A major new buying spree is just getting underway according to Adam Hamilton, and there is an event in the making that will propel the gold price higher…
Adam Hamilton dives deep into the fundamentals. In this thorough analysis, Adam breaks down what has been going on with silver mining, but more importantly, he explains what to look for as we wind down 2017…
Pit stop SITREP coming off a brutal week for the miners
He also explains what it means for gold
The gold-futures and silver-futures short positions held by speculators have rocketed up to extremes in recent weeks. These elite traders are aggressively betting for further weakness in gold and silver prices. But history has proven extreme shorts are a powerful contrarian indicator. Right as speculators wax the most bearish as evidenced by their collective bets, gold and silver decisively bottom and birth major new rallies.
The gold miners’ stocks have drifted lower over the past month, slumping back to major support. This weakness has naturally intensified the bearish psychology engulfing this small contrarian sector, traders want nothing to do with it. Yet summers typically see gold and its miners’ stocks meander sideways to lower. These summer doldrums spawn the best seasonal buying opportunities of the year in gold stocks.
The US stock markets have enjoyed an extraordinary surge this year, shattering all kinds of records. It’s been fueled by hopes for big tax cuts soon from Trump’s Republican government. But such relentless rallying has catapulted complacency, euphoria, and valuations to dangerous bull-slaying extremes. This has left today’s beloved and lofty stock markets hyper-risky, with mounting potential for serious selloffs erupting.
Doldrums term is very apt for gold’s summer predicament. It describes a zone in the world’s oceans surrounding the equator. There hot air is constantly rising, creating long-lived low-pressure areas. They are often calm, with little or no prevailing winds. History is full of accounts of sailing ships getting trapped in this zone for days or even weeks, unable to make any headway. The doldrums were murder on ships’ morale.
Gold reversed sharply lower after the Fed’s latest rate hike this week, on heavy selling from speculators and investors alike. Bearish sentiment flared on traders’ long-held belief that higher rates spell trouble for zero-yielding gold. But market history reveals the opposite, that Fed rate hikes are actually bullish for gold. This week’s Fed-induced gold dump is likely to flag gold bottoming just before a major new rally erupts.
The gold miners’ stocks remain deeply out of favor, largely shunned by traders. Since this sector just spent the better part of a year grinding sideways, such bearish sentiment isn’t surprising. But with a giant technical formation nearing a major inflection point, things look to be coming to a head in gold-stock land. A big breakout is nearing, and gold stocks’ deep undervaluation relative to gold argues it will be to the upside.
Silver has suffered a lackluster year so far, really lagging gold’s upleg. Sentiment is still reeling following silver’s crushing selloff from mid-April to mid-May. But that plunge was largely driven by extreme silver-futures selling by speculators, including a blistering spike in short selling. The resulting excessive shorts have left silver with excellent near-term potential for a short squeeze, which would catapult it rapidly higher.
With silver-stock sentiment remaining excessively bearish, this sector is primed to soar as silver itself continues mean reverting higher to catch up with gold’s new upleg. The silver miners’ profits leverage to rising silver prices remains outstanding. After fleeing silver stocks so aggressively in Q4, investors and speculators alike will have to do big buying to reestablish silver-mining positions. These inflows will fuel major upside…
The junior gold miners’ stocks suffered a serious thrashing between mid-April and early May.
The recent major selloff was totally unjustified.
That makes this battered sector a screaming buy right now fundamentally.
The gold miners’ stocks have been slammed by a sharp gold pullback in recent weeks, spawning today’s bearish sentiment.
However, the major gold miners’ accounting earnings already exploded higher in Q1 without Q4’s big writedowns. That leaves the gold stocks wildly undervalued even at today’s prevailing gold prices, let alone where gold is heading in coming quarters. Sooner or later gold-stock traders will realize how irrational their latest bout of excessive fear was. Then they will flood back in with a vengeance, catapulting gold stocks far higher:
Gold has suffered a sharp pullback over the past couple weeks, stoking much bearish sentiment. While a variety of factors fed this selloff, the precipitating catalyst was a gold-futures shorting attack. These are relatively-rare episodes of extreme selling specifically timed and executed to manipulate gold prices lower rapidly. Traders need to understand these events, which are inherently self-limiting and soon bullish.
Gold has had a wild ride since Trump’s surprise election win in early November. This metal first plunged then surged, ultimately making little headway. It wasn’t until mid-April that gold regained its pre-election levels. This overall lackluster gold action was confounding given all the mounting uncertainties. But it once again highlights that gold investment demand is often hostage to the US stock markets’ fortunes.
Gold’s young upleg just enjoyed a major upside breakout, bolstering strong technicals and heralding a coming Golden Cross buy signal. Investors have started aggressively buying gold again after record-high stock markets distracted them. This gold upleg’s upside momentum is really building, portending accelerating gains in coming months. Yet sentiment remains poor, with traders still quite bearish on gold.
The get-no-respect gold-stock sector is in a strong young bull market. Past gold-stock bulls have grown to utterly-massive proportions before giving up their ghosts, greatly multiplying the wealth of contrarian investors and speculators. Today’s gold-stock bull is very likely to grow vastly larger before fully running its course. Fundamental gold-stock-bull upside targets reveal the lion’s share of gains are still yet to come.
The gold-mining stocks’ usual volatility has proven outsized so far this year, spooking investors. A fast initial surge in a new upleg was soon fully reversed by a sharp major correction, which spawned much bearish sentiment. That combined with the great distraction from the Trumphoria stock-market rally has left gold stocks unloved and overlooked. But their outlook is very bullish, and major upside breakouts near.
Gold suffered heavy selling in early March leading into the Fed’s latest rate hike. Speculators frantically dumped gold futures ahead of the Fed’s meeting as implied rate-hike odds soared. This is nothing new. This key group of traders has long feared Fed-rate-hike cycles, convinced they are the mortal nemesis of zero-yielding gold. But this view is highly irrational, as history proves gold actually thrives in rate-hike cycles!
The silver miners’ stocks have had a roller-coaster ride of a year so far. They surged, plunged, and then started surging again last week on a less-hawkish-than-expected Fed. Such big volatility has spawned similar outsized swings in sentiment, distorting investors’ perceptions of major silver miners. But their recently-reported fourth-quarter operating and financial results reveal the true underlying fundamental realities.
The junior gold stocks corrected hard in recent weeks, setting them up to blast higher on Wednesday’s less-hawkish-than-expected Fed. That started to dispel some of the serious bearish sentiment that has been mounting in this sector. The junior gold miners’ fundamentals justify much-higher stock prices, as evidenced in their recently-reported fourth-quarter operating and financial results. They remain very bullish.