have seen increasing capital coming into the GDX-J, and rising volumes. Jeb also says that when the overbought general equities markets enter into a correction, capital can start to flow into sectors that benefit from a rising inflationary environment, like natural resource and precious metals stocks.
When discussing how deeply undervalued gold stocks are trading, in comparison to almost every metric possible, Jeb’s research tells him that the situation we are in now is historically unprecedented.
Jeb points out that in the correction of 2008/09 we saw the XAU drop from 200 to below 80, with the gold price dropping from $1,000 to $700, respectively. Now the XAU is around 100, and gold has corrected from $1,900 to $1,200. With a small rise in the gold price, the mining companies could see tremendous upside. It is the miners that have the real leverage now in Jeb’s opinion.
Jeb says that it is possible to buy the indexes and other ETF’s to take advantage of rising precious metals prices, but there are opportunities in the junior mining sector to beat those indexes, if you do your homework.
Gold Stock Trades Editor Jeb Handwerger is a highly sought-after stock analyst syndicated internationally and known throughout the financial industry for his accurate and timely analysis of the equities markets, particularly the precious metals sector.