Another Reason to Buy Gold Stocks NOW

Commodities Commodity Prices
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President Obama will be sworn into office for a second term on January 21. And that’s good news if you own gold stocks.

I stumbled upon the following chart on Business Insider yesterday, which shows the performance of gold mining stocks in post-election – i.e. inauguration – years since 1985:

Not a bad chart, huh? An average 20% jump is nothing to sneeze at.

Of course, there’s no real rhyme or reason as to why gold stocks thrive in inauguration years. And as the chart cautions in very fine print at the bottom – “past performance does not guarantee future results.”

Nevertheless, the 25-year history of stellar performance in post-election years – statistical anomaly or otherwise – is yet another reason to buy gold stocks right now.

As my fellow Resource Prospector Kevin McElroy wrote in his “A Rare Opportunity in Gold Stocks” article earlier this week, “Now is arguably the best time in a decade to buy gold stocks.”

Why? For one, gold stocks are cheap, down approximately 30% from their September 2011 highs. XAU, the Philadelphia Gold and Silver Index (charted above) that tracks the stocks of gold and silver mining companies, is as cheap as it’s been since August.

Another reason is that there are plenty of gold stocks brimming with potential right now – particularly in Africa, which boasts the three fastest growing economies in the world and the largest collection of untapped gold deposits on the planet.

Those are tangible – and very real – reasons to buy gold stocks now. But if you’re someone who likes investing based on past performance, consider these fun inauguration-year facts:

  • The last time President Obama was sworn into office was the best year for gold stocks since 2003, as the XAU index rose 36%.
  • Gold stocks climbed 28% in 2005, the previous inauguration year.
  • Barrick Gold (NYSE: ABX), Goldcorp. (NYSE: GG) and Newmont Mining Corp. (NYSE: NEM) – the three largest publicly traded gold miners in the world by market capitalization – were up an average of 16.6% in 2009, the last post-election year. That’s an encouraging number for those of you who don’t have the stomach to invest in riskier, small-cap Africa gold miners.

For whatever reason, inauguration years are a boon for gold stocks. The difference this year is that there are already plenty of other good reasons to buy them.

Further Reading:

Resource expert Tyler Laundon expects an upside breakout in gold stocks to resume any week now… Right now, the two African companies he expects to lead the charge are cheap and offer outstanding upside… with only modest risk. Get the full story here to learn more about these gold stocks from “The Heart of Darkness.”

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