Gold Stocks Still Undervalued

By Adam Hamilton – Re-Blogged From Gold Eagle

Gold miners’ stocks rocketed out of mid-March’s stock panic, breaking out to major new bull-market highs in mid-May. Such blisteringly-fast gains, and gold stocks’ upleg stalling out since, have left many traders nervous about this sector. Calls for a serious selloff are mounting. But arguing in favor for more near-term gains to come, gold stocks never grew overvalued in this post-panic upleg and are still undervalued today.

The recent gold-stock action is best understood through this sector’s most-popular benchmark, the GDX VanEck Vectors Gold Miners ETF. Holding the world’s biggest and best gold miners, it dominates gold-stock-ETF capital flows. GDX’s world-leading $15.1b in net assets this week are triple the size of its little-brother GDXJ mid-tier gold miners ETF! No other gold-stock ETFs come remotely close to GDX’s scale.

Continue reading

Silver’s Epic Mean Reversion

By Adam Hamilton – Re-Blogged From Silver Phoenix

Silver is powering higher in a new bull market after getting clobbered in March’s stock panic.  Investors have been flocking back to silver in the aftermath of that ultra-rare extreme-fear event.  That brutal selloff also utterly wiped out speculators’ upside bets in silver futures, giving them massive room to buy back in.  After being pummeled to record-low levels relative to gold, an epic silver mean reversion higher is underway.

A couple weeks ago, I wrote a popular essay “Big Silver Bull Running!”.  It explained what happened to silver in this recent COVID-19 stock panic, and why silver soared in its wake.  Sucked into that blinding fear maelstrom, silver was thrashed to a miserable 10.9-year low.  This metal plummeted in a near-crash, fueled by speculators’ fastest long purge ever witnessed!  That exhausted their selling, totally resetting longs.

That meant these super-leveraged traders’ capital firepower was fully available to buy back into silver.  And much more bullish than that, strong and relentless silver investment demand emerged since that mid-March collapse.  That’s evident in the soaring silver-bullion holdings of silver’s leading exchange-traded fund, the SLV iShares Silver Trust!  This dominant silver ETF is the best daily proxy for global investment demand.

Continue reading

Stocks’ Last Cheap Sector

By Adam Hamilton – Re-Blogged From Gold Eagle

The lofty stock markets suffered a sharp selloff this week that may prove a major inflection point.  There was one lone sector that bucked the heavy selling to surge in the carnage, the gold miners’ stocks.  They are the last cheap sector in these bubble-valued stock markets, long overlooked and neglected.  Wildly undervalued today, the gold stocks have great potential to soar dramatically even if stock markets keep weakening.

Just several weeks ago, the US stock markets hit new all-time record highs stoking universal euphoria.  The flagship S&P500 broad-market stock index (SPX) closed at 2930.8 in late September, extending its monstrous bull to 333.2% over 9.5 years.  That made for the 2nd-largest and 1st-longest in US stock-market history!  It also left these markets dangerously overvalued, literally trading at bubble valuations.

Continue reading

Gold Stocks’ Strong New Upleg

By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com

Gold stocks are on fire this year, powering higher in market-dominating performance.  This is a massive reversal from their dark fourth quarter, with 6/7ths of those losses already erased.  But this strong new upleg still remains young and small by historical standards.  Gold stocks’ recent rally is only the vanguard of another major bull-market upleg.  This sector’s bullish technicals reveal vast upside potential from here.

The gold miners are a small contrarian stock-market sector that isn’t widely followed.  Hearing about how the gold stocks are faring in the mainstream financial media is pretty rare.  So this sector generally flies under the radars of the great majority of speculators and investors.  That’s rather unfortunate, because the gold stocks have enjoyed some of the greatest gains in all the stock markets in this young century.

The flagship gold-stock index is the NYSE Arca Gold BUGS Index, which trades under the symbol HUI.  BUGS stands for Basket of Unhedged Gold Stocks, as major gold miners can’t be included in the HUI unless their gold production is not hedged beyond 1.5 years.  Running all the way back to June 1996, and having no management fees like ETFs, the HUI offers the definitive read on gold-stock performance.

Continue reading

Gold Stocks Screaming Buy

By Adam Hamilton – Re-Blogged From http://www.Zealllc.com

The gold miners’ stocks are suffering from universal and overwhelming bearishness today, with nearly everyone expecting further selling.  That’s the natural reaction following this sector’s recent massive correction, which climaxed in one of its biggest daily plummets ever witnessed.  But within bull markets, there’s no better time to buy aggressively than deep in a major selloff that’s riddled with great doubt and fear.

The core mission of speculation and investment is so simple even children can easily grasp it, buy low sell high.  The great challenges arise not from understanding, but execution.  Actually buying low then selling high in real markets is exceedingly unnatural and uncomfortable.  It requires traders to overcome their own greed and fear to do the exact opposite of everything their own instincts are screaming to do.

The only times speculators and investors want to buy aggressively is when it feels great to do so.  That only happens late in powerful rallies, when everyone can clearly see how strong a sector’s performance has been.  Traders then commit one of trading’s cardinal sins, extrapolating recent performance out into the indefinite future.  They assume a red-hot sector will keep on rising, and eagerly rush to buy high after a rally.

Continue reading

Fueling Gold’s 2016 Upleg

By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com

Gold certainly had a rough year in 2015, grinding inexorably lower on Fed-rate-hike fears and investor abandonment.  But gold is poised to rebound dramatically in this new year, mean reverting out of its recent deep secular lows.  The drivers of gold’s weakness have soared to such extremes that they have to reverse hard.  The resulting heavy buying from dominant groups of traders will fuel gold’s mighty 2016 upleg.

Investment demand, or lack thereof, is what overwhelmingly drives the gold price.  Investment certainly isn’t the largest component of gold demand, a crown held by jewelry at roughly 4/7ths of the total.  But that is somewhat misleading, as gold’s investment merits are the primary reason Asians flock to gold jewelry.  But since global jewelry demand is fairly consistent, it’s not what drives the gold price on the margin.

Investment demand is much smaller.  According to the World Gold Council, it only accounted for 17.7% of global gold demand in 2013, 19.4% in 2014, and 22.0% in 2015 as of the end of the third quarter.  So call investment demand something like 1/5th of total world gold demand.  While that isn’t huge, it is a super-volatile demand category.  That’s where gold’s biggest demand swings emerge, driving its price.

Continue reading

Silver’s Deep Undervaluation

By Adam Hamilton – Re-Blogged From http://www.Silver-Phoenix500.com

Silver is finally showing some signs of life after suffering a dark year.  The epically-bearish sentiment that bludgeoned this metal to major secular lows is cracking, with a strong rebound rally now underway.  And this recent buying is likely just the earliest vanguard, as silver remains deeply undervalued relative to its primary driver gold.  Silver will need an utterly massive upleg to fully mean revert to normal levels.

Silver has been out of favor for a long time, the last few years.  And 2015 didn’t give beleaguered silver investors much hope.  By late August, July’s extreme gold-futures shorting attack had dragged silver down to a major 6.0-year secular low.  Down 9.9% year-to-date at that dark nadir, silver was left for dead by traders.  The despair was real, as it certainly felt like silver was doomed to keep grinding lower forever.

Silver’s slumber was certainly vexing, but this metal was way overdue for a rebound rally as I predicted at the time.  And indeed that’s come to pass.  Since silver’s dismal lows in late August, this metal has surged 14.4% at best.  Fully 4/5ths of these impressive gains came in the first two weeks of October alone.  This strong rally blasted silver above its 50-day moving average to challenge its critical 200dma.

Continue reading