Relative Breakout In Goldminers – Don’t Chase Stocks Yet

As expected and explained in our outlook published in July, gold has finally broken above key resistance at USD 1’300. Not only has gold managed to move above the highs from April and June, it has also broken the very significant downtrend that started in late 2011. Remember, gold is following an 8yr cycle and we continue to believe that the low in late 2015 was a major low. My price target remains at around USD 1490/1520, to be reached by late 2017/early 2018.

Being bullish on gold automatically translates into being bullish for goldminers. Major goldminers have AISC (All-In Sustaining Costs) of well below USD 1’000 (Barrick Gold USD 730, Agnico Eagle USD 824, Goldcorp USD 856, Newmont Mining USD 911). A rise in the price of gold will have an extremely bullish effect on profits.

Looking at the the relative charts of goldminers (GDX) versus gold itself but also versus the Dow Jones Industrial reveals a very bullish picture. After months of relative underperformance, the miners have broken out of a triangle. I therefore expect them to outperform gold AND common stocks in the coming months.

A quick on word on equities. In early August I warned of a pending correction and not to chase stocks. I do not believe the correction to be over, despite the recent rally. The cycles remain bearish into October and we still haven’t seen a spike in several fear indicators during the recent correction. I rather view the bounce as a typcial countertrend move within an a-b-c correction. On Monday, markets will remain closed for Labor Day and then, the focus will turn to the debt ceiling and the budget. While it is still likely that they will finally come to a solution, volatility should be higher than normal, given the very unpredictable political situation in the U.S.. (I would never ever call it  “Muppet Show”….)

Now to somehting different. I’ve found an article that exactly expresses my feelings about the current crypto-currencies hype. Massive media coverage, insane price movements and a common topic among friends during an after-work drink all reminds me of the year 2000. Back then, the price of stocks of companies with no business model exploded. The current hype has all characteristics of a massive bubble. While a few companies such as Apple and Amazon survived the crash (we cannot imagine life without them anymore), most other just disappeared. I don’t think it will be different this time…. Just my opinion.

There’s Literally A “Token” Called “Fuck” That’s Up 370% In The Last 24 Hours

 

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