From Gold Investing News
When the Streets Get Too Bloody: Oliver Gross Dumps Gold Stocks Wednesday November 5, 2014, By Charlotte McLeod .......... Last Friday, Gold Investing News (GIN) published an article on Continental Gold (TSX:CNL,OTCQX:CGOOF), whose share price had sunk 28 percent over the course of the week for no apparent reason. .......... At the time, GIN concluded that as the company had not released any bad news and was not being hampered by any jurisdictional issues — such as those currently plaguing gold companies in Burkina Faso — the fall was likely a reaction to the gold’s big price drop on October 30 and 31. .......... However, since then it’s become clear that another factor was in play last week — and it could have contributed to Continental’s share price plunge. That factor is German gold stock newsletter writer Oliver Gross, who on October 30 decided to sell everything in his portfolio. According to CEO.ca’s Tommy Humphreys, it’s uncertain what “everything” entails, but as of June 2014,: .......... Continental, Wildcat Silver (TSX:WS), Pilot Gold (TSX:PLG), Dalradian Resources (TSX:DNA), Red Eagle Mining (TSXV:RD), Timmins Gold (TSX:TMM,NYSEMKT:TGD), Columbus Gold (TSXV:CGT), Sandspring Resources (TSXV:SSP) and perhaps Pure Gold Mining (TSXV:PGM) were covered in his letter. .......... Most of those stocks fell over 20 percent last week. What happened? .......... As mentioned, gold took a steep drop at the end of last week, with blame being placed on a number of factors, including a high US dollar, the Fed’s decision to end its bond-buying program and the Bank of Japan’s surprise move to increase stimulus. .......... That downward movement no doubt scared a lot of investors out of the market. But why would it affect Gross? After all, he told The Gold Report just a few days before his sell off, “I like to invest when there is blood in the streets, and that is certainly what is happening with precious metal equities.” .......... Put simply, the situation got a little too bloody, even for him. In a statement to CEO.ca, he explains, “[t]he last days for precious metals miners have been just shocking. The most important gold and silver miner indices and ETFs broke their support lines and hit new multi-year lows.” He goes on to state, “I had to liquidate the whole portfolio today to protect my subscribers, which is my responsibility. .......... The market letter is owned by the publishing house and they have special risk and money management rules. The losses during the last weeks were so big for many subscribers that I was forced to react, which lead to complete, temporary liquidation of all stocks in the market letter.” .......... He concludes, “I plan to buy gold miners again when the dust has settled and we see something like a bottom and a bottom-building process. At the moment, I have to deal with the potential for further blood baths as I can’t see lights in the end of the tunnel yet.” .......... What’s an investor to do? .......... In tough markets, investment gurus like to point to poor prices as an opportunity to buy good-quality companies at a bargain. Case in point: Rick Rule, chairman of Sprott US Holdings, told Mineweb just last week, “if we get a capitulation sell-off my suspicion is that … it will be for the real dross, the juniors, the best remaining buying opportunity of my career.” .......... However, that’s not particularly useful advice for investors who have gotten in at the top and are now losing money. .......... So what’s an investor to do? .......... Interestingly, Gross provides a good suggestion in his Gold Report interview: “investors must stick to best-in-class stories and must demonstrate constancy and patience.” Though that’s certainly not what he did, it’s a strategy that might work for investors with a little more grit — or without newsletter subscribers to answer to. Continental Gold’s (TSX:CNL,OTCQX:CGOOF) share price sank 28 percent this past week, ending Friday at just $1.89. With no obvious reason for the decline, many shareholders are wondering what exactly is going on. The company, whose focus is on its Colombia-based Buritica project, is also wondering. On Friday it put out a press release that simply states that it has “no material changes to report. The Preliminary Economic Assessment is on track for release in the fourth quarter and the environmental amendment to complete the permitting process is proceeding according to schedule.” Indeed, none of the factors that usually cause share price drops are present. For one, the company hasn’t put any bad news out — though it released initial channel sampling results from the Veta Sur vein system at Buritica on Tuesday, its share price held steady all through that day as well as Wednesday. For another, jurisdiction doesn’t seem to the problem. Companies often run into difficulties when issues occur where they are operating — that’s exactly what happened to Roxgold (TSXV:ROG), True Gold Mining (TSXV:TGM) and others when violent protests erupted Thursday in Burkina Faso — but if anything, the situation in Colombia is improving. News out of the country this week suggests that peace negotiations between the government and rebels are advancing, albeit slowly. The best bet, then, seems to be that gold’s big price drop this past week is to blame for Continental’s misfortune. Continental Gold’s share price activity from October 27 to 31. While of course it’s tough to say for sure that the company’s share price fell in reaction to gold’s drop — making assumptions is rarely a good plan for resource investors — it certainly seems likely. What’s thus key for investors to remember is that even good companies can suffer when the markets take a turn for the worse, and in those cases the best bet can be to just hang in there. And of course, unexplained share price drops can also be an opportunity for new investors to jump in at a discount.