(OroyFinanzas.com) – After a breakout in the spring of 2001 from a years-long downtrend, the gold price ran to $425 an ounce in January of this year and since then has pulled back, settling for the moment just above $400. The accompanying bull market in junior gold shares saw many stocks shoot up in price, only to pull back severely, in many instances dropping 50% or more. At the moment, their prices are mostly languishing at lows with little volume to buoy them.

Yet our short answer to the question posed above is that the bull market is alive and well, and may represent one of the “investment opportunities of a lifetime.”

Why do we say this?

• A cursory inspection of the gold price chart shows a clearly established unbroken uptrend.
• Junior gold companies, well financed during the raging bull of last year, are spending their money exploring and discovering. Assay laboratories are backed up and giving geologists and CEOs headaches because of the resulting delays.
• The fundamentals supporting the rise in the price of gold are still present, and in our opinion are stronger than ever.
• In contrast to the popular belief three years ago that Gold was Dead as the ultimate currency and would continue to fade in importance, it now has an established presence in the popular mind – for instance, the price of gold is now reported daily in the media.
• If the average ratio of the gold/oil price since 1971 were true today then gold would be trading above $600 per ounce.

Over the years, we have written at length about the fundamentals supporting gold. They include:

·        The US debt stands at an unprecedented 300% of GDP. The long term trend of the US dollar is down. This will be exacerbated as the major world stock exchange indexes top and we enter a secular bear market.

·        Investment demand for gold maintains strength.

·        There is a large and growing gap between mine supply and traditional demand – mine supply is predicted to drop in the coming few years.

·        World geopolitical tensions, including terrorist activity, are at a heightened level.

·        Large short positions in the derivative market need to be unwound.

We maintain that as these economic and political trends continue to develop it is inevitable that gold will resume its rise, continuing its long-term upward trend. For some believers, it is inevitable that gold will skyrocket in price because of the disastrous consequences of the unprecedented debt and unrestricted printing of money by federal governments. If that occurred, there would be forced unwinding of what may be massive short positions in the derivative market, and we may have a gold market which would be one of the great investment opportunities of a lifetime.

Whether the rise is gradual or steep, the well-established trend in the gold price provides an opportunity for investors, especially in a time of a temporary pullback such as we are seeing now. Historically, great fortunes have been built on discerning and investing in economic trends.

In the near term, ordinarily the next step in a junior gold stock bull market would be the excitement resulting from a significant discovery, creating market leaders and at least one area play. With so many juniors exploring now we see every reason for this to come true, especially since technology has improved greatly since the last exploration bull. And because they are a leveraged way to take advantage of the rise in gold, if gold rises 20% gold juniors will double or better. These juniors represent very good value for the investor at this moment.

Frank Quinby

© OroyFinanzas.com