From the Desk of Ian Culley @IanCulley
Have you noticed precious metals printing fresh highs?
Last week, gold posted new multi-month highs. So did silver and platinum, hitting their highest levels since the spring of 2022.
Not a bad start to 2023 for these shiny rocks. And it gets better!
Gold broke out to new all-time highs relative to bonds last week. The yellow metal is not only showing strength on an absolute basis – it’s also outperforming its alternatives.
These are classic bull market characteristics and two critical pieces of evidence suggesting gold is in the early stages of a new structural uptrend.
If gold is on its way to new all-time highs, gold mining stocks will be participating.
And it just so happens they are…
If gold prices rise, companies that remove gold from the ground and sell it will surely benefit. Simple!
Check out the Philadelphia Gold and Silver Index $XAU, which tracks the 30 largest precious metal mining stocks:
We don’t directly trade XAU. Instead, we look to the index for information. Think of it as a roadmap for gold mining ETFs and stocks.
Last November, XAU reclaimed a crucial shelf of former highs marked by a key retracement level at approximately 115. The upside resolution hinted at a new markup phase to come, paving the way higher for mining stocks.
Six weeks later, the Gold Miners ETF $GDX is following suit:
The GDX chart looks very similar to XAU since both carry many of the same components and have a similar cap-weighted structure.
As long as the upside resolution held in XAU, it was just a matter of time before GDX took out its respective level.
Now that it has, we’re buying GDX on strength above 31 with an initial objective of 46 and a secondary target at the former all-time highs at approximately 67.
Our targets represent close to a 50% gain and more than a double in the event we hit our secondary objective.
These are the types of moves we expect from mining stocks as gold marches toward 5K.
When you flip through the latter half of the 100-plus charts in our Precious Metals Chartbook, you’ll notice plenty of individual names poised to take out key resistance levels.
The pieces are falling into place for gold bugs everywhere – silver outperforming gold, a weakening US dollar, new absolute and relative highs.
And now gold miners are joining the party.
The message is clear: Risk appetite across the precious metals space is improving as the market rewards investors for buying rocks and their associated stocks.
Ready to play this powerful trend?
Stay tuned. If everything plays out as we suspect, this could be just the beginning of an epic rally.
Thanks for reading!
As always, please let us know what you think. And be sure to download this week’s Precious Metals Report below!
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