Pacific Gold Corp fka PCFG

[WhiteSahara]

Small-Cap Gold Miners Repeating 2010 Rally
GDXJ is posting strong returns so far this year
Feb 28, 2012, 12:50 pm EST | By Michael A. Gayed, Pension Partners
“I see a lot of patterns in our behavior as a nation that parallel a lot of other historical processes.”
– Maynard James Keenan

With risk assets moving ever higher and more and more investors believing in the reflation theme I keep stressing in all of my writings, I wanted to provide yet another piece of confirming data to the idea that we could be up in a way similar to 2003 and 2009.

I did a segment on Bloomberg’s Chart Attack with Matt Miller addressing this. Across the board, market internals continue to suggest inflation expectations are rising, with gold participating in that. I continue to believe that while gold can go up in such an environment, the odds of outperformance in equities are likely higher given the overall level of bearishness still in stocks.


Click to Enlarge The Market Vectors Gold Miners ETF (NYSE:GDX) is performing well, and the Market Vectors Junior Gold Miners (NYSE:GDXJ) really is rocketing higher. Take a look at the price ratio of GDXJ relative to GDX. As a reminder, a rising price ratio means the numerator (GDXJ) is outperforming (up more/down less) the denominator (GDX).

Think of GDXJ as the riskiest and most volatile segment of the gold mining industry. Given lower liquidity, higher big-ask spreads and smaller size, the Junior Miners ETF tends to perform in a more exaggerated way than larger miners such as Newmont Mining (NYSE:NEM).

I have annotated the chart to show the similarity of outperformance in the Junior Gold Miners ETF to the way it looked in the second half of 2010 as the QE2-induced rally began. If you remember that time period, there was a significant and consistent move higher in risk assets. The environment looks quite similar to that now, and Junior Gold Miners appears to be anticipating that such a move still is early.

http://www.investorplace.com/2012/02/small-cap-gold-miners-repeating-2010-qe2-rally-gdx-gdxj/