Gold’s correction from last month’s record high at $3500 continues to consolidate inside of another bullish symmetrical triangle. Gold Futures have bounced from support at $3200 following a brief 8.5% correction from the April 22 high, closely matching the nearly 9% correction seen following the Nov. 5 U.S. election results.
The current gold bull run began from a low at $1614 in November 2022. Thus far, there have been five corrections of note, ranging from 6.7% to 12.7%, while the gold price has more than doubled in just 18-months.
Since Donald Trump was announced the victor of the 2024 Presidential election, each correction began with a sharp move down and has taken progressively less time to consolidate the subsequent downdraft as this powerful secular gold bull market moves forward.
Although this healthy consolidation of recent out-sized gains may continue in the short-to-medium term, the structural drivers underpinning gold's strength remain firmly in place.
Chief among them: a weakening U.S. dollar and volatile bond yields, persistent BRICS related central bank de-dollarization, mounting concerns over the ballooning U.S. fiscal deficit, along with ongoing geopolitical concerns in Ukraine, the Middle East, and now India vs Pakistan.
A lot has to go right in the world for the conditions that have propelled gold higher to change. Gold has become the safe-haven of choice, one of the few asset classes large enough to absorb $100s of billions of inflows if/when China and/or Japan sell U.S. Treasuries more aggressively.
Meanwhile, gold stocks have recently broken out of a major five-year base to become an island of safety in a sea of marketplace volatility.
After both GDX and GDXJ soared over 19% with convincing volume during the second week of April to signify a significant breakout, the gold miner ETFs have been bullishly consolidating inside of their own symmetrical triangle patterns along with the gold price for the past three weeks.
Despite the huge move gold has already made since breaking out of an uber-bullish 13-year cup & handle pattern in March 2024, gold stocks have only recently begun attracting the attention of generalist investors.
The current sentiment regarding the mining space is similar to when I discovered this tiny sector in 2003. When initially beginning to invest in the stock market over 20 years ago, I was determined to become the best investor possible.
I watched CNBC daily, read Barron’s and countless other mainstream paraphernalia…and promptly lost over 50% of my investment capital in just two years.
After losing a large sum of money by listening to mainstream media, I made sure to get my money’s worth by learning from a plethora of newbie mistakes. Chief among them being chasing wildly overvalued tech stocks near the peak of what became the top of an historic dot.com bubble.
Although this was an expensive lesson, it was an essential one which motivated me even more to become a successful investor in the stock market.
After a few all-night drinking binges’, I decided to do some contrarian research and came upon a newsletter entitled “Dow Theory Letters,” and the living legend that published this highly successful service, Richard Russell.
Until his passing in 2015, there were countless lessons I have learned from Mr. Russell over the years. One of the best was to find an unloved and completely decimated sector that has made a solid bottom.
Then, overweight your portfolio into that sector and hold on until it matures. This is the best way to make big money in the market.
I have been recommending readers of this column to accumulate long-term holding positions in the deeply undevalued junior gold and silver stocks before the breakout in the mining sector occurred last month.
Now that a major bottom in the GDX has been confirmed with a monthly close above 4-year resistance at $43 in April, weakness in the sector continues to be bought down the food chain of riskier juniors now outperforming the miners.
With the GDX having broken out of a huge 4-year base last month, gold stocks are just beginning to spark the interest of generalist investors as the miners continue to announce blow-out Q1 earnings reports.
Record gold prices drove first-quarter demand in 2025 to the highest level since 2016. Gold averaged a record $2862/oz in the quarter, up 7.6% QoQ and 38.1% YoY.
Analysts calculated all-in sustaining cost (AISC) margins increasing 87% in Q1 2025 versus Q1 2024 with a 16% higher AISC but 38% higher gold price.
Late last month, top gold miners Newmont Corp (NEM) and Agnico Eagle (AEM) both reported better-than-expected results, with Newmont’s AISC margin increasing 99% y/y and Agnico 96% y/y.
Furthermore, both reported lower-than-expected costs for the quarter. Sector bellwether and the world's largest gold miner Newmont highlighted $1.2B in free cash flow (FCF). Given that the company's average realized gold price was $2944/oz, the Q2 FCF could be $1.5B, a run-rate of $6 billion per year!
Energy accounts for anywhere between 40% and 60% of precious metals mining costs. With gold holding above $3000, and silver above $30, energy prices have been declining this year as WTI Crude has broken key support at $65 into the end of Q1.
Hence, future quarterly (and especially annual) gold miner financial results should continue to be stellar in 2025, attracting more generalist attention to this tiny sector.
With gold miners reporting record profits, hedge fund luminaries and momentum players have only recently begun to come into this tiny sector and continue to buy the precious metals mining complex on weakness.
Enter Mr. Russell’s words of wisdom “hold on until the sector matures” which harken back to a character known as “Old Turkey” from whom famed trader Jesse Livermore learned so much over a century ago.
In Edwin Lefevre’s “Reminiscences of a Stock Operator”, published in 1923, Livermore recounts this valuable lesson from Old Turkey:
“And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this it is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.”
My very patient subscribers and I have been waiting for “Old Turkey Time” in the junior precious metals equity complex since the first phase in the miner bull market ended in Q1 2021.
With gold stocks breaking out of a huge accumulative 4-year base, the beaten down and left for dead in 2024 mining sector is in the process of a 2025 mean reversion, with many quality juniors now outperforming the miners.
If you are already fully invested in the space, then just think of Old Turkey when the sector is experiencing a correction. There is strong support on the breakout line at $43 in the GDX and $54 in GDXJ, while the technically measured initial target of the breakout is $60 and $85, respectively.
Those of you that are still accumulating positions, buy weakness in quality gold & silver stocks and hold fast until this impulse move from the 5-year accumulative base has matured.
For a glimpse of what the rest of 2025 and beyond may have in store for the gold space, with mining stocks only recently posting an historic multi-year breakout, consider mining sector performance during previous major gold breakouts over the past two decades.
Once the gold price made a monthly close above $500 in late 2005, which was strong overhead resistance for the previous 12-years, the $HUI (both GDX & GDXJ were introduced in Q4 2009) doubled by late 2007. And once the gold price printed a monthly close above $1000 in mid-2009, the HUI doubled again by mid-2011.
Yet, select higher-risk/reward juniors are set to perform even better. The weekly Canadian TSX-Venture chart (CDNX), where 50% of its holdings are small-cap junior resource stocks, is breaking out of an uber-bullish 3-year accumulative inverse head & shoulders basing pattern with rising volume.
Following a spike low at 330 in early 2020, the TSX had tripled in just one year. A similar move back to the peak at 1113 in January 2021, would be a 75% rise from the recent breakout at 640.
With the tiny junior sector being unloved, undervalued, and under-owned for the past decade, higher-risk/reward quality small-cap issues can quickly result in doubles, triples, and even 10-baggers along the way.
The Junior Miner Junky (JMJ) weekly newsletter is a one-stop shop for precious metals stock speculators. Along with providing detailed macro commentary and technical analysis for subscribers following the real-money JMJ junior portfolio, the letter also teaches its members risk management via successful selling strategies.
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