Gold Correcting In Price β Gold Miners Correcting In TimeFriday July 22, 2016 10:45
For almost 15 years I have been beholden to this wild and crazy precious metal miner sector that entailed two crashes and two huge run-ups. However, I believe this third run-up will be the charm as the set-up since January has all the makings of being a generational bottom. We have the “perfect storm” for the miners as negative real rates, together with rising systemic risk in Europe, have people all over the world gravitating towards gold. It’s also not a coincidence that gold started this move when it was confirmed who the candidates were going to be for the US Presidency! This has created the perfect gold and silver cocktail. Not to mention the end of the worst miner bear in 90 years as the old market adage “The bigger the bear, the bigger the bull that follows” seems appropriate here.
The lack of any sustained weakness in the miners tells us there is still big money on the sidelines wanting into what has quickly become the hottest sector on the planet. I have repeatedly argued this in my columns here at Kitco since early March. Since this move has happened so quickly and without a correction of more than 15%, it has left many sector retail investors, professional money mangers, and sector newsletter services on the sidelines waiting for a larger correction that has yet to give them the “cheaper entry” they have been waiting for.
We also have mainstream media still in denial of this new gold bull. Here are a few examples:
As a result, I continue to conclude the miners still have farther to go on the upside before a significant correction. Since the Brexit market shocker, gold has has been correcting an overbought move as the GDX & GDXJ have been in a consolidation flag as weakness continues to be bought very quickly. They should either break down or break out possibly as early as next week. I would not be surprised if GDX does not have a 20-25% correction until the 40-42 level is reached. This is where the trap door opened in the miners when gold broke down below $1500 per oz. in January 2013 as the big money shorts decimated the sector. I also believe GDX 40-42 could happen this year so we may have a 3 year short selling nightmare retraced in less than a year.
Welcome to the most volatile sector on the planet!
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."