-- Posted Sunday, 28 August 2011 | | Disqus

Investors in the gold sector will be familiar with the junior gold or exploration companies. These generally micro-cap companies own the gold mines of the future, or at least they hope to do as they own the rights to look for gold on land thought to have gold underneath it.

A few years ago there was a boom in the valuation of these companies when the gold price first started to take-off. Then it went spectacularly bust and with some notable exceptions the junior gold sector has been bombed-out ever since.

$2,000 gold

Now logically as the price of gold goes up and up then the value of these mining prospects or claims ought to go up too. In fact, you might think that as the start-ups of the future these companies might become very highly rated by investors.

But that was not actually quite what happened in the last great gold boom of the 70s. In the autumn of 1979 the gold price leaped from $200 to $400 an ounce, and yet all the gold stocks lagged behind.

It was only a year later that gold stocks hit their all-time highs. It appears that the market simply would not believe the cash flow and earnings projections of these companies until it saw them.

Some canny buyers like George Soros are stocking up on the big cap gold companies now. But in the last gold boom the biggest performance did come from the juniors, albeit they were the last sector of the gold complex to boom with dot-com style increases in many share prices.

No different this time

ArabianMoney reckons it is pretty clear that we are in a similar phase now. You cannot argue with the gold price rise. The only reason for skepticism about the gold companies is a feeling that they will not deliver on profits. You could make a point about rising energy costs earlier this year but not now.

It will be the same story for the gold juniors this time around and the ArabianMoney newsletter will be considering what to buy in this sector over the next six months and sharing this information with our subscribers (click here).

For those in search of the best profits from this bull market in gold this is most probably the best place to look, although selling at the right time will be just as important and we will be looking at that very carefully too.

-- Posted Sunday, 28 August 2011 | Digg This Article

About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link

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