Pullback or Market Crash: What’s Your Game Plan?

During the first half of this week, we had a decent sell-off in gold and silver equities, which have now mostly rebounded. I saw a lot of chatter on X that this was the sell-off we had all been waiting for, and as far as I know, it might still be ahead of us. What’s more, there are increasing voices about a potential recession.

It’s interesting to see how many investors and speculators in gold and silver equities seem to have low conviction in this bull market and are trying to trade in and out of it on a day-to-day or week-to-week basis. That’s totally understandable, given that we are just coming out of a horrible market for these equities and I hope this strategy works well for everyone who’s trying to implement it. I have come to know myself as an investor well enough now to realize that I won’t be able to do so profitably on a very short-term basis.

I want to devote some time today to talk about how I’m thinking about these things and my strategy for a pullback or a crash scenario. I believe it’s still early days for this bull market, and pullbacks and a potential market crash are opportunities to add more. Mining equities are, after all, equities, and they are likely to crash along with other equities in a market crash scenario. However, I think there’s a good chance that the price of gold won’t, at least not for long.

If anything, the current drivers of the gold price are likely to be exacerbated in a bear market, as that could ignite further monetary interventions and fear buying by non-Western investors and central banks. If you’re interested in learning more about the dynamics at play in this gold and silver bull market, you can get the replay of John Feneck and Don Durrett’s recent event, where they explain these beautifully, as well as what to expect in case there is a market crash.

It’s hard to tell for sure how this will all play out, and there’s a lot of uncertainty, so I’m cautious about making any directional bets. For me, the most important thing is to not get pulled into the day-to-day trading game because I don’t have an edge there. I also just don’t want to commit the time required and be constantly on my toes with my portfolio.

Where I believe I do have an edge is buying the gold and silver juniors while they are cheap. Many juniors are still incredibly cheap and practically uninvestable for most institutional investors because of market cap and liquidity considerations, but both are improving fast. We can buy these equities now and hold them until their day in the sun comes, at which time I believe institutional investors and mining companies will be competing to buy the good juniors. If you’re interested in reading more on this, check out our recent article, "Finding Deep Value in Mining."

In order to participate in this bull market, I want to stay significantly invested in these junior mining equities while their value is being unlocked. The risk is getting pulled into the day-to-day trading game, which, in my case at least, is a sure way to lose. What I try to do is keep overall exposure to these stocks manageable, maintain a healthy cash balance, and take small profits at intermediate peaks that I can recycle into other stocks later.

As I talked about last Friday, I think we’re still in the early stages of a long-term bull market, and I believe it’s important to stay invested to capture the big moves up. There’s still incredible value on offer, and investors and speculators are far, far away from euphoria, so I think this bull market has legs to run still. If the market crashes, that could be a great buying opportunity, so I try to be positioned for that as well.

However this market plays out, I want to have a strategy where, if a recession comes, that’s fine, but if it doesn’t, that’s fine as well, as I’m still invested. I’m just trying to do whatever works to be able to play the game where I have an edge and not be pulled into a game where I don’t have any edge and am sure to lose over time.

Disclaimer: This article is for informational purposes only and does not constitute investing advice. Please consult with a qualified financial advisor before making any investment decisions.