The US dollar is marching higher, stomping gold mining stocks into dust.
Harmony $HMY, Kinross $KGC, and Eldorado Gold $EGO are hovering just above last month’s breakout levels.
And Franco Nevada $FNV – a secular leader among royalty companies – is sliding toward fresh multi-year lows!
Check out FNV undercutting a shelf of former lows:
I’m not crazy about shorting it. But you can’t own FNV below its 2022 lows at approximately 110.
The path of least resistance points toward 80 if it trades below those former lows.
A Franco-Nevada breakdown shines an unfavorable light on the current condition of the precious metals space. But FNV is taking a different course than most royalty companies.
Here’s a performance chart of FNV, Royal Gold $RGLD, Osisko Gold Royalties $OR, and the SPDR Gold Trust ETF $GLD since last March:
The returns carry less significance here than the divergence beginning last fall.
OR, RGLD, and GLD bottomed last October (when the US dollar peaked – not a coincidence) while FNV continued to fall.
I have no idea what’s going on at FNV. Honestly, I don’t care.
I only see the company-specific risk – the risk we can diversify away.
Perhaps it’s not the most bullish look for the precious metals space. But the supply and demand dynamics for physical gold and silver do not hinge on the success or failure of a single royalty company.
Why buy FNV when you can own RGLD?
RGLD is bouncing off a similar shelf of former lows – not undercutting them:
No matter what market area or part of the cycle we’re trading, there will always be stocks we should buy and stocks we should sell.
I simply see a chart I don’t want to own in FNV.
Sure, you could short it. But there are better trades out there.
