Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21
CISCO 2020 Dot com Bubble Stock vs 2021 Bubble Tech Stocks Warning Analysis - 6th Oct 21
Precious Metals Complex Searching for a Bottom - 6th Oct 21
FB, AMZN, NFLX, GOOG, AAPL and FANG+ '5 Waves' Speaks Volumes - 6th Oct 21
Budgies Flying Ability 10 Weeks After wings Clipped, Flight Feathers Cut Grow Back - 6th Oct 21
Why Silver Price Could Crash by 20%! - 5th Oct 21
Will China's Crackdown Send Bitcoin's Price Tumbling? - 5th Oct 21
Natural Gas News: Europe Lacks Supply, So It Turns to Asia - 5th Oct 21
Stock Market Correction: One More Spark to Light the Fire? - 5th Oct 21
Fractal Design Meshify S2, Best PC Case Review, Build Quality, Airflow etc. - 5th Oct 21
Chasing Value with Five More Biotech Stocks for the Long-run - 4th Oct 21
Gold’s Century - While stocks dominated headlines, gold quietly performed - 4th Oct 21
NASDAQ Stock Market Head-n-Shoulders Warns Of Market Weakness – Critical Topping Pattern - 4th Oct 21
US Dollar on plan, attended by the Gold/Silver ratio - 4th Oct 21
Aptorum Group - APM - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 3rd Oct 21
US Close to Hitting the Debt Ceiling: Gold Doesn’t Care - 3rd Oct 21
Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
Original Oculus VR HeadSet Rift Dev Kit v1 Before Facebook Bought Oculus - 3rd Oct 21
Microsoft Stock Valuation 2021 vs 2000 Bubble - Buy Sell or Hold Invest Analysis - 1st Oct 21
How to profit off the Acquisition spree in Fintech Stocks - 1st Oct 21
�� Halloween 2021 TESCO Shopping Before the Next Big Panic Buying! �� - 1st Oct 2
The Guide to Building a Design Portfolio Online - 1st Oct 21
BioDelivery Sciences International - BDSI - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 30th Sep 21
America’s Revolving-Door Politics Behind the Fall of US-Sino Ties - 30th Sep 21
Dovish to Hawkish Fed: Sounds Bearish for Gold - 30th Sep 21
Stock Market Gauntlet to the Fed - 30th Sep 21
Should you include ESG investments in your portfolio? - 30th Sep 21
Takeda - TAK - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 29th Sep 21
Stock Market Wishing Away Inflation - 29th Sep 21
Why Workers Are NOT Returning to Work as Lockdown's End - Wage Slaves Rebellion - 29th Sep 21
UK Fuel PANIC! Fighting at the Petrol Pumps! As Lemmings Create a New Crisis - 29th Sep 21
Gold Could See Tapering as Soon as November! - 29th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Junior Gold Mining Stocks From Distress To Misery For Investors

Commodities / Gold and Silver Stocks 2013 Jun 21, 2013 - 01:28 PM GMT

By: Bob_Kirtley

Commodities

Gold prices have been taking a pounding of late with today’s session on the NYSE witnessing a close of $1277.80/oz, with poor man’s gold, silver, closing at $19.82. The gold Bugs index (HUI) also took it on the chin losing around 7.5%.

With this environment as a back cloth it is understandable that the juniors in this sector also had a torrid time with Market Vectors Junior Gold Miners ETF (GDXJ) losing 9.78% to close at $9.32. So it begs the question; is GDXJ now a buy?


As an investment vehicle this ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Junior Gold Miners Index. The attraction of this fund for investors is the ability in invest in a myriad of small to medium sized companies in the gold and/or silver mining space. The fortunes of this fund are in turn predicated on gold and silver prices maintaining price levels that are profitable to mine. 

The GDXJ Chart

The above chart depicts GDXJ’s fall from grace. We could analyze the technical indicators, but at this juncture it is the high level of sell orders in the paper market and the low level of sentiment that is driving prices south and until that thirst is slaked there could be more selling to come.

Financials

GDXJ trades on the NYSE and has a market capitalization of $1.38 billion; a 52 week high of $25.66 and 52 week low of $9.26, the liquidity is good with around 3 million shares traded per day, although it can spike dramatically from time to time. There are 133,600,000 shares outstanding. The dividend payment has experienced rather an erratic performance so far, $2.93 in 2010, $0.03 in 2011 and $0.75 in 2012.

We should also note that some of the juniors are running low on cash and may need some help from a friendly banker to keep them in the swim, getting a loan won’t be easy given the current state of play.

Conclusion

We have looked at GDXJ a number of times in the past, more recently was in December, 2012 in an article entitled; Junior Gold Mining Sector: Distress For Investors? where we concluded; “for now this investment does not appeal to us, we do not own it and won't be buying it any time soon.”

At $9.32 it could be argued that it is cheaper to buy GDXJ now, however, that does not mean it is a bargain, it can still go lower. You have only to scan this financial landscape to see any number of good quality mining stocks trading at half the price they were a year ago.

Also remember that the cash costs of production have been increasing at a fair pace and can be as high as $1200/oz to $1300/oz, so unless there is a rapid recovery in both silver and gold prices, a number of mines may have to close. Yes this would take some of the supply off the market but there would be a time lag before this impact was felt.

Other considerations are the summer doldrums, a rather slow period for the precious metals sector, so our expectation is for further weakness, unless the dead cat dollar falls out of bed.

The NFP jobs numbers appear to satisfy our political masters which have led to more talk of tapering QE, which has certainly put a cap on gold’s progress. This may change given the reaction of the DOW, down 353 points today and the current economic fragility that exists almost worldwide. We will cross that bridge if and when it comes, but for now we have a down trend or retracement in place, until it comes to a halt we will trade accordingly.

As bulls we can sit it out and hope for this period of consolidation to run out of steam or we can recognize it for what it is; an opportunity to trade on the ‘short’ side. If you are not one of the giants in this field then you are small enough to adapt rapidly and change your trading strategy to match the current trends and make it work for you. This is a time when you use your ‘opportunity cash’ to generate profits or at least to get some insurance against your current portfolio. This strategy is helping us to generate cash and place us in a good position financially at a time when the gold and silver market is being taken to the wood shed.

Once again we can only conclude that GDXJ is not for us and until we can detect a reversal in gold’s fortunes it will stay that way.

On a positive note the summer will come to an end and usually by Labor day in the United States, 02 September, things pick up for the precious metals sector, should that coincide with the exhaustion of the selling, then we could be in for a real treat. The issue then will be about raising enough courage and the cash to hit the acquisitions trail with a vengeance. Start your planning now and be prepared for when the opportunity presents itself.

Take care.

Bob Kirtley
Email:bob@gold-prices.biz

URL: www.silver-prices.net

URL: www.skoptionstrading.com

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. Winners of the GoldDrivers Stock Picking Competition 200

DISCLAIMER : Gold Prices makes no guarantee or warranty on the accuracy or completeness of the data provided on this site. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This website represents our views and nothing more than that. Always consult your registered advisor to assist you with your investments. We accept no liability for any loss arising from the use of the data contained on this website. We may or may not hold a position in these securities at any given time and reserve the right to buy and sell as we think fit.

Bob Kirtley Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in