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Updated from 11:55 a.m. EST

Many investors believe that the value of gold will go much higher, and in turn, gold mining stocks will move up along with the price of the commodity. Unfortunately, many stocks iin the sector have suffered along with the rest of the market and may be heavily shorted, making them oversold. This confluence, however, could create a short-squeeze buying opportunity.

The short interest is measured by the short ratio, the number of days it would take the short-sellers to cover their positions, based on the stock's recent trading volume. On any positive catalyst, these stocks could rush higher as the short-sellers, or those betting against the stock, are forced to cover their bearish bets.

Stockpickr has reviewed the stocks in the gold mining sector and compiled a list of the

top gold stocks with highest short-squeeze potential


One of the gold mining stocks with the highest short ratios is

Royal Gold

(RGLD) - Get Royal Gold Inc. Report

, with a short ratio of 8.4, meaning that, based on recent trading volumes, it would take roughly eight days for the short-sellers to cover their positions. Shares of this manager of gold mining royalties have a trailing price-to-earnings (P/E) ratio of 45, a P/E-to-growth (PEG) ratio of 7.4 and pay a yield of 0.9%.

Royal Gold is also part of the portfolio of the

Old Mutual TS&W Small Cap Value Fund

, a five-star Morningstar-rated fund managed by Frank Reichel. The fund also holds

Terra Industries

( TRA), with a short ratio of 4.9,

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Chicago Bridge & Iron


, with a short ratio of 0.6, and



, with a 2.9 short ratio.

Another gold stock with a relatively high short ratio, currently at 5, is

NovaGold Resources

(NG) - Get Novagold Resources Inc. Report

. The company, which explores and develops gold mines in Western Canada and Alaska, is expected to release its delayed full-year earnings results on Friday.

NovaGold shares are also owned by the

Royce Value Plus Service Fund

, a five-star rated long-term capital growth fund managed by Whitney George. The portfolio also includes

Reliance Steel & Aluminum

(RS) - Get Reliance Steel & Aluminum Co. (DE) Report

, with a short ratio of 1,

Unit Corp

(UNT) - Get Unit Corp. Report

, with a 2.2 short ratio, and


(TNC) - Get Tennant Company Report

, with a 9.4 short ratio.

Gammon Gold

( GRS) has a short ratio of 5. Shares of this Canada-based explorer and developer of gold and silver mines in Mexico sport a forward P/E of 82.

Gammon appears in the portfolio of the Eaton Vance Growth Fund, which also holds shares of

Research In Motion

( RIMM), a stock with a 0.9 short ratio,

Foster Wheeler


, with a 1.6 short ratio, and

Diamond Offshore Drilling

(DO) - Get Diamond Offshore Drilling Inc. Report

, with a 2.6 short ratio.

For a complete list of top gold stocks with short squeeze potential, check out the

Top Short-Squeeze Gold Stocks


At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.

James Altucher is president of


LLC, a wholly owned subsidiary of and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for the

Financial Times

and the author of

Trade Like a Hedge Fund


Trade Like Warren Buffett



. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;

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