Following a brutal year for bullion in 2013 and an even worse year for gold miners, those bullish on the yellow metal and the companies that extract it from the earth may finally have something to hang their hats on.
So says Todd Shriber (etfTrends.com) in edited excerpts from his original article* entitled A Generational Opportunity in Gold Miners.
[The following is presented by Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com and www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Shriber goes on to say in further edited excerpts:
…[Why so? Because] the $6.9 billion GDX, the largest gold mining ETF by assets, is up 4.5% in just the past week…[and] that could be just the beginning for an ETF that plunged 54% last year, a drop that was nearly twice as bad as the losses incurred by the major ETFs backed by holdings of physical gold.
Are XAU and HUI Finally Turning Upwards?
Technical analyst Chris Kimble of Kimble Charting Solutions says the current scenario for the miners is a rare scenario noting that
- the momentum on the PHLX Gold/Silver Sector Index (^XAU) is more oversold than it has been at any time over the past 30 years
- on a monthly basis, XAU and HUI, the NYSE Arca Gold Bugs Index (^HUI) are both at 10-15 year support and that
- “From a risk/reward standpoint, you can only dream of this.”
Click on chart to enlarge
Chart Courtesy: Kimble Charting Solutions
GDX…tracks the NYSE Arca Gold Miners Index (GDM), a modified market capitalization-weighted index that combines 36 large-, mid- and small-cap companies. Top holdings in GDX include Barrick Gold (NYSE: ABX), Goldcorp (NYSE: GG), Newmont Mining (NYSE: NEM) and Silver Wheaton (NYSE: SLW).
Are Barrick and Silver Wheaton Showing the Way?
Charts from Kimble below illustrate encouraging technical patterns in ABX and Silver Wheaton. That is good news for GDX because Barrick and Silver Wheaton are the ETF’s largest and fourth-largest holdings, respectively, combining for 19.3% of the fund’s weight.
Click on chart to enlarge
“It’s intriguing to do the bottom-fishing with something that has done terribly over the past three years” says Kimble and that certainly is the case with GDX. The fund has plunged almost 61% over the past 36 months…[and, given its dismal] once-in-a-generation sentiment reading it may well be…the ultimate rebound trade for 2014.
Paraphrasing Sir John Templeton, Kimble said “Bull markets are born in pessimism and die in euphoria. I love scouring those stages.”
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
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