A strong stomach and a tremendous amount of patience are required if your invested in gold stocks these days, as miners have been exhibiting their typical volatility pattern.
That's why I often say to anticipate before you participate, because gold stocks are historically twice as volatile as U.S. stocks. As of March 31, 2013, using 10-year data, the NYSE Arca Gold BUGS Index (HUI) had a rolling one-year standard deviation of nearly 35 percent. The S&P 500's was just under 15 percent.
I believe the drivers for the yellow metal remain intact, so for investors who can tolerate the ups and downs, gold stocks are a compelling buy. Here are three reasons:
This Gold Prices Chart Answers a Classic Question
Since gold's bull run began a decade ago, many people have asked me whether the metal was in a bubble, despite the fact that there were many drivers in place for gold.
Here's another comparison - shown in the chart below - that answers this classic question.
Research firm Commerzbank's strategists recently compared the price of gold starting in 2002 to the price of Brent crude oil starting in 1998 and the NASDAQ Composite from 1990.
Jim Rogers on Investing in Gold 2013
Money Morning Executive Editor William Patalon III recently had a chance to catch up with famed investor Jim Rogers on investing in gold, U.S. stocks, and the best commodities for 2013.
Renowned commodities investor Rogers is concerned about the worldwide economy, but he's not worried about the recent sell off in gold.
In fact, he stands poised to pounce on the yellow metal should it fall further.
Jim Rogers on Gold Prices 2013
With the yellow metal down about 14% this year, wouldn't it be great to get the scoop from famed investor Jim Rogers on gold prices in 2013- specifically, why they're down, and if investors should still bet on a long-term gold bull market?
We had a chance to ask Rogers those very questions last weekend.
Sunday evening, Money Morning Executive Editor William Patalon III spoke on the phone with Rogers - who was at his home in Singapore - in a wide-ranging discussion about gold, U.S. stocks, commodities and global central banks' "race to the bottom" - or, as Rogers calls it, "race to insanity."
In this exclusive interview, the legendary investment guru took us on a tour of the gold market, taking a close look at what's driven the past 12 years of gold price gains - and what will move the yellow metal going forward.
He also pointed out the one fundamental reason why gold prices fell recently...
Jim Rogers Exclusive: Once Gold Bottoms, We're Looking at "A Multi-Year Bull Market"
Gold soared 650% from August 1999 to August 2011.
But it's down 24% from the $1,885 peak and in recent days has whipsawed gold investors in a way they haven't experienced in 30 years.
The bear market has gold bugs reaching for the Dramamine. But we reached for the telephone instead and dialed Singapore - and legendary investment guru Jim Rogers.
Many of Wall Street's biggest investment banks are calling for additional blood-letting - meaning gold prices have a lot more room to fall. But in his usual contrarian manner, Rogers dismissed the consensus.
Indeed, the former hedge-fund manager and best-selling author believes this is a badly needed - even healthy - price correction.
And that will set the stage for a new bull market in gold - and a run to record prices that are sure to come in an era of cheap-money policies by the world's central banks, Rogers told Money Morning during an exclusive interview.
"Gold was setting us up for some kind of correction," Rogers said in a Sunday night telephone interview from his home. "Gold needed a correction - it still needs a correction - and I hope this is the proper correction which gold needs. Then gold - somewhere along the way - will make a bottom and we can all join in the bull market as [it] goes higher and higher."
And make no mistake: The shiny metal is going higher - much higher.
Gold Prices Rise as Traders Cut Short Bets
Gold regained some of its luster Monday with June Comex gold ending up $30.50 at $1,425.80, and spot gold prices finishing up $19.80 at $1,426.75.
The gains came from short covering, bargain hunting, and strong demand for physical gold.
According to the Commodity Futures Trading Commission's Commitments of Traders report released April 19, managed money traders (i.e. hedge funds and commodity trading advisors) boosted bullish positions on gold by 21,675 contacts to 68,662 contracts, while paring bearish bets to 54,025.
The CFTC's summary of trading positions showed bullish investors returned to the gold market last Tuesday, when the data was compiled. The increased long positions came on the heels of gold's largest one-day sell off in 30 years.
The report showed managed money traders covered 12,411 shorts, as gold prices finally bounced last Tuesday.
Is Now the Time to Buy Gold and Silver?
Wondering if now's the time to buy gold and silver? Wonder no more. Let me explain.
Thanks to the selloff, a buying frenzy for bullion has crashed websites, jammed phone lines and depleted inventory.
"Our website was overloaded for the first time ever Friday and Monday. Every phone line was lit up. We did seven times our normal volume," Jake Haugen, VP of sales for Texas-based Provident Metals, told Money Morning.
You see, with gold on track to log its fourth weekly decline and silver headed for the worst week in about 19 months, bargain hunting abounded.
Declines in gold and silver prices began last Thursday and accelerated Monday when gold plunged $140.40, or 9.4%, to $1,360.90 an ounce, marking its biggest one-day decline in 30 years. Since its 2011 high of nearly $1,900 an ounce, gold has tumbled 28%.
Silver slumped $2.97, or 11.3%, Monday to $23.36 an ounce, well off its 1980 record high of $49.45.
As recently as last year, investors like me were paying more than $1,700 per ounce for gold and $35 per ounce for silver.