Gold to New All Time Highs? Miners About to Breakout?

16th Aug '24 by Jack Corsellis

5 comments 890 reads

The technical action of Gold looks constructive under all time highs, in conjunction with numerous positive fundamental drivers.

Gold on the daily chart displaying a characteristics of a 'volatility contraction pattern'. Higher lows, tightening price action, several bounces off the 50d SMA (purple MA).

GLD (proxy ETF) multi-month consolidation under ATHs, and in the last 4-weeks or so displaying 'VCP' characteristics.

Gold Futures (GC) 12+ year Cup with Handle breakout on volume earlier this year. If you're familiar with the Law of Cause & Effect in financial markets, that's an almighty causality.

Gold Miners currently building constructive continuation bases, in my view, as is the group ETF VanEck Gold Miners ETF (PCQ:GDX).

Several precious metal miners below high on my radar and/or I have long positions at the time of writing, including: Newmont (NYQ:NEM) Eldorado Gold (NYQ:EGO) Agnico Eagle Mines (Ontario) (NYQ:AEM) Kinross Gold (NYQ:KGC) Alamos Gold (NYQ:AGI) Harmony Gold Mining (NYQ:HMY)

Talk of potential acquisitions too, with junior miners getting acquired by the larger cap stocks in the group such as Barrick Gold (NYQ:GOLD)

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Jack Corsellis

19th Aug '24

And up they go...

ken mitchell

Jack.

I started a Mining thread last December because the likelihood then looked a good chance of a big sector bull market this year. So far it hasn’t happened apart from a big rally in the copper price which has now fallen back again.The key reasons argued in the header article why there’s a big Mining bull market coming still apply. A key reason why it hasn’t even started yet is continuing very poor economic news from China. That looks like continuing for a while and so continuing to keep a lid on key commodity prices.

I don’t take much notice of big Mining up days like the one today. It’s a very volatile sector with big one day gains and falls. Weak days and as near to 2024 lows as possible is the time to accumulate for those long term gains rather than getting sucked in after a sector rally.

Here is that Mining thread which hasn’t seen any posts for a while:-

https://www.stockopedia.com/co...

20th Aug '24

Ken.

1. I'm a trader, not an investor.

2. Many 'metals' (excluding gold which I'll come on to) and their respective miners are economically sensitive - i.e., if the 'world' slows down then so does demand for base metals.

3. Arguably the biggest driver of gold prices is the inverse correlation with the US Dollar. The Peter Schiff's of the world will give you all the reasons why the US Dollar is going lower and gold is going higher. The key point, gold is currently going higher with a recent all time high, and there's many fantastic trading opportunities for those skilled at trading.

4. Precious metal miners, specifically gold miners which are less economically sensitive than silver miner counterparts, are 1) more shielded vs 'base metals' in a slowing global economy (especially US slowing economy), and 2) likely to have better performance vs base metals in a Fed rate cutting cycle expected to start later this year.

5. The technical strength and reported earnings of gold miners vs 'base metal stocks' is far superior. Relative strength is not my opinion or your opinion, but the opinion of the market.

6. You say in your post... 'could be the start of the long promised multi year Mining bull market'. I've been doing this long enough to know nothing is promised, and find a 'one day at a time' mentality works better and keeps the mind open to interpret information in a non-biased way.

7. The skill is in timing entries and exits of trades/positions, compare thee gold stocks and the GDX ETF from the original post above compared to now.

These are your reasons stated to be bullish...

Reasons to be bullish:-

1. Mining sector debt is at historic lows and at lows compared with other sectors.

Why does this mean prices will go up and when?

2. There has been a decade of underinvestment in to new metal supply. So supply shortages and rising commodity prices ahead.

Sounds like guesswork and an opinion of someone writing an article.

3. Inventories for copper are now at relatively low levels. So recent oversupply because of that temporary lower demand will likely reverse.

Sounds like guess work and an opinion of someone writing an article, nothing helpful in terms of timing.

4. Metals are ESSENTIAL for renewable energy.

Yes, we all know that, but timing is key.

5. Global demand for copper, nickel, cobalt and lithium likely to rise dramatically along with masses of iron ore going to be needed just for wind turbines for starters.

Ok, but does this mean prices of stocks will go up and when?

That underinvestment in new mining projects could well see demand far outstripping supply with much higher core commodity prices ahead as a result.

Ok, but what does one do with this guesswork for timing positions?

6. Mining sector trading at around 5 times cash flow. That’s the lowest for many years apparently.

Ok, but does this mean prices will go up?

Below is a historic monthly chart of spot gold vs the US Dollar (DXY proxy) emphasising the inverse correlation of gold's last significant 'bull run'.

21st Aug '24

Thanks Jack for going through my header post so thoroughly. I agree with much of it and with so few following your thread (unfortunately) it’s not worth focusing on where we don’t.

Like you I’ve followed and invested in Mining sector shares for many years, focusing on the big Miners and 3 Investment Trusts CQS Natural Resources Growth and Income (LON:CYN) Blackrock Energy and Resources Income Trust (LON:BERI) and BlackRock World Mining Trust (LON:BRWM) as well as a few producing smaller Miners. I rarely invest in early stage Miners hoping one day to get to where alternatives already are!

Unlike you (I think) I’m a long term investor who buys on the big sector dips like after the 2008 banking crisis, and then especially after the extraordinary Mining sector bear market that ended at the end of 2015, and then bought and topped up again as Markets recovered following the covid falls in 2020. I’m not looking to trade except to top slice and also when I sold most of my portfolio too late near the lows in the covid crash. There’s no right way. As long as whatever we do works!

I agree that timing the next sector rally is difficult.e.g in 2015 I wrongly assumed that the 2008 lows were probably the bottom and bought heavily then. e.g paid around £2 for KAZ Minerals but incredibly it fell to 80p in the next 6 months. I averaged down several too early buys at the end of 2015 and posted the great buy opportunity then on Mike Walters website. E.g added to KAZ about 80p and it went up 10 fold in 2016 and even my buy at £2 that had been down 60% quadrupled! Anglo American (LON:AAL) which I bought at £2.20 but sold far too soon ahead of the huge gains went up 6 fold in 2016 and peaked at £41! And that was a FTSE100 share going up 18 times, and quickly too! The big advantage of buying the dips and then holding is the huge double digit annual dividends even now after sector dividend cuts.

As for your comment about the bull case for the copper price sounding like guesswork, I focus most on Results and Results Management comment for key guidance. And I’ve pasted below this what Antofagasta (LON:ANTO) said about future demand for copper when issuing their Results yesterday.

Thanks again for your reply.

“Rising demand for copper is primarily driven by the energy transition, with electric vehicles, renewable power and related infrastructure providing support to global copper prices. Demand is forecast to grow by between 2% and 3% per annum through to 2030. On the supply-side, fundamental technical challenges are grade decline and rising ore hardness, while increasing permitting delays, infrastructure challenges and rising mine construction costs suggest a likely contraction or very measured growth in existing mine supply in the medium- to long-term. The gradually shifting balance of global copper demand and supply is therefore supportive of copper's fundamental value.”

Alphaflight

13th Sep '24

Gold swaps squeezed

"Gold finally broke out above its tight consolidation range into new high ground yesterday and saw overnight demand taking it to $2570 this morning. That’s up $73 from last Friday’s close. Silver was at $30.15, up $2.25 on the same time scale."

Gold to New All Time Highs? Miners About to Breakout?

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Jack Corsellis

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