VIDEO - David Erfle: When Gold Stocks are Hated, That’s the Time to Buy

The first quarter of 2021 has been and gone, and for gold it was a period of downward momentum. The yellow metal fell about 10 percent to close Q1 at around US$1,710 per ounce.

Speaking to the Investing News Network, David Erfle, editor and founder of Junior Miner Junky, said he views gold’s price activity as a “healthy correction” from last summer’s all-time high.

“What we started was a very healthy correction. If we would have had just a correction down to maybe US$1,800, US$1,900 and then it took off again, then it would have been a problem later on because we would have had a strong(er) correction,” he explained in an interview.

Erfle pointed to rising bond yields as one reason the gold price is struggling, and said he thinks the market is waiting to hear from the US Federal Reserve about yield curve control.

“Once that is announced, then the Fed’s balance sheet will really start to go up again,” he said. “It’s already approaching US$8 trillion, and it’s expected to be US$10 trillion by the end of the year, but if they announce some kind of Operation Twist yield curve control program, then their balance sheet will really start to move and the gold price will really start to move up along with it.”

So where is the bottom for gold right now? Erfle said the metal may already have hit it, although it’s also possible that the precious metal could sink below US$1,600.

“There’s a good chance it’s bottomed here around that US$1,670, US$1,690 level, but if it breaks that area of support, then the 50 percent Fibonacci retracement level of that move from US$1,045 to US$2,089 would be US$1,557,” he commented. “There’s some really strong support at US$1,560, US$1,580, so a move down there wouldn’t shock me. But you’re going to see a bounce first if that did take place.”

Aside from the gold price, Erfle spoke about trends among gold companies, saying he expects to see M&A activity heat up this year as majors continue to look for ways to boost their reserves.

He also emphasized that it’s a good time for investors to enter the sector as many gold stocks have corrected along with the price. But, said Erfle, it’s key to take profits when appropriate.

“If you didn’t know it before, you know it now — always be taking some profits when you have these huge moves on the upside. These up legs can go a lot farther than people expect, and then when we have a correction they can go a lot lower than people expect. Always maintain a core position now that we’re technically in a buy-and-hold bull market, but take some profits off the table at the top.”

Watch the video above for more from Erfle on the gold price and other themes.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.