Sector performance over the past few years is encouraging

Below is an excerpt from a recent commentary at www.speculative-investor.com. Gold stocks, as a group, did poorly in 2011. They did very well during 2009 and 2010, although the strong 2009-2010 performance was partly a reaction to the dismal 2008 performance. If we step back we see that despite experiencing some huge swings, they have essentially gone nowhere since March, 2008. In other words, long-term holders of gold stocks have now spent almost four years treading water in rough seas. If past is prologue, the gold sector's performance over the past few years is encouraging. We say this because if we step even further back we see that the current long-term bull market is continuing to evolve in a similar manner to the long-term bull market that extended from the early-1960s to 1980. In particular, with reference to the following weekly log-scaled chart of the Barron's Gold Mining Index (BGMI) we see that: 1. The previous bull market had three major upward legs separated by huge corrections back to a long-term trend-line (drawn in green on our BGMI chart). The new bull market appears to have completed the first major upward leg and the first huge correction back to the long-term trend-line (the trend-line under the current market is drawn parallel with the earlier one to help make the point that the long-term pace of advance is roughly the same in both cases). In terms of time it now appears to be about half way into the second major upward leg, although in terms of price it is probably less than half way. This is because a disproportionately large percentage of a multi-year up-leg's price gain usually occurs during its final six months. To continue reading this article, visit Stockhouse.com.