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
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

New Bull Market in Gold and Gold Stocks?

Commodities / Gold & Silver 2009 Sep 04, 2009 - 03:23 PM GMT

By: Q1_Publishing

Commodities

Best Financial Markets Analysis ArticleHas a New Bull Market in Gold Emerged?

Up, up, and away…

That’s how gold stocks are moving. The Market Vectors Gold Miners ETF (NYSE:GDX) is climbing. And the recent move was exceptionally strong. The ETF, which tracks the major gold stocks has steadily climbed this week.  


The exceptionally strong move in gold stocks was propelled by a $20+ surge in the price of gold.

But we have to wonder whether this surge in gold stocks will end up going the way of every other gold rally in the past year and a half, if not how sustainable the rally is, or how much in gains to expect in the short-term if this is the last great buying opportunity in gold.

Strength and Sustainability

Back in January, gold stocks were terribly undervalued relative to gold.

In our “Trade of the Year” we looked at how to play the undervaluation of gold stocks relative to the price of gold. We looked at the price of gold – as tracked by the SPDR Gold ETF (NYSE:GLD) – relative to the value of gold stocks – tracked by GDX, Gold Miners ETF mentioned above (Gold/XAU is more popular, but it has much more exposure to volatile silver stocks).

At the time the gold to gold stocks ratio was near a multi-year peak. You could purchase 2.6 shares of GDX for every GLD share. This was well above the long-run historical GLD/GDX ratio which ranges between 1 and 1.5.

Today, the ratio continues to decline (the ratio declines when gold stocks outpace gold). The ratio closed at 2.26 (GLD - 96.19/GDX - 42.48). As the chart below shows, the ratio is working its way back to its lows for the year – which is very good for gold stocks.

So, when wondering if this rally in gold is sustainable, the answer is a resounding yes. In fact, there is a lot more room to run for gold stocks before they reach their 2008 relative norms.

How Much Can We Make Of This Run?

Now, if we look back to early 2008 when inflation was the fear du jour, gold passed $1,000 an ounce, and gold stocks were hot, we can see gold stocks – as a whole – have a lot more room to run.

The GLD/GDX ratio hit a low of 1.75 in April 2008. That means, from this point, gold stocks could realistically climb another 22% from here even if gold doesn’t move another inch. But if we start adding in a rally in gold as well, the short-term potential gets a bit more enticing. A run in gold to $1050 would push the upside in gold stocks up to 42%.

Of course, not all gold stocks are created equal. For instance, these five gold stocks actually climbed a total of 516% in three months and two of them have doubled again in the past few months(get full report free here).

So gold is looking good and gold stocks are looking great at this time.

What Does History Say?

Finally, we can’t forget what else history is telling us.

As many of you know by now, historically, September is the worst-performing month for stocks as a whole. September, however, is one of the best-performing months for gold stocks.

The chart below, as published by Frank Holmes, CEO and CIO of U.S. Global Investors (NASDAQ:GROW), points out how well gold stocks have done in September:

Clearly, September is historically a stellar months for gold stocks.

The Stars Are Aligning

We all know the long-term outlook for gold – unfounded government spending, unprecedented money printing, and the long-run value of the U.S. dollar – but now, the prospects for a short-term run is a very real possibility. Best of all, if the market is going down and the gold stocks are going up, they’re going to attract a lot of the “hot” money.

There are no guarantees in the investment world, but you have to look for high potential opportunities. Gold is shaping up to be one of them in short- and long-term.

Good investing,

Andrew Mickey
Chief Investment Strategist, Q1 Publishing

Disclosure: Author currently holds a long position in Silvercorp Metals (SVM), physical silver, and no position in any of the other companies mentioned.

Q1 Publishing is committed to providing investors with well-researched, level-headed, no-nonsense, analysis and investment advice that will allow you to secure enduring wealth and independence.

© 2009 Copyright Q1 Publishing - 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.

Q1 Publishing 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