Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Plunging Inventories have Zinc Bulls Ready to Run - 15th Feb 19
Gold Stocks Mega Mergers Are Bad for Shareholders - 15th Feb 19
Retail Sales Crash! It’s 2008 All Over Again for Stock Market and Economy! - 15th Feb 19
Is Gold Market 2019 Like 2016? - 15th Feb 19
Virgin Media's Increasingly Unreliable Broadband Service - 15th Feb 19
2019 Starting to Shine But is it a Long Con for Stock Investors? - 15th Feb 19
Gold is on the Verge of a Bull-run and Here's Why - 15th Feb 19
Will Stock Market 2019 be like 1999? - 14th Feb 19
3 Charts That Scream “Don’t Buy Stocks” - 14th Feb 19
Capitalism Isn’t Bad, It’s Just Broken - 14th Feb 19
How To Find High-Yield Dividend Stocks That Are Safe - 14th Feb 19
Strategy Session - How This Stocks Bear Market Fits in With Markets of the Past - 14th Feb 19
Marijuana Stocks Ready for Another Massive Rally? - 14th Feb 19
Wage Day Advance And Why There is No Shame About It - 14th Feb 19
Will 2019 be the Year of the Big Breakout for Gold? - 13th Feb 19
Earth Overshoot Day Illustrates We are the Lemmings - 13th Feb 19
A Stock Market Rally With No Pullbacks. What’s Next for Stocks - 13th Feb 19
Where Is Gold’s Rally in Response to USD Weakness? - 13th Feb 19
US Tech Stock Sector Setting Up for A Momentum Breakout Move - 12th Feb 19
Key Support Levels for Gold Miners & Gold Juniors - 12th Feb 19
Socialist “Green New Deal” Points the Way to Hyperinflation - 12th Feb 19
Trump’s Quest to Undermine Multilateral Development Banks - 12th Feb 19
Sheffield B17 US Bomber Crash 75th Anniversary Fly-past on 22nd February 2019 Full Details - 12th Feb 19
The 2 Rules For Successful Trading - 12th Feb 19 -
Financial Sector Calls Gold ‘Shiny Poo.’ Are They Worried? - 11th Feb 19
Stocks Bouncing, but Will They Resume the Uptrend? - 11th Feb 19
EURO Crisis Set to Intensify: US Dollar Breakout Higher
Stock Market Correction Starting? - 10th Feb 19
Gold Stocks Gather Steam - 10th Feb 19
Are Gold Bulls Naively Optimistic? - 9th Feb 19
Gold, Silver Precious Metals Update - 9th Feb 19
The Wealthy Should Prepare to Be Soaked - 8th Feb 19
US Business Confidence Is Starting to Crack - 8th Feb 19
Top Myths and Facts about ULIP Plans - 8th Feb 19
A Major Stocks Bear Market in 2020? - 8th Feb 19
Gold Market Extremes Test Your Mettle - 8th Feb 19
The Venezuela Myth Keeping Us From Transforming Our Economy - 8th Feb 19

Market Oracle FREE Newsletter

The Real Secret for Successful Trading

GDX - Will you Buy This Hated Stock with Me?

Commodities / Gold and Silver Stocks 2018 Nov 11, 2018 - 03:31 PM GMT

By: Stephen_McBride

Commodities

Will you listen to me?

Will you buy the stock I recommend in this issue?

I hope so… because we have a realistic shot to make roughly 140% on our money in just a few months.

Stock markets don’t often hand us opportunities like this. I study markets for a living and I see one setup like it a year, max.


But I know there’s a good chance you won’t take advantage of this opportunity. Because to join me in this trade, you’ll have to do something painful…

  • You’ll have to buy the single most hated asset class on the planet today.

Gold.

Since 2011 gold has plunged 35%. Even worse, gold stocks have cratered 70% in the past seven years.

Investors have completely given up on gold and gold miners. The VanEck Gold Miners ETF (GDX), which tracks the performance of gold stocks, recently suffered a losing streak where it closed lower for six weeks in a row.

