Comment BALTIMORE, MD -- Over the past few days we've seen a significant decrease in most of our TSX Venture positions, especially in our zinc plays. But we shouldn't be worried about this one bit. That's because the overall trend remains in place for a continuing bull market in zinc and other metals that will drive our positions and the Venture Exchange, as a whole, higher.
In the 2001 film Blow -- based on the true-life story of George Jung, the man who established the cocaine market in American during the 70's -- Ray Liotta, playing Jung's father, made an outstanding comment on the ups and downs of life. Liotta said, "Sometimes you're flush, and sometimes you're bust. And when you're up, it's never as good as it seems. And when you're down you never think you'll be up again."
This maxim can also be applied to capital investments.
Just as life has its peaks and valleys, so too does the stock market ebb and flow with rallies and corrections. And right now, the Canadian markets have corrected causing a dip in the Gold World portfolio.
At present, the U.S. markets are quite robust. The Dow Jones Industrial is again flirting with all-time highs and the NASDAQ and S&P 500 aren't too shabby either. The strength comes in part on the back of a healthy U.S. dollar and oil prices that have now dipped to $62 a barrel for the first time in 2006.
However, a stout greenback, which has helped to drive down precious metal prices, and crude prices toying with $60 again has put downward pressure on the Canadian markets, especially the TSX Venture Exchange, where most of our positions are listed.
Take a look at the 30-day TSX-V chart...
It's actually not as bad as it looks.
The Venture Exchange has fell 8.8% since the 5th. But like I said, this is just a correction. Not a fall-out.
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The unbending fact is that a healthy market will correct from time to time. And as long-term investors, we are forced to weather these storms. I know it can be trying. Especially when your hard earned money is on the line.
But we've seen these types of corrections many times on the TSX-V in the past. Take a look at the 5-year chart...
The trend is clear: BULLISH.
The same thing can be said about metals right now.
Gold, the front man in the metals market, has lost over 10% since the beginning of the month. However, all of the technical and fundamental markers are still in place that indicate a continuing bull market in gold and metals as a whole.
The drop in gold doesn't come as a surprise. It's actually something we've been expecting for quite some time. And I think that we'll still see even further declines in the yellow metal between now and the end of the month.
Nevertheless, I believe we're nearing the turnaround point. As it stands today, I feel comfortable say that the bottom of this correction is somewhere near $560 an ounce. After that we'll see another run-up.
That means we should be looking to stake or increase our positions now. In fact, while I always like gold for asset protection, I've been advising against buying physical bullion for investment for the entire summer.
Until today.
If you've been thinking of buying physical gold, I'd say the time to do it is now. Prices are low enough to where I believe an investor could make a nice chunk of change in a short period of time with physical gold.
Now, I mentioned our zinc plays at the beginning of today's letter because I think there is some decent short-term potential also with Firestone Ventures (TSX-V: FV) and in particular Selkirk Metals (TSX-V: SLK).
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Both stocks have lost quite a bit just this week. Firestone has lost 8.8% since the beginning of this week while Selkirk has dropped 25% even after putting out some decent drill results from the Ruddock Creek project on Tuesday.
These two stocks have dropped in part because of weaker zinc prices.
And quite frankly I'm very surprised. The fundamentals that have been driving this zinc market haven't changed a bit. We are still seeing diminishing supplies and increasing demand.
The London Metal Exchange warehouse stocks have fell by nearly 25,000 tons, or 13.5% in the past 30 days. Yet zinc prices have increased less than half a cent.
Fact is I think both Firestone Ventures (TSX-V: FV) and Selkirk Metals (TSX-V: SLK) have sold off in a panic...more so with Selkirk.
I strongly urge you to pick up some shares of Selkirk while it's still trading at the bargain-basement price of under $0.60.
Next week I will have an update on both companies for you.
- Luke Burgess
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