Hard Money Heat Check

There are few things I like more about NBA basketball than when a player gets so hot that it seems as though they can’t miss a shot, no matter where they are shooting from. The legendary video game NBA Jam captured this beautifully, for those that remember.

A “heat check” is when a hot player takes what would normally be a shot that’s borderline absurd because they are feeling so good and confident in their ability that they feel like they can “push it” a little. The difficult shot is supposed to be the determining factor as to whether or not the player is still “hot”.

The point is that I’m having the same kind of “heat check” feeling about precious metals and hard money this week — let me explain why.

First off, the movement in gold has been absolutely outstanding — even Goldman Sachs raised their forecast to $2700/oz. this week. But still, the action in the precious metal has really only gotten limited coverage in the news media so far.

And if it isn’t obvious by now, gold miner stocks are still extremely unloved. As I mentioned in my portfolio review days ago, sentiment around miners remains horrific. Gold and the GLD is continually piercing through all-time highs, and miners and GDX are nowhere near all-time highs, let alone 52-week highs.

As the divergence between the gold spot price and miners continues to widen, it feels as though it is getting more and more blindingly obvious that miners remain one of the best places for value in the entire market.

Miners continue to be my top conviction pick, and I still think there is tons of runway. While gold spot prices have gotten a few mentions in financial media, the precious metal miners have gotten very few, if any. The sell signal I’ll be looking for will be the days when the GDX performance has been so good that CNBC can do nothing but talk about miners.