Followers | 686 |
Posts | 142493 |
Boards Moderated | 35 |
Alias Born | 03/10/2004 |
Friday, May 31, 2024 4:28:29 PM
By: Adam Hamilton | May 31, 2024
After getting off to a slow start in this upleg, gold miners’ stocks are beginning to catch up with their metal. Gold stocks lagged dreadfully early on, but are increasingly outperforming in gold’s remarkable breakout surge of recent months. These mounting gold-stock gains are boosting bullish sentiment, attracting in more traders accelerating the upside. This virtuous circle of capital inflows still has a long way to run.
If gold stocks can’t leverage gold’s gains, they aren’t worth owning. While miners have high potential to soar with their metal, they bear big additional risks. Those include all kinds of operational, geological, regulatory, and geopolitical challenges and problems. And they are all heaped on top of the biggest risk of all, gold price trends! Yet that’s the only risk in gold bullion, so miners’ stocks really need to outperform.
If they don’t, speculators and investors are much better off sticking to gold itself. Historically the leading GDX gold-stock ETF has amplified material gold moves by 2x to 3x. This range’s lower end is probably the minimum acceptable to compensate traders for gold stocks’ big additional risks. And the upper end is where this high-flying sector can quickly multiply wealth. Unfortunately much of gold’s latest upleg saw neither.
This mighty upleg was born in early October at a deep low near $1,820. Gold V-bounced sharply out of that anomalous nadir on heavy gold-futures short-covering buying. By early December gold had already surged 13.8% to $2,071, its first record close in fully 3.3 years! Yet despite the growing excitement and bullishness that generated, GDX’s parallel early-upleg gains merely ran 22.8% making for weak 1.7x leverage.
After hitting a second marginally-higher record in late December, gold rolled over into a pullback. That really proved mild, with gold slumping just 4.2% at worst into mid-February. Yet confidence remained so darned low in gold stocks that GDX collapsed 19.1% on that, for horrendous 4.6x downside leverage! Then even though gold soon rebounded 2.1% by late February, GDX ground another 0.4% lower to $25.79.
Shockingly that was marginally under early October’s $25.91 when this upleg was born! Gold’s young upleg remained strong then, still up 11.7%. But the major gold stocks of GDX somehow still edged down 0.5% in that entire span. This sector was a total disaster, not only not leveraging gold but completely ignoring a strong upleg! That miserable anomaly was murder on sentiment, leaving bearishness running rampant.
I wrote an essay on gold stocks languishing that very week, concluding then “These seriously-oversold gold stocks riddled with capitulatory bearishness is an anomaly that will prove short-lived. They are due to soon mean revert sharply higher with gold. ... gold’s bull advance will soon resume on big gold-futures long buying. Incredibly all that fueling gold’s young upleg has been reversed, fully reloading spec-long buying.”
I continued, “After similar past excessively-bearish longs, mean-reversion buying has catapulted gold about 12% higher in roughly six weeks. The battered gold stocks will fly as that drives gold deep into record territory.” I caught a lot of flak for that hardcore contrarian essay, which used this same chart. At that time, GDX was way down at its latest deep low labeled here “Crazily Retreats to Pre-Gold-Upleg Lows”.
With gold stocks at absurd lows relative to gold then, we were aggressively adding cheap trades to fill up our newsletter trading books. All that was a great call, as what happened since proved. We didn’t have to wait long either. As March dawned, a top Fed official gave a speech hinting at monetizing more US Treasuries. That indeed triggered epic gold-futures long buying, and gold was quickly off to the races again.
Speculators’ gold-futures holdings are only published weekly in the famous Commitments of Traders reports. In the CoT week alone straddling that Fed surprise, gold rocketed a monster 4.9% higher! The specs bought an astounding 55.0k long contracts, the fourth highest on record out of all 1,314 CoT weeks since early 1999 then! GDX blasted up 10.2% during that CoT week, returning to normal 2.1x leverage...
* * *
Read Full Story »»»
DiscoverGold
Information posted to this board is not meant to suggest any specific action, but to point out the technical signs that can help our readers make their own specific decisions. Caveat emptor!
• DiscoverGold
Recent GDX News
- YieldMax GDXY Name Change • GlobeNewswire Inc. • 01/25/2024 04:22:00 PM
- Surging S&P 500 Breadth • ValueWalk • 07/19/2023 03:16:37 PM
- S&P 500 Corrects In Breadth • ValueWalk • 07/18/2023 03:08:49 PM
- If The USDX Fell So Much, Why Didn’t Gold Truly Soar? • ValueWalk • 07/17/2023 05:16:20 PM
- USD’s Decline That’s… Bearish For Gold?! • ValueWalk • 07/12/2023 02:38:08 PM
- S&P 500 Late Day Reversal Worry • ValueWalk • 07/10/2023 03:17:34 PM
- Massive Gaming Celebrates Global Launch of House of Blackjack with USDC Earning Race • ValueWalk • 07/10/2023 02:44:17 PM
Glidelogic Corp. Becomes TikTok Shop Partner, Opening a New Chapter in E-commerce Services • GDLG • Jul 5, 2024 7:09 AM
Freedom Holdings Corporate Update; Announces Management Has Signed Letter of Intent • FHLD • Jul 3, 2024 9:00 AM
EWRC's 21 Moves Gaming Studios Moves to SONY Pictures Studios and Green Lights Development of a Third Upcoming Game • EWRC • Jul 2, 2024 8:00 AM
BNCM and DELEX Healthcare Group Announce Strategic Merger to Drive Expansion and Growth • BNCM • Jul 2, 2024 7:19 AM
NUBURU Announces Upcoming TV Interview Featuring CEO Brian Knaley on Fox Business, Bloomberg TV, and Newsmax TV as Sponsored Programming • BURU • Jul 1, 2024 1:57 PM
Mass Megawatts Announces $220,500 Debt Cancellation Agreement to Improve Financing and Sales of a New Product to be Announced on July 11 • MMMW • Jun 28, 2024 7:30 AM