Should you follow the rich into these gold stocks?

Do they know something we don’t know?

Possibly. As it seems quite a few wealthy investors and fund managers are jumping into or topping up their holdings in junior gold miners.

Well-known small caps fund manager, David Paradice, is reported to have jumped into the junior end of the gold sector in September last year, including Saracen Mineral Holdings (ASX: SAR) and Perseus Mining (ASX: PRU), according to the Australian Financial Review (AFR).

Mr Paradice told the AFR that he thinks the US still has some issues and it will take a while for the economy to recover there. And as a result he was looking at defensive stocks like gold.

James Packer’s Ellerston Capital has acquired a 5.4% stake in Teranga Gold Corp (ASX: TGZ), while BRW rich-lister, Bill Paterson, holds shares in Kingsrose Mining (ASX: KRM), Northern Star Resources (ASX: NST) and Beadell Resources (ASX: BDR), having recently sold out of Saracen.

Legendary prospector Mark Creasy, of nickel explorer Sirius Resources (ASX: SIR) fame, holds shares in gold miner Evolution Mining (ASX: EVN).

As Mr Creasy told the AFR, “Things are on the improve for gold shares. Last year the market was basically pricing gold stocks as if gold was never going to come back again, ever.”

Late last year, many analysts were predicting gold prices of around US1,000 an ounce or lower, perhaps taking the short-term falls as a longer-term trend. That hasn’t occurred, and gold has recovered back above US$1,300 an ounce.

Foolish takeaway

The evidence suggests these wealthy investors took a sensible, contrarian approach and invested when most of the market was predicting dire straits for gold stocks. It’s an important lesson for investors — ‘being greedy when others are fearful’ as Warren Buffett has said. Something I suggested in this article back in August last year.

Get it now: "2 Hot Stocks for the Next Australian Tech Boom"!

The smart money is already on the move… and savvy investors will want to add these two ASX tech stocks to their portfolios sooner, not later! You can get all the details – including names and codes – in The Motley Fool's brand-new FREE report, "2 Hot Stocks for the Next Australian Tech Boom." Simply click this link now to claim your FREE copy.

Motley Fool writer/analyst Mike King owns shares in Kingsrose Mining and Beadell Resources. You can follow Mike on Twitter @TMFKinga

5 ASX Stocks for Building Wealth After 50

I just read that Warren Buffett, the world’s best investor, made over 99% of his massive fortune after his 50th birthday.

It just goes to show you… it’s never too late to start securing your financial future.

And Motley Fool Chief Investment Advisor Scott Phillips just released a brand-new report that reveals five of our favourite ASX stocks for building wealth after 50.

– Each company boasts strong growth prospects over the next 3 to 5 years…

– Most importantly each pays a generous dividend, fully franked.

Simply click here to find out how you can claim your FREE copy of “5 ASX Stocks for Building Wealth After 50.”

See the stocks now