(Kitco News) - It was another incredible week for the gold market as the price set another record high on the way to its eighth consecutive weekly gain. With this kind of momentum, analysts think it's only a matter of time before prices reach $3,000.
The question is, what happens after that? $3,000 has become an extremely important psychological level, which means it could take some time to work through the resistance level as traders take profits at these highs.
The market has been on an incredible run for more than a year as the price action cuts through resistance points like a hot knife through butter, but I would like to add some historical context to the rally.
Gold saw a similar rally in 2020 when it made its first attempt at $2,000. Despite the momentum, there wasn’t enough for a sustainable breakout. It took four years and three tests of that resistance before $2,000 broke.
In another example, in 2008, gold went on a three-year rally and prices peaked in 2011 just above $1,900. However, by 2013 gold was in an official bear market and prices then consolidated for the next five years.
I don’t want to dampen anyone’s enthusiasm, but I do think it’s important to manage expectations.
While gold may be preparing to consolidate for a while, the one area that should be getting a lot more attention is the mining sector.
We are in the thick of the earnings season for miners, and they have been impressive, to say the least. The entire sector has been firing on all cylinders as producers report strong production numbers in a rising price environment.
In fact, you could probably run out of clichés trying to describe just how impressively some of these companies performed in the final three months of 2024. On Thursday, the world’s biggest gold producer, Newmont Corp., said its free cash flow increased by 115% from last year as its earnings beat expectations.
While the sector is starting to attract some investor attention, valuations are still extremely depressed. The VanEck Gold Miners exchange-traded fund (NYSE: GDX) is still well off its 2011 highs. Gold prices are up $1,000 from those all-time highs, yet miners struggle to raise enough capital to buy a cup of coffee because nobody is paying attention.
According to a growing number of analysts, if investors are looking for value in the precious metals space, they should definitely be looking at miners.
That’s it for this week. Have a great weekend.
Neils Christensen
Neils Christensen has a diploma in journalism from Lethbridge College and has more than a decade of reporting experience working for news organizations throughout Canada. His experiences include covering territorial and federal politics in Nunavut, Canada. He has worked exclusively within the financial sector since 2007, when he started with the Canadian Economic Press. Neils can be contacted at: 1 866 925 4826 ext. 1526 nchristensen at kitco.com @KitcoNewsNOW
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