GDX Gold-Stock Benchmark

Zeal041114BThe American GDX Gold Miners ETF is slowly becoming the de-facto standard for measuring gold-stock performance.
Now on those rare days when gold stocks are discussed on CNBC, the HUI is never mentioned.  In this new ETF-dominated world, the dominant ETFs have replaced minor sector indexes as the leading benchmarks of choice.  So to mainstreamers not steeped in gold-stock trading experience, GDX is the gold-stock sector.  So we’re long overdue for revisiting its construction, components, and performance. [Read more...]

Gold-Stock Spring Rally

Zeal032213ASubmitted by Adam Hamilton, Zeal

The loathed and left-for-dead gold miners look to have begun their usual spring rally.  This sector has actually exhibited strong seasonality for its entire secular bull.  For well over a decade, most years have enjoyed a major gold-stock rally between mid-March and early June.  These favorable seasonals are a welcome tailwind for a sector that is radically undervalued fundamentally and overdue to explode higher. [Read more...]

Stewart Thomson: Dollar Bugs About to Strike Out Against Silver Bullion

srike outSubmitted by Stewart Thomson:

Every baseball player knows the saying, “3 strikes and you’re out!”  Well, the dollar bugs may be about to strike out, against silver bullion.   In the previous 2 corrections, silver made a “capitulation low”, and that was followed by a final lower low, which looks like a spike.

The same set-up is in play now.  Of additional interest, is the fact that the silver market now shows three corrective phases, since topping in October.   It’s quite possible that the next rally will be of “intermediate trend quality”, rather than just a minor uptrend that ends quickly.
If I had to buy just one metal now, I would choose silver, but all investors should own more gold than silver, in a super-crisis.   

[Read more...]

Adam Hamilton: Contrarian Gold Stocks

Zeal011813ASubmitted by Adam Hamilton:

Before investors can sell high and multiply their wealth, they first have to buy low.  The lower any trade’s entry price, the greater its ultimate profits.  The best time to buy low is when stocks are deeply out of favor, when few others are willing to buy.  And that certainly describes gold and silver stocks today.  This sector is universally loathed despite fantastic fundamentals, offering vast opportunities for brave contrarians.

Gold stocks are trading today as if gold was far lower, as if they had little hope of ever earning big future profits.  There is a vast fundamental disconnect between these miners and the price of the metal that drives their profitability.  This critical point is easily illustrated through a simple construct known as the HUI/Gold Ratio.  It divides the premier gold-stock index, known as its symbol HUI, by the price of gold.

Contrarian investing is simple in concept, yet very difficult in execution.  The fortunes of stocks flow and ebb, their prices rising and falling.  After they’ve risen, they quickly become popular.  Everyone wants them and bids up their prices.  That’s when it feels the best to buy, so that’s when the great majority of investors rush in to chase the rally.  But following the herd leads to buying high, the recipe for failure.

[Read more...]