By Angelos Damaskos, CEO of Sector Investment Managers and fund adviser to the Junior Gold Fund
For 93 weeks to the end of June 2013, gold saw its longest and deepest downturn in the last twenty years, losing 37% of its value since reaching an all-time high of $1,927/oz in September 2011. This move was much steeper and longer that the previous three major corrections in gold’s 12-year bull market, and certainly unnerved most investors who believe in the safe-haven value of the metal.
However, there are now certain indicators that point to recovery that could be just as sharp and significant as the fall. Gold mining shares, which have been in a vicious bear market for two years now, rebounded strongly in July.
This first phase of recovery may be driven by shorts-covering and bottom-fishing speculative positions, nevertheless, given the strength of the moves, it would appear that the equities now discount a recovery in the gold price. The Junior Gold fund, which focuses on small-cap gold-miners, rose by 17.4% in July, indicating its re-rating potential after the dramatic falls of this year.