Make Kitco Your Homepage

Gold stocks vs gold: it's rocket time

Commentaries & Views

  1. A year ago, gold stock investors had to choose their stocks carefully.  In contrast, now it’s hard to find a gold stock that isn’t roaring higher!

  2. Double-click to enlarge this awesome GDX breakout chart.

  3. Momentum-oriented rallies and major breakouts tend to occur with oscillators at or near overbought levels.  That’s what’s happening right now.  Also, price reactions tend to be brief and are great buying opportunities.

  4. When ETFs like GDX, GDXJ, SIL, and SILJ stage major breakouts, hundreds of off-the-radar miners stage mindboggling rallies.

  5. For junior miners, rather than the exception to the rule, “ten bagger” gains quickly become the norm.

  6. ETF and option traders can expect to get in on major runs with limited drawdowns, and on that note, Double-click to enlarge. 

  7. My https://guswinger.com swing trade service has caught all three of the major moves in 2019 and 2020.  Drawdowns are tightly controlled, and the great news is that we may be at the dawn of another mighty blast to the upside for the ETFs and the miners!

  8. In 2008, gold hit about $1000 and GDX hit $53.  Given the fabulous job miners have done in cutting costs after increasing them from 2008-2012, I believe a “normalization” price for GDX would be about $90.

  9. Gold is up about 70% from the 2008 high, and a 70% move above the 2008 high for GDX would put it about $90.  The bottom line:

  10. If the Fed drops support for the US stock market “poster boy”, and I think it will do that in 2021, institutional money will pour into gold stocks, making my $90 normalization price for GDX likely to happen… even if gold doesn’t rise above $1800.

  11. Double-click to enlarge this stunning HUI versus gold chart.

  12. In my professional opinion, the mining stock dilution and general sloppiness in management actually began in 2004, and that year marked the peak in the HUI’s rise against gold.

  13. Given the lean and mean management at many mining companies now, which is comparable to the 2002-2004 period, GDX could conceivably rise far beyond my $50 and $90 targets, to many hundreds of dollars per share.

  14. Again, that’s with the assumption that gold trades no higher than the $1800 level.  For some insight on where gold might actually trade. Double-click to enlarge this weekly gold chart.

  15. If gold trades near my $3000 target price while the directors of the gold stocks continue to run a tight ship, the sky is the limit for senior miners.  I believe many juniors would quickly move into “hundred bagger” mode.

  16. I don’t engage in price chasing in the market.  In October 2010 I issued a massive “loss of sanity” call for investors racing to buy gold stocks, while company managers ran shoddy operations at best, and pillaged at worst.

  17. Buying a major breakout from the base patterns that exist on gold stocks now, while the US empire sinks into a permanently setting sun…

  18. Somehow that just doesn’t feel like a price chase, especially given the spectacular shareholder-oriented decisions being made at hundreds of mining companies.

  19. It’s not a price chase, and the time is now for new investors in the gold market to take buy-side action!

  20. Double-click to enlarge what is likely the most important chart in the juniors market, the CDNX index.  I’ve highlighted what could be my first “green light” signal in two years. 

  21. I believe this buy signal will be the most important since 2004.  A Friday close over 600 “seals the green light deal”.  I don’t think it happens this week, but it appears to be imminent.

  22. GDXJ is called a junior miners ETF, but most component stocks are intermediate producers, and there are even some seniors in it.  In contrast, the CDNX is a true juniors index that includes hundreds of small but great companies.

  23. A CDNX ETF was attempted years ago, but there apparently wasn’t enough interest and it failed.  Maybe a new one is tried and finds success, but for now, even senior mine stock investors should take note of the CDNX price action. 

  24. That’s because the CDNX is a key indicator for overall heath of the gold sector, and for imminent upside price action of most of the world’s miners… junior, intermediate, and senior!
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.