Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Up 8 Out of First 9 months - 13th Dec 24
What Does a Strong Sept Mean for the Stock Market? - 13th Dec 24
Is Trump the Most Pro-Stock Market President Ever? - 13th Dec 24
Interest Rates, Unemployment and the SPX - 13th Dec 24
Fed Balance Sheet Continues To Decline - 13th Dec 24
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Stock Investors Buy GDX and GDXJ

Commodities / Gold and Silver 2011 Sep 09, 2011 - 02:05 AM GMT

By: George_Maniere

Commodities

Best Financial Markets Analysis ArticleYesterday morning I had a conversation with a brilliant reader of mine. We spoke about precious metals, the blatant manipulation of the metals (which I am happy to report the Central banks have been unable to sustain) and to point out two stocks that I had not given their fair due.


In fairness, I first learned about the GDX from a fine young analyst but truthfully I could not get my hands around it. If I don’t believe in the fundamentals of the company you can show me charts all day long, I will not buy into the trade until I am convinced that this can be a profitable trade. There have been times that cost me dearly but I simply have my style or system and I don’t stray from it. Part of my style is that when I am wrong I promptly admit it.

Well Mea Culpa! I was wrong. The GDX has seemingly proved me to be wrong. I had espoused my view that this was not anything more than human reaction to gold and silver. I believed that investors would rather own gold and silver above the ground rather than real wealth under the ground.

I have always tried not to be stubborn and not be arrogant. Sadly this stock was recommended to me at $52.00 and I watched it flounder for months and was convinced that I was right in my original premise. What I didn’t see coming was that at some point investors would realize that the cost to bring gold and silver out of the ground were at unbelievably cheap valuations. Oil is cheap and labor is cheap and this only adds to a company’s profit margins. Sooner or later I too would recognize that these stocks were selling at amazingly discounted prices. So rather than bemoan the fact that I came to the party late I choose to embrace the fact that I came at all.

For the last few days I have been studying the GDX (which broke into all time highs yesterday) and the junior gold miners ETF (GDXJ). On any pull backs I'm going to be a buyer and here's why. I know who's who in the GDX. They are the best of the breed mining companies like Barrick (ABX), Goldcorp (GG), Newmont Mining (NEM), Kinross (KGC), Anglo Ashanti (AU) just to name a few. While I am conversant in these companies, I have no inside knowledge of when one of these companies will make an acquisition so I think while I do own Barrick and Goldcorp. I feel it would be the most prudent to scale out of them on strength and buy the GDX.

elow is a chart that my reader sent me that overlays the price of gold, the gold miners and The GDX. A study of this chart courtesy of AgoraFinancial.com shows that in the last two weeks the GDX is up 6%, gold is up 4% and the S&P is down 6%.

That leaves me wanting the GDXJ. When one of the majors makes an acquisition it will be from the pool of the GDXJ. There are too many companies in the GDXJ and as Bernard Baruch taught us you only have to be right 2 out of 10 times with small companies like the GDXJ to be successful. There is no doubt that there will be majors trying to make acquisitions. Which ones do we buy? The answer of course is to buy them all - Buy the GDXJ. Please see the chart of the GDXJ below.

Today the GDXJ was up 3% to close at the line of resistance at $39.18. This stock is poised to breakout to the upside. With the demise of the Swiss Franc gold rose $54.00 to close at $1872. These cash rich major mining companies will be looking to add to their staple gold and silver rich properties and when they choose a company the place they will be looking will be in the GDXJ. The GDXJ is above the 200 day moving average, it is just at the point of breaking resistance and when it does I see nothing but upside potential for the trade. 

I am long GLD, PHYS, IGL, IAU, SLV, PSLV and AGQ.

By George Maniere

http://investingadvicebygeorge.blogspot.com/

In 2004, after retiring from a very successful building career, I became determined to learn all I could about the stock market. In 2009, I knew the market was seriously oversold and committed a serious amount of capital to the market. Needless to say things went quite nicely but I always remebered 2 important things. Hubris equals failure and the market can remain illogical longer than you can remain solvent. Please post all comments and questions. Please feel free to email me at maniereg@gmail.com. I will respond.

© 2011 Copyright George Maniere - 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.


© 2005-2022 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