The biggest issue in the gold sector right now is lack of leverage. Gold has had a great month, gaining 5.2% since May 7th, but gold stocks have barely provided leverage to those gains. The ETF of gold majors, GDX, is up just 8.9% and the junior ETF brother, GDXJ, is up just 11%.
Leverage is the fuel that feeds investment in this volatile sector. Without leverage, why would any of us invest in gold stocks? Gold alone is risky enough, what with it reacting to such a range of economic and political events. Gold stocks add exploration, development, or mining to that equation, multiplying the risk.
The only reason gold bulls invest in stocks, then, is because miners are supposed to provide leverage to the metal’s upside moves. But of late that leverage has been missing. What gives?
I think there are two reasons.
One is a bit of stubborn disbelief. Gold investors are so used to Sell in May and Go Away, so used to a market that slides through the summer, that they are struggling to believe that gold’s gains are real. It doesn’t help that politics have played a major role in gold’s recent gains. Gold investors know well that political gains are the least reliable.
But politics ain’t the only factor at play. Take a look at these two charts.
The second is the yield on 10-year Treasuries. Yields jumped in November following the election, when Trump optimism amped up yields and the dollar. But so far yields have spent 2017 giving that ground back, to sit today at just 2.17%.
As this year-to-date chart shows, gold has been marching upward and marking out what looks to me like a confirmed uptrend, especially now that it has again reached $1,290 per oz. marking yet another higher high for the year.
None of these are official Maven portfolio holdings yet, as I will re-assess the situation after Van Eck’s announcement on Friday. But there’s a preview of where I am seeing opportunity.
In her letter, Resource Maven explains what she is buying and selling, and why. Maven has bought into several of the markets best - performing stocks well ahead of the curve. She regularly identifies exciting new exploration opportunities and manages the inherent risk by selling some into speculative gains. And the mine builder and operator stocks that form the basis of the portfolio give strong, ongoing leverage to the rising prices of gold and silver. She has your precious metal bases covered.
I'm one of your new subscribers (by way of investing.com) and just want to belatedly thank you for the recent sell recommendation that saved me quite a bit of money. (I also follow a few other mining newsletters, and, like so many other financial analysts, they were too hesitant and biased against putting out sell alerts.) And I find your newsletters very nicely done in general.
Thank you so much for this important insight. It makes complete and makes the decision complex....The newsletter is incredible, your insight is very fun to read.