Gold Sector Pops During Conference Week in Vancouver
Like mostAmerican males, I enjoy NFL Playoff football and have been an avid New EnglandPatriots fan since I was a kid. Weather you love them or hate them, they haveprovided a very well-played AFC Championship game the past seven consecutiveseasons. Unfortunately for mining junkies such as myself, the game is alwaysplayed on the first day of the Vancouver Resource Investment Conference (VRIC),so I am limited to glimpses of the game on the conference room floor whiletrying to get the most out of what I have flown over 1,250 thousand miles toattend.
However, Iwas less disappointed in missing most of the contest this year due to the overwhelmingattendance at the conference. Judging by the standing room only crowds in mostof the workshops and main room presentation hall, the appetite for risk in thejunior miner space is coming back into our tiny sector in a big way. The highamount of retail investors in attendance bodes well for the sector in 2018, as mostof the over 250 companies at the conference were high-risk, micro-capopportunities in early stage, exploration juniors.
The move offof the mid-December lows in gold continued while the trio of miners’conferences in Vancouver, the Metal Investors Forum (MIF), VRIC, and AMERoundup, were being held the past few weeks. On Tuesday, the early weakness ingold and the miners reversed mid-day and accelerated when the slumping USdollar fell to a three-year low and dipped below the psychologically critical90 level on the Cash Settle Index. The gold rally continued into Wednesdayevening until it reached $1365 in Asia before the European Central Bank leftinterest rates unchanged, while suggesting they will remain at current levelsfor an "extended period of time.”
However, asI type this missive on Thursday afternoon, the GDX has made a sharp reversal afternearing long-term resistance at the $25 region, while gold is attempting tohold the $1350 level. The reversal in the GDX on Thursday also came on tradingvolume eclipsing that of rally days over the past few weeks, which does notbode well for a continuation of this move in the miners for the short-term.
The extremevolatility in the sector this week came from comments out of the World EconomicForum in Davos Switzerland influencing the extremely over-sold US dollar. On Wednesday,US Treasury Secretary Steven Mnuchin was quoted by Bloomberg as saying: "Obviouslya weaker dollar is good for us as it relates to trade and opportunities".The following day from Davos, president Donald Trump said in an interview: “Thedollar is going to get stronger and stronger, and ultimately I want to see astrong dollar. Our country is becoming so economically strong again and strongin other ways, too."
I am stilllooking for a monthly close above $1375 in spot gold, which I believe would bringenough buying power into the mining space to clear the all-important $25 levelon the GDX. Although bullion may be getting a bit over-extended for this tohappen by the middle of next week, I expect the quality juniors will continueto bifurcate from the sector and trade with an upward bias before $1375 hasbeen breached on a monthly basis.
If you arenot fully invested in the sector, I strongly suggest continuing to buy weaknessin the best junior gold & silver developer/explorers and sub $1 billion marketcap growth-oriented producers. A collection of micro-cap, early-stage explorer“lottery tickets” is also advised if you do not mind a bit more risk. Andjudging by the cryptocurrency and pot stock moves lately, I believe the miningspace is no longer the riskiest sector in the stock market and has insteadbecome the last deep value alternative left in the marketplace, especially whenyou consider the fact that the mining space has a combined market cap ofroughly one half of 1% percent of the stock market.
To put thisinto historical perspective, at the peak of the last precious metal miner bullmarket in 2011, the miners made up 2% of the stock market and by the end of thefabulous gold bull which ran from 1971 to 1980, gold investments as a percentageof Total Global Financial Assets had reached 5.0%. This means gold investmentas a percentage of Global Financial Assets were nearly 9 Times greater in 1980than it is today. In the event gold investments as a percentage of GlobalFinancial Assets again rises to 5.0%, it means $5.25 trillion will flood intogold.
If yourequire assistance in choosing the best quality junior resource stocks toinvest, please stop by my website and check out the subscription service at http://juniorminerjunky.com/.
By David ErfleContributing tokitco.com
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newsfeedback@kitco.comwww.juniorminerjunky.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.