Palisade Research - Tue, Sep 5, 2017

Simple Charts Showing Why Gold Stocks Are Poised To Blast Off

picture of a rocket blasting off

When gold began to rally in late 2015, investors breathed a sigh of relief. The longest resource bear market was finally over, and capital slowly began finding its way back into the mining sector.

line chart showing the performance of gold and gold stocks from December 2015 to July 2016

During the beginning of gold's rally, gold stocks actually declined as investors could not get a true pulse on the market. However, when the recovery was apparent, gold stocks soared, eventually yielding over 150% returns in less than a year.

Unfortunately, with such rapid gains a pull-back was inevitable and healthy. From its peak, gold decreased -17% while gold stocks gave back up to -38% in aggregate.

line chart showing the performance of gold and gold stocks from July 2016 to December 2016

It appears the pull-back is now over, and gold is once again on the mends.

line chart showing the performance of gold and gold stocks from December 2016 to present

Since late 2016 gold has recovered 16%, but the Junior Gold Miners ETF (GDXJ) and the Arca Gold BUGS Index (HUI) are only up 21% and 29%, respectively. Just like when gold was first recovering, investors are reluctant to begin deploying capital. However, once this recovery is apparent, we expect gold stocks to once again continue its precipitous ascent.

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