Will Gold Stocks Correct Next Week?

Source: Sam Kirtley, Seeking Alpha  (10/16/07)

...many gold stocks look overbought and we have sold a proportion of our holdings, although we have maintained a significant core position, in anticipation of a correction across the board in precious metals.

We feel that gold and gold stocks are in for a sizeable correction in the next week, or possibly in the next few weeks. We have seen a massive rally in gold stocks, with the HUI rising over 40% from its August lows.

However to us many gold stocks look overbought and we have sold a proportion of our holdings, although we have maintained a significant core position, in anticipation of a correction across the board in precious metals. After this correction, we intend to buy back the shares we sold at lower prices, enabling us to purchase a larger overall position. For example if we sold 1000 shares at $20 this gives us $20,000. If the shares fall to $15, we reinvest our $20,000 and this now buys us over 1333 shares, so giving an increase of 33% on our original position.

We still are very bullish on gold and silver in the longer term, and we see gold making $1000 and silver reaching $20 perhaps sooner than you think and in a few years, we see no reason why gold could not be at $3000 and silver at $100.

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