The Bull Sneaking Up on You
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
The stock market is enough to drive people crazy. Action is bullish â€¦ bearish â€¦ a mix of both! Then the president tweets, and itâ€™s like someone kicked the chessboard in the air. Itâ€™s stressful!
The good news is, thereâ€™s a bull sneaking up on you right now. And thatâ€™s a bull you can ride to huge gains.
This bull is in a sector that is hated more than Kim Jong-unâ€™s barber. Wall Street despises it. Says no one should own it. Why, you might as well put a gun in your mouth as buy this!
Psst!Â Thatâ€™s just when you want to buy it.
Meanwhile, this bull keeps tippy-toeing closer and closer.
Somebodyâ€™s about to take an unpleasant ride on the bullâ€™s horns, and it wonâ€™t be me.Â Iâ€™m harnessing that bull. Iâ€™m going to ride it. Sure, itâ€™s going to be a wild ride. But itâ€™s going to be awesome.
Iâ€™m talking about gold miners.
Now, I just talked about the bullish forces in goldÂ a few weeks ago. And you can go back and read that. But now I want to talk specifically about gold miners. Because itâ€™s the action in gold miners that is the latest sign the bull is creeping up on us.
You see, gold has spent the last week pulling back. That happens â€” it zigs and zags as it builds the base for its next big move. As I told you it would.
But the action in miners? Oh man, that is BULLISH! Hereâ€™s a chart showing the percentage price action in theÂ VanEck Vectors Gold Miners ETF (NYSE: GDX)Â and gold.
You can see that gold continues to be rangebound (for now). But miners arenâ€™t waiting. The GDX (which tracks a basket of the biggest precious metals miners) has zig-zagged its way higher since March. Itâ€™s outperforming gold.
Miners outperforming the metal is one of the classic signs of a bull market.Â That particular sign has been missing until recently.
Itâ€™s a sign that big money believes gold will break out. So, that big money is taking positions in miners that are leveraged to the underlying metal.
So, letâ€™s say gold moves to $1,650. Thatâ€™s a nice 25% move from recent prices.
But letâ€™s say a miner has an all-in sustaining cost of $1,100 per ounce. And that it recently made $220 on every ounce of gold it sold. A 20% profit margin. If gold moves to $1,650, it makes $550 on every ounce. Thatâ€™s a 50% profit margin!
Thatâ€™s leverage.Â And itâ€™s why gold miners are so appealing in a bull market.
Gold has yet to break out. Thereâ€™s still time to get onboard. But this bull is twitching with energy. Itâ€™s ready to go on a wild ride. When it busts out, you better be harnessed to the better gold miners. Or youâ€™ll miss out, big time.
All the best