The Motley Fool

Why Gold Stocks Continued to Bounce Back

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of several gold miners continued to crawl back on Monday as the price of gold broke through a tricky resistance level at $1,300 (U.S.) an ounce.

So what: It’s no secret that gold miners have been battered over the past year, but a recent retreat in the dollar, coupled with Fed Chairman Ben Bernanke’s comments that quantitative easing would remain accommodative and subject to economic conditions, is fueling some optimism over a triumphant rebound in the sector. Among the big movers on the TSX were Detour Gold (TSX: DGC), Kirkland Lake Gold (TSX: KGI), and Eldorado Gold (TSX: ELD) — all up more than 10% — as analysts are naturally being prompted to bake in a higher price per ounce into their valuation models.

Now what: I wouldn’t be so quick to jump into the gold miners just yet. Most foreign exchange developments point to a stronger greenback over time and if the U.S. economy continues to grow at the rate simply expected by the central bank, the Fed will almost assuredly withdraw support eventually. So while the beaten-down sector is certainly good for a short-term bounce, long-term Fools might want to look elsewhere.

Canada has yielded its fair share of great companies. But unsuspecting Canadian investors could get ambushed by a glaring weakness in their portfolios. One basic investing principle holds the key to a rock-solid portfolio … and it starts with our neighbors to the south, America.

That’s why The Motley Fool has put together a Special FREE Report, “3 U.S. Stocks Every Canadian Should Own.” The funny thing is, these stocks might as well be Canadian … because you use them every day. Just click here to receive a copy at no charge!

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned.  The Motley Fool does not own shares in any of the companies mentioned. 

5 Canadian Growth Stocks Under $5

We are giving away a FREE copy of our "5 Small-Cap Canadian Growth Stocks Under $5" report. These are 5 Canadian stocks that we think are screaming buys today.

Get Your Free Report Today

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.