Now its May, Do we Sell (Gold Shares) and Walk Away?

Here we are in May, and everyone asks the question, is it time to sell and walk way? Well that depends what you are holding. This article focuses on timing in regard to the junior resource mining equities, for which we use the S&P/TSX Ventures Composite Index as a proxy.

Resource Junior Sector Roller Coaster

Over half of our fund’s portfolio of 50+ junior issues are trading 50% below their peaks, and I suspect many other junior resource investors are in the same boat. Indeed, despite oil and gold trading at all time record highs, the TSX Ventures Composite Index (“Ventures Index”) is trading near its 2 year low. Investing in juniors in the past 2 years has not been for the faint-of-heart and the Ventures Index has made several round-trips between 3,300 and 2,500, highlighted by a stunning and record 33% drop last August.

Junior Shares: Buy or Sell?

Below we show the chart of the Ventures Index divided by gold.

This ratio indicates the relative value of junior mining shares compared to the price of gold.

As the chart indicated, resource equity investors did well by selling in April of 2002, 2004, 2005, 2006 and 2007 (red circles).  Is selling resource equities the right move again in Spring 2008?...