Monday, March 9, 2009

Royal Gold - time to buy

Ticker (RGLD) is one of my favorite gold stocks as it combines banking with gold and is essentially a gold royalty company. The stock broke out of a long-term consolidation pattern and is now re-testing the breakout, which will serve as support.

This stock started its current short-term consolidation before other gold stocks and will likely finish its consolidation first. I started nibbling today via 2010 call options and will buy more over the next few days. This stock will be taking a shot towards the moon soon and I intend to go along for the ride. Here's a 6 month daily chart:

I have covered the long-term breakout of this stock before for those interested and have previously drawn my anticipated road map for this correction, which the stock is following like a script. This stock has been acting absolutely textbook and, while investing carries no guarantees, RGLD is a lock for massive profits in my opinion. Patience has paid off and now it's time to start buying. I am waiting a little longer to buy Goldcorp (GG), as I think its' consolidation has a little further to go.

Gold has started its' last leg down for this short-term correction and I don't know where it will end but the $800-$880 range seems like a good bet. Panic plunges are common at the end of gold price corrections, so a dip briefly under $800 would not be shocking.

I have given up trading the gold price (I use the mining stocks instead for trading) and simply look to accumulate more physical gold using my savings and trading profits on price dips. Some day I will trade my gold in for real estate and paper assets like stocks, but that day is nowhere near. Once the Dow to gold ratio gets to one, then I will start looking to unload my gold as opportunities present themselves. Until then, gold is my cash equivalent holding and cash is king during a deflationary crash.

Gold is money, has been for thousands of years, and is a better deflation hedge than inflation hedge. Gold miners are the best stock sector to put money into if you want to play the long/bullish side during a secular credit contraction, which is now well established and cannot be stopped by our bankstas or governments.

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