Almost everybody should be officially back to work this week.  And some are in for a real surprise when they sit down and look at their screens.  Since just a few days before Christmas, Gold is up nearly $80 an ounce – even after today’s correction!  Silver’s up about a buck.  And Palladium.  Wow!  Palladium prices are like out of this world!  Rhodium is going nuts, too, and base metals are firming.

Bullishness is in the air, but there’s not a stench of bullishness.  By no means is it anywhere near being overwhelming or pervasive, but people are starting to pick up on the bullish scent.  The smell is really starting to make the rounds, like when someone nearby is grilling Porterhouse steaks.  One person smells steak, then a 2nd, and before much longer everybody in the neighborhood knows somebody’s grilling steaks!  Smells good!

That’s right about where we are right now.  Those who have a nose for it are starting to really smell the bullishness, so they’re getting more aggressive as their confidence rises.  Simultaneously, I’d guess many of these pros, with a nose for the business and great deals, are feeling like their positioning is too small.  Even precious metals focused funds are probably more “underweight” the sector right now than they’d like to be.  They’re wanting to move toward an “overweight” position ASAP.

ASAP means urgency!

The urgency factor has steadily been creeping its way back into the market, and it’ll continue.  The urgency factor will keep ratcheting itself up in the months and years to come, until it ends in some sort of panic.

Truly great deals don’t last forever, so there’s legitimate reasons to act fast.

The backdrop is such that when you look at stock prices relative to precious metals you know something isn’t quite adding up.  Something about this equation is out of whack.  Either PMs need to come down drastically (which we aren’t forecasting) or the stocks have a lot of catching up to do (and when they move they move fast!).  We subscribe to the latter theory because charts and common sense are pointing us in that direction.

When prices rise at the pace they’ve been rising the profitability of producers gets magnified, hence the reason we’ve been recommending small producers like GoGold (GGD, TSX) and Fiore (F, TSX), plus larger producers like Kirkland Lake (KL, TSX), especially post-Detour, which we suggest gaining exposure to via CALL options.

All I’m trying to say is that this should be an aha OMG type moment for many money managers out there.  Those guys and gals just getting back from vacation, seeing Gold conquer $1,550 an ounce, are going to start realizing, uh-oh, I don’t own nearly enough Gold and Silver stocks.

Those with a nose for this stuff have already been in the market, and they’re starting to layer in even more heavily.  Everybody else, 99% of the world with some money in the market, are just now starting to get the drift.  They’re beginning to smell the bullishness in precious metals, which ultimately wafts its way over into miners and explorers.  Our little industry has been primed perfectly for continued and increasing levels of money flow going forward.

As a regular reader you know I’m a big fan of Canada Cobalt (CCW, TSX-V), 1911 Gold (AUMB, TSX-V) and QMX Gold (QMX, TSX-V).  Some of the biggest gains in this business are had due to new high-grade discoveries.  These 3 stocks are all discovery stories, to one extent or another, but they’ve got the double bonus of having near-term production potential.

At this point in the cycle, I firmly believe one of the biggest mistakes you could make is going too far down the quality curve.  Stick with high-quality stocks.  For your “play money”, whatever, you can go down the food chain if you want.  But for your serious money, for my serious money, I’m staying near the top of the food chain, I’m banking on stocks like CCW, AUMB and QMX.  And smallish producers with growth potential, such as GGD and F.

These 5 stocks are very grounded in terms of valuation, but sky’s the limit in terms of potential.  Not to mention, for anyone in the process of constructing their investment portfolio these 5 stocks make for one hell of a good foundation in terms of gaining leveraged exposure to precious metals.