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Following a brutal year for bullion in 2013 and an even worse year for gold miners, those bullish on the yellow metal and the companies that extract it from the earth may finally have something to hang their hats on.
So says Todd Shriber (etfTrends.com) in edited excerpts from his original article* entitled A Generational Opportunity in Gold Miners.
[The following is presented by Lorimer Wilson, editor of www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]Shriber goes on to say in further edited excerpts:
…[Why so? Because] the $6.9 billion GDX, the largest gold mining ETF by assets, is up 4.5% in just the past week…[and] that could be just the beginning for an ETF that plunged 54% last year, a drop that was nearly twice as bad as the losses incurred by the major ETFs backed by holdings of physical gold.
Are XAU and HUI Finally Turning Upwards?
Technical analyst Chris Kimble of Kimble Charting Solutions says the current scenario for the miners is a rare scenario noting that
- the momentum on the PHLX Gold/Silver Sector Index (^XAU) is more oversold than it has been at any time over the past 30 years
- on a monthly basis, XAU and HUI, the NYSE Arca Gold Bugs Index (^HUI) are both at 10-15 year support and that
- “From a risk/reward standpoint, you can only dream of this.”
Click on chart to enlarge
Chart Courtesy: Kimble Charting Solutions
GDX…tracks the NYSE Arca Gold Miners Index (GDM), a modified market capitalization-weighted index that combines 36 large-, mid- and small-cap companies. Top holdings in GDX include Barrick Gold (NYSE: ABX), Goldcorp (NYSE: GG), Newmont Mining (NYSE: NEM) and Silver Wheaton (NYSE: SLW).
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Are Barrick and Silver Wheaton Showing the Way?
Charts from Kimble below illustrate encouraging technical patterns in ABX and Silver Wheaton. That is good news for GDX because Barrick and Silver Wheaton are the ETF’s largest and fourth-largest holdings, respectively, combining for 19.3% of the fund’s weight.
Click on chart to enlarge
Chart Courtesy: Kimble Charting Solutions
“It’s intriguing to do the bottom-fishing with something that has done terribly over the past three years” says Kimble and that certainly is the case with GDX. The fund has plunged almost 61% over the past 36 months…[and, given its dismal] once-in-a-generation sentiment reading it may well be…the ultimate rebound trade for 2014.
Paraphrasing Sir John Templeton, Kimble said “Bull markets are born in pessimism and die in euphoria. I love scouring those stages.”
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
*http://www.etftrends.com/2014/01/a-generational-opportunity-in-gold-miners/
Related Articles: (The articles posted on munKNEE.com deliberately present a diverse perspective on subjects discussed. Below are links, with introductory paragraphs, to a variety of related articles designed to help you become truly informed regarding both sides of the issues so that you can assess the merits of all points of view and come to your own conclusion.)
1. Gold Stocks: What Can We Expect in 2014?
After three years of pain, can gold stocks break their losing streak and see a gain in 2014? History says the chances are good. Here’s why that is the case. Read More »
2. Gold Stocks: Likelihood of Making Breathtaking Returns Has Never Been Greater! Here’s Why
We all think the price of gold, the metal, is depressed and is about equal to the total cost of production but when one compares the price of precious metals mining companies to the price of gold bullion, their prices are at historical lows. It seems that the mining shares can only go in one direction…up…but when and by how much? This article suggests it presents the greatest opportunity in 30 years. Look at the charts! Absolutely unbelievable. Read More »
3. Here’s How to Choose Gold & Silver Stocks With the GREATEST Chance of Major Returns
Which gold/silver mining companies own quality undeveloped gold and silver deposits in safe stable countries – and are extremely well managed? Such companies offer exceptional value in that they provide the best exposure to a rising precious metals price environment. Below are a number of things to look for when considering an investment in such companies. Read More »
4. Gold Producer Stocks Dramatically Undervalued: Don’t Miss This Blood-in-the-Streets Opportunity
While the waterfall decline in gold stocks is painful for those of us already invested, the reality is that this is a setup we get a shot at only a few times in our investing life. It’s a cruel irony that those who are fully invested are now faced with the buying opportunity of a lifetime; however, it would be a shame for anyone to miss this blood-in-the-streets opportunity. Read More »
5. Huge Rebound in Gold & Silver Stocks Coming Soon – Here’s Why
It’s been a tough road for precious metals but the path ahead has strong potential of being significantly profitable and in a short period of time. The buying opportunity that we’ve spoken of for months could be days away. When precious metals equities rebound, they rebound violently. Read More »
6. Focus on Quality Junior Gold & Silver Companies to Maximize Returns – Here’s Why & How
The outlook for many junior resource companies in 2013 is grim so investors should focus on those who own quality undeveloped gold and silver deposits in safe stable countries. Such companies offer exceptional value in that they provide the best exposure to a rising precious metals price environment – and the assets the world’s mining companies desperately need. [Let me explain.] Words: 1328; Charts: 15 Read More »
The timing of this article may seem incongruous given the current weak performance of gold and gold stocks but that was the identical situation in each of the past manias – both the metal and the equities didn’t excel until the frenzy kicked in. The following documentation (exact returns from specific companies during this era are identified) is actually a fresh reminder of why we think you should hold on to your positions – or start accumulating them, if you haven’t already. (Words: 1987; Tables: 7)
8. Why Invest in Junior Miners?
Leverage is the simple answer. It is not uncommon for junior mining companies to experience huge gains (10x or more) very quickly as news of a discovery is made known to the public. Words: 893
The precious metals complex is arguably at its most bearish sentiment since the start of the bull market 12 years ago. Either the bull market is over or this will prove to be a tremendous buying opportunity. It’s clear that anyone who doesn’t believe in Gold for the long-term has sold and judging from the sentiment indicators, Gold is now in much stronger hands than when it was trading at these prices at the 2012 and 2011 lows. Despite all of the bearish sentiment, the panic and bad-mouthing, Gold (and Silver) has maintained its consolidation. Thus, if Gold is able to hold this support and turn higher, it should approach $1750 to $1800 faster than one would think. This year will go down in history as one of the best buying opportunities for both the metals and the stocks. Words: 675; Charts: 3
10. Gold Miners Have Hit Rock Bottom! Now’s the Ultimate Buying Opportunity
Looking at the recent Gold Miners price action and crash-like conditions, I cannot hide my excitement. As we judge the recent cyclical bear market within the longer term secular uptrend, we can see that Gold Miners are becoming very attractive. Whether it is the technically oversold levels that only occur a handful of times over a generation, the rock bottom valuations on nominal or relative basis, or the extreme sentiment that the overall sector is going through, all of these indicators point to one conclusion: we are fast approaching a major buying opportunity. [I support that contention below with the use of 8 charts and a full explanation of each.] Words: 1133; Charts: 8
11. Country Risk: ALWAYS Discount the Value of Companies Operating in Risky Jurisdictions – Here’s Why
There is enough risk in investing without the added risk of political instability so why does the investment community often use the same metrics to value the shares of exploration and production of resources companies regardless of their location in the world? This is so very wrong, yet it continues. Frankly, when investing in the stock market you should ALWAYS discount the value of the stock that you are considering buying if the jurisdiction is not historically safe, stable, and economically strong. [Let me explain further.] Words: 746
12. Focus on Quality Junior Gold & Silver Companies to Maximize Returns – Here’s Why & How
The outlook for many junior resource companies in 2013 is grim so investors should focus on those who own quality undeveloped gold and silver deposits in safe stable countries. Such companies offer exceptional value in that they provide the best exposure to a rising precious metals price environment – and the assets the world’s mining companies desperately need. [Let me explain.] Words: 1328; Charts: 15 Read More »
13. Gold & Silver Miners: What’s the Best Time to Invest in the Producers – and in the Juniors?
While juniors, mid-tiers and large producers will usually bottom around the same time, they each outperform at different times. In this missive we look at some charts to decipher when its time to buy [each category and when one or the other] should be avoided. Words: 470
