“Junior miners have been in a bear market … since early 2013, and now it’s a buy and hold market,” said David Erfle of Junior Miner Junky.
After a record-setting summer that took it above US$2,000 per ounce, the gold price has taken a hit this week, even spending some time trading below the US$1,900 mark.
Speaking to the Investing News Network, David Erfle of Junior Miner Junky reassured investors that the yellow metal’s move was not unexpected and is healthy for the market in the long term.
“You don’t want to see gold continuing to go higher without a healthy consolidation period. The consolidation period so far has only been about eight weeks, and both the GDX and GDXJ haven’t even corrected 20 percent yet,” he explained.
“What you want to see is a nice, healthy correction that cleans out sentiment.”
Speaking about where gold may be by the end of the year, Erfle said it’s hard to say given the uncertainty that will come with the US presidential election and other events. However, he said, “I think the US$1,750 to US$1,800 level is a pretty strong floor. I don’t see it going any lower than that.”
For Erfle, negative real interest rates are a key factor moving gold right now, but not the main driver. “I think the biggest (factor) is the loss in faith in government and in central banks and their currencies,” he said. “That’s what we’re seeing more and more of.”
When asked about his investing strategy in the current environment, Erfle said he and his followers were able to get into their holding positions in juniors before the gold sector experienced its breakout.
“Junior miners have been in a bear market — a very brutal bear market — since early 2013, and now it’s a buy and hold market. So we basically have to take our bear market hats off and put them in mothballs, and take the bull market hats that were in mothballs and put them on now,” he commented.
Erfle’s biggest success story so far this year has been Novo Resources (TSXV:NVO,OTCQX:NSRPF), and overall he said his portfolio has been performing well.
“On days like today you see that the bull market will do anything in its power to shake you off its back,” Erfle said when asked to share his final words of advice for investors. “It’s very important to maintain your core positions while this is happening and try to trade the least amount possible — meaning you want to accumulate on weakness and hold your positions and trim them when they get too large.”
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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.