It’s one surprise after another. 

Five and a half weeks ago, Donald J. Trump, the billionaire reality-star/real-estate mogul, was elected president over the matriarch of a would-be political dynasty. 

Everyone expected the markets to tank and historically popular hedges, like precious metals, to rally on the uncertainty. 

That’s when the second surprise came, as the Dow continued to break record after record, hitting all-time highs on a daily basis, all the while smacking gold back down. 

What are we to make of all of this? Is this the start of a mega-bull run that’s going to carry us forward from the much-anticipated Dow 20,000 milestone all the way to 30,000? 50,000?

Chances are, no. 

Common Wisdom: More Like Common Ignorance

Thanks to a very unfortunate, strictly human psychological tick known as “optimism bias” — a mental reflex that convinces us that bad things won’t happen, and that good things, when they’re happening, indicate that more and possibly even bigger good things are around the corner — this Dow 20,000 moment that we’ve all been awaiting belies the fact that we’re actually teetering. 

Optimism bias doesn’t just affect individuals. It affects entire institutions. 

In the early 2000s, when the Western world was heading into a real-estate bubble that would eventually bring on the biggest financial downturn in three-quarters of a century, major financial institutions laughed at the idea that the subprime mortgage market could fail. 

They laughed at anybody who predicted calamity, and happily issued newly invented investment instruments designed to invest in the failure. 

It ended in the loss of trillions of our collective national net worth and riches for those few who saw that the sky really was falling. 

Fast-forward eight years, and, amazingly enough, based on what we’re seeing on Wall Street, common wisdom is once again believing that failure isn’t an option. 

Well, I’m here to tell you that it is indeed an option. Moreover, I’m here to tell you that it’s exactly at times like this, when everyone seems keen on doubling-down on what are already record price levels for the Dow’s 30 component firms, that it’s time to get scared. 

Weren’t we all taught to buy low and sell high? That makes sense to a pre-schooler, and yet the entire world seems to be contradicting it. 

As a result, the go-to hedge, gold, is getting beaten up while people rush into stocks. 

The Basics Haven’t Changed

Dow’s up, gold’s down… Buy low, sell high…

Seems to me that a premise is coming together here, and it’s that the time to buy gold is now.

Click Image to Enlarge

To those who want more bang for their buck, though, buying raw bullion isn’t going to cut it. Sure, that may be a viable way to store wealth in the long term, but if you want to ride the bargains to maximum gains, you need to go to the source.

In this case, that source is the companies that produce the metal themselves. The smaller the gold producer, the greater the risk, but with that added risk also comes added upside — especially if the company in question is still in the exploration stage. 

You’re not going to find too many junior mining exploration companies trading on the NYSE. For that, you have to go to a more specialized exchange. 

The TSX Venture (companies on this exchange can be identified by the .V at the end of their ticker symbols) is the home of most of North America’s junior mining sector. 

Get the right one at the right time, and you’ll see your investment jump the moment we enter a bull period for the metal. 

Until next time,

John Peterson
Pro Trader Today