The jump in gold stocks -- both recently and since their lows last May -- creates a dilemma as to what investors should do now.
While it's always nice to buy on a pullback, who knows when, or if, people will get a chance to do that now.
And for those who have already made a handsome paper profit, is it time to pocket it?
One way to decide is to look at the behaviour of gold stocks in the context of a total portfolio. Looking at it that way, only raging market bulls should lighten up, advised George Vasic, strategist at UBS Securities Canada.
History shows a clear pattern, Mr. Vasic said: The worse the stock market, the better the relative performance of gold stocks.
Accordingly, those who share Mr. Vasic's view that the S&P/TSX composite index will manage only meagre single-digit gains this year should consider loading up on golds.
Mr. Vasic points to 2005, when the S&P/TSX rose 22 per cent and gold stocks gained 20 per cent.
Moreover, UBS believes a weaker U.S. dollar will bolster gold as the year unfolds.
© The Globe and Mail
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