Opportunities in gold miners
While the outlook for gold is tactically uncertain, the opportunity in gold miners is more distinct. The accompanying chart shows the Gold Miners Index (GDM), which is the index tracked by the Gold Miners ETF (GDX). The GDM-to-gold ratio has been falling and looks washed out (second panel). There have been three other similar lows in the past 10 years and they were all accompanied by strong price rebounds.
Here is a close-up look on gold miner technical internals. GDX has
- Traced out a positive RSI divergence as it made a lower low;
- Breached a GDX-to-gold ratio zone, indicating capitulative sentiment; and
- Percentage bullish fell into an oversold zone and recycled, which is a buy signal.
In conclusion, if you are concerned about the YOLO and FOMO frenzy in the stock market, you may wish to consider gold and gold mining stocks as refuges. NDR’s NASDAQ Cycle Composite, which is based on the one-year seasonal cycle, the four-year seasonal cycle and 10-year decennial cycle, is forecasting a NASDAQ cycle about now. Regardless of whether the market undergoes an actual correction or just an internal correction, gold and gold mining stocks should be beneficiaries under both scenarios. Gold has negative beta characteristics should stock prices fall, and gold mining stocks are poised to be winners in light of their technical conditions should leadership rotate from AI and GLP-1 stocks.
From a standalone perspective, the technical pattern for gold is constructive, but not unabashedly bullish. Gold miners appear to be washed out against gold and present the best opportunity for gains in the next 6–12 months. In the short-term, Powell’s testimony could be decisive in the direction of gold this week.
Disclosure: Long GDX
Let’s talk digital gold ie BTC.
So there is a halving coming up, which if I understand correctly means that the amount of coins the miners get is halved…so they are talking scarcity of supply increasing and maybe this is being flogged as a reason to buy BTC. I disagree, and this also could boost gold.
The problem the way I see it is that BTC has only 1 use which depends on the miners. Whether you want to speculate on BTC, or HODL it for armageddon, or do illegal stuff, none of it works without the miners. Well if the miners get half the coin, this will affect their earnings and the cost of mining isn’t going down (I don’t think). What happens if there is a selloff in BTC . You know when markets crash how people have to dump things to cover liabilities? Will the miners keep mining at a loss for long? What happens then?
So if BTC gets snuffed, what does this do to gold? That barbarian remnant.
If BTC takes a dirtnap, who will come to the rescue? The loss of however many billions of perceived wealth will likely have an impact.
One last point is the price of BTC in spite of the ETF news of the past month or so did not make a new high. If it does, does not change my view. We could easily make insane prices, but when the market crash happens (whenever it does, unless market crashes are a thing of the past) there will be liquidation of BTC. It will be something to watch.
One factor, not a small one, is money laundering out of a certain large country, last seen in 2021 during the crazy pandemic lockdown. This time it is due to the deteriorating economy. When you see BTC making large moves it indicates large flow of money being laundered in a short period of time. When it happens it invariably attracts many speculators to pile on. When the flow ebbs the speculators jump off. Most of the mined coins are not available for trading and that magnify the price movement.