Welcome to the Quest for 1000% gains through buying and selling gold and silver mining stocks

 Hi everyone

Welcome to my blog which centres around my passion for trading the stock markets, with my favourite asset classes being gold and silver mining stocks. From this passion I've decided to document a challenge and record it here on this blog site. The challenge is to grow a $20k investment into $200k. A 1000% gain. This is in Australian dollars and all on the Australian stock exchange. 

Why have I decided to do this? The reason is simple. Late last year,  I created a demo account in an online brokerage called CMC markets. I was given a $100k pool of pretend money to buy and sell stocks and indexes ranging from the UK stockmarket index (FTSE), to the US Tech index (NASDAQ), gold, silver and even crypto stocks. With some well timed buying, selling (long & short) that $100k pool of money is currently sitting at $1.84m (as of 12/5/2021), all in the space of around 9 months. Close to a 2000% gain. What if I could do that with real money? It's worth a challenge, I thought to myself.

With that in mind, I've deposited $20k into the trading arm of my online day-to-day bank. It's a very simple process; it was all done online and as my bank has all my personal details anyway, it was all done in a a few minutes. That's the easy part done.

Over the next few weeks, I will be mostly buying stocks and then holding until I think the time is right to sell, with the intention of buying low and selling high. Sounds simple but the stats are that out of every 10 traders, 1 will break even, 8 will lose money and only 1 will make money. I'm hoping to be that in that 10% of money makers.

 I will explain the rationale behind all of my stock trading and post charts and simple analysis. I'm an ordinary person with a normal, non-finance related day job, but I did a diploma in share trading and finance a few years ago and I intend to use those skills to hopefully win this challenge. I haven't set a time-frame on this challenge. A 1000% gain over 10 years would be incredible but let's be optimistic and see if this can be achieved in a fraction of that time.

Dipping my toe in the water - Kirkland Lake Gold

So, today is the day that I made my first purchase with that $20k. I used ~$5k to buy a 100 shares in a company called Kirkland Lake Gold at $52.69/share. Ticker symbol: KLA on the Australian Stock Exchange (ASK). This company is a well known gold mining company and is also on the New York Stock Exchange (NYSE) and Toronto Stock Exchane (TSX). It's a fantastic company with incredible gold reserves.

The company is on track to mine 1.3 million ounces of gold for this 2021 and at a gold price of $2,352 AUD this equates to gross revenues of  in excess of $3 billion. Obviously there are costs involved but if you look at last year, they made $733 million in free cash flow. Fantastic. 

But, there are 100s of great mining companies out there doing well, and 1000's of smaller mining companies that cost a fraction of the price I paid for Kirkland Lake Gold. Why would I not buy those? Reason being, I'm looking for percentage gains and I think this one will do really well. Also, I am in no rush to invest my $20k into those kinds of penny stocks. That's more of a lottery. You may as well buy crypto if you want to  speculate with that kind of risk. Note: I do own some crytp, alt coins to be precise but that's for another day. This company - Kirkland Lake Gold - most certainly will not be going to zero. Read more about the company here if you like.

OK, so back to the diploma I did in Share Trading and Investing. This course equips you with a combination of fundamental analysis e.g p/e rations, earnings per share etc. and technical chart analysis, with 6 out of the 7 modules focussing on the latter. The charts really do tell you all you need to know. This is my preference for knowing when to buy and sell my stock positions. I will leave the fundamental analysis to the accountants out there. Below is the weekly chart of Kirkland, taken from a chart analysis tool called Trading View. It's a free online tool and has amazing features that you would normally pay top dollar for. 

As you can see, it's been in a downtrend for about 8 months and has now poked above it. In fact, we have 4 weeks that have poked above the trend line with this week (2nd week of May 2021) being more empahtic. 

This 8 month decline in the share price has mirrored the recent decline in the raw gold bullion share price to a certain degree

Why not buy gold on its own? Well, it's not going to help me with my quest for 1000% gains as it is a slow moving beast. Whereas if we look at Kirkland, it can make some serious gains in a lot shorter time-frame. This is the rule of thumb with mining companies, they do really well when the gold price improves but do much worse in relation to gold when the price of gold declines. Looking at the charts above, for gold to reach its previous high from last year will involve a 25% gain from its recent low to high versus Kirkland Lake Gold which will gain nearly 100% if it reaches its previous high over the same time frame. With smaller mining stocks, these gains could be double, triple however, I'm going to avoid those for now, but may dive in to small to medium sized mining stocks i.e. market caps around 50 - 100 million later down the track if we see some acceleration in the sector.

So another question could be, why not invest in conventional stocks? Look at the gains in Apple, AfterPay, any tech stocks. I'll write about that soon but there is no right or wrong answer, it's simply a favourite sector of mine and I'll show you some examples of incredible gains that were had in this sector in the 1970s. It'll definitely wet your appetite.