That almost never happens. If fact, going back to the creation of GDX in 2006, it has only happened twice.

The last time was in late 2015. I’ve marked it in the chart below.

Do you see what happened last time gold stocks plunged six weeks in a row? They bounced around for a few months before ripping to 140% gains in eight months:

  • Today, just like in 2015, GDX has entered a state of exhaustion. 

Finance nerds use the word exhaustion to describe an investment that’s been subject to relentless selling pressure.

You see at some point, all investors interested in selling a stock have sold it. When this happens we say the supply of sellers has been “exhausted.”

Because there’s no one left to sell, exhaustion often signals that a stock has put in a bottom and is ready to march higher.

GDX has entered a state of exhaustion for the first time since 2015. And after months of sharp drops, it’s finally perking up.

It recently jumped 6% in a single week… one of its best stretches since its 140% surge in 2016.

  • Now when I say gold mining stocks are hated, I mean HATED.

Six straight weeks of losses in GDX is just one data point that shows investors want nothing to do with gold stocks.

According to the Commitment of Traders report, last month professional traders were “short” gold more than any time in last 17 years… since 2001!

As you may know, 2001 marked the beginning of the last great gold bull market that saw gold soar 630% in a decade.

The 2001 bottom also kickstarted a 1,350% surge in gold stocks.

Here’s another telling statistic. Since the beginning of 2018 investors have yanked $3.5 billion from gold-related ETFs. That’s the highest level of withdrawals in five years.

To get a sense of what market insiders are seeing right now I called up Adrian Day of Adrian Day Asset Management. Adrian is a professional investor who’s been putting money to work in the resource sector for over 25 years. Here what he told me:

“Gold stocks are more or less at the same level they were in 2001 when gold was a fifth the price it is today. Very few funds hold any gold stocks today, whereas 15, 20, 25 years ago, a lot of them did. But the stocks are now responding to good news—a very positive sign that the market is turning.”

  • It’s no exaggeration to say gold stocks have NEVER been as hated as they are today. 

This extreme hatred tells me buying gold miners now is a smart move.

It’s never easy to go against the crowd and buy a hated asset. You’ll probably feel uneasy hitting the “buy” button.

But as regular RiskHedge readers know, buying hated stocks is one of the lowest risk ways to make big profits in markets.

In fact, the last “hated” stock I recommended to you was 3D printing company Stratasys. It has leapt 25% in the last week thanks to better than expected earnings.

  • Gold may lack the excitement of the disruptive technologies I often write you about... 

Self-driving cars, DNA mapping, and the coming superfast 5G cell phone network are much “sexier” than gold mining stocks.

But please, don’t let that stop you from taking this opportunity seriously.

Gold miners are perhaps the most explosive group of stocks on the planet. Gold stocks have exploded for triple- or quadruple-digit gains seven times in the past 48 years.

Buying gold stocks at the correct time is one of the few legitimate strategies for earning big returns quickly in the stock market.

It’s also a backdoor way to profit from one of the most insidious disruptions to your finances: the slow death of the US dollar.

I won’t get into the whole case for gold here. If you’ve paid a medical or tuition bill recently, you know a dollar doesn’t go far these days.

And if you’re familiar with how our financial system works, you know our money isn’t tied to anything of real value anymore.

Rather, the value of the dollar largely depends on politicians making responsible financial decisions.

By the US government’s own calculations, a dollar is worth 86% less than it was 50 years ago.

Think of gold as the reciprocal of the US dollar. Although it goes through short-term price swings, it has held its value for thousands of years.

Gold miners are a supercharged version of gold. Even a modest move in gold can slingshot gold stocks much higher. As I mentioned earlier, when gold jumped 30% in early 2016, GDX shot up 140%.

I’m buying GDX here. My research shows we could double our money or better in the next few months.

Will you join me and buy GDX? If not, why not? Tell me at stephen@riskhedge.com.

This article originally appeared on RiskHedge.

By Stephen McBride

http://www.riskhedge.com

© 2018 Copyright Stephen McBride - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 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

6 Critical Money Making Rules