While oil rose in today’s trading gold closed basically flat, after a five day run. Last week the dollar fell, and as we all know, has been weak for some time. Many have called the long gold/short dollar trade the most crowded trade in recent history. As a result, we have seen blue chip gold stocks like Newmont Mining (NEM:NYSE) double since 2009. Newmont has been one of the gold stocks to watch for sometime. Certain gold penny stocks have also provided huge returns, and silver penny stocks have also benefited greatly from the widespread interest in the yellow metal.
As many know, there are very smart people on both sides of the gold trade. Both sides are extremely passionate in their beliefs that gold will either drastically go up or down. One thing that seems evident, is that gold is no longer solely used as an inflationary hedge. Factors like QE3 will always influence the price of gold and will lift the rising tide of gold large caps, ETF’s and gold penny stocks. However, much of the move we have seen in this precious metal can be attributed to the most basic economic principal. It’s called supply and demand.
Sheer buying interest and short covering is always a part of any prolonged rally. It happens every day, and the sharp moves in physical commodities are often as sharp as those seen in a rising gold penny stock. The percentage of gold related investments has risen dramatically in relationship to portfolios asset allocation ratio. Financial pundits talking of a return to the gold standard has even added more fuel to the fire. Does this signal a top ? I’m not sure. However, I do know that it probably won’t hurt to do some research on the names in the gold space. Just in case the gold bugs are correct. Forming a list of gold stocks to watch is certainly prudent. Especially with what’s going on in Japan, North Africa and the Middle East. If you decide to act hold some of the large cap names for the long haul and speculate with a smaller dollar amount in a few well thought out gold penny stocks.