Will Yellen's Jackson Hole Speech Provide the Next Miner Catalyst?Friday August 26, 2016 09:52
The mining sector in August tends to be uneventful due to thin trading volume creating potentially unreliable moves. Savvy traders often ignore such moves. However, for long-term investors looking for a good entry on quality miners during bull markets, August can be a very opportune time to buy.
Although many sector pundits are calling for a hard correction and even in some cases a “gold crash” into October, the miners continue to be bought on weakness while forming a potential base which could give way to higher prices. Miners historically lead the metals whether up or down and that has again been the case this year.
Turning to the present, Fed Chair Janet Yellen is on tap next week in what figures to be a market moving event.
Each year since 1978, the Federal Reserve Bank of Kansas City has sponsored a symposium on an important economic issue facing the U.S. and world economies. Symposium participants include prominent central bankers, finance ministers, academics, and financial market participants from around the world. The participants convene to discuss the economic issues, implications, and policy options pertaining to the symposium topic. The symposium proceedings include papers, commentary, and discussion.
The 2016 Economic Symposium, "Designing Resilient Monetary Policy Frameworks for the Future," will take place Aug. 25-27. The conference has also been the venue for major Fed policy announcements. Federal Reserve Chair Janet Yellen’s speech on Friday, the 26th could provide clues to the direction of the Feds interest rate policy heading into the next meeting on Sept. 20-21st.
These events, combined with many traders returning to market after their summer vacations, could very well provide the catalyst for a move towards my $1500-$1550 gold and 40-42 GDX as well as 350-375 HUI targets heading into Q4. However, an unexpectedly hawkish tone could also trigger the 20-30% correction the short term bears have been waiting for.
With big money still on the sidelines waiting to buy the miners, combined with a likely dovish Yellen speech next week, we could very well see this move heat up after Labor Day. So, I fail to see how the bears will get their long awaited correction until we, at the very least, have a blow off move to the aforementioned targets.
David Erfle is a 52 year old self-taught mining sector investor. He stumbled upon the mining sector in 2003 as he was looking to invest into a growing sector of the market. After researching the gains made from the 2001 bottom in the tiny gold and silver sector he became fascinated with this niche market. So much so that in 2005 he decided to sell his home and invest the entire proceeds from the sale into junior mining companies. When his account had tripled by September, 2007, he decided to quit his job as the Telecommunications Equipment Buyer at UCLA and make investing in this sector his full time job. He personally survived two bear markets, witnessed incredible sector changes and had to alter his investment philosophy numerous times in order to adapt to changing market conditions."