We are running out of Coffin Nails...
With today’s dramatic collapse in the price of gold (almost $70 per ounce), the old saying “another nail in the coffin” might apply to junior resource stocks (and investors). However, the sad reality is that we are running out of nails.
For these poor companies and the beaten down shareholders who have been thrown the concrete life preserver, I am not sure much more can go wrong (aside from bankruptcy or incredible shareholder dilution).
As I noted last weekend, none of this makes a lot of sense when you consider the fundamentals that “should” be supporting gold.
However, if you are a gold “bear” you have just been vindicated (for now).
Last weekend’s comment section at the bottom of my report was a good sounding board for many investors so this weekend...have at it ! I know there will be a lot of people that just feel like venting.
If you feel like flogging your own stock picks, that is also welcome. Just keep the comments on topic and constructive – otherwise I have them removed so we have something productive and not full of spam and flamers.
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DESTRUCTION OF INVESTOR CONFIDENCE
Capitulation: the point at which investors sell on heavy volume, often signalling a near term bottom.
A large majority of speculators (both retail and professional) threw in the towel this past year while others have been dipping their toe back into the water recently (picking away at higher quality juniors that are trading near lows).
Imagine what today’s dramatic commodity selloff has done to (what’s left) of investor confidence. Metals and energy stocks are important strands in the fibre that holds investors together in the TSX and TSX venture.
Those strands have been severely tested the past year (or two) but today a few tore completely away and for many, what was left of investor confidence was completely shattered.
That destruction of confidence spills over to every other micro and small cap company on the Canadian stock exchanges.
To signal a bottom we often look for a capitulation. We have been looking for that the past year but there has been no clear sign.
Instead it has been a long drawn out process – a “slow” death per se.
Do we still need a capitulation? Or is there anyone left to capitulate with these small companies? I’m not sure anyone knows.
This beating in gold April 12th will be the equivalent of a capitulation for many investors who are tired of watching their portfolio erode.