The
gold miners’ stocks look to be nearing a crucial psychological
tipping point. After years of mostly being ignored, this small
contrarian sector seems on the verge of roaring back into favor.
When gold stocks grow popular and traders increasingly chase them,
their gains grow massive. More than doubling in individual uplegs
isn’t unusual, and total bull-market returns can easily exceed an
order of magnitude.
For
a quarter-century now, I’ve been studying, trading, and writing
newsletters primarily about gold and its miners’ stocks. Since 2000
I’ve penned 1,132 of these
weekly web essays,
1,107 weekly subscription newsletters, and another 289 monthly
subscription newsletters! The latter two have recommended and
closed fully 1,510 individual mostly-gold-stock trades, which have
all averaged 15.6% annualized realized gains.
That’s a great record spread across 25 years, roughly twice the
long-term stock-market average! The key to that is staying
informed, always following gold stocks no matter how they are
faring. That’s the only way to consistently buy lower then later
sell higher. Sadly the vast majority of traders miss most
opportunities because they only pay attention when sectors are hot,
after big gains have already been won.
That
natural human tendency has been the most-frustrating part of the
newsletter business for me. The most-important times for traders to
be interested in gold stocks are when they are beaten-down and
deeply out of favor. Those are the best buy-relatively-low
opportunities, the easiest times to multiply wealth. Yet around
those pivotal lows, interest and sales wither as bearishness reigns
and traders capitulate.
Gold
stocks’ last couple major lows weren’t long ago, early October 2023
and late February 2024. Then the leading
GDX gold-stock
ETF and benchmark plunged to just $25.91 and $25.79. I pounded
the table on the incredible opportunities in this sector around both
lows, and we filled our newsletter trading books with cheap
fundamentally-superior mid-tier and junior miners. Only diligent
traders paying attention participated.
That
latest week
languishing gold stocks bottomed, I wrote a whole essay
explaining why that was such a fantastic buying opportunity in late
February. Traders need to stay informed and engaged when sectors
are unloved and deeply oversold after just selling off
substantially. That’s why I’ve subscribed to excellent financial
newsletters covering various sectors since high school, and later
went into this business myself.
Staying abreast of markets professionally requires great expertise
painstakingly forged over decades of full-time work. Few analysts
attain this to greater degrees than seasoned newsletter writers.
Rather than putting in all that work myself for other sectors, I can
reap their experts’ awesome wisdom in little time for trivial
subscription fees. But newsletters are only valuable if you
consistently digest them through all cycles.
On
the last day of February my essay concluded “Excessive selling has
slammed GDX way back down to early-October levels when today’s gold
upleg was born. Yet that makes zero sense fundamentally with gold
remaining about 12% higher. 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.”
Naturally that proved correct, as you’d expect after a
quarter-century of studying a sector. Over the next 4.6 months into
mid-July, GDX blasted 52.3% higher. Our newsletter trades
added around those lows have fared even better, with unrealized
gains running as high as 97.2% then! There’s no magic in that, just
time on task. The more years anyone devotes to studying anything,
the more their knowledge on it grows.
Our
innately-human herd psychology works alike across all markets, from
mega-cap tech stocks to crypto to physical commodities to gold
stocks. When prices are low after major selloffs, bearishness and
apathy lead traders to abandon sectors. Right when they should be
diligently engaged looking for opportunities to buy in
relatively-low, they flee. That’s why most speculators and
investors ultimately fail in the markets.
Then
later when those same perpetually-cyclical sectors inevitably
rebound soaring to lofty heights, traders flock back. They get
caught up in the popular greed and euphoria stoked by increasing and
more-bullish financial-media coverage. As their interest soars they
flood into sector newsletters, then end up buying in relatively-high
after the lion’s share of gains have already been won. Way late,
they usually ride down selloffs.
Sector psychology follows prevailing price levels, slowly swinging
like a giant pendulum between greed and fear. The reason I’m
writing today’s essay is gold-stock sentiment sure seems to be
nearing the halfway point at the bottom of that arc! This
sector is no longer mired in fear like in late February when traders
should’ve been aggressively buying. But despite their surge, gold
stocks aren’t yet drenched in greed.
This
chart reveals GDX’s mounting bull market over the past couple
years. Gold stocks have achieved higher lows and higher highs on
balance, carving an indisputable secular uptrend. From this
sector’s last major bear-market low in late September 2022 to
mid-July 2024, GDX has powered 79.6% higher. Yet this young bull
remains super-small by sector standards, with much-larger gains
coming as traders return.
Gold
stocks are ultimately leveraged plays on the metal they mine, which
overwhelmingly drives their profits and hence stock prices. GDX’s
bull is mirroring gold’s underlying one over this same span, where
the yellow metal climbed 51.9% at best. The major gold stocks have
actually only amplified gold by 1.5x in this bull, still way
under their usual 2x-to-3x range! Sector psychology has remained
stubbornly bearish.
That
resulted from a pair of crazy anomalies. First gold and especially
gold stocks collapsed in mid-2022, as the Fed’s most-extreme
hiking cycle in its history
launched the US
dollar stratospheric. That fueled excessive gold-stock
bearishness taking longer than normal to work off. Second the US
stock markets have been soaring in their latest
AI bubble led by
mega-cap tech, distracting traders from all other sectors.
But
all that is changing, with gold enjoying a
remarkable
breakout to many new nominal records this year! Incidentally on
that experience front, I predicted that in my early-January essay “Gold’s
2024 Breakout Upleg”. With gold still at $2,043, I concluded
“gold’s breakout upleg into nominal record territory is set to
accelerate in 2024. New records generate bullish financial-media
coverage putting gold back on investors’ radars.”
Even
American stock investors who have ignored gold’s entire upleg are
starting to take notice as the AI stock bubble looks to be
bursting. The combined gold-bullion holdings of the mighty American
GLD and IAU gold ETFs grew 1.7% or 20.2 metric tons in July, their
biggest monthly build since March 2022! Capital inflows into
gold have grown as the flagship S&P 500 stock index pulled back 4.7%
in seven trading days.
Today’s gold upleg is already up 35.5% at best since early October,
despite no net buying from American stock investors who normally
fuel major ones. During that exact span, GLD+IAU holdings
actually fell 4.5% or 57.2t! This gold upleg is so remarkable
because it has mostly been fueled by Chinese investors and central
banks buying. With American stock investors only starting to
return, gold is heading much higher.
Nothing drives and widens interest in any sector like new record
highs, with bitcoin and mega-cap tech stocks being great recent
examples. The more new records achieved, the more the financial
media covers a sector and the more-bullish that coverage. That
stokes popular greed attracting in increasing numbers of traders to
chase those gains. This dynamic forms powerful virtuous circles of
self-feeding buying.
Gold’s last two uplegs achieving new record streaks both
crested in 2020, at monster 42.7% and 40.0% gains! Their dominant
drivers were American stock investors flooding into the major gold
ETFs to chase gold’s momentum. GLD+IAU holdings soared 30.4% or
314.2t during the first and skyrocketed 35.3% or 460.5t in the
second! Today’s gold upleg can grow much larger yet as American
stock investors reallocate back.
But
gold doesn’t need to push deeper into
nominal-record
territory for gold stocks to soar. Again gold is up 35.5% at
best since early October, a mighty upleg. Yet GDX has merely
climbed 51.6% during that timeframe, the major gold stocks only
leveraging gold by 1.5x. They will almost certainly again amplify
that by 2x to 3x before gold’s upleg gives up its ghost, implying
overall GDX gains growing to 71% to 106%.
The
higher gold’s own upleg ultimately powers, the bigger gold stocks’
proportional upside potential. The higher they rally, the more
interested traders will become and the more capital they’ll deploy.
That will force this sector’s sentiment pendulum back through the
middle of its arc towards the greed side. With gold stocks
nearing a major secular breakout, that key psychological tipping
point is likely coming soon.
GDX
just hit $39.28 at best in mid-July. But at normal 2x-to-3x
leverage to gold’s upleg gains so far, that boosts GDX to
about $44.25 to $53.50. That entire range is well above GDX’s last
major secular peak of $40.87 in mid-April 2022, before that
extreme-Fed-rate-hike-driven anomaly! Popular greed will definitely
balloon as major gold stocks carve new secular highs, and a
more-spectacular secular breakout unfolds.
Prior to that April-2022 high-water mark, GDX crested at $44.48 in
early August 2020. Astoundingly GDX hasn’t traded above there since
way back in late January 2013, well over a decade ago! Forging
above there only requires another 17.3% of rallying from
mid-week levels, which is nothing with gold stocks so lagging gold.
You better believe bullish financial-media gold-stock coverage will
explode when that happens!
Circling back to financial newsletters, since my job is analyzing
gold and its miners’ stocks I don’t have time to dig deeply into
mega-cap techs or bitcoin or crude oil. So I rely on expert
newsletter analysts who have long studied those realms full-time. I
can absorb their decades of knowledge and wisdom applied to current
markets with some brief reading. I trust their judgment on their
specialized sectors’ sentiment cycles.
In
my line of work, I always have CNBC or Bloomberg on in my office. I
also listen in the hours before the markets open when I exercise
early in the mornings. Bullish mainstream financial-media coverage
of both gold and gold stocks is definitely growing. I’m hearing and
seeing both discussed more often, with interviewed analysts
bullishly seeing higher prices coming. That
record-momentum-chasing dynamic is mounting.
This
is one key reason that gold-stock psychological tipping point is
nearing. The more traders who don’t normally follow this sector
become aware of its growing gains, the more interested they will get
and the more capital they will deploy. The higher gold stocks
rally, the more traders will want to buy them. That will boost
gold-stock gains, driving even more bullish financial-media coverage
and increasing trader inflows.
Gold
stocks’ sentiment pendulum swinging back through the bottom of its
arc toward the greed side
will
proportionally overshoot. I wrote a whole essay analyzing this
a couple weeks ago. Back in late February at GDX’s latest low,
major gold stocks hadn’t been more undervalued relative to gold
since a single day in March 2020’s pandemic-lockdown stock panic!
After extremes reversions don’t stop at means.
That
portends a dazzling GDX upside target way up over $59.25 at mid-July
gold levels! That’s nearing GDX’s all-time high of $66.63 in early
September 2011. That was the end of a gargantuan secular gold and
gold-stock bull born in April 2001. Gold soared an epic 638.2%
during that, but GDX wasn’t born until the middle. Yet the similar
HUI gold-stock index skyrocketed a life-changing 1,664.4%
during that bull!
Today’s gold-stock upleg also remains relatively anemic by recent
years’ standards. Again gold’s last uplegs achieving
new-record-high streaks both crested in 2020, averaging 41.4%
gains. GDX averaged 105.4% gains during them, doublings
making for better-than-2.5x upside leverage! Today’s 51.6%-at-best
GDX upleg with gold’s up 35.5% is atypically limp, gold stocks have
big catch-up rallying left to do.
Another important reason it looks like gold stocks’ psychological
tipping point is imminent is the fantastic earnings the gold
miners are now reporting. For this sector as a whole, Q2’24 is
going to prove
the most-profitable on record by far! Gold stocks’ fat profits
are going to attract plenty of institutional investors who haven’t
been paying attention. Substantial inflows of fund capital should
accelerate gold stocks’ upleg.
While it would’ve been better to get deployed when our newsletter
subscribers did at recent major lows, it isn’t too late. Odds are
gold stocks’ young bull market has years left to run, and today’s
upleg is likely only halfway done. If you’re interested in
learning about this high-flying sector, subscribe to our newsletters
and reap my decades of experience and wisdom. Their trading books
are currently full of great gold stocks.
We’ve long specialized in fundamentally-superior
mid-tier and
junior gold and silver miners, which tend to well outperform the
GDX majors in gold uplegs. With smaller bases, mid-tiers and
juniors are better able to consistently grow their production. They
are usually more profitable too, operating fewer lower-cost mines.
Their lower market capitalizations also make their stocks much
easier to be bid way higher.
Successful trading demands always staying informed on markets, to
understand opportunities as they arise. We can help! For decades
we’ve published popular
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and
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newsletters focused on contrarian speculation and investment. They
draw on my vast experience, knowledge, wisdom, and ongoing research
to explain what’s going on in the markets, why, and how to trade
them with specific stocks.
Our
holistic integrated contrarian approach has proven very successful,
and you can reap the benefits for only $10 an issue. We extensively
research gold and silver miners to find cheap fundamentally-superior
mid-tiers and juniors with outsized upside potential.
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The
bottom line is gold stocks seem to be nearing a crucial
psychological tipping point. While they have lagged gold’s mighty
upleg so far, their gains are increasingly being noticed.
Financial-media coverage is mounting as GDX nears a major secular
breakout. This sector’s sentiment pendulum is on the verge of
pushing through the bottom of its arc towards the greed side, where
it is due for a huge proportional overshoot.
Traders should increasingly start chasing high-potential gold
stocks, accelerating their upleg gains. They are reporting record
quarterly earnings while American stock investors are only starting
to return to gold. So it’s not too late to get informed and get
deployed before this sector becomes hot again. The earlier
gold-stock allocations are made, the greater the gains when the herd
roars back in to chase this upleg. |