The gold miners’ stocks have skyrocketed this year as investors started returning to this long-abandoned sector.
Many have doubled since January, with plenty tripling or even quadrupling.
Naturally such fast gains raise concerns about whether they are actually fundamentally justified or merely the product of fleeting sentiment that could reverse.
Gold miners’ latest quarterly results offer great fundamental insights.
The gold-mining stocks have skyrocketed this year, radically outperforming every other sector.
Smart contrarians who bought them low late last year and in January have seen their capital doubled, tripled, and even quadrupled! But such blistering gains raise the ominous specter of crippling overboughtness, conditions preceding major toppings. Have gold stocks come too far too fast to continue their epic run?
Since silver’s overwhelmingly-dominant driver is gold, the white metal followed the yellow metal lower. Just several days before gold’s secular low in mid-December, silver dropped to a dismal 6.4-year secular low of its own. Q4’15’s average silver price of $14.77 was the worst since Q3’09’s $14.72. Silver was perfectly fulfilling its traditional role of acting like a gold sentiment gauge, tracking its driver into the abyss…
Silver officially entered a new bull market this week, decisively crossing the necessary +20% threshold. Speculators and investors alike are returning as awareness spreads of how radically undervalued silver is compared to prevailing gold prices.
When silver awakens to a new bull market after a long bearish slumber, massive gains are usually unleashed.
Silver’s tiny advance so far is just the tip of the iceberg…
Gold has spent much of the past couple months consolidating, vexing traders and bleeding away most of early 2016’s enthusiasm that catapulted the yellow metal higher. But this sideways grind has actually been a very impressive show of strength. Gold managed to hold its massive gains despite an incredible stock-market rally, which can really sap gold investment demand.
This portends another MAJOR gold upleg:
Silver’s reluctant, sluggish participation in early 2016’s powerful gold rally has been glaringly obvious. Instead of amplifying the yellow metal’s big gains as in the past, silver largely failed to even keep pace. The lack of silver confirmation for gold’s big move has certainly raised concerns.
But despite silver’s vexing torpidity in recent months, it is a coiled spring ready to explode higher to catch and surpass gold.
The red-hot gold stocks have spent most of March in consolidation mode, grinding sideways near their 2016 highs. Interestingly this month’s rally pause is par for the course seasonally in gold-stock bull markets. Like gold itself, this sector tends to slump to a seasonal low in mid-March before embarking on a strong spring rally in April and May. With gold stocks back in a bull, their seasonality warrants consideration.
Is a BIG SPRING RALLY Dead Ahead?
Gold stocks have radically outperformed every other sector in the stock markets this year, blasting higher as investors flock back to gold. This powerful surge is spawning worries that gold stocks’ new bull run is in danger of exhausting itself. But such fears are totally unfounded. A longer-term perspective reveals that gold stocks’ baby bull market in 2016 remains tiny in the grand scheme.
This new bull has barely begun:
With gold miners’ stock prices surging dramatically this year, investors’ attention is starting to return to the gold juniors. These smaller miners and explorers suffered terribly in recent years, all but abandoned as gold slumped to major secular lows. But even during gold’s darkest quarter, the fundamentals of the juniors actually mining gold remained quite strong. This portends explosive profits growth as gold recovers.
Gold’s powerful surge in 2016 has been driven by utterly massive investment buying. This is a marked sea change from recent years, where investors relentlessly pulled capital out of gold. But with that dire sentiment reversing, they are rushing back in with a vengeance. Major investment capital inflows into gold are an exceedingly-bullish omen, as they are what transform a mere gold rally into a new bull market.
With the gold-mining sector’s market-dominating outperformance this year, investors are searching for the best-of-breed gold miners. The elite mid-tier OceanaGold is certainly among them. OceanaGold has truly epic fundamentals, combining super-profitable low-cost gold production with a solid balance sheet and great growth potential. Gold-stock investors really need to seriously consider this gem for their portfolios.
The gold miners’ stocks have soared this year as investors flock back into this long-abandoned sector. Many traders wonder if these eye-popping gains are merely the product of fleeting sentiment that could reverse anytime, or are supported by strong underlying fundamentals. With the gold miners reporting their latest quarterly operating results, this extensive new data offers great insights into gold mining’s fundamentals.
Gold and its miners’ stocks are rocketing higher as speculators and investors alike return to this left-for-dead sector. This sudden deluge of capital inflows has crowned gold stocks the best-performing sector of this young new year by far, shocking traders!
And this stunning reversal of fortunes in both the metal and the companies producing it is only starting, so it’s exceedingly important to understand what’s going on.
Contrary to Wall Street’s assertion that gold and silver demand continue to implode heralding much-lower precious-metals prices, the US Mint says these American Eagle coins are selling like hotcakes.
On December 31st it reported that 2015 sales of its gold bullion coins soared 53% above 2014’s levels, while silver-bullion-coin sales hit an all-time record!
That’s impressive considering 2015’s poor price action.
Gold stocks remain the pariah of the investment world. Despite gold’s strong early-year gains, the stocks of its miners have slumped to new secular lows. This whole forsaken sector continues to languish at fundamentally-absurd price levels, an extreme anomaly that is long overdue to start unwinding. The gold miners will be bid massively higher to reflect their impressive profitability even at today’s dismal gold prices.
The US stock markets have suffered their worst early-year losses in history in young 2016, an ominous proof that a major trend change is underway. The Fed’s new tightening cycle is already slaying recent years’ extraordinary easy-Fed-fueled stock-market levitation. Unfortunately the only possible reckoning after such a record artificial stock boost is a long-overdue major bear market that is finally awakening.
The world’s financial markets changed dramatically entering this young new year, led by sharp stock selloffs and a mounting gold rally. These are major reversals from recent years’ action. The immediate catalysts were China’s plummeting stocks and ongoing yuan devaluation. But the far larger underlying driver is the Fed’s first tightening cycle in a decade, which is just starting to unwind years of gross distortions.
Gold certainly had a rough year in 2015, grinding inexorably lower on Fed-rate-hike fears and investor abandonment. But gold is poised to rebound dramatically in this new year, mean reverting out of its recent deep secular lows. The drivers of gold’s weakness have soared to such extremes that they have to reverse hard. The resulting heavy buying from dominant groups of traders will fuel gold’s mighty 2016 upleg.
The Federal Reserve finally mustered the courage to end its radical zero-interest-rate-policy experiment this week. Its quarter-point rate hike announced on the seventh anniversary of ZIRP kicks off the long road to normalization. This leaves the stock markets and gold in unprecedented uncharted territory.
The Fed has never before attempted to exit ZIRP, let alone in the midst of such extremely distorted markets.
Gold’s deep new secular lows of recent weeks were fueled by American futures speculators’ overpowering fear of Fed rate hikes. They believe zero-yielding gold is doomed in a higher-rate world, so they dumped gold futures at astounding record rates. The problem is history proves just the opposite, that gold tends to thrive during Fed-rate-hike cycles. This revelation is a super-bullish near-term omen for gold